What is a unit-price contract?

A unit-price contract, known in Mexico as contrato a precios unitarios, is one in which the total payment to the contractor is calculated by multiplying the quantities of work actually executed by the agreed unit prices for each concept of work. Payment is not tied to a single lump sum but to measurable, completed units of construction.

Each unit price is composed of five elements defined by the LOPSRM Regulations: direct cost, indirect cost, financing, profit, and additional charges. Together these elements form the complete economic structure of every billable concept. The sum of all unit prices, applied to the projected quantities, produces the total contract budget.

This structure is the default in Mexican public works. When foreign contractors enter Mexico without prior experience in the local framework, they often encounter unit-price contracts without fully understanding how payment, adjustments, and exceptions operate under Mexican law.

Unit-price contracts in public works are governed by the Ley de Obras Públicas y Servicios Relacionados con las Mismas (LOPSRM), last amended November 14, 2025, and its Regulations (RLOPSRM, last amended February 24, 2023). Article 45, Section I defines unit-price contracts as those in which “the total remuneration or payment to be made to the contractor is per completed and executed unit of concept, in accordance with the project, construction specifications, and quality standards.”

The April 16, 2025 reform did not modify the core articles governing unit-price contracts: Article 45 (contract modalities), Articles 56 and 57 (cost adjustment), and Article 59 (volume increases and decreases) remain unchanged. Contracts executed before April 17, 2025 continue to be governed by the provisions in force at the time of execution.

Two institutional changes from the 2025 reform are relevant in practice: the Secretaría Anticorrupción y Buen Gobierno (formerly Secretaría de la Función Pública) is now the authority that authorizes indirect cost adjustments, and the Electronic Construction Log (BEOP) became mandatory from April 17, 2025.

Structure of a unit price

Understanding the five components of a unit price is essential for any foreign contractor working in Mexico. They cannot be separated, invoiced independently, or renegotiated in isolation once the contract is signed.

Direct cost covers materials, labor, tools, and equipment directly used in executing the concept of work.

Indirect cost covers central office and field office overhead: administrative staff, temporary facilities, insurance, bonds, and similar expenses not directly tied to a single concept.

Financing reflects the contractor’s capital contribution to the project during the period between expenditure and payment collection.

Profit is the net margin expected by the contractor.

Additional charges are expenditures the contractor must make under other applicable regulations, such as environmental fees or training obligations.

A common error in international practice is attempting to invoice these components separately, for example, billing indirect costs as a separate line item or treating financing as an add-on after the fact. Under Mexican law, a unit-price contract is paid by completed concept of work, with all five components included. Partial invoicing of a concept, for example, billing for materials delivered to site before installation is complete, is not permitted and constitutes a pre-payment contrary to the contract and to the LOPSRM.

How payment works

Payment in a unit-price contract is made through periodic valuations called estimaciones. These are prepared by the contractor based on a work schedule agreed at the start of the contract, which specifies which concepts of work and what volumes are to be executed in each billing period.

A concept of work is billable only when it is fully completed and executed in accordance with the project documents, construction specifications, and quality standards. A contractor that delivers materials to site, begins installation, or completes part of a multi-step concept cannot bill for that concept until all components are finished.

This is a frequent source of cash-flow problems for foreign contractors. Project teams accustomed to milestone-based or percentage-complete billing may not structure their work program to generate completed concepts at regular intervals. The result is periods with no billable work, followed by large invoices that take time to process.

Volume adjustments and extraordinary prices

Unlike fixed-price contracts, unit-price contracts allow for adjustments that reflect changes in the actual scope of work.

Volume increases and decreases (Art. 59 LOPSRM) allow the contracting authority to increase or decrease the quantities of any concept of work, provided both parties agree. Volume changes do not automatically entitle the contractor to additional compensation beyond the agreed unit prices applied to the revised quantities.

Extraordinary prices are new unit prices established during contract execution for concepts of work not included in the original catalog. They follow the same five-component structure as original unit prices and must be agreed between the parties before the corresponding work is executed.

Both mechanisms require formal documentation and, in the case of extraordinary prices, prior authorization. A contractor that executes work outside the original catalog without formal agreement on the price does so at its own risk.

Cost adjustment (indexation)

Cost adjustment, ajuste de costos or indexation, is one of the most important protections available to contractors in unit-price contracts and one of the most misunderstood by foreign companies.

When significant economic circumstances change between the date the contract was signed and the date the work is executed, particularly when inflation or supply chain disruptions materially alter the cost of inputs, the contractor has the right to request a review of the direct cost component of its unit prices. This right is grounded in the doctrine of unforeseen circumstances (teoría de la imprevisión) and is expressly provided in Articles 56 and 57 of the LOPSRM.

The result of the review is a factor applied to the unit prices pending execution. The process and the methodology for calculating the factor are specified in the LOPSRM and its Regulations.

Cost adjustment does not apply to fixed-price contracts. It is available only for unit-price contracts or the unit-price portion of mixed contracts. Foreign contractors moving between contract types need to be aware of this distinction from the moment of pricing.

Indirect cost and financing adjustment applies when the contract amount, the schedule, or both increase or decrease by more than 25% of the original contract value. In that case, both parties are obligated to review the indirect cost and financing percentages and, if warranted, adjust them. Authorization from the Secretaría Anticorrupción y Buen Gobierno is required when the adjustment exceeds that threshold.

Unit-price vs. fixed-price: choosing the right structure

The choice between contract types depends on several factors: the source of funding, the completeness of the executive project, available budget, payment schedules, whether the works are public or private, the type of asset being built, and the nature of the parties.

A unit-price contract is generally more appropriate when the executive project is not fully developed at the time of contracting, when quantities are difficult to estimate with precision, or when the scope is likely to evolve during execution. It allows the contract to be progressively refined as the project develops.

A fixed-price contract requires a fully defined executive project and stable quantities. When public authorities use fixed-price contracts with incomplete projects, execution problems are common, the contract structure does not match the reality of the works.

For foreign contractors evaluating which structure is more favorable, the unit-price contract offers more flexibility and legal protection mechanisms (cost adjustment, volume adjustments, extraordinary prices). The fixed-price contract offers price certainty for the authority but concentrates risk on the contractor.

What foreign contractors commonly get wrong

Treating unit prices as negotiable after signing. Once unit prices are agreed, they are fixed except through the specific mechanisms provided by law (cost adjustment, extraordinary prices). Attempting to renegotiate individual components mid-contract has no legal basis.

Not structuring the work program to generate billable concepts. The work schedule must be designed so that completed concepts are generated at each billing period. A schedule optimized for construction logic rather than billing logic creates cash-flow gaps that compound over the life of the project.

Billing for partially completed concepts. Delivering materials, completing preparatory work, or finishing part of a multi-step concept does not create a right to bill. The concept must be fully completed. Teams unfamiliar with this rule generate invoices that are rejected and create disputes with the supervision.

Missing the cost adjustment window. The right to request cost adjustment must be exercised within the deadlines established by the LOPSRM and the contract. Contractors that do not monitor price indices or fail to submit adjustment requests on time lose a protection that can be economically significant on long or high-inflation contracts.

Confusing indirect cost adjustment with cost adjustment. These are two separate mechanisms with different triggers, thresholds, and procedures. Applying one when the other is warranted, or failing to pursue either, are both common errors with material economic consequences.

Dispute resolution

Disputes arising from unit-price contracts in public works are resolved before the Tribunal Federal de Justicia Administrativa (Federal Administrative Court). Conciliation before the Secretaría Anticorrupción y Buen Gobierno is available as a prior step. For contracts with PEMEX or CFE, jurisdiction falls to commercial courts.

The Electronic Construction Log (BEOP) is the primary evidentiary instrument in any dispute. Events not recorded in the BEOP, delays caused by the authority, project errors, change instructions, quality test results, are extremely difficult to prove in subsequent proceedings.

How Construbufete can assist

Construbufete advises foreign contractors and project owners on unit-price contracts in Mexico at every stage of the project lifecycle:

  • Reviewing contract documents and work programs before execution begins
  • Structuring estimaciones to maximize cash flow within the legal framework
  • Identifying and pursuing cost adjustment rights on time
  • Documenting extraordinary works and volume changes for formal recognition
  • Representing contractors in conciliation and before the TFJA

If you are pricing, executing, or in dispute under a unit-price contract in Mexico, contact us for a preliminary assessment.

Frequently asked questions

What is a unit-price contract under Mexican law? A contract in which total payment is made per completed and executed unit of concept, in accordance with the project, specifications, and quality standards. Each unit price includes five components: direct cost, indirect cost, financing, profit, and additional charges.

Can the components of a unit price be invoiced separately? No. The five components form an indivisible unit. Payment is made by completed concept of work, with all components included. Invoicing only the direct cost, or billing for materials before installation is complete, is not permitted.

What is cost adjustment and when does it apply? Cost adjustment is a statutory mechanism that allows the contractor to request a review of the direct cost component of its unit prices when significant economic changes occur after the contract was signed. It applies only to unit-price contracts or the unit-price portion of mixed contracts. It does not apply to fixed-price contracts.

Did the 2025 LOPSRM reform change unit-price contracts? Not in substance. The core articles governing unit-price contracts (Art. 45, Arts. 56-57, Art. 59) were not amended. The relevant contextual changes are the new authority (Secretaría Anticorrupción y Buen Gobierno), the mandatory BEOP from April 17, 2025, and the new digital procurement platform.

What is the difference between a unit-price and a fixed-price contract? In a unit-price contract, payment is based on quantities actually executed and allows for cost adjustments, extraordinary prices, and volume changes. In a fixed-price contract, a single total is agreed for fully completed works and price adjustments are statutorily excluded. The title of the contract does not determine its legal nature, the substance of the clauses does.

What happens if the contracting authority orders work outside the original catalog? Those works must be priced as extraordinary prices before execution. A contractor that executes out-of-catalog work without a formally agreed price has no guaranteed right to compensation beyond what the authority chooses to recognize.