Construction Bids and Construction Estimates – What’s the Difference?
Construction clients may use the terms estimate and bid interchangeably which contractors are likely to attach specific meanings to each work. These two definitions correspond to different parts of the process of calculating a contractor’s internal costs and then setting out the final price that is charged to the client.
Estimates are all About Costs
The client wants to know the price of a specific project and, as a contractor you’ll need to know what expenses will be incurred while carrying out the work (for example the costs of labour and materials). The difference between your expenses (the costing estimate) and the price you present to the client (the price estimate) represents your overall profit. A price estimate provides the client with information, but is not necessarily a commitment from the client or the contractor to go ahead with the project.
An estimate presented to the client should be reasonably accurate. As a contractor, however, you may have your own “internal” estimates which can vary in accuracy as you plan the project.
·A preliminary estimate will enable you to assess the feasibility of the project. Some projects may be too large or too small, or a project may involves risks that you’re not willing to take on. If so, a preliminary estimate will give you an overall view of whether the project is right for your company.
·A square foot estimate is the industry standard costs per square foot, multiplied by the number of square feet (or metric equivalents).
·An assembly estimate contains refined figures and calculations derived from each separate component of the project. Foundations, flooring, windows, roofing, sanitation, etc. may all require differing levels of resources, compared with the more general approach of the square foot estimate.
·The final estimate features the most details and accuracy. This may involve getting written commitments from partners and subcontractors in order to arrive at a firm or official commitment that you can make to the potential client.
The construction bid is a firm offer to the client in which you commit to provide the client with a specified construction at a set price (and often by a set date). If the client approves the bid, you will be expected to honour your commitment and carry out the work described in the bid for the price you’ve committed to.
Some bids and estimates may take a lot of time and effort, particularly for larger projects. When it comes to smaller projects the client may want to make a quick decision and sign the contract if it’s a reasonable estimate. The price estimate can then become the bid that is signed by each party so that the work can commence immediately.
There are software programmes that contractors can use to make estimates quickly, using applications with a built-in database of unit costs. This is a quick and easy way of putting together both estimates and bids and many of these software solutions are cloud based and easy to access.