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I'm coming across several instances of Unit Price Book contracts where the client has modified the prices of only certain items and subitems compared to the prior version of the UPB (say from 3-5 years ago), and in a non-uniform fashion.  For instance, let's take something like the construction of manholes.  For certain measurements of the manhole, you would see that the client has lowered the price in the new UPB relative to the price in the prior UPB.  For other measurements of the manhole (with all other specs remaining the same), the client has raised the price.  For example:

  • Manhole 10 ft x 10 ft x 10 ft
    • New Price: $500 each
    • Old Price: $300 each
    • Difference: +66.7%
  • Manhole 25 ft x 25 ft x 25 ft 
    • New Price: $800 each
    • Old Price: $1,000 each
    • Difference: -20%

Now I do realize one explanation could be that the client simply decided to reset prices closer to "market" rates, but I'd like to see what other plausible scenarios might be causing this.  One explanation I've heard is that the client is in a way signaling which items will be included in the actual scope or a job order, and which won't, and that the client signals that by raising the prices of those items which will be worked frequently in the project, and lowering the prices of those which the client believes have a small chance of ever being executed.  If the bidders understand this signal, their mark-up or mark-down ratio to the UPB will be more aggressive (ie optically more favorable to the client).  

 

I'm curious to see what you guys think about this and what other plausible interpretations for this pattern of adjustments there may be.  

 

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