Item Rate Contract- Advantages And Disadvantages, Suitability

What Is Item Rate Contract?

In the item rate contract, the contractor starts the execution of construction work on the basis of the item rate.

The contractor estimates the rate for individual items of work on the basis of the bill of quantities.

In the Item Rate contract or Schedule rate contract, the payment received by the contractor depends on the detailed measurements of each different item of work performed by the contractor.

Let’s dive into the detailed Advantages And Disadvantages Of the Item Rate Contract.

Advantages Of Item Rate Contract

The main advantage of the item rate contract is that there is no importance of detailed drawing at the time of giving the contract to the contractor. The detailed drawing is prepared later on.

In the item rate contract, the change in the drawings can be made as per requirements.

The change in the quantities of the individual items also can be made as per requirements.

The item rate contract method is more scientific because this contract is based on the detailed analysis of cost, payment to the contractor.

An engineer easily finds out the unbalance in the tender by comparing the rate estimated by the contractor with the schedule rate prepared by the department.

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Disadvantages Of Item Rate Contract

The main disadvantage of the Item Rate Contract is the total cost of the construction project work is only known after the completion of the project work. If the final cost of the project is high then it creates a financial problem for the owner.

In the Item Rate Contract, there is a need for some extra staff for taking the detailed measurements of project work. So extra money is required for the payment of extra staff.

In the desire of saving money, the contractor may use lower-quality materials, and due to lower-quality materials, the life cycle of the project work decreases.

The profit of the contractor is known after the completion of project work.

The Contractor may quote a rate too high or too low and create an unbalanced tender perhaps due to outside information.

The profit of the contractor is not assured because it depends on the cost of the project work.

More Read- Advantages And Disadvantages Of Cost Plus Percentage Rate Contract

Suitability Of Item Rate Contract

The Item Rate Contract is suitably used in all types of governmental engineering projects where execution of large work needs like the railway’s department etc.

Item Rate Contract is used in the construction work where the work is split into various items and quantities under each item can be estimated accurately.

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Frequently Asked Questions (FAQ)