What is an Item Rate Contract?

An item rate contract is the type of contract in which the contractor agrees to carry out the work as per drawings and specifications considering the payment made entirely on the basis of measurements taken as the work proceeds and at the unit price tendered by the contractor in the bill of quantities. This type of contract is also called Unit Price Contracts or Remeasured Contracts. A bill of quantities (BOQ) will be prepared by the client during the tendering stage where the quantities of items to be carried out is precisely worked out by the client and the contractor has to quote a unit price against each item of work. 

The basis of agreement here will be a unit rate for each item of work plus a reasonable variation margin that will be accepted by both parties. All documents will be invariably included in the agreement.

Example of an Item Rate Contract 

For example, a bill of quantities includes an item of work named reinforced cement concrete work and the estimated quantity by the client is 15000 Cum. Under the item rate contract, the contractor quotes a certain rate for this work package (Say Rs.9306 per Cum). This tendered rate of contractor represents the amount they are going to get paid for executing that item of work even if the quantity of work is less than or more than the estimated quantity. This tendered rate will be inclusive of all the labour, material, overhead cost and profits.