When planning your new construction or home remodeling project, you want to know the amount you will spend on it. In addition to knowing the amount you are likely to spend on the project, you also want to know the form in which your contract will be. Will it be a fixed price or time and materials?
A fixed price is also called a bid. Time and materials is also called an estimate or cost plus. When you know or understand the subtleties of the contract form, you can make a more informed decision.
A fixed price or bid guarantees you that you will have a specific amount of work accomplished for an agreed amount of money. For instance, you can agree that a contractor will remove or replace three roofing layers of 1,000 square feet with CertainTeed composition roofing inclusive of starter flashing, underlayment and ridge vents for $5,000 including tax.
With a fixed price proposal, the costs should not exceed the amount agreed unless more work is added, changed or subtracted.
Some people prefer fixed prices or bids because the amount specified for the project should not be extended. Thus, changes orders are prevented.
Estimates or Time and Materials
Estimate of cost comes not as a bid but an estimate. The estimate details the line items and the tasks of a project. In addition to the tasks, an estimate provides general costs details or general conditions. These include cleanup, supervision, portable restroom, and materials handling. It also shows tax and markup and costs like liability insurance in some cases. What is included in the line items depends on the company and its approach to estimates.
A major advantage of estimates is the fact that you can compare them. For instance, you can take three estimates to compare and see the amount each contractor thinks your project will cost.
With this knowledge, it’s easy to decide whether to go for a construction bid or estimate.