When you’re planning a home renovation project, getting bids from different contractors is a necessary step. But here’s the thing—you’ll probably notice these bids are all over the place. This can be pretty confusing — maybe even a bit annoying. You’re just exploring different contractor options to figure out what your project will cost, and instead, the prices vary so much that you don’t know what to expect.
At Lamont Bros. Design & Construction, we’ve seen firsthand the factors that cause these discrepancies among contractor bids. We’ve also seen homeowners make the mistake of hiring the contractor they thought was the cheapest, only to end up with a home remodel that cost them more time and money than they wanted to spend. We definitely don’t want to see you make this same mistake.
This article will explain the common reasons for varying contractor bids, helping you understand why different contractor prices can vary in the bids they present. By the time you finish reading, you’ll know five of the most common reasons for discrepancies among contractor bid prices. With this information, you’ll be better equipped to select a contractor based on all of their qualifications, and not just the price they present to you.
- It’s Not the Same Project
- One Contractor Isn’t Charging Enough
- One Contractor Is Charging Too Much
- You’re Dealing with a “Bait & Raise” Contractor
- The Contractor Made a Mistake
1. It’s Not the Same Project
When you’re looking at contractor bids, it might seem like you’re comparing apples to apples. But, more often than not, it’s not a perfect comparison. Different contractors can bid on the same project with different scopes of work, leading to a wide range of prices.
Not all Services or Products are Included in the Bid
One bid from one contractor might cover the entire remodeling process — full design services, project management, permitting, you name it. Another might just cover the bare minimum labor and materials required to do the job. Naturally, the more services included, the higher the price. Here’s a quick rundown of services that might or might not be included in your bid:
Design: Some contractors include a complete design process in their bid. It usually costs an extra 5-10%, but it means the project is fully developed when it moves to construction.
Project Management: Some bids cover comprehensive project management, taking care of every detail from start to finish. Others might expect you to be more hands-on, managing the project and hiring subcontractors yourself.
Permitting: The cost and effort of obtaining permits can also vary from contractor to contractor, impacting their prices. Some contractors handle this for you, while others might leave it up to you.
These differences can make a lower bid look attractive, but you might be missing out on crucial components of the project.
Project Definition and Specifications
Even if two bids include the same services, they might not be bidding on the same project because the project itself isn’t defined well enough. A detailed remodeling project with clear construction documents, selections, and specifications leads to more accurate bids. If the details are vague, a contractor might bid too high or too low because they don’t fully understand your vision. This difference in expectations often explains why some contractor bid prices vary for the same job.
When a project isn’t clearly defined, it leaves room for interpretation. One contractor might see the vague details and assume a bare-bones approach, while another might envision high-end luxury upgrades and include those in their bid.
This is why detailed plans and specifications are crucial. They ensure everyone is on the same page and that the bids you receive are for the same project, making comparisons fair and meaningful.
2. One Contractor Isn’t Charging Enough
Sometimes, a bid might come in much lower than others not because the price is better, but because the contractor is charging too little for the work. This situation often arises for a few reasons.
Unsustainable Pricing
A contractor might start out with low prices to attract clients, especially if they’re new to the industry.
If you can find a trustworthy contractor who is just getting started and is offering lower prices to build their brand, this could be a great option for you. However, keep in mind that contractors who are just starting out do carry a higher level of risk to the client.
It’s also worth noting that underbidding prices is not a sustainable practice in the long run. While it’s fine to bid low for the sake of winning jobs and gaining experience, contracts that do this for two long won’t make enough to cover their costs and stay in business.
Potential Cash Flow Problems
Contractors who consistently charge too little for their might struggle with cash flow issues due to not having enough cash on hand.
This can lead to delays as they juggle multiple projects to make ends meet, cut corners to save costs, or even disappear before completing the work, leaving you with an unfinished project.
How to Spot Undervalued Bids
Experience: Check how long the contractor has been in business. A contractor who’s been around for less than five years might still be figuring out sustainable pricing.
Part-Time Work: Be wary of contractors who seem to be working part-time or have other jobs. If they have other responsibilities, they may not give your project the attention you expect.
Price Comparison: If a bid is significantly lower than others, it could be a red flag. Compare it to other bids to see if it’s unreasonably low. If you think a bid is suspiciously low, don’t be afraid to ask the contractor why.
3. One Contractor Is Charging Too Much
While some bids come in too low, other contractor prices may vary in the opposite direction, coming in higher than anticipated. Understanding why a contractor is charging more can help you determine whether the extra cost is justified or if you’re being overcharged.
High Overhead Costs
Some contractors might have higher overhead costs, which may include expenses such as office or showroom space, administrative staff, and high-end equipment. While these additional overhead items may increase the cost of the project, they also provide a level of value to the client that some deem worth the extra expense.
Reputation and Experience
Contractors with a long-standing reputation and extensive experience in the industry often charge more for their services. They might justify this by pointing to their track record of successful projects and satisfied clients. While paying for experience and a proven track record can be a wise choice, it’s up to you to decide if this is worth the additional cost.
Marketing and Sales Tactics
Be cautious of contractors who bid a high initial price and then coax you into signing a contract by offering massive discounts. These tactics can inflate the initial bid, making it appear as though you’re getting a deal when, in reality, they’re just setting the initial price high so the discount appears to offer greater savings.
How to Spot an Overpriced Bid
Compare Multiple Bids: Look at several bids to determine the average price for your project. If one bid is significantly higher without a clear justification, it might be overpriced.
Ask for Detailed Explanations: Request a breakdown of the costs and ask the contractor to explain why their bid is higher. If the reasons are vague or lack adequate detail to justify the high cost, it’s a red flag.
Evaluate the Contractor’s History: Check reviews, ask for references, and look at their portfolio. A contractor who consistently charges more should have a track record of delivering exceptional value.
4. You’re Dealing with a ‘Bait and Raise’ Contractor
One of the more deceptive practices that is unfortunately prevalent in the construction industry is the ‘bait and raise’ tactic. This involves initially providing a low bid to secure the job, only to increase the price significantly once the project is underway through various change orders and additional charges.
Incompetent Budgeting
Some contractors might not have a thorough understanding of the project’s requirements from the start. This can lead to initial bids that are too low because they haven’t accounted for all necessary work and materials. Once the project begins, they realize the scope and budget need to be adjusted upwards, leaving you with unexpected costs.
Outright Deception
More unscrupulous contractors may deliberately provide a low initial bid with the intention of raising the price later. They might omit certain cost items or understate the complexity of the project to make their bid more attractive. Once you’re committed, they start adding costs through change orders and claiming unforeseen complications.
How to Spot “Bait and Raise” Contractors
Lack of Detailed Planning: If the bid lacks detailed construction drawings and specifications, it’s a red flag. A comprehensive bid should include detailed plans that outline every aspect of the project.
Frequent Change Orders: Contractors who frequently issue change orders for additional costs not included in the original bid should be approached with caution. While some changes are normal, an excessive number can indicate poor planning or a deliberate strategy to increase costs.
Cost-Plus Contracts: Avoid contractors who operate on a cost-plus contract. Without a fixed-price agreement, you’re essentially handing your contractor a blank check. With this contract model, it’s very easy for costs to balloon out of control.
Protecting Yourself from ‘Bait and Raise’ Tactics
Ask For Detailed Bids: Ensure that the bids you receive are comprehensive and include all aspects of the project. Detailed plans and specifications should be part of the bid to minimize the risk of unexpected costs.
Regular Updates: Choose a contractor who provides regular pricing updates based on actual progress and changes in the project scope. This transparency helps prevent unexpected cost increases during construction.
Fixed-Price Contracts: Insist on a fixed-price contract to protect yourself from cost overruns. This type of contract clearly defines the project scope and costs before construction begins, reducing the likelihood of unexpected charges.
5. Mistakes in the Bid
Sometimes, the reason for a wide variance in contractor bids is simply a mistake. Errors in the estimating process can cause the bid to vary greatly from other contractor prices. Understanding how to identify and address these mistakes can save you from potential headaches down the road.
Human Error
Contractors are human, and humans make mistakes. A simple typo, a misplaced decimal point, or an oversight in the materials list can lead to a bid that’s either much higher or much lower than it should be. These errors are usually unintentional but can have significant consequences for your project budget.
Inaccurate Measurements
Errors in measuring your space or estimating quantities of required materials can lead to incorrect bids. For example, underestimating the amount of lumber needed to fram an addition can result in a lower bid that doesn’t reflect the true cost of the project. Conversely, overestimating can inflate the bid too high.
How to Spot Mistakes in Bids
Careful Review: Carefully review each bid for accuracy. Look for inconsistencies or items that seem unusually high or low. If something doesn’t look right, ask the contractor for clarification.
Ask Questions: Don’t hesitate to ask the contractor how they arrived at their numbers. If there’s something they might have missed during the estimation process, asking questions about the bid might help them catch it and resolve the issue.
Choose Experienced Contractors: Work with contractors who have a proven track record and experience in similar projects. Experienced contractors are less likely to make mistakes in their bids.
Want To Find the Best Contractor For Your Remodel?
Now that you understand why different contractors vary in their initial bid prices, do you feel more confident in your ability to choose the best contractor for your remodel? As you continue to explore your options, take the next step in your research by downloading our free 3-Step Guide to Choosing Your Contractor. In it, you’ll find insights and information from the experts here at Lamont Bros. to help you find and hire the best contractor for your needs.
Think it’s time to start designing your remodel? We can help. Click the button below to schedule a free design consultation with a member of our team. As a full-service remodeling firm, we’ll help you navigate the remodeling process from start to finish.