Unit-Price Contract

A unit-price contract is a pricing structure in which the contracting authority and the supplier agree a fixed rate per unit of work or supply. The authority estimates quantities in advance, suppliers compete on rates, and the final contract payment depends on the actual quantities measured and verified during delivery.

What is a Unit-Price Contract?

In European public procurement, unit-price contracts (sometimes called schedule of rates contracts or bills of quantities contracts in construction) are standard for requirements where the type of work is well-defined but the precise volume is uncertain until execution. The buyer pays only for what is actually delivered.

Typical applications include:

• Civil engineering and road maintenance (price per tonne of asphalt, per metre of kerbing)
• Utilities maintenance (price per repair type, per inspection)
• Supplies with variable call-off volumes (price per unit, with estimated annual quantities)
• IT support services (price per incident type or service call)

The contracting authority publishes estimated quantities in the tender documents. Suppliers bid unit rates against those estimates. Award is made on the basis of the evaluated total (unit rate multiplied by estimated quantity) but the actual payment reflects the real quantities measured on delivery.

This structure gives the authority flexibility to increase or decrease volumes within the agreed rates without triggering a new procurement, provided the variations remain within the scope and estimated value range stated in the contract notice. Under Article 72 of Directive 2014/24/EU, modifications that substantially change the overall value of the contract may require re-tendering.

For longer-term arrangements, unit-price structures often appear in measured term contracts and indefinite quantity contracts, where the rates are fixed for a period and called off as demand arises.

Why it matters for bidders

Unit-price tendering requires careful analysis of the authority's quantity estimates. Experienced buyers estimate quantities conservatively, and actual volumes may exceed estimates significantly. If your unit rate assumes a certain volume to cover fixed costs, and actual volumes fall short, your margin will be squeezed.

Conversely, identifying items where estimated quantities are likely to be understated allows you to price selectively: loading rates on high-volume items while remaining competitive on the overall evaluated total.

Example

A Swedish highways authority invites tenders for road maintenance services across a region. The bill of quantities includes 50 line items: 5,000 square metres of patching at EUR X per m2, 200 drain clearances at EUR Y each, and so on. Suppliers complete the schedule of rates; the authority evaluates the total of rate multiplied by estimated quantity. The winning supplier is paid against actual measured quantities throughout the contract period.

Frequently Asked Questions

What happens if actual quantities far exceed estimates?

Contract terms usually specify a tolerance band (for example, plus or minus 20% of estimated quantities) within which the agreed rates apply. Beyond that band, either party may request a rate review. Very large volume increases may constitute a substantial modification under Article 72 of Directive 2014/24/EU and require a new procurement assessment.

Is a unit-price contract the same as a framework agreement?

No, though unit-price contracts often underpin framework agreements. A multi-supplier contract or framework may include agreed unit rates for calling off work orders. The unit-price structure describes the pricing mechanism; the framework describes the contracting relationship.

How are unit rates adjusted for inflation in multi-year contracts?

Most multi-year unit-price contracts include a price adjustment formula linked to a published index, applied at agreed intervals (annually, for example). Without such a provision, rates are fixed for the contract term, which places inflation risk on the supplier.