If you’re in the construction industry, it’s not uncommon for people to talk about quotes, estimates, bids, and proposals and use the words interchangeably. So, which term wins in the battle for construction supremacy? Find out below in Quote vs. Estimate in Construction: What’s the Difference?
Depending on where you’re from, you might walk onto a job site and hear people using the terms quote and estimate and proposal and bid mutually. Although they take on different meanings based on who is using the word, they convey similar things. For example, how people from different areas might say “Hi” while others say “Hello” and some who even say “Howdy!” Although fundamentally different sayings, they all convey the same thing–a way of greeting.
Putting all of the subtleties aside, what is the real difference between Quote vs. Estimate and Bid vs. Proposal, and when should you use each? Is the Quote vs. Estimate even a battle because these words are easily interchangeable. What it boils down to is the intent of the person using the word or words and the context in communicating with the second party.
That might sound confusing, but what it means is that as a subcontractor, you must clarify what the client wants when they ask for one of these documents. The client might think they need you to send over a completed proposal when, in reality, an estimate would be sufficient for their needs. That’s why you must know the differences between a Quote vs. Estimate vs. Proposal vs. Bid and require clarification of your client’s expectations.
Below, I highlight some fundamental differences between the construction quote, estimate, proposal, and bid. Let the battle begin.
What is a Quote?
In construction, a quote is a document that has a detailed breakdown of the expected costs that are associated with a proposed project. This includes facets like labor cost, material costs, and quantities. Usually, quotes are only going to be valid for a certain period of time–generally about a month. The reason that quotes can expire is that the costs of materials and labor demands can fluctuate over time.
Quotes rely heavily on the supply and demand of the materials and labor around the region of the project. For example, materials like lumber don’t always have a quick turn around time. Lumber availability in the region is a concern and may have to be shipped from a distant location. Ultimately, it can take time for suppliers to catch up to the unanticipated demand, which is why quotes have to be thought out and have expirations. Quotes are generally discussed before any work begins.
What is an Estimate?
Construction estimates are used to get a general idea about how much a project might cost to complete. Contractors look at the specs of a project and determine how much labor and raw materials they will need. Then the contractors gather up the quotes for materials and use that to give an estimate for a job.
An estimate may also include other facets of a job, such as the overhead equipment costs, and taxes associated with a project. It’s a best practice for contractors to draft an estimate before submitting a bid or proposal.
What is a Bid?
Now that you have a quote for materials in hand and your overall projected project estimate, you need to submit a bid. In construction, a bid may refer to a document that illustrates the price for performing a specified amount of work at a specific price within a certain amount of time. The bid may also include designs, plans, or illustrations of the proposed project. A bid can also be referred to as the specific price offered in a document.
On big jobs, general contractors might get multiple bids from multiple subcontractors to complete one section of work on a project. For example, a general contractor might pick a trade contractor to do all the windows on a project. They would use the bid submitted by the window trade contractor and use that towards the budget for the entire project/building.
What is a Proposal?
Lastly, there is a proposal. The proposal brings together all of our previous terms into a detailed document that gets submitted as part of the process for winning business.
Proposals generally include:
- Quotes received from the supplies for all the raw materials for completing the project
- An estimate of the costs associated with things like labor cost, taxes, and other overhead items
- An overall bid (or cost) to complete the work, based on your quotes and estimates
- Proposals also include the type of material that will be used, such as the type of wood, concrete, or windows. They also can consist of the timeline and payment schedule for the entire project.
Construction projects are overburdened with paperwork not only before the start but during and after the project. Well, there’s a solution. Self-performing contractors can rely on field-first project management software with document management and control functionality. Imagine having all of your documents and work in process data accessible online – from any location. In regards to estimates, these are easily imported into the project management platform so contractors can manage to work in process – what’s estimated, real-time job costs and current billings — daily, until close-out. Imagine connecting your project management platform to your accounting system for payments. No more duplicate data entry or loose ends for invoicing and getting paid much faster. With data (labor, time, and materials) easily collected from users’ mobile devices on the jobsite, real-time becomes the new reality for both the office and jobsite teams. Increasing operational efficiency and productivity hits new levels for the entire company.
Although the differences between a Quote vs. Estimate vs. Bid vs. Proposal might seem quite obvious, there are still nuances to each term and needs to be clearly articulated for clients. It’s always good to take a look back at the definitions and examples of each, so you understand your client’s expectations. If you still aren’t sure what a client wants from you, the best thing is to ask. It is better to be well informed and meet all the criteria then to under-deliver and lose out on a job because of it. And the winner of the battle between the Quote vs. Estimate is? A tie, since it is shrouded in context and clarity with your customer.