Unit Price Contracts UK: Construction Guide 2025
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Pricing a construction job is rarely straightforward. Quantities shift, ground conditions surprise you, and what looked neat on paper turns messy on site. Unit pricing contracts are one answer to that problem. Instead of committing to a single lump sum or handing the contractor a blank cheque, both sides agree a rate for each measurable unit of work, whether that is a cubic metre of concrete, a linear metre of drainage, or a square metre of tarmac.
The contractor is then paid for the quantity actually installed. For UK civil engineering, highways, and groundworks projects, this model has been a staple for decades. This guide walks through how these contracts operate, where they fit best, and what to think about before signing one.
What this document is
A unit pricing contract, sometimes called a measurement contract or remeasurement contract, is an agreement where the contractor quotes a fixed rate for each unit of a defined item of work. The parties agree provisional quantities at the outset, usually set out in a bill of quantities or schedule of rates.
As work progresses, the actual quantities installed are measured on site, and payment is calculated by multiplying those measured quantities by the agreed rates. The final contract value is therefore not fixed at signing. It is calculated as the job is built.
In England and Wales, this approach sits neatly within standard forms such as the NEC4 Engineering and Construction Contract (Option B) and JCT Standard Building Contract with Quantities. Both give the parties a recognised framework for measurement, valuation, and change control, which matters when disputes arise or payment cycles need to run under the Construction Act.
How to use this document
- Define the scope and units of measurement. Start with a clear description of the works and break them into discrete items that can genuinely be measured. Follow a recognised method such as the Civil Engineering Standard Method of Measurement (CESMM) or the NRM for building works, so both sides understand what each rate covers and what falls outside it.
- Prepare the bill of quantities or schedule of rates. The employer, usually through a quantity surveyor or engineer, estimates provisional quantities for each item. The contractor then prices each unit, building in labour, plant, materials, overheads, and profit. Accuracy here shapes the whole contract, so take time over it.
- Agree the contract form and payment mechanism. Choose a standard form that suits the project, typically NEC4 Option B for civils or JCT with Quantities for buildings. Confirm how interim valuations will be carried out, how often measurement takes place, and how disputes over quantities or rates will be handled.
- Measure and value the works as they progress. On site, the actual quantities installed are recorded and agreed between the contractor's surveyor and the employer's representative. Interim payments are made against these measured figures, giving both sides a live picture of where the final account is heading.
- Manage variations and close out the final account. When the scope changes, new rates may need to be negotiated using the existing rates as a benchmark where possible. At practical completion, a final measurement is taken, retention arrangements kick in, and the parties settle the final account based on everything actually built.
Common questions
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Common questions
Q When is a unit pricing contract better than a lump sum?
Unit pricing works well when quantities cannot be fixed at the start, which is common in groundworks, drainage, highways, and repair projects. Lump sum is usually better where the design is complete and the scope is predictable. If you expect the ground or the scope to throw up surprises, paying per measured unit can be fairer to both sides than forcing the contractor to price risk they cannot reasonably see.
Q Does a unit pricing contract fall under the Construction Act?
In most cases, yes. The Housing Grants, Construction and Regeneration Act 1996 (as amended) applies to construction contracts in England, Wales, and Scotland above certain thresholds, regardless of whether they are lump sum or remeasurable. That means statutory rights to interim payments, payment notices, and adjudication generally apply. There are some exclusions, so it is worth checking whether your particular project falls within scope.
Q Who takes the risk on quantity overruns?
Broadly, the employer carries the quantity risk and the contractor carries the rate risk. If more units are installed than estimated, the employer pays for them at the agreed rate. If the contractor's rate turns out to be too low, they absorb the loss. This allocation is one of the main reasons unit pricing is used where quantities are genuinely uncertain.
Q What is the difference between a bill of quantities and a schedule of rates?
A bill of quantities lists items with estimated quantities already inserted, so the contractor prices against those figures. A schedule of rates lists the items and units but leaves quantities open, with the contractor simply pricing each unit. Bills of quantities are common on defined projects. Schedules of rates suit term contracts and frameworks, such as highways maintenance, where the work is called off over time.
Q Can the rates be changed once the contract is signed?
The agreed rates are usually fixed for the items in the contract. However, if the employer instructs a variation that changes the character or conditions of the work significantly, the contract will often allow a new rate to be agreed or the existing rate to be adjusted. Most standard forms set out a clear process for valuing change, and keeping contemporary records on site is essential.
Q How are disputes over measurement typically resolved?
Measurement disputes are common and are usually tackled first through joint measurement on site between the parties' surveyors. If they cannot agree, the contract's dispute resolution clauses apply. Under the Construction Act, either party can refer a dispute to adjudication at any time, which produces a quick binding decision. Arbitration or court proceedings remain available for a final determination.
Q Are unit pricing contracts suitable for small projects?
They can be, but the administrative overhead is higher than a straightforward lump sum. Measurement takes time and usually needs a quantity surveyor involved. For small works with a clear scope, a fixed price is often simpler and cheaper to run. Unit pricing tends to earn its keep on civils, infrastructure, and repeat-task projects where measurement is built into how the sector already operates.
If you're dealing with this kind of situation, speak to an experienced legal adviser who can walk you through it — from £89.
Sources
This guide is based on primary UK law and official guidance.
- LegislationHousing Grants, Construction and Regeneration Act 1996legislation.gov.uk
- LegislationLocal Democracy, Economic Development and Construction Act 2009 (Part 8)legislation.gov.uk
Legal helpline
Thinking about a unit pricing contract?
Measurement contracts look simple until the rates, variations, and final account start moving in different directions. An experienced legal adviser can help you think through the key issues based on what you describe about your project on the call.
- Plain-English answers to your specific questions about unit pricing
- Practical perspective on how the contract form fits what you describe
- Clarity on measurement, variations, and payment cycles in your situation
- Help thinking through what to watch out for before you sign
Legal disclaimer
This article is for general information only. It is a tool to help you find your way — not legal advice, and not a substitute for speaking to a qualified adviser about your situation.