What Should Be in a Contractor Bid, And What to Do If It Is Not

Most investors get a contractor bid and look at one number.

The total at the bottom.

That is the wrong number to look at first. By the time you get to the total you should already know whether the bid is worth taking seriously. A number at the bottom of a vague document is not a bid. It is a guess with a signature on it.

Here is what should be in every contractor bid you receive and what it means when something is missing.

Cover Sheet

Name of the project, name and contact information of the contractor, date submitted, and license number. That last one matters more than most investors realize. A contractor who does not put their license number on their bid either does not have one or does not want you checking it. Check it anyway. Every time. Through your state licensing board before you read another word of the document.

Scope of Work

This is the most important section in the entire bid and the one most commonly done wrong.

A scope of work is not a description of what the contractor plans to do. It is a specification of exactly what will be done, using what materials, to what standard, under what conditions. It should call out every trade, every phase, every material specification, and any special requirements like working around other trades, meeting specific code requirements, or coordinating with inspections.

If the scope says install flooring throughout and nothing else that is not a scope. That is a placeholder for a future argument about what flooring throughout actually meant.

Vague scope language is how a forty thousand dollar bid becomes a sixty thousand dollar project. The change orders that kill renovation budgets almost always trace back to scope language that was too loose to hold anyone accountable to anything specific.

Pricing

Line item breakdown. Not a lump sum. Every trade, every material category, every phase of the project with its own number.

A lump sum bid tells you what the contractor wants to charge. A line item bid tells you how they think about the work. The difference between the two is the difference between a number you can evaluate and a number you just have to trust.

Look at each line item against your independent cost estimate or against the other bids you received. The line items that deviate significantly in either direction are where the conversation needs to happen before you sign anything.

Also look for what is not there. Permits. Debris removal. Temporary utilities. Final cleaning. These items are real costs that show up on every project and disappear from most bids. When they are missing they do not disappear from the project. They show up as additions after work has started.

Schedule

Proposed start date, milestone dates, and completion date. Not ranges. Dates.

A contractor who cannot give you a completion date is a contractor who has not thought seriously about how they are going to execute the work. The schedule also tells you whether the contingency exists for permits, inspections, and material lead times or whether the timeline assumes everything goes perfectly.

Tie your payment schedule to the milestone dates in the schedule. Payment for framing releases when framing is complete and inspected. Not when the contractor says it is complete. When it is verified complete.

References

Previous projects with contact information for the owner or the person who hired them. Not a list of project names. Actual people you can call.

Call them. Ask three questions. Did they finish on time. Did they finish on budget. Would you hire them again. The answers to those three questions tell you more about a contractor than anything in the bid document.

Qualifications

License numbers, certifications, and years of experience with this specific type of work. General construction experience and specific renovation experience are not the same thing. A contractor who has built commercial office space for twenty years is not automatically qualified to manage a residential renovation. Ask specifically about projects similar to yours in scope, size, and property type.

Insurance

Certificate of insurance showing general liability coverage and workers compensation. Not a statement that they have insurance. The actual certificate with the carrier name, policy number, coverage amount, and expiration date.

Verify that the expiration date extends through your projected project completion. A policy that expires halfway through your project is not coverage for the second half of your project.

If they do not carry workers compensation get a signed waiver of liability before anyone steps on your property. If someone gets hurt on your job site without proper coverage the liability does not stay with the contractor. It comes to you.

Payment Terms

Milestone based. Not time based. Not percentage of completion based. Milestone based with specific completion criteria for each draw.

Any contractor asking for more than ten percent upfront before work begins is either undercapitalized or planning to use your money to fund another project while yours waits. Neither situation is one you want to be in.

Signatures

Signed by the contractor with their license number next to the signature. This is the document that governs the project. Make sure it is executed properly before anyone touches anything.

The Summary

A contractor bid is not a formality. It is the foundation document for the entire project. What is in it determines what you get. What is missing from it determines what you pay for later.

Read every bid completely. Compare every line item. Call every reference. Verify every license and every insurance certificate.

The investors who do this consistently never wonder why their projects come in over budget. The ones who skip it find out the hard way.

Not sure if the bid you received covers everything it should? That is exactly what I look at.
Schedule a call at calendly.com/jeph-reit