3 UNIT PRICE CONTRACTS A VARIANT OF THE PRIME COST OR REIMBURSABLE T...

A variant of the prime cost or reimbursable type of contract is the unit price

contract. Here, there is some control over cost because the parties agree on the

rates which will apply to the work even though there is no contract sum.

This type of contract might be contemplated where there is enough definition

about the work to enable schedules to be prepared relating to the materials,

plant and labour required for the project but, for reasons of time or otherwise,

there are no specifications, drawings or bills of quantities.

The advantages of reimbursable and unit price contracts from the employer ’ s

point of view are that: the work can begin without delay; there is considerable

flexibility in making changes in the work; and the employer can exercise a

high degree of control over it. The disadvantages are mainly the risk of cost

overrun and the related risks of lack of incentive from the contractor to com-

plete on time or in general to control costs.