How to Read a Bid or Estimate

The parts of a good bid

• Company name, license number, contact info
• Scope of work written room-by-room or phase-by-phase
• Materials named (brand, model, size, color, quantity)
• Labor and materials (lump sum is OK if the scope is detailed)
• Allowances with dollar amounts (what you can spend on tile, fixtures, etc.)
• Exclusions (what is NOT included)
• Permits, inspections and fees
• Demolition, disposal and cleanup
• Unit prices for unknowns (rotted decking per sheet, rock per hour, etc.)
• Schedule: start date and duration
• Payment schedule
• Warranty
• How long the price is good for

Comparing bids apples-to-apples

1. Make a simple table with one row per item (demo, framing, plumbing, fixtures, permit...) and one column per contractor.
2. Mark each item 'included', 'excluded' or 'allowance $___'.
3. Add the cost of anything excluded to that bid so totals compare fairly.
4. Be wary of the lowest bid if it is missing items the others include.
5. Ask each contractor to explain big differences.

Words you'll see

• Allowance - a placeholder budget for items you'll pick later. If you pick something pricier, you pay the difference.
• Exclusion - work the contractor is not doing or pricing.
• Change order - a written, signed change to scope and price after signing.
• Contingency - money set aside for surprises (some bids include it; you can also keep your own).
• Markup/overhead & profit - the contractor's cost of running the business and earning a living. It is normal and legitimate.
• T&M (time and materials) - you pay actual hours and materials, usually with a cap you should insist on.

Commonly missing items

• Permit fees and inspections
• Disposal/dumpster
• Drywall patch and paint after plumbing or electrical
• Trim and transitions
• Repairs found during demo (ask for unit prices)
• Appliance hookups
• Cleanup

Get a second opinion

Compare the bid with a ballpark from the free Project Estimator, then send it for a Second Look Review ($25). We'll point out missing items, vague language and pricing that looks off. Quick question? Try the Contractor's Desk ($5).

Sources

• How To Avoid a Home Improvement Scam Federal Trade Commission
• What should I look for in a contract? California Contractors State License Board
• Home Improvement Contracts consumer guide (PDF) California CSLB
• Before You Hire a Contractor Arizona Registrar of Contractors

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