How To Evaluate Contractor Bids

How To Evaluate Contractor Bids

Once you have narrowed down your potential contractor to a few choices, you need to analyze those bids. You might think that you can just read through the proposals and choose the best contractor. However, there is more to comparison than looking at a few details. Every bid will be different. You must decipher these bids to know what is accurate and comparable. It might seem like an arduous task, but you can handle this job with a couple of tips.

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How Do You Compare Two Bids or Proposals?

close up shot of a contract

As mentioned, not all contractor bids are the same. When you need to compare them, you need to consider a few factors. You should not make the overall cost the determining factor for these proposals. Think about breaking down the bids into comparable line items or pieces. You can start by looking at large items and comparing them with all contractors. These basic line item costs are an excellent way to start your comparison

Going line by line will help you understand whether the contractor offers you a fair price or not. Remember that some contractors will charge more for labor, while others may use cheap materials for the job. Some might charge for site plans or permits. Unfortunately, it is up to you to determine which bid will be the right choice for your project. 

Related: How Much Does a Home Inspection Cost?

What Should A Contractor's Estimate Include?

Hopefully, your contractor put in many details in the bid. More details mean a more accurate proposal. If the offer is ambiguous, then you should proceed with caution. In some cases, the contractor could levy hidden fees on the job. Any lack of details means you are not getting a complete estimate of your job. You need to insist on the full details of the proposal. A comprehensive bid will give you a more accurate estimate.

With an estimate, you should have:

  • The cost of hiring a subcontractor
  • Price of materials
  • Assessment of labor

Along with that, any fees or other costs should be listed in the estimate. Every proposal also needs a schedule for when the project is expected to be completed.

Watch Out for Allowances

As a child, you probably liked "allowances." However, allowances in the construction industry are not the best estimates. An allowance covers those exact costs not determined by the contractor. Think of it as a ballpark estimate. These allowances are frequently inaccurate, leading to substantial additional costs. With a large number of allowances, there is a bigger chance that the estimate will be less accurate. 

In some cases, the contract will create a low allowance to create a smaller bid. Unfortunately, these contractors know that you will spend more on the allowances than increasing the actual total cost of the project's proposal. As a result, you can sign a contract for a specific price but will end up paying much more. 

You should request that these allowances be converted into firm bids. Contractors should be able to offer more accurate costs for particular items. For example, if your flooring costs are set at a $20,000 allowance, you can request a specific flooring at a firm price. If a contractor doesn't want to establish a firm price, it could be a bad sign. A professional contractor will be willing to convert those allowances to a firm price if you provide them with the necessary information.

When you have fewer allowances, that is better for you. Fewer allowances mean a more accurate bid from the contractor.

Related: 10 Things Your Remodeling Contractor Wants You to Know

How Do I Choose a Competent Contractor?

man comparing a contract bid

When taking bids from contractors, you need to find a professional and reliable individual or company. You can check out the Better Business Bureau and look up reviews (or complaints) of the company. Ask your family, friends, and neighbors for recommendations. Competent contractors will let their work speak for the company. They will have pictures or a portfolio of completed work. Plus, they will share the names of former clients. A professional contractor will never hide anything from you. If the contractor is vague about detail, like pricing, it could signify that they are incompetent. 

During the interview process, what should you not say to a contractor? Absolutely nothing. Your contractor should be upfront with an open line of communication. They should be willing to discuss everything with you, including the price. If your contractor makes you feel like you're a bother, then find someone else for the job. 

How Do You Tell If a Contractor Is Ripping You Off or the Price Is Too High?

You need to get an estimate from several contractors in the area. You can decide if the contractor is trying to pad the bill by reviewing several estimates. However, sometimes that is not enough, do a little research online. You can look up prices and see if they are in the general range for your specific area. Remember that prices are often set locally. For example, materials might cost more in California than in Minnesota. You can determine if the contractor is making a fair price or ripping you off with that information. 

Related: Is It Cheaper To Build Or Buy A House?

Never Make Assumptions

contractor and home owner shaking hands

If you are unsure about something, always seek clarification from the contractor. You can ask questions about anything in the bid. A professional contractor will take the time to explain the proposal. Don't ever think it is insulting to talk about price or calculations for the project. A contractor wants you to have a clear understanding of the bid. With that, the construction project can move without any uncertainties.

Now that you know the basics, remember always to ask questions and read those fine details in the estimate. With these tips, you could save money on your next project

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FAQ Answer
What are some red flags to watch for when reviewing contractor bids? Look for significantly lower bids than others as they may indicate hidden costs or subpar materials. Also, be wary of bids that lack detail in itemized costs or timelines.
How can you verify the quality of materials proposed in a contractor's bid? You can request samples of the materials or specifications and compare them against industry standards. Additionally, asking for references or previous project examples where the same materials were used can help.
What steps should be taken if a contractor's bid is ambiguous? If a bid lacks clarity, ask the contractor to provide a more detailed breakdown of costs and scope. If they are unable or unwilling to clarify, consider this a potential warning sign of their reliability.
How should you handle discrepancies between different contractor bids? To address discrepancies, you can organize a meeting with the contractors involved to discuss and clarify the differences in their proposals. This approach promotes transparency and can help in making an informed decision.
What is the best practice for handling allowances in a bid? It's advisable to negotiate allowances into fixed-price items whenever possible. If allowances are necessary, ensure they are reasonable and based on accurate, up-to-date price information to avoid large variances in the final cost.

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  • Ryan Crownholm