Unit Rates in Construction: Definition, Components, Examples, and Why They Matter

Introduction

If the internal walls of your house in Nairobi need a fresh coat of paint, you will likely call an experienced painter or a painting contractor for a quote. The painter will probably give you a simple estimate broken down into materials, tools, and labour. The contractor, on the other hand, will likely submit a Bill of Quantities (BoQ) containing a structured breakdown: a description of the work item, the quantity of work, the unit of measurement (e.g., square metres), the unit rate, and the total cost.

Despite these different approaches, both methods may produce similar overall costs - but how they arrive at those costs is fundamentally different.

A painter relies on personal judgment and experience to estimate materials, tools and labour. A contractor relies on systematic measurement guided by established standards. If you ask both parties to revise their quotes after excluding certain rooms, the painter must reassess the entire estimate manually, while the contractor simply adjusts the measured quantities and re-applies the unit rate.

Similarly, if you invite another three painters to price the same job, you may receive three completely different submissions - in structure, items included or excluded, and total cost. But if you ask other contractors to quote using a BoQ measured under a Standard Method of Measurement (SMM), their submissions will be structurally similar, differing mainly in their unit rates and commercial strategy.

The difference is standardization.

Contractors follow the Standard Method of Measurement of Building Works for Eastern Africa (SMM), which defines how work should be described and measured, what is included, and what is excluded. This uniformity allows scientific tendering, structured comparison of bids, and clarity of intent.

At the heart of all this is one concept: Unit Rates.

Unit Rates

Unit rates are central to pricing, estimating, tendering, cost control, and forecasting. But to fully understand their role today, it helps to look at where they came from.

History of Unit Rates

The evolution of unit rates is inextricably linked to the histories of Bills of Quantities, the Standard Method of Measurement (SMM), and the profession of Quantity Surveying.

Before the Industrial Revolution

Building work was measured and valued only after completion. Builders submitted lump-sum prices without breakdowns, leading to inconsistent quotations, high risk, and frequent disputes. There were no standardized methods of describing or measuring work - very much like the painter examples earlier.

Early Industrial Revolution

Architects managed both design and construction. Master craftsmen carried out individual trades and submitted accounts for materials used and labour spent. Over time, craftsmen began hiring “measurers” to prepare their accounts, while architects hired their own “surveyors” to contest exaggerated claims.

Rise of General Contractors

As the industrial revolution wore on, general contractors began submitting inclusive quotes covering all trades. To ensure accuracy, they hired surveyors to prepare Bills of Quantities. As competitive tendering grew, contractors sometimes combined resources to appoint a single surveyor to prepare a common BoQ, with architects appointing their own surveyor to verify the quantities.

This collaboration laid the foundation for the independent quantity surveyor; responsible for preparing an impartial BoQ and valuing variations during construction.

Standardization and the Birth of Modern QS Practice

Surveyors used standardized units and consistent descriptions to prepare accurate BoQs. But a BoQ alone was not enough. Contractors needed a structured way to price each measured item - leading to the development of unit rates.

Professional bodies eventually formalized measurement practices into Standard Methods of Measurement. Today, SMMs ensure that BoQs across the industry follow uniform rules, enabling fair tendering and transparent pricing.

Unit rates remain the industry’s backbone, used by contractors, consultants, and clients to estimate, control, and justify construction costs.

What Is a Unit Rate?

A unit rate is the cost of completing one measurable unit of work – such as, per square metre, per cubic metre, per metre length, per piece, or per hour.

A unit rate typically includes:

1. Materials
2. Labour
3. Equipment and tools
4. Overheads
5. Profit and risk allowance

Unit rates vary from one contractor to another, from project to project, and from one location to another, depending on market prices, productivity, construction methods, and project conditions.

Components of a Unit Rate

A well-prepared unit rate is not just a figure - it is a structured breakdown of all costs required to deliver one unit of work.

1. Materials

Material cost includes the purchase price plus allowances for:

• Delivery to site
• Off-loading
• Storage
• Placing in position
• Wastage

Here is a formula that can be used to compute the cost of material:
Cost of Material = (a + b + c + d + e) × f

Where:
a = Purchase price
b = Delivery cost
c = Off-loading cost
d = Storage cost
e = Handling/placing cost
f = Wastage factor

2. Labour

Labour cost is calculated by determining how long a task takes and multiplying by the operative’s (or gang’s) hourly rate.

Here is a formula that can be used to compute the cost of labour:
Cost of Labour = (a / b) × c

Where:
a = Total quantity of work
b = Productivity rate (work completed per hour)
c = All-in hourly labour rate

3. Equipment and Plant

Plant used for a specific operation is priced the same way as labour: hours required × hourly cost.

Here is a formula that can be used to compute the cost of plant:

Cost of Plant = (a / b) × c

Where:
a = Total quantity of work
b = Productivity rate (work completed per hour)
c = Plant’s hourly rate

Static plant, which cannot be associated with a particular item of work, (e.g., scaffolding, site huts, tower cranes) is priced under preliminaries, not within unit rates.

4. Overheads, Profit & Risk

Contractors must cover:

• On-site overheads (utilities, supervision, security, temporary works)
• Head-office overheads
• Profit
• Risk allowances (complexity, competition, cash flow, uncertainties)

This is typically added as a percentage on top of material, labour, and plant costs.

5. Other Adjustments

These may be added to the unit rate depending on project conditions such as:

• Location factors
• Access constraints
• Taxes
• Safety requirements
• Special handling or transport

Example: Unit Rate for Painting General Wood Surfaces

I am going to prepare a unit rate for painting general surfaces of wood.

Work Item:

Prepare, knot, and stop general surfaces of wood (girth over 300mm); apply one coat of primer, two coats of undercoat, and one coat of gloss finish.

Estimator’s Task:

Prepare a unit rate for 100 m² in Nairobi, Kenya.

Solution:

We first have to identify the components of the unit rate. In this case, we’re obviously going to have:

1. Materials – in paint, primer, putty stopping and knotting solution;
2. Labour – for the preparation of surfaces and application of material;
3. Tools – paint brushes; and,
4. Overheads and profit – a percentage which we will assume to be 15%

Materials

* The quantities required for 100 m² of wood surfaces come directly from manufacturer specifications, and are typically stored as material constants in a database. Cost Master includes these constants - and many more - so you don’t have to worry about looking them up. All you need to know is that these constants help determine the exact amount of material needed for your project.

** The prices are estimated for Nairobi as of 8^th December 2025 and are presented on a brand-agnostic basis.

Labour

* The number of labour hours required for 100 m² of work is typically a constant determined through on-site experimentation and data collection. Cost Master includes these constants - and many others - so you don’t have to calculate them manually. Simply put, these values help determine the labour hours needed for each task.

Total hours required for 100 m² = 30.8 hours
Skilled painter’s all-in hourly rate (Nairobi) as of 8^th December 2025  = Kes 187.50

Labour Cost = 30.8 × 187.50 = Kes 5,775

Tools

For painting works, the only tool required is a paint brush. A paint brush typically has an expected life of 100 hours. If we assume that the painter uses the brush two-thirds of the time they are painting, then:

• In painter hours, a brush will last:
  • 100% brush utilization -> 100 hours
  • 66.67% brush utilization -> (100/66.67) * 100 hours = 150 hours.
• A paint brush (6”) costs approximately Kes. 400.00*
• Therefore, the hourly cost of the brush is: Kes. 400/150 = Kes. 2.667
• Therefore, for 30.8 hours that the painter is working, the total brush costs are:30.8 x 2.667 = Kes. 82.14

* The prices are estimated for Nairobi as at 8^th December 2025 and are brand agnostic.

Overheads & Profit (15%)

We assume a percentage addition of 15% to cover all overheads, to provide a risk allowance and attain a profit.

This is added on top of the cost of material, labour, and tools.

Subtotal = Kes 19,580 (materials) + Kes 5,775 (labour) + Kes 82.14 (tools) = Kes 25,437.14

Overheads & profit = 15% × 25,437.14 = Kes 3,815.57

Final Unit Rate

Total cost for 100 m² = Kes 25,437.14 + 3,815.57 = Kes 29,252.71

Unit Rate = 29,252.71 / 100 = Kes 292.53 per m²

Why Unit Rates Matter

Unit rates play a critical role throughout the project lifecycle.

1. Accurate Cost Estimation

They ensure estimates are grounded in real inputs - materials, labour, and equipment - reducing guesswork and improving budget accuracy.

2. Transparent Pricing

They create a clear basis for tendering, allowing clients and consultants to compare bids fairly and understand what they are paying for.

3. Faster Preparation of Bills of Quantities

A strong unit rate library makes it easy for QSs and contractors to price works quickly and consistently.

4. Cost Control During Construction

Unit rates allow the project team to:

• monitor actual versus budgeted costs,
• identify variances early,
• make informed decisions when changes occur.

5. Better Forecasting and Planning

Accurate unit rates help clients and contractors forecast resources, timelines, and cash flow across the project.

6. Reduced Disputes

Clear, well-documented unit rates reduce misunderstandings between contractors, consultants, and clients—especially during variations or re-measurement.

Common Misconceptions About Unit Rates

In practice, several common misunderstandings lead to cost overruns, disputes, or unrealistic budgets:

• Assuming there is a “universal” unit rate: In reality, unit rates differ from one contractor to another and are shaped by region, materials availability, labour productivity, and project conditions.
• Treating unit rates as fixed or “market” prices: Unit rates are estimates, not guarantees. Actual costs often shift due to market volatility, site-specific challenges, or variations in workmanship and productivity.
• Using historic rates without adjusting for current conditions: Market prices change continuously. A unit rate from last year (or even last month) may no longer reflect current material costs, labour availability, currency fluctuations, technology changes or inflationary pressures.
• Believing the cheapest unit rate is always the best: A low rate may signal under-pricing, missing labour or materials, inadequate risk allowance, or unrealistic productivity assumptions. These usually surface later as claims, delays, or poor-quality workmanship.
• Ignoring the role of preliminaries and overheads: Many people expect unit rates to cover everything, yet preliminaries often contain significant cost items like site security, scaffolding, temporary works, and site management. Mixing these with unit rates leads to distorted pricing.
• Assuming unit rates automatically include all tasks associated with an item: The SMM specifies coverage rules - what is included and what is excluded. Without understanding these rules, contractors may overprice or underprice items, leading to disputes during construction.
• Confusing unit rates with total project costs: A correct unit rate alone does not guarantee an accurate total cost. If the measured quantities are incorrect, the overall project cost will also be wrong, no matter how precise the unit rate is.
• Ignoring local and logistical factors: Transport, site access, waste allowances, storage, and other “small” site conditions can significantly influence actual cost, especially in remote or high-cost regions such as coastal areas.

Because of these pitfalls, many consultants advise using published or historic rate books with caution; especially in fast-changing markets where prices shift month to month.

In summary, many people incorrectly assume that unit rates are universal, equal to market rates, derived directly from textbooks, or driven solely by material costs. In reality, unit rates are project-specific, contractor-specific, and highly sensitive to context.

How Technology is Changing Unit Rates (and How Cost Master Helps)

Digital tools are transforming how unit rates are created and managed. Modern construction software can now:

• Generate unit rates from first principles automatically, reducing manual calculations and human error.
• Update rates instantly as market prices change, keeping estimates aligned with real-world conditions.
• Store project-specific or contractor-specific rate libraries, ensuring consistency across teams and projects.
• Enable on-site adjustments from mobile devices, allowing field teams to update rates in real time.
• Use AI to analyse past data and improve rate accuracy, helping professionals make smarter cost decisions.

Where Cost Master Fits In

Cost Master brings these capabilities together into one platform designed specifically for contractors, quantity surveyors and other consultants in the Kenyan and East African market. With Cost Master, you can:

• Build your own dynamic rate library without spreadsheets.
• Generate first-principles unit rates automatically - optimized for your region, materials, and productivity levels.
• Keep your rates up-to-date with market changes across Kenya and East Africa.
• Prepare BoQs and take-offs faster using AI-generated descriptions and clean workflows.
• Access and edit your rates on mobile during site visits or client meetings.

The result? More accurate estimates, fewer surprises on site, and a more professional workflow that helps you win and deliver projects confidently.

Conclusion

Unit rates remain one of the most important building blocks in construction costing. When properly developed, they improve accuracy, transparency, and control across every stage of a project. Understanding their components—and preparing them systematically—helps contractors, QSs, architects, engineers and clients make better decisions, avoid disputes, and deliver projects more efficiently.

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References

• Ross D. Buchan, F.W. Eric Fleming & Fiona E. K. Grant (2003), Estimating for Builders and Surveyors (Second Edition), Elsevier
• Ivor H. Seeley (1969), Building Quantities Explained (S.I. Edition), Macmillan & Co. Ltd
• James, W. ‘Why the quantity surveyor.’ The Chartered Surveyor, May 1960.