WHAT IS AN ESTIMATE?
An estimate is a professional approximation of project cost based on the information reasonably available when it is prepared.
It reflects the contractor's experience, judgment, evaluation of the proposed work, and the level of detail available at that stage of the project. Unless specifically stated otherwise in a written agreement, an estimate is not intended to represent a guaranteed or fixed final price.
The accuracy of an estimate is directly related to the completeness of the information upon which it is based. Preliminary plans, incomplete selections, evolving design, limited site access, or unknown existing conditions can all affect the eventual cost of the work.
Project costs may vary from an estimate because of:
- Incomplete or evolving plans and specifications
- Concealed or unforeseen existing conditions
- Changes in material pricing or availability
- Owner-requested changes in design, materials, or scope
- Labor, access, scheduling, permitting, or site conditions
- Additional information discovered as the project develops
Unless otherwise established by agreement, estimates are intended to assist with planning, budgeting, and decision-making as the project is developed.
An estimate is only as precise as the information available when it is prepared.
WHAT IS A BID?
A bid is a formal offer to perform a defined scope of construction work for a stated price or established pricing structure.
Unlike an estimate, a bid should be based on sufficiently developed project information that allows the contractor to understand and price the work being requested. This may include plans, specifications, material selections, site information, schedule requirements, and other documents that establish the scope of the project.
A bid will typically identify or incorporate:
- The defined scope of work
- The price or pricing structure
- Relevant plans and specifications
- Allowances, if applicable
- Assumptions and exclusions
- Schedule or timing assumptions
- Payment terms and other contractual conditions
When a bid is accepted and incorporated into a signed construction agreement, the agreement establishes the contractual obligations of the parties.
That does not necessarily mean that the project cost can never change. Work outside the defined scope, owner-requested changes, concealed or unforeseen conditions, design revisions, and other circumstances addressed by the construction agreement may result in changes to the contract price.
Those changes should be addressed through the change-order or other documentation process established by the construction agreement.
A bid establishes a price for a defined scope of work — not for work that was never included in that scope.
About The Gem State Group
CHANGE ORDERS & UNFORESEEN CONDITIONS
A signed construction agreement establishes the scope and pricing structure for a project, but it cannot always anticipate every condition or decision that may arise during construction.
A change order is the formal process used to document a change to the contracted work. Depending on the change, it may modify the scope, contract price, project schedule, or a combination of these.
Change orders may result from:
- Owner-requested additions, deletions, or modifications
- Design or material changes
- Concealed or unforeseen existing conditions
- Conditions that differ from the information available when the work was priced
- Required work that was not included in the original scope
- Changes required by permitting authorities, inspectors, engineers, or other project professionals
Unforeseen conditions are particularly important in remodeling and renovation. A contractor can evaluate visible and reasonably accessible conditions before work begins, but no contractor can know with certainty what exists behind every wall, beneath every floor, above every ceiling, or within existing building systems.
When previously unknown conditions are discovered, the appropriate work and associated cost should be evaluated, documented, and addressed in accordance with the construction agreement.
A change in price does not necessarily mean the original estimate or bid was wrong. The important question is whether the work or conditions causing the change were included in — or reasonably identifiable from — the original scope.