Unit Price
The price per unit of work — for example per cubic yard or per linear foot — that an estimator quotes for a single scope item.
Definition
A unit price is the price an estimator quotes for one unit of a defined scope of work — for example $185 per cubic yard of placed concrete or $4.20 per linear foot of 4-inch PVC pipe. The unit price already bundles direct material, direct labor, equipment, and a share of overhead and profit into a single number per unit.
Unit prices are the building blocks of every priced BOQ and the contract basis of every unit-price contract. Multiplying the unit price by the actual installed quantity gives the contractor’s payment for that line.
How unit price is used in estimating
Estimators build unit prices in two ways. The first is bottom-up: take the production rate (units installed per labor hour), multiply by labor cost, add the material cost per unit, add equipment cost per unit, and apply markup. The second is historical: pull the unit rate from prior similar work, then adjust for inflation, location, and project conditions.
On a unit-price contract, the unit prices in the BOQ are the contract terms. The owner pays for actual quantities installed, multiplied by the bid unit prices. This is common on infrastructure, earthwork, and any project where final quantities cannot be precisely defined upfront. Unit prices are also used inside lump-sum bids as the pricing for alternates and for any line item that may vary, so the owner has a pre-agreed rate to apply to changes.
Common unit price mistakes
The biggest mistake is failing to load enough overhead into the unit price — direct cost is only part of the picture, and a unit rate that does not carry its share of general conditions, supervision, and profit will lose money on every unit installed. Another common error is using an old historical unit rate without adjusting for current labor and material inflation. Estimators should also be careful that mobilization-heavy items (small quantities of specialized work) are priced with enough setup cost included rather than at a productive run-rate.
Frequently asked questions
Q.What is included in a unit price?
A complete unit price includes direct material, direct labor (with burden), equipment cost, consumables, and a pro-rata share of overhead and profit. Some bids separate overhead and profit out as their own line, in which case the unit price is direct cost only.
Q.How do you calculate a unit price?
Determine the production rate, divide labor cost by units per hour, add material cost per unit, add equipment cost per unit, then apply your overhead and profit percentage. The result is the unit price.
Q.What is a unit-price contract?
A unit-price contract pays the contractor based on actual quantities installed multiplied by the bid unit prices. It shifts quantity risk to the owner and price risk to the contractor.
Q.Are unit prices used on lump-sum jobs?
Yes — even on lump-sum contracts, unit prices are typically requested for items that may change in quantity (extra excavation, additional concrete) and for alternates. They give the owner pre-agreed pricing for changes.
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