What’s the Difference Between a Bid or Estimate Proposal?

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By George DeMare, Vice President Business Development

“The cost” is one of the first things homeowners want to know when planning a home remodel or upgrade.

Determining price involves defining what work needs to be done in coordination with materials and labor. Once the cost is determined, a contractor provides a bid or an estimated proposal.

Bid Style Proposal

 Smaller projects like windows, roofs, or floor installations are almost always presented with a bid style proposal. A fixed-price or all-inclusive bid style is a proposal where the contractor looks at the situation, assesses the amount of work and materials needed, then offers a single price for the work.

The biggest positive aspect of a bid-based proposal is a guaranteed price for a specific job at a specific price. If the project costs increase, the contractor will (to a degree) absorb them within the contingency. A budget can be determined easier, and project costs are less likely to get out of control.

Downsides of bid style proposals include the contractor possibly buying cheaper materials and hiring the least expensive sub-contractors to ensure a higher profit margin. Only a reasonable amount of unexpected costs can be covered by the built-in contingency. Bid proposals make it harder to compare between different contractors because items may be listed differently.

Estimate (Or Time & Materials) Proposal

 In an estimate style proposal (also called a time-material or cost-plus contract) every item that makes up the project is listed in fine detail. The homeowner is billed for the materials used, actual hours worked, and work performed by subcontractors. The contractor’s fee is expressed in the form of a percentage of the project cost.

Estimate proposals are easy to compare side by side and give a homeowner more control over a project. Contractors are less likely to shop around for lower-priced materials and sub-contractors.

This type of contract is best for homeowners who are less cautious of risk and like the prospect of saving more money. Bear in mind, the contractor’s fee is included in the project cost and the contractor stands to make more money with higher project