A bid is a price given by a contractor to complete a specific project. Sometimes jobs are “bid out”, meaning there are multiple contractors all bidding for the same job. Or you might have a contractor over to look at a project, and later they send you a “bid”. But what does that mean?
Bids are generally all inclusive
A bid is generally the grand total price to complete your project. It usually includes all the labor and materials required to bring your project to life. If you are speaking with a general contractor, their bid will also include the costs of hiring any necessary subcontractors to complete your project.
The Benefits of Bids
Bids allow you to directly compare the price of a project when completed by contractor A vs contractor B. This varies pretty drastically compared to hiring someone based on “Time and Material”. It's much harder to compare prices in terms of dollars per hour. Contractor A could cost less per hour but they might be a much slower worker than contractor B. Bids let you compare what matters- Total cost of project.
Furthermore, bids give you a set price. Unlike an estimate, a bid is the contractor promising that this project is going to cost X amount of dollars. Not more, not less (this assumes the scope of work does not change during the project). This allows people to budget and make sure their project isn't going to cost more than they were planning on.
The Costs of Bids
Generally, the customer pays a little more for the project when the price is given as a bid. Why? Because when a contractor is giving a bid, he is having to predict the future. There are many unknowns in the construction business. Exactly how much material is going to be used? Exactly how long is the project going to take? And so on. By giving you a set price on your project, the contractor is taking a risk. If things go well, the contractor may make a little extra money. If things go poorly, they will make less. They could even lose money. However, the price to the customer remains the same.
If bids generally cost more, wouldn't I be better off hiring them on time and material?
Maybe. Maybe not. Thats the risk I am talking about. If the job goes well and according to plan, yes you would have saved money if they were on time and material. However, If the job goes poorly, you could end up with a much bigger bill than you expected. Let me explain with a story.
I once underbid a job by half. The price that I bid was $15,000. The project ended up costing $30,000. What happened? There were many unforeseen circumstances and some materials that fought us like crazy. As a result, the job ended up taking about twice as long as I had expected. That really hurt. However, it was a risk I had accepted by giving that bid. If I had gone time and material, the customer would have been left with a bill $15,000 dollars greater than what they had planned on.
All in All
Bids give security to the price of your project, but there is a chance you may have ended up paying more for the project if it all played out perfectly for the contractor.
Time and materials may end up costing less, but there is no set price. So if unforeseen obstacles arise, you may end up paying more than you initially thought for your project.
Some contractors only give bids and some only work on time and materials. Our decision typically depends on the project. Have no fear in asking your contractor which they plan to do for your project.
Next week we will dive deeper into Time and Materials and explain what it means exactly, the pros and cons, and the types of projects it makes sense for. If this topic, and other Hiring a Contractor topics, interest you then don't forget to subscribe to get the latest articles.
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