Do you know the difference between the total price and the unit price in EPC general contracting?

Mondo Finance Updated on 2024-03-01

In the EPC general contracting model, the total price and the unit price are two common pricing methods. The main differences between them are the following:

1.The basis of pricing is different.

The total price is based on the entire project, and the contractor needs to bear all the risks and costs in the process of project implementation, including engineering changes, material fluctuations, etc. The unit price package is based on the unit project or individual work in the project, and the contractor only needs to bear the risk and cost of the unit project or single work.

2.Changes are handled differently.

In a lump sum contract, the project change usually causes the adjustment of the contract, which needs to be resolved through negotiation between the two parties. In the unit price contract, the project change will generally not affect the unit price, and only the project cost needs to be calculated according to the actual amount of work completed.

3.Risk sharing is different.

In a lump sum contract, the contractor bears relatively large risks, and the overall cost and risk of the project need to be fully assessed and controlled. In a unit price contract, the contractor has relatively little risk and only needs to focus on the cost and risk of the unit project or individual work.

4.Contract management is different.

The management of the lump sum contract is relatively complex, and it requires strict management of engineering changes and cost control. The management of the unit price package contract is relatively simple, and only the quality and progress of the unit project or individual work need to be managed.

In short, there are advantages and disadvantages to the total price and unit price in EPC general contracting, and the specific pricing method should be comprehensively considered according to the characteristics of the project, the risk tolerance of both parties and other factors. In practice, a hybrid pricing method can also be used to achieve a balance between risk and benefit.

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