Process Guides / By Kerry O'Brien / March 15, 2016
Understanding and Comparing Estimates – How to Level Bids like a Pro
When general contractors send bids for your renovation, you may find that each one is in a different format with different components. Trying to make sense of all of these individual line items and costs can be a daunting process. To better comprehend and compare bids, it helps to think like an industry insider. Architects and developers use a process called “bid leveling” to do this. This process allows you to go through each bid to compare individual elements of a complex renovation, side by side. Not only is Sweeten a free service matching renovators with vetted contractors but we can provide personal support in breaking down and comparing costs between each of the bids. Here are a few ways to approach bid leveling.
Find the big similarities and differences
Even though bids come in a variety of formats, you will probably see that major work categories (like demolition, cabinetry, installation of significant elements like countertops and tile, etc.) are called out specifically in each bid. Find the biggest categories of work in each bid and see how those compare across bids so that you can get a feel for how your candidates are thinking about the work and the time/skill needed to complete it.
As tempting as it is to get really granular on pricing, you need to work with your contractor to view the project holistically. You may find places where bids diverge significantly or you may see categories that are represented in some bids but not others. You may also find that your site visits with individual contractors led to ideas or suggestions that didn’t come up with other candidates, making a line-by-line comparison even more challenging.
The goal here is not to use individual line items to pit contractors against one another or negotiate a particular price down, but instead to talk with your candidates about how they view the work and distribute their time and effort.
You should feel free to follow up with your candidates to clarify any particular costs that jump out at you, to give them an opportunity to provide a price for an idea that may not have come up in your site visit, and to ask for their input on areas where taking a different approach might help you achieve what you want at a lower cost.
Think about materials and labor
There are all sorts of assumptions built into bids in different ways – this can make comparison challenging for even the most seasoned renovator! Your site visits were an opportunity to meet with candidates and give them a broad overview of what you want to do. But, you probably don’t yet know exactly which materials you’ll be buying, so each general contractor is providing an educated estimate based on the finishing level you discussed.
Look for places where major material purchases (and permits, if applicable) are or are not included in the pricing, and see if that varies across bids. Again, the goal here is not to negotiate a particular price down but to clearly compare your options. Don’t walk away from a great contractor because a price that looks high includes materials that aren’t included in another bid, and get clarity on assumptions about materials before you make your decision so you aren’t surprised when it comes time to buy items that weren’t included in the bid.
Either way, you should work with your contractor to place orders for materials that you choose (even though it might be tempting to order materials on your own). That’s because general contractors:
– know how much to buy (and when to buy extra in case issues come up)
– often have access to industry and trade discounts
– handle delivery logistics
– take accountability for checking to ensure that deliveries are correct and complete
All of these factors can save you money and headaches in the long run as you go through your renovation.
Plan and budget for contingencies
You should expect and plan for surprises. Your contractor has a very limited ability to know what is behind the walls and under the floors of your home. The quality of plumbing lines and electrical infrastructure can vary dramatically, sub-floors often need extensive leveling, and the variety of materials used in buildings throughout the last century make it challenging for anyone to anticipate all issues before work begins.
To avoid getting stuck with expenses you didn’t foresee, you should include some contingency funds. 10% is a good starting point, but the actual percentage is up to you. You should talk with your contractor about the possibility of worst-case scenarios and build in contingency funding that makes sense for the scope of the project. You may notice that each bid you receive has a different amount for contingency, so it’s helpful to calculate this into your overall comparison so that you feel comfortable and prepared going into a major renovation.
Clarify work in multiple rooms
If you are working on a large scale renovation across multiple rooms, it may be worthwhile for you to ask that bids group work by room. In doing so, you’ll be able to more easily understand the costs for each space and make revisions or decisions about the scope and cost of the project.
You may find that some work is very easy to divide out by room — kitchen and bathroom work is usually fairly concrete and discrete. You may also find that electrical work, plumbing, millwork, painting, and flooring needs are more challenging to break out by room, so look at the ways in which your contractor is representing these line items so that you can realistically compare across bids.
Cost is a huge factor, but it’s not the only one
Major renovations are significant purchases, but you should be cautious about letting price dictate your decision altogether. You are inviting a team of people into your home and you will need to work together to navigate planning and handle issues as they come up. As you compare estimates, pay attention to your instincts. What qualities did you see in the contractors you met? Who showed enthusiasm for your project and really “got” what you were trying to articulate? Who made you feel excited about working together? Ultimately, you are choosing a skilled craftsperson, not purchasing objects, so be sure to think about the intangible qualities that you value as you consider and compare the tangible costs.
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