What is Unit Value?
Definition of Unit Value in Construction
Term used to identify the cost of, one piece, of a construction component. For example, the unit value for a brick could be $2.50 / each, if there were 1000, the total value of the line item would be $2,500.00 Unit values can be for material only, labor, equipment and material, or whatever combination of ingredients required by the entity requesting the unit price. Unit values are established when estimating a project and can be incorporated within a contract for a project. In many cases the unit values for particular items are required as part of the initial proposal format. In this manner, the owner has some control over the costs of anticipated change orders, due to the establishment of unit values for products or services at bid time. The creation of unit values, based upon numerous other projects performed by a contractor, can be a very important data base to be used for future estimates and proposals. The manipulation of unit values, is a common trick, that is performed by general contractors as well as subcontractors. This manipulation is based upon knowledge of the project being bid, as well as the adjustment of unit values to correspond to anticipated additional work activities. For example, if the contractor feels that the project was misrepresented and there will be substantially more rock excavation than the documents show, the contractor may decide to escalate the unit value for rock removal. If the contractor feels the opposite, and understands that unsuitable soils will most likely be encountered, then the unit value for unsuitable soils will be escalated.
The experienced and knowledgeable owner, architect or construction manager, will acknowledge the insight of the sub or contractor in regards to specifics involving the unit values. A spreadsheet will be generated to identify any and all discrepancies that appear out of line with the other bidders on the project. In this manner the unit values can be balanced between all the bidders, to ensure that one contractor with more knowledge than the their competitors, does not gain a tremendous financial reward if selected to perform the project. The manipulation of unit values is the oldest trick in the book, and only an entity experienced with this unit price game, will be capable of controlling the contractors, to ensure that the owner is not hurt. In addition, the request for a different unit value for an additional work item as opposed to a credit work item, can also be manipulated. If the contractor understands that the area is all rock, and that the documents do not identify this, the contractor can elevate the unit value for rock removal and devalue the unit value for earth excavation. In this manner, if the project is, as the contractor thinks, all rock, the owner will request an extra based on the unit values in the contract for rock removal. In addition the owner will request a credit for the earth that is not being excavated because it is all rock. If the contractor has succeeded in escalating the rock unit value and devaluing the earth unit value, the contractor wins on both accounts. Unit values are extremely difficult to properly and fairly manage, it will require someone that has the experience as well as the practical experience to decipher the accuracies of the unit price situations.