Brazil is a country with growing economy and a constant demand for infrastructure. Investing in projects in Brazil offers foreign companies the opportunity to benefit from this economic growth and the need for infrastructure development in a range of sectors, including energy, transportation, telecommunications and civil construction, in addition to the existence of incentive programs and tax benefits for investments in certain sectors and regions of the country.
One way to formalize such projects and develop these sectors is the so-called “Unit Price Agreement”, widely used in the construction industry, which corresponds to contracts in which the client pays for service units, that is, the measurable portion of work, instead of a fixed global price. In engineering agreements, the service unit can correspond, for example, to square meters, hours of equipment availability, hours of service provision and kilometers of highway.
In other words, instead of making a fixed payment covering all activities for project execution and completion, as in contracts with a fixed global price, in the Unit Price Agreement, only the amounts resulting from each unit of work actually performed, proven by measurement and recording, during project execution, will be due.
The unit price value is negotiated between the parties at the time of contracting and will vary according to the metric used, with only the values referring to duly measured and documented activities being due.
Regarding the advantages of this contractual modality, it is important to note that the agreement ensures greater transparency in negotiations, as both parties are aware of all times of the amounts due and work actually performed, as well as greater flexibility, since the parties are able to adjust the scope as needed for the project, not being tied to a fixed value as in the lump sum agreement.
Another fundamental aspect is the efficiency stimulus provided by this contractual model. Since payment is directly linked to the quantity of work performed, the contractor have a clear incentive to operate productively and efficiently. This promotes the search for more effective execution methods, reducing unnecessary costs and ensuring project completion within the planned timeframe and budget.
As for the disadvantages, the Unit Price Agreement may also entail some uncertainty for the parties because, as the values are paid according to the services actually provided, unpredictable market fluctuations or external factors such as weather can influence the need for additional activities, increasing initially budgeted amounts.
In addition, for the proper functioning of this agreement, significant management and organization by the parties are necessary, being contractor liable for documentation of each activity performed, and client for auditing and supervising the work, closely monitoring its progress. Thus, in complex agreements, this contractual type may demand too much from the parties.
Therefore, the Unit Price Agreement is mainly used in contracts of lesser complexity, with a better-defined scope, with perfect delineation of quantities and specifications, ensuring greater predictability and a lower burden on the parties.
In summary, this contractual modality is interesting for simpler contracts because it divides the project into service units and allows remuneration only for the units conclusively completed, ensuring greater transparency in negotiations and allowing for scope adjustment and flexibility when necessary, but in complex agreements, it can excessively burden the parties.
Amidst the scenario of economic growth and continuous demand for infrastructure in Brazil, Engineering Agreements by Unit Price emerge as a valuable tool for formalizing and developing projects in various sectors. This specific contractual modality offers transparency, flexibility, and efficiency stimulus, promoting more effective project management in construction projects. Although it presents clear advantages, such as adapting the scope according to the project’s needs, it is important to recognize that the model also poses challenges, such as uncertainties related to market fluctuations and the demand for detailed management by the companies involved.
Thus, while ideal for projects of lesser complexity, the use of these contracts in more intricate undertakings requires careful analysis to avoid unnecessary burdens on the parties. In summary, Engineering Agreements by Unit Price represent a promising approach for the development of construction projects, as long as they are applied with caution and consideration for the specific nuances of each endeavor.