Why You Should Always Get 3 Bids on Your New Home or Renovation Project

Getting prices from contractors for your construction project probably scares the daylights out of you and for good reason – you don’t really know what you should be paying for the work.

How do you know whether the price you’re offered for your new home or remodeling project is a “good” price?

It’s can be very difficult to know if you’re paying too much, because every custom home or renovation project is different – it’s not anything like buying a car.

By the time you get to the car dealer, you’ve already done a ton of research on the particular car you’re interested in. You should already have a very good idea of what that car should cost.

So how can you compare prices on your one-of-a-kind custom home or remodeling project?

There’s only one reliable way, and that’s competitive bidding, a tried and true process that starts with complete, detailed plans and specifications for your project.

After a general contractor picks up a set of plans from the Architect, he starts by making a series of take-offs.  A take-off is an estimate of the quantity of a particular finish or material based on the plans.

The contractor might estimate he’ll need 80 square feet of granite countertop in the kitchen, for example, and at $50 per square foot, that’s a line item in his bid of $4000.

He’ll also send copies of the plans to his suppliers and subcontractors for prices on the work he’ll hire them to do.  The window supplier will price each unit and send a total to the contractor, and the contractor will be responsible for figuring the price to install the windows.

The contractor will add line items for permits; insurance; temporary utility services, and dozens of others.  Finally, he’ll total them all up and add his overhead and profit.

It’s a time-consuming and nerve-wracking process for the general contractor because he’s got to get it right – too high and he won’t get the job.  Too low and he’ll lose money on the project.

Surprisingly, different contractors bidding from the same set of drawings can come up with substantially different prices, especially when the drawings aren’t as detailed as they should be. That’s too often a culprit.

But just as important, and frequently overlooked, is your choice of contractors to bid on the project. You can’t have two large, professional remodeling contractors bid against two guys and a pick up truck; the differences between their experience, professionalism, access to quality subcontractors, and dedication to their craft will make comparing their bids meaningless.

Likewise, contractors that aren’t used to competitive bidding won’t compare favorably with those that are.

We recently completed the construction drawings for a medium-sized but fairly complex remodeling and addition project with a construction budget of about $240,000.

I recommended two qualified contractors to the owner – contractors I’d worked with many time before and knew well. The owner added the third bidder, someone their neighbor had used for work on their house.

I’d also worked with that third bidder and knew they did top-quality work –but for significantly higher prices than other contractors in the area.  I also knew that they rarely bid on work; they preferred the “design-build” method to deliver their projects.

I didn’t think they were a good fit for our project but the owner insisted, and we kept them on the list.  Here’s how the three prices came out on the $240,000 project:

Bidder 1: $236,000
Bidder 2: $243,000
Bidder 3: $363,000

Clearly, something’s wrong with that last bid at 50% higher than bid #2 – a math error perhaps?

No, the contractor told me, that was his price.  More importantly, it was the price he would expect to get on a similar project.

Imagine if the owner had chosen not to get three bids, and had only taken a price from bidder #3 – he would never have known that he was paying $120,000 more than he had to!

“Bidder #3” boasts a wall of awards, does great quality work, and has a long list of satisfied clients.  And if you’re willing to spend a lot more to assure quality, they might be the right choice for you.

But with the help of your Architect, you should be able to get the same quality work for a far more reasonable price.  And with properly-detailed drawings, a good list of specifications, and three qualified, comparable contractors, your bids should come in reasonably close to each other.

Two bidders aren’t enough to give you confidence in the bids, but four or five is too many to manage – and you’ll greatly decrease a contractors’ motivation to bid if he has only a 20% or 25% chance of getting the job.

The key is three – always get three qualified bids on any significant custom home or remodeling project.

And maybe you’ll save enough on the project to go out and buy that new car you’ve been doing so much research on.


Need expert Residential Architectural advice for your new home or remodeling project? Contact Richard Taylor, AIA at Richard Taylor Architects.

1 Comment
  • Get at least three bids. By having more than one bid, anyone will be able to get a fairly accurate idea of what the work should cost. If the three prices are relatively close, we can usually feel safe taking the lowest bid. If one of the prices is much lower than the others however, it's important to evaluate the contractor carefully before blindly accepting the lowest bid. Suspiciously low bids usually mean inexperienced contractors, or may mean that he or she will use inferior materials.

    08/24/2012 at 10:25 am

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