During the project set-up stage, on the Align Deliverables, Pricing and Material Disclosures page, you will be asked to select a pricing structure for each category of deliverables:
Lump sum (also referred to as “flat fee,” “firm price,” “total price,” or “stipulated sum”) means a total price for all items in the deliverable category. This model is only appropriate where all specifications are known in advance, all conditions affecting price are known and the terms of the contract are clear. It is not uncommon for projects to consist of a single deliverable category with lump sum pricing. See Creating Deliverable Categories for more on the intersection of deliverable categories and pricing structures.
Unit price means a per-item price for the required goods or services, which is then multiplied by the number of items acquired. Similar to the lump sum pricing structure, this pricing structure requires exact specifications for the goods or services required, along with clear metrics (e.g. price per kilogram). Unit prices may be applied to a one-time purchase or a standing offer. A deliverable category using unit price pricing may include multiple items with different unit prices (as in the example of the “Office Supplies” category in Creating Deliverable Categories). In such cases, a separate document listing items within the category can be uploaded by the drafter of the Pricing section.
Hourly, Daily, or Annual Rates
Hourly, daily, and annual rates are different measures of unit price. As with unit prices, clear specifications are necessary. Hourly or daily rates may be used in conjunction with unit prices for “Time and Materials” pricing models.
(Part of this post were adapted from Rosslyn Young, Selecting an Appropriate Pricing Structure, which appeared in Paul Emanuelli’s Accelerating the Tendering Cycle).
Read more about pricing and pricing structures: