How to Compare Contractor Bids

March 14th, 2016 5:01pm

Compare at least 3 contractor bids

Comparing contractor bids for your home remodel can be a challenge. Each contractor has a different format for providing estimates, and it can be impossible to compare bids line by line. It is wise to compare at least three proposals. Don’t automatically jump to the lowest quote, especially if two of them are comparable and the third is substantially lower. A lower bid may reflect lower quality work, or a higher likelihood for increased costs during the project.

Provide detailed plans

If your remodel requires an architect and/or an engineer, the architectural drawings and specifications will provide a critical reference for contractors bidding on your project. For any items that are not reflected on your architectural plans, provide a detailed list of what needs to be done. The best way to get comparable contractor bids is to be as specific as possible about the scope of work, and make sure each contractor has the same details.

Plan out your finishes

You may not have all of your finishes (tile, appliances, cabinets, countertops, etc) picked out yet, but at least specify the types of materials you plan to use. The cost of labor to install different materials can vary. For example, the cost to install a wood floor is different than the cost to install a tile floor. Let the contractors know the general types of flooring, countertops, windows, etc that you plan to use so that they can more accurately estimate the cost of labor for installation. You can also ask them to include a specific budget for different materials (referred to as allowance) so that the bids are more comprehensive. Just make sure to give the same direction to each contractor. If you have not made decisions about types of materials, pick a type for the purpose of the bid. That way you know all of the contractor bids are based on the same assumptions. You can always ask them to revise the numbers later if you change your mind on the finishes.

If one of the potential contractor comes to you for clarification on a particular item while creating the bid, make sure you provide that clarification to others so that everyone is on the same page.

For more information on the impact of different materials on the cost, check out this article by Better Homes and Gardens.

Subcontractor bids are not broken out

When you are requesting a comprehensive bid from a general contractor, they in turn collect bids from each of their subcontractors. Each subcontractor (such as a plumber, electrician, carpenter, etc) gives the general contractor the total cost for their portion of the project. Subcontractors do not usually breakdown their cost (by room for example) but instead give their total cost for the whole job. That is why if you ask the general contractor to adjust the bid based on adding or subtracting a portion of the work, it will take some time for them to get updated estimates and revise the cost.

Expect a 25% markup

General contractors spend a lot of their time communicating with their clients, managing the subcontractors, working with city officials on permits and inspections, and coordinating and purchasing materials. They need to include fees in the bid to pay themselves and to keep their business going. The fees go towards salary, company overhead, administrative expenses, and profit to reinvest in the business. These fees are added as a markup, or a percentage added to the cost of labor and materials. The actually percentage can vary and you may not see it identified in the proposal. If you do find out what each contractor is charging for their markup, do not automatically gravitate towards the the lowest one.

Like all professionals, the best contractors might command the highest salaries. You’d be surprised at how many contractors charge too little and lose money on the job, or don’t make enough to maintain their business. In this world you often do get what you pay for.

After comparing bids and narrowing down on a final candidate or two, be sure to check references before making your final selection.

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