Item Rate Contract Advantages and Disadvantages

Item rate contract

An item rate contract contract is a type of contract which is undertaken on per piece or item basis. Simply, it is a type of contract where the contractor works and gets paid on 'per item basis'.

The contractor quotes the rate for each individual items of the work, on the basis of schedule of quantities supplied by the department.

The payment to the contractor is to be made periodically on basis of actual work done by the contractor by taking the parties.

Advantages

1. The variations of the items due to change in design and drawing do affect the contract.

2. The contractor is paid for actual measurement of the completed work which is fair for the both the parties.

3. There is no risk of loss to the contractor hence the quality of work is perfect.

4. As rates are quoted for each item, unworkable rates are avoided by the contractor.

5. As the rates are quote for each item, the authority competent to accept the tender checks the rates and decides which of the tender is favourable.

Disadvantages

1. The final total cost of the work is known only after completion of the work.

2. The detailed measurement are essential as well as records is to be maintained, which increases the establishment charges for both department and contractor.

3. The extra item in the contract creates trouble of finalization of the rates and contractor may demand for higher rates.

4. In case of discrepancy of the rates in words and figures the lower of the two may be accepted by competent authority.

5. A comparative statement of item rate contract is more elaborate and comprehensive and perfect scrutiny is required.