How Are Bids and Estimates Different in Construction?


A New York-based business manager, Mohammad Riaz leads National Restoration Group, Inc., in the Bronx. With his guidance, the company provides a range of services, including masonry, structural, waterproofing, rehabs, and roofing services. In his capacity as manager, Mohammad Riaz handles the bidding process for all projects.

In construction, many people use the terms “estimate” and “bid” interchangeably. However, the two terms have very different implications in terms of price and scope of various projects.

Of the two, estimates are more flexible. These provide customers with information about the expected cost of a certain project. While estimates should be as accurate as possible, there is no expectation that they are 100 percent accurate. Rather, they provide customers with a ballpark figure of the cost of the project, and the actual cost of the project may be either above or below the estimated value.

The purpose of providing an estimate to customers is to manage client expectations. Estimates do not overwhelm clients by providing too many details about the project, but are still accurate enough to help clients compare different contractors and other professionals.

Meanwhile, construction bids are much more precise since they typically represent the final price that is charged to the customer. They are firm offers, and are typically only used when the scope of a proposed project is clearly defined. This is essential for construction professionals because they must evaluate the material, labor, profit, and other costs associated with doing the project to ensure they create an accurate bid.

Due to the fact that creating an accurate bid requires much more effort, customers rarely request a formal bid unless they are genuinely interested in doing business with a particular company. Further, once a customer accepts a bid, companies must adhere to the cost and process outlined in it.