Item Rate vs Lump Sum vs Percentage Rate
The three common Indian works contract forms look interchangeable on paper but carry different risk profiles. In an item-rate (unit-rate) contract the contractor quotes a rate for each BOQ item and is paid that rate for the quantity actually measured, usually within plus or minus 15 percent of the BOQ quantity per item, so the owner pays for quantity variation within that range.[1]Where the contract specifies IS 1200, measurement follows the relevant part for each trade.[2]A lump-sum contract fixes the price for a fixed scope and is meant for work where the risk of change in quantity or specification is minimal; a percentage-rate contract asks bidders for a single percentage above or below the owner's estimate.[1]The right choice depends on how complete the design is at tender stage — and on who can absorb a quantity swing without litigation.
EPC, PMC, and the Risk Vocabulary
EPC (Engineering, Procurement, Construction) bundles design and execution under a single contractor who carries both delivery and performance risk. PMC (Project Management Consultancy) keeps design ownership with the owner and uses the consultant as an extension of the project management office. The two words overlap in casual conversation but produce different insurance requirements, different approval chains, and different cash-flow curves — pick the model that matches the capability you actually have on the owner's side, not the label that sounds modern.
Clauses That Quietly Decide the Project
Variation clauses, price-variation formulas, retention terms, and defect-liability periods decide more project outcomes than the headline rate. Under the Government of India works manual, retention is usually five percent of each running bill, on top of a performance security that is usually also five percent; half the retention is released at taking-over and the other half after the defect liability period.[1]The same manual gives an example price-variation formula for contracts exposed to commodity price movement.[1]Read these clauses against your real exposure, not against the template the contract team last used.
Sources
- Manual for Procurement of Works (Updated June, 2022), paragraphs 3.2.1, 3.2.2, 4.13 and Annexure 14 — Department of Expenditure, Ministry of Finance, Government of India
- What it says:
- Item-rate (unit-rate) contracts pay the contract rate for measured quantities, usually within +/-15% per item of the BOQ quantity; lump-sum contracts fix the price for a fixed scope and suit work where quantity risk is minimal; retention is usually 5% of each running bill (in addition to a performance security usually 5%), half released at taking-over and half after the defect liability period; Annexure 14 gives an example price variation formula.
- Rights:
- Government of India publication; cited and paraphrased, not reproduced
- Retrieved:
- 2026-09-23
- IS 1200 (Part 1):1992 Methods of measurement of building and civil engineering works, Part 1: Earthwork (fourth revision) — Bureau of Indian Standards
- What it says:
- Foreword: IS 1200 is the Indian standard method of measurement for building and civil engineering works, first published in 1958 and issued in separate parts by trade, written to unify the differing measurement practices of construction agencies and government departments.
- Rights:
- Bureau of Indian Standards copyright; clause cited, text not reproduced (copy published by Public.Resource.Org under the Right to Information Act, 2005)
- Retrieved:
- 2026-09-23