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Unit Price Contract
What is a Unit Price Contract?
A unit price contract is a widely used pricing model in the construction industry where general contractors (GCs) provide a fixed price for each unit of work and material (based on the anticipated quantities specified by the client). The final contract amount is calculated by multiplying the pre-agree unit prices by the actual quantities used or work performed.
This approach allows for flexibility as the total costs adjust to reflect actual usage. Therefore, unit price contracts are ideal for projects with uncertain material and work quantities, helping avoid cost overruns due to miscalculations.
For subcontractors, there are specific considerations when working with unit price contracts. It’s crucial to ensure precise unit price calculations to maintain profitability and implement sound systems for tracking and reporting actual quantities. Clear communication with the GC about quantity changes is also important, and subcontractors should be prepared to justify any discrepancies that may occur.
Siteline—an intuitive A/R management system—simplifies unit price billing for subcontractors, allowing them to:
- Easily input and update unit prices;
- Automatically calculate billing amounts based on reported quantities; and
- Generate accurate, detailed pay applications that show up-to-date unit prices and quantities.
Ready to optimize your unit price billing process? Contact Siteline today to learn how our solution enhances A/R workflows to accelerate payments.
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Other construction terms
What is Enterprise Resource Planning (ERP)?
Enterprise Resource Planning (ERP) in the construction industry refers to a suite of integrated software applications designed to automate and control the core processes of a construction company. It serves as a central platform that facilitates the flow of information among different business functions such as accounting, human resources, procurement, project management, risk management, and compliance. ERP systems simplify data-driven decision making by providing real-time insights into every aspect of the construction project which include, but aren't limited to, project costing, inventory management, and workforce allocation. By enhancing visibility and streamlining workflows, ERP systems can significantly boost productivity and efficiency in the construction sector.
What is a Performance Bond?
A Performance Bond is a type of surety bond issued by an insurance company or a bank to guarantee satisfactory completion of a project by a contractor. In the construction industry, a Performance Bond is often required to protect the client if the contractor fails to complete the contract or does not meet the agreed standards or time frame in performing the project. It is essentially a safeguard tool that ensures the project owner will not incur financial loss due to the contractor's inability to fulfill the contract. This bond provides assurance that the contractor has the necessary resources and competencies to execute the project according to the stipulated terms.
What is Conditional?
In the construction industry, the term "conditional" typically refers to a state or situation where certain obligations, requirements, or criteria must be met for a particular outcome or transaction to occur. This term is often used in contracts or agreements. For instance, a construction project could be conditional upon gaining necessary building permits or approvals, meeting safety standards, or obtaining adequate funding. The failure to fulfill these conditions could suspend or terminate the project.
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