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Units of Measureaka: unit costaka: unit rate

Unit Price

In Plain English

The agreed price for one unit of a specific type of work, used to calculate payment based on actual quantities.

Definition

A unit price is the cost per unit of measure for a specific item of work, used as the basis for billing quantities that cannot be precisely determined in advance. Unit price contracts specify a price per unit (e.g., per cubic yard of excavation, per linear foot of pipe, per each of a fixture) and the owner pays based on actual measured quantities installed. Unit price bidding is common for underground utility work, site work, and other quantity-variable scopes.

Why It Matters in Bidding

Unit pricing lets owners and contractors bid work whose final quantities are genuinely unknown at bid time — like rock excavation or buried pipe — by fixing a price per unit and paying for what is actually measured in the field. This shifts quantity risk to the owner while keeping the contractor's per-unit margin protected, which changes how estimators build and defend their numbers. Accurate unit prices also become the basis for pricing change-order quantities, so they carry weight well beyond the original bid.

Example

The earthwork contract sets a unit price of $18 per cubic yard for unclassified excavation; when the contractor excavates 12,400 CY, the payment is $223,200.

Related Terms

Lump SumEachLinear Foot

Frequently Asked Questions

Unit pricing fits scopes where exact quantities cannot be known until work proceeds — earthwork, utilities, paving, and other underground or site work. The owner pays for measured installed quantities rather than a fixed total. Lump sum suits well-defined scopes with stable quantities, while unit price absorbs the natural variability of quantity-driven field work.
The owner generally bears quantity risk: if more units are installed than estimated, the owner pays more at the agreed rate. The contractor bears the risk of its own productivity and pricing per unit. Many contracts include estimated quantities and variation clauses that allow renegotiating the unit price if actual quantities swing far from the estimate.
Bid unit prices often become the contractual rates for pricing added or deleted quantities later, which is why owners require them even on otherwise lump-sum jobs. This prevents disputes over the cost of field-directed quantity changes. Contractors sometimes load certain unit prices, anticipating where actual quantities will exceed the bid estimate, to improve their position.

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