Why Two Contractors Quote the Same Job Differently

Owners see it on nearly every competitively bid project: two qualified contractors receive the same drawings, the same specifications and the same addenda, and return numbers that are hundreds of thousands of dollars apart. The instinct is to assume one of them is padding the price or the other missed something. Usually neither is true. The spread comes from a handful of decisions every estimator makes before the first quantity hits the spreadsheet, and most of them are invisible on the bid form.

The drawings are the same. The assumptions are not.

A bid is not a measurement. It is a measurement multiplied by a set of assumptions about how the work will actually go: who does what, how fast, with material bought when, at what waste, under what schedule, with what margin and what cushion for the unknown. Change any one of those and the bottom line moves. Change several at once, in the same direction, and two honest bids can land 15 to 20 percent apart on identical documents.

The seven reasons two bids diverge

1. Scope interpretation. Where the drawings are silent or the specs conflict, one estimator carries the work and the other assumes it belongs to someone else: the landlord, a separate vendor or a later phase. Above-ceiling conditions, sprinkler head relocations, fire-stopping and low-voltage pathways are the usual suspects on interior work.
2. Labor productivity assumptions. The same 9,000 SF of drywall can be priced at 55 SF per labor hour or 40 SF per hour depending on whether the estimator expects an empty floor plate with normal hours or an occupied building with after-hours noise restrictions. Labor drives 35 to 50 percent of most interior bids, so this assumption alone can move the total by several points.
3. Material pricing dates. A steel stud and gypsum quote pulled eight weeks ago is not the same number as one pulled this week. Estimators who bid from a stale database or a prior job's pricing land lower in a rising market and higher in a falling one.
4. Waste factors. Carpet tile at 5 percent waste versus 10 percent, drywall at 7 versus 12, ceiling tile at 3 versus 8. Each is defensible depending on the layout, and on a 12,000 SF floor plate they add up to real dollars.
5. General conditions. Schedule duration, supervision, hoisting, dumpsters, temporary protection and cleanup are priced per week. An estimator carrying 18 weeks and a full-time superintendent will be well above one carrying 14 weeks and a working foreman.
6. Markup structure. Overhead and fee percentages differ by company, but so does what they are applied to. Some firms mark up subcontractor quotes at the same rate as self-performed work; others apply a reduced rate. Some roll insurance and bond into fee; others list them as separate lines.
7. Risk pricing. Contingency, allowances and escalation are where an estimator prices what the drawings cannot show. One bidder may carry nothing and plan to recover unknowns through change orders; another carries a visible line item and competes with it showing.

A worked example: 12,000 SF office tenant improvement

Consider a second-generation office TI, 12,000 SF on a single floor, with new partitions, finishes, lighting, a small break room and HVAC rebalancing. Two general contractors bid from the same 100 percent CD set. Bid A comes in at $1,380,000, about $115 per SF. Bid B comes in at $1,628,000, about $136 per SF. The gap is $248,000, almost exactly 18 percent. When the owner's representative asked both bidders to walk through their assumptions, the difference broke down like this.

Not one of those decisions is wrong on its face. Bid A read the lease exhibit and concluded the landlord owns sprinkler relocations. Bid B read the same exhibit and concluded the landlord owns only the main loop. Bid A assumed the floor would be vacant because the RFP implied it; Bid B called the property manager and learned two suites on the same floor would stay occupied. The 18 percent is not padding and it is not an error. It is two different projects priced from one set of drawings.

What the low bid is really telling you

A low bid is not automatically the better buy. If Bid A wins and the ceiling grid turns out to need replacement, the owner pays for it as a change order at the contractor's change-order markup, usually higher than the bid markup, and with no competition. If the floor turns out to be occupied, the after-hours premium arrives as a claim. Bid A's $1,380,000 could plausibly finish at $1,520,000 or more. Bid B's $1,628,000 may finish at $1,628,000.

How owners should level competing bids

Bid leveling is the process of adjusting each bid to a common scope and common assumptions so you are comparing the same project. It takes a few hours and saves far more in disputes.

• Issue a scope matrix with the bid documents listing every gray-area item (ceiling grid, sprinkler relocations, fire-stopping, low-voltage pathways, utility fees, permits) and require each bidder to mark it included, excluded or by others.
• Require a schedule of values in CSI MasterFormat divisions so general conditions, overhead and fee are visible as separate lines rather than buried in unit costs.
• Ask for the duration and staffing plan each bidder priced, in weeks and headcount, and normalize general conditions to the duration you actually expect.
• Request material pricing dates for the five largest commodity items and ask whether quotes are firm through award.
• Ask each bidder to state contingency and allowances explicitly. A bid with zero contingency is a bid that will recover unknowns through change orders.
• Add plugs to the low bid for every excluded item the high bid carried, then compare. That adjusted number is the real spread.

Before you sign

Once the bids are leveled, the spread in our example drops from 18 percent to under 5 percent, and the owner can decide on qualifications, schedule and references rather than on a number that was never comparable. If you do not have the time or the in-house estimating depth to do the leveling, an independent estimate built from the same documents gives you a third reference point and a line-by-line basis for the conversation with both bidders.