The Core Problem
A contractor bid is a legal document. Most homeowners sign it without understanding what they are agreeing to.
The sections you skip are the ones that cost you money. Exclusions define the gap between bid price and true project cost. Allowances determine how much you will actually spend on finishes. The change order clause determines your exposure for every decision made after signing. Read every section. Know what each one means before you sign.
10 Sections of a Contractor Bid — Explained Line by Line
What to look for in each section and the red flags that signal problems.
The opening section should describe the project — address, square footage, number of stories, foundation type, and a general description of what is being built. This sets the baseline for everything that follows.
A quality bid breaks the project into cost categories — foundation, framing, roofing, plumbing, electrical, HVAC, insulation, drywall, finishes, and so on. Each category should show a subtotal.
Allowances are budget placeholders for items not yet selected — cabinets, countertops, flooring, fixtures, appliances, lighting. The contractor sets a dollar amount per category and you pay the difference if your selections exceed it.
The exclusions section lists what is NOT included in the bid. This is one of the most important sections and the one most buyers skip. Exclusions define the gap between the bid price and the true project cost.
General conditions cover the contractor's project overhead — supervision, temporary power and water, job site sanitation, insurance, permits (if included), and project management. This typically runs 5–8% of construction cost.
The general contractor's overhead and profit is typically 15–25% applied to the total subcontractor cost. This is how the GC makes money — it covers their business overhead and profit margin.
Some bids include a contractor contingency — a buffer for unforeseen conditions. This is separate from your own contingency budget. If included, it is typically 3–5% of construction cost.
The payment schedule outlines when payments are due and what triggers each payment. Draws should be tied to construction milestones — foundation complete, framing complete, dry-in, finishes, final completion.
A complete bid includes a projected start date, estimated completion date, and milestones for major phases. This creates accountability for the contractor and sets expectations for your temporary housing and financing.
The change order section defines how modifications to the original scope are handled — who can authorize them, how they are priced, and what markup applies. Change orders happen on almost every build.
What Is Typically NOT in a Contractor Bid
These items are commonly excluded from contractor bids. Add them back at market rates to get the true project cost.
These exclusions typically add $50,000–$200,000 to the true project cost. Always read the exclusions section and add missing items at market rates before comparing bid totals.
Frequently Asked Questions
What should be in a contractor bid for new home construction?
A complete contractor bid should include: a detailed scope of work, line-item cost breakdown by category (minimum 8–12 divisions), realistic allowances, a complete exclusions list, general conditions, GC overhead and profit percentage, a milestone-based payment schedule, a projected timeline with completion date, and a written change order process.
How do I know if a contractor bid is too high?
Compare the bid against an independent cost estimate based on RSMeans data for your location. If the bid is more than 15–20% above the estimate without explanation, ask the contractor to walk through each line item. Common areas of inflation: framing, roofing, and HVAC. Low allowances with high markups on upgrades is another common pattern.
What is a lump sum bid vs. a line-item bid?
A lump sum bid gives you a single total price with little or no breakdown. A line-item bid breaks the project into categories with subtotals. Line-item bids are significantly better for homeowners — you can evaluate what is fair, identify missing scope, and negotiate specific categories. Never sign a lump sum bid without requesting a breakdown.
What are allowances in a contractor bid?
Allowances are budget placeholders for items not yet selected — typically cabinets, countertops, flooring, fixtures, and appliances. The contractor sets a dollar amount; you pay the difference if your selections cost more. Low allowances are the most common way contractors make bids look competitive. Always price your actual selections before signing.
What is typically excluded from a contractor bid?
Common exclusions from contractor bids: land, site work and grading, utility connections, permits (sometimes), driveway, landscaping, appliances, and window treatments. These can add $50,000–$200,000 to the true project cost. Always read the exclusions section carefully and add excluded items back at market rates before comparing bid totals.
Kerem is a construction cost analyst and architectural graduate with a degree from the Illinois Institute of Technology. He has spent over a decade analyzing residential and commercial build costs across all 50 U.S. states, and leads the cost methodology team at Equin Global LLC — the company behind CostToBuildHouse.com.
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