What is the difference between a lump sum contract and a unit price contract?

A unit price contract, also known as a measurement or remeasurement contract, bases project costs on the number of units required by a project. Costs are accrued incrementally, as the project progresses. A lump sum contract, also known as a stipulated sum, reflects a total fixed fee for an entire project.

What is a rate based contract?

A Rate Contract or a Rate Agreement (RC in short) is a procurement cost reduction strategy aimed at standardizing procurement prices for commonly procured, homogenous and price varying inputs.

How does unit price work?

To obtain the unit price, simply divide the price of the package by the number of units it contains. In the dog-food example, the 20-pound bag selling for $13.95 has a unit price of 69.75 cents a pound, while the 15-pound bag selling for $10.69 has a unit price of 71.27 cents a pound.

What is an example of unit price?

We divide the price of certain number of units of an item by the number of units to find the unit price of that item. For example, to find the unit price of 12 ounces of soup that costs $2.40, divide $2.40 by 12 ounces, to get unit price of soup as $0.20 per ounce.

Which is better lump sum or unit price?

Unlike lump sum contracts, unit price contracts deal with changes pretty well. If a major issue arises, the contractor can handle it as an additional unit and provide a price to complete it. This allows the owner to make changes at will and work with the contractor to create a better project.

How do you write a rate contract?

The usual procedure for forming a rate contract involves the issuing of tenders by the purchasing party. The inviting bids are evaluated by the purchaser and the best suited bid is given the tender consequently.

How do you prepare a unit price contract?

In a Unit price contract, the contractor first divides the total work to be done into parts or “units”. He then prepares a pricing estimate for each of the units. The pricing depends upon the quantity of material used, overhead expenditures, labor charges, his share of profits, etc.

Is unit price the same as selling price?

Unit selling price is the price which gets reflected once the discount which is mentioned in the modifier, gets applied. So, (List price-discounts applied ) = unit selling price. Unit price and unit selling price are same.