In construction, the words “bid”, “quote”, “proposal” or “estimate” are commonly used interchangeably when they should not be.
The use of these four words can confuse the many stakeholders involved in a project, so it is important to understand what each one means.
Although they sound similar and are often interpreted the same way, the difference between a quote and an estimate or a bid and a proposal is important to clarify because it can be the difference of a chunk of money if used the wrong way.
This guide explains:
The difference between bids, quotes, estimates, and proposals
When each word should be used in the construction industry
The importance of using each term at the appropriate time; and
What written bids, quotes, estimates, and proposals should all include.
CM Fusion is a construction management software that is designed to help construction companies streamline their projects.
CM Fusion’s software is cloud-based, meaning it can be accessed over the internet rather than from the computer and can be used by multiple people.
Through CM Fusion, construction companies and subcontractors can:
Keep track of projects
Manage necessary construction documents
Track change orders
Send and receive bids and estimates
Sometimes “estimate” and “quote” are used interchangeably when they don’t mean to be, so it is important for the involved parties to be clear about what they are looking for when they use either of these words (or “bid” or “proposal”).
A quote is a fixed price based on …
Cost of labor
Cost of materials
Scope of the project
... and is often used when a project is subject to a specific time frame. If a quote is accepted, the work must be completed at that price.
An estimate is an approximation of cost to help the client understand a general idea of what the total cost of a project or parts of a project might be. A written estimate usually includes more than just costs:
Timeline and dates
Project scope; and
A bid is typically used when a project is already outlined and in need of a worker. The requirements are laid out and potential workers can bid to do the work by coming up with a price it would cost to complete the project.
Similar to a bid, a proposal is all-encompassing and includes all of the information a quote, estimate, and bid typically offers. Proposals are used to showcase what a company can provide to the client and usually include:
Detailed project scope
Before moving forward with providing any numbers, you should clarify what your client wants to avoid any conflict or confusion down the road.
Are they asking for a quote or an estimate? Did they want a bid or a proposal?
You might discuss things like:
Is your client okay with small fluctuations in the cost or are they only interested in fixed numbers?
Do they want an itemized breakdown of costs and services?
Are they interested in more information than just the cost?
Do they want a proposal that showcases your work before moving forward?
What is the difference between a quote and an estimate? What about a bid and a proposal?
In the construction industry, you might hear these words used interchangeably, but it is important to clarify what a client, supplier, or contractor is really looking for when one of these words is used.
Definitions might vary based on:
Which part of the country (or world) that you live in
The section of the construction industry you are working in (residential vs. commercial)
Which stakeholder is speaking (owner, contractor, subcontractor, suppliers, etc.)
In construction, a quote is usually referring to a fixed price that is time-sensitive due to fluctuations in the price of materials.
This is only one definition of a “quote” and is normally used a lot in smaller construction and residential construction.
For example, a client might be interested in a quote for:
Installing new countertops in their bathrooms
Laying new flooring throughout their home; or
Adding backsplash in the kitchen.
A quote should be used when a stakeholder is interested in a close-target cost estimate for anything related to a construction project.
All parties should be aware that the cost provided in a quote can and might change slightly before the project is complete.
In construction, an estimate is typically used to give an idea of the total price for a project or a specific part of a project.
Here’s how estimates work:
The contractor or subcontractor uses the specifications provided (often in a blueprint) to determine what is needed.
They do takeoffs, which can be measuring spaces or counting necessary materials (like light fixtures), to come up with an accurate estimate.
They provide the estimate for the complete project or their part of the project to the client.
In commercial construction, where CM Fusion specializes, a quote and estimate can be used interchangeably because they both refer to the process of looking at blueprints, doing takeoffs, and providing a list of materials, labor, and pricing.
The word “estimate” should be used when a client is looking for contractors or subcontractors to provide an as-accurate-as-possible list of materials, labor, and pricing for a project. The client should be aware that these numbers can change.
In construction, a bid is when subcontractors review the scope of a project and provide a price that they’d be able to complete the project for the client. After receiving all of the bids, the client can choose which one to move forward with for the work.
In an effort to win the contract, when subcontractors submit construction bids, they typically include:
A competitive estimated cost
Project scope; and
Work schedule and timeline
Bids are used when clients are searching for one or more subcontractors among many subcontractors and want to find the best value for their money. The comprehensive strategy (cost, scope, schedule) included with the construction bid can help a subcontractor secure a job.
Construction proposals are usually offered when there is bidding on a project. Because of this, these two words are often used interchangeably in the construction industry or can be confused for one another.
Construction proposals are used to show what your company offers. They should include:
Specifications of the project
Scope of project
Costs and terms
A proposal is usually used when there is a bid happening for a project. The proposal helps showcase your company’s work and what you can offer for the project.
It is not uncommon for the words bid, proposal, quote, or estimate to be used interchangeably in the construction industry. Although clients and contractors should clarify exactly what it is that they are looking for, all four written documents should include some version of the same elements:
The materials provided
The pricing for the materials
The cost of labor; and
The timeline for completion of the project
A builder estimate or quote will include all of the materials that will be provided throughout the project because the price presented to the client has taken the necessary materials into account when creating an accurate or close-to-accurate number.
Estimates, quotes, bids, and proposals will all include pricing for the project materials. This is important because materials play the largest role in the cost of a project.
The document will often include a markup added by the contractor or subcontractor to the supplier cost.
Doing work for a project takes time, and time is money. The cost of labor should always be included in any of these documents (bids, proposals, quotes, or estimates) because it can heavily affect the final numbers.
In construction, labor costs are approximately 25-35% of the total project costs.
How long will it take for the project to be complete? Because time is money, this has to be included in any bid, proposal, quote, or estimate.
Gathering and managing all of the necessary documents and information for construction projects can be difficult to do.
With all of the required paperwork and the back-and-forth communication between clients, construction companies, and subcontractors, it is not unlikely that information gets lost in the shuffle.
CM Fusion’s cloud-based construction management software helps to streamline projects and manages the bidding process all through the internet.
The mobile-ready software provides more benefits than managing your bidding, like:
Keeping track of schedules
Daily field reports
Organized project tasks
If you are trying to figure out where to look now, our company CM Fusion offers a free version of Construction Project Management Software. Not to mention, our customers brag about it’s ease of use, so you should be able to sign up and start managing your projects in minutes.