When working with a general contractor, at some point he is going to present you with one of the following: a bid, estimate, proposal, or quote. The terms don’t always mean the same thing to every general contractor in every corner of the United States but they each have one main definition. Knowing these definitions can help keep you in the loop and informed about what is going on with your commercial building project, especially if this is your first time working with a general contractor.
You will want to know exactly what these terms mean so that you are getting the best deal and the best quality on your building project. Understanding how contractors bill for services can help you keep costs down. If you are taking offers from several general contractors, be sure to have them define the document they give you. You should know if you are receiving a bid, estimate, proposal, or quote from them.
Here are the usual definitions for each of the terms:
According the Merriam-Webster dictionary, a bid can mean that you are offering to do work for a particular price or that someone is offering to pay a particular price for someone’s work. In the construction industry, a bid is a document that a general contractor gives to a potential client that shows how much he will charge to do the work. The word “bid” can also refer to the actual dollar amount in the document.
A bid is created when the scope of the work is clearly defined by the client. Often a bid is given when the client is accepting offers from several general contractors. It’s kind of like during an auction when several people are trying to win one item.
In addition, subcontractors present bids to general contractors in order to win their specific projects such as the plumbing work, the painting, the masonry, etc. Their bid will go into the general contractor’s main bid that is given to the client.
An estimate is just that: an estimation. It is an approximate rough figure that a general contractor gives to a client. The number is based on less clear data and limited information. Estimates are usually done for free in order for the client to get an understanding of roughly how much things will cost. This can help you determine if a certain general contractor is within your budget.
Some estimates are more detailed than others. A detailed one will highlight how much materials and labor might cost for the project. A general contractor might even get a quote from their material supplier.
It’s important to remember that an estimate is not set in stone. You can’t expect the price to stay exactly the same once more details about the project are given to the contractor. The price could go up or down but the contractor is not legally bound to keep the price the same.
A proposal is much more detailed than a bid or an estimate. It is a document that outlines the exact scope of the project, the timeline, the materials used, and the costs. Like a bid, it can also be competitive. It will include bids from subcontractors, raw materials costs, labor costs, taxes, and the contractor’s mark-up. It will show you when your general contractor expects payments.
Often, a proposal can turn into a contract when the client signs it or there may be a place to sign to acknowledge receipt of the proposal. Either way, once accepted, this is the closest you will get to actually starting the project.
A quote is similar to an estimate. It is non-binding until a contract is signed and it is usually based on a specific time frame. For example, you won’t be able to receive a quote from a general contractor and come back a year later expecting the same price.
A quote can also refer to a dollar amount that a contractor receives from a material supplier or other vendor. A general contractor will use the quote that is given to him in the estimate, bid, or proposal that he gives to you. This is why there is a time frame associated with these documents - because material costs are a commodity and they will fluctuate from month to month. If a general contractor gives you a bid, estimate, or proposal based on the cost of goods in April and you don’t move forward with the project until October, the material costs could have changed dramatically. A new document will need to be drafted to reflect current costs.
You can get a free quote on your next building project from Panhandle Steel Buildings by clicking here.
When you are working with a general contractor for the first time, the success of your building project will depend greatly on your knowledge of these terms.