Why Are Commercial Construction Bids So Different? How to Compare Proposals Beyond Price

Have you sent the same commercial construction project to several contractors, only to get back several very different numbers? One proposal may be noticeably lower than the others while another may include costs or notes you don’t see anywhere else.

So why are commercial construction bids so different?

Often, it’s because the proposals aren’t pricing exactly the same thing. Differences in scope, inclusions, exclusions, allowances, assumptions, trade coverage, and unresolved project details can all change the total.

That’s why comparing commercial construction bids requires looking beyond the number at the bottom of the page.

Why Can Commercial Construction Bids Be So Different?

A commercial construction proposal reflects what a contractor understands about the project at the time they price it.

Even when contractors receive the same drawings, important details may still be interpreted differently or remain unresolved. One proposal may include work another contractor excludes. One may carry an allowance where another has a more defined number. Another may identify a scope question that hasn’t been addressed yet.

Scope and Trade Coverage

It’s best to start with the actual scope of work.You should be thinking about the following questions:

Does each proposal cover the same construction work? Are the same major trades accounted for? Are there pieces of the project that appear in one proposal but not another?

A lower total can look attractive until you discover that part of the required work isn’t included.

That doesn’t automatically mean anything is wrong with the proposal. It means the proposals need to be compared on equivalent scope before the totals tell you very much.

Inclusions and Exclusions

A good commercial construction proposal should help clarify what is included and what is not.

Exclusions are especially important when comparing bids. If one contractor excludes a portion of the work that another contractor carries in their price, the difference between the totals may be easier to explain than it first appears.

Allowances

An allowance is an amount carried in a construction budget for something that hasn’t been completely selected or defined yet.

Allowances are useful when a project still has open decisions, but they also make bid comparison more important.

For example, two contractors may both include an allowance for the same category of work while carrying different amounts. The initial proposal totals will be different even though the final cost will depend on what is eventually selected or required.

When comparing commercial construction bids, look at both the number and what that number is meant to cover.

Assumptions and Clarifications

Contractors sometimes have to price a project before every question has a final answer. The proposal may therefore include assumptions about the scope, building conditions, project requirements, or information shown in the drawings.

If two contractors make different assumptions about the same unresolved issue, they may arrive at different prices without either proposal necessarily being incorrect.

Clarifications help show how a contractor arrived at the number and which questions still need to be resolved.

Existing Conditions and Project Unknowns

Existing commercial buildings add another layer of complexity to estimating.

The intended use of the space, existing building conditions, utilities, equipment needs, landlord requirements, and other project constraints can all influence the eventual scope.

Some of those conditions may be clear before pricing. Others become better understood as planning and design move forward.

When one proposal treats an unresolved condition differently from another, the difference can show up in the price.

How Should You Compare Commercial Construction Bids?

The first step is simple: compare the scope before comparing the totals.

Look at whether the proposals include the same work, carry similar assumptions, address the same major trades, and identify the same unresolved questions.

This process is often called bid leveling.

What Is Bid Leveling in Construction?

Bid leveling is the process of comparing construction proposals against an equivalent scope.

Instead of lining up three totals and choosing the lowest number, the project team looks at what each contractor included, excluded, assumed, or carried as an allowance.

For example, imagine one contractor appears significantly less expensive than the other two. During bid leveling, the owner may discover that the lower proposal excludes a portion of work included in the others.

The original price difference now has context.

Bid leveling helps owners understand whether they’re truly comparing different prices for the same work or different prices for different scopes.

Should You Choose the Lowest Commercial Construction Bid?

A lower bid isn’t automatically a bad bid and a higher bid isn’t automatically a more complete one.

It’s important to understand why the numbers are different.

If one commercial construction proposal is significantly higher or lower than the others, that difference should lead to questions about the scope before it leads to a conclusion about value.

What Should You Ask When Construction Bids Don’t Match?

Before selecting a commercial general contractor, make sure you can answer questions such as:

• Are all contractors pricing the same scope of work?
• What is specifically included and excluded from each proposal?
• Where are allowances being used, and what does each allowance cover?
• What assumptions did each contractor make?
• Are the same major trade scopes included?
• Are there unresolved project details that contractors treated differently?
• Does one proposal contain clarifications or scope questions the others don’t?
• What explains any unusually large difference between the totals?

You don’t need to become a construction estimator to compare proposals well. You do need enough clarity to understand what you’re agreeing to.

Better Bid Comparisons Start Before the Bids Arrive

The quality of a bid comparison depends partly on how clearly the project has been defined before pricing begins.

When the project team understands how the business needs to operate, what the building needs to support, which parts of the scope are required, and which decisions remain open, contractors have better information to work from.

That’s one reason preconstruction planning can be useful well before construction starts.

Early conversations around scope, existing conditions, equipment, priorities, design, and budget help identify questions while the team still has time to resolve them.

For business owners planning a build-out, renovation, or new commercial space in Columbus or Central Ohio, that planning can also make the eventual contractor-selection process easier to understand.

Frequently Asked Questions About Commercial Construction Bids

Why are commercial construction bids so different?

Contractors may be pricing different scopes, assumptions, allowances, exclusions, or unresolved project details.

What should I compare besides the total price?

Compare scope, inclusions, exclusions, allowances, assumptions, trade coverage, and clarifications.

What is bid leveling in construction?

Bid leveling compares multiple proposals against an equivalent scope so the differences are easier to understand.

Should I automatically choose the lowest construction bid?

No. First understand why the number is lower and whether the proposal includes the same work as the others.

What is an allowance in a construction bid?

An allowance is a budgeted amount for work or selections that haven’t been fully defined when the proposal is prepared.

A Commercial Construction Bid Is Only Useful If You Understand What It Includes

A construction proposal should help you make a decision, not leave you guessing about what the number represents.

When commercial construction bids come back far apart, don’t assume the lowest contractor missed something or the highest contractor is overcharging. Start by comparing the scope.

Look at the inclusions, exclusions, allowances, assumptions, trade coverage, and clarifications behind each number. Ask why the proposals differ. Make sure the project you think you’re buying is the project each contractor actually priced.

If you’re planning a commercial construction project, Compton Construction helps owners work through preconstruction, estimating, and commercial general contracting with a clear understanding of scope, budget, and the decisions that need to happen before construction begins.

Talk with Compton about your upcoming commercial project.