A bid is not a guess. A bid is a calculation, a strategy, and a commitment all at once.
Get the calculation wrong and you lose money. Get the strategy wrong and you lose the job. Get the commitment wrong and you spend the whole project arguing about change orders.
This is the bid process most experienced general contractors use, broken down into steps you can actually follow. We will cover what to include, what to leave out, and the math that determines whether you make 18 percent or break even.
Step 1: Read the scope of work twice before you touch a calculator
The single biggest source of bid losses is misreading the scope.
Read the scope of work. Then read it again. Highlight every quantity, every spec, every reference to a drawing, every owner-supplied item, every allowance.
If the scope says “kitchen cabinets allowance: $12,000” that is not your number. That is the owner’s allowance and you bid your labor to install around it. If the scope says “owner to supply appliances,” do not bid appliances.
Write down every question you have. Send them to the owner or architect before you bid, in writing. If you guess at the answers, you will guess wrong on the ones that matter most.
Step 2: Do the takeoff
A takeoff is the line-by-line count of every material, every labor hour, and every piece of equipment the project requires.
For a residential project, your takeoff should include at minimum:
- Site work (excavation, grading, utilities)
- Foundation (concrete, rebar, forms, labor)
- Framing (lumber, fasteners, sheathing, labor)
- Exterior (siding, roofing, windows, doors, trim)
- Mechanical (HVAC, plumbing, electrical, each broken into rough and finish)
- Insulation
- Drywall (board, mud, tape, labor, finish level)
- Interior finishes (paint, flooring, cabinets, trim)
- Fixtures (plumbing, electrical, hardware)
- Final (cleaning, punch, warranty walk)
For each line, you need a quantity and a unit cost. Quantities come from the plans. Unit costs come from your historical data, current supplier quotes, or published cost guides if you are starting out.
Step 3: Get subcontractor quotes in writing
You cannot bid a project by assuming what the trades will charge. Send your scope and the relevant plan sheets to each sub and ask for a written quote.
When you receive a quote, check that it covers the full scope you sent. Sub quotes that exclude key items are a leading source of bid losses. “I assumed you were doing the demo” is a $4,000 conversation you should have at bid time, not three weeks in.
Get at least two quotes per trade if you can. The lowest is not always the right number. The most reliable sub at a fair price is usually the right number.
Step 4: Calculate direct costs
Add up:
- Materials (all line items from the takeoff)
- Labor (your in-house crews, including burden)
- Subcontractor quotes
- Equipment rental
This is your direct cost. It is the floor. You cannot bid below this number and survive.
Step 5: Add overhead
Overhead is the cost of running your business that is not project-specific. Office rent. Insurance. Software. Your own salary as the GC. Vehicle costs. Marketing. Bookkeeping.
Calculate your annual overhead. Divide by the dollar volume of projects you do per year. That gives you an overhead percentage to add to every job.
For most small-to-mid GCs, overhead runs 8 to 15 percent of project cost. If you have never calculated it, do it before your next bid.
Step 6: Add profit
Profit is what you take home after the project is done and everyone else is paid.
Industry standard ranges for residential general contractors are 10 to 20 percent. Commercial typically runs 5 to 12 percent. Remodels often justify 15 to 25 percent because of the complexity and risk.
Do not confuse markup with margin. A 20 percent markup is not a 20 percent margin. If your direct cost is $100,000 and you mark up 20 percent, your price is $120,000 and your margin is 16.7 percent of revenue. To get a true 20 percent margin, you mark up 25 percent.
Step 7: Account for contingency
Contingency is money set aside for the unknowns. Hidden rot behind drywall. A subgrade surprise. A material price spike.
For new builds, 3 to 5 percent contingency is typical. For remodels, 8 to 12 percent. For historic or major renovation, 15 percent is not unreasonable.
Contingency is the owner’s money, not yours. Anything unused goes back at project close, or rolls into owner-approved upgrades.
Step 8: Write the bid document
Your bid document should include:
- A clear scope summary (what is included, in plain language)
- A clear list of exclusions (what is NOT included, equally plain)
- Allowances broken out by category
- A schedule with a projected start date and substantial completion date
- Payment terms (deposit, draw schedule, retainage)
- The total price
- Validity period (most bids should expire in 30 days)
- Signature lines
Keep it short. Owners do not read 40-page bids. They read three-page bids that look professional and answer their questions.
Step 9: Submit and follow up
Submit the bid by the deadline, in the format requested.
Follow up three to five business days later. A short email asking if they have any questions about the scope is enough. Most jobs are not lost on price. They are lost on silence.
Common bid mistakes that cost real money
Underbidding labor. New GCs almost always underestimate labor hours. Track your real hours on every project and update your numbers quarterly.
Forgetting soft costs. Permits, inspections, plan review fees, dump fees, portable toilets, site security. These add up.
Skipping the schedule. A bid without a schedule is incomplete. Owners want to know when, not just how much.
Vague exclusions. “Landscaping not included” is not specific. “Final grading included to within 12 inches of finish grade. Sod, plantings, irrigation, and hardscape NOT included” is specific.
Bidding too high too often. If you lose more than 70 percent of your bids, your number is probably right and your sales process is the problem. If you win more than 50 percent, your number is probably too low.
Tracking bids and schedules in one place
Once a bid is won, the projected schedule in the bid document becomes the project schedule. Most GCs lose this transition by rebuilding the schedule from scratch in a different tool.
In Relay, you can paste your bid schedule directly from a spreadsheet or build it from a template, and the same schedule becomes the operational schedule the trades work from. One source of truth from bid through final.
See it at relayconstruct.com.