How to Read a Contractor's Bid: Understanding Estimates and Proposals

A contractor's bid can be three pages or thirty pages. It can be crystal clear or deliberately vague. Learning to read and compare bids is one of the most valuable skills you can develop as a homeowner—it's the difference between getting what you expected and getting surprised by hidden costs.

This guide teaches you how to decode contractor bids, spot red flags, and compare proposals so you can make confident hiring decisions.

What's the Difference: Estimate vs. Bid vs. Proposal?

Contractors use these terms loosely, but they mean different things:

Estimate

An educated guess based on limited information. Usually free, often verbal or brief written. Not binding—final price may vary significantly.

Bid

A specific price for a defined scope of work. More detailed than an estimate. Usually binding if you accept (though terms may allow adjustments for unexpected conditions).

Proposal

A comprehensive document that includes the bid plus terms, timeline, materials, and conditions. This becomes the basis for your contract.

What you want: A detailed written proposal that you fully understand before signing.

Anatomy of a Contractor's Bid

A well-structured bid contains these sections. If any are missing or vague, ask for clarification.

1. Company Information

Should include:

• Company name (legal name, not just trade name)
• Business address
• Phone, email, website
• Washington contractor's license number
• Insurance and bond information

Red flag: No license number listed or generic contact info only.

2. Project Description

Should include:

• Your address and property information
• General description of the project
• Reference to any drawings or specifications
• Date of the site visit/assessment

Red flag: Generic description that could apply to any project.

3. Scope of Work

This is the most important section. It should detail exactly what work will be performed.

Good scope language:

• "Remove and dispose of existing fiberglass shower/tub unit"
• "Install new Kohler Archer 60" x 32" alcove bathtub (model K-1946)"
• "Install Moen Brantford fixtures in brushed nickel (model 6610BN)"
• "Install new exhaust fan, vented to exterior, 80 CFM minimum"

Bad scope language:

• "Bathroom renovation per discussion"
• "Install new tub and fixtures"
• "Standard bathroom upgrades"

What to look for:

• Specific actions (remove, install, repair, replace)
• Specific products (brand, model, size, color)
• Quantities where applicable
• Location of work within your home

4. Materials List

Should include:

• Specific products by brand and model
• Quantities
• Quality level/grade
• Color, finish, or style selections

Watch for "allowances": An allowance is a budget for items you'll select later. For example: "Tile allowance: $500"

Important: Make sure allowances are realistic. A $500 tile allowance for 100 square feet of floor tile might only cover the cheapest options. Ask what that allowance would buy and whether it matches your expectations.

5. What's Excluded

Equally important to what's included is what's not included.

Common exclusions:

• Permits and inspection fees
• Unexpected structural issues
• Hazardous material abatement (asbestos, lead)
• Final cleaning
• Landscaping repair
• Items not specifically listed

If it's not listed in scope and not listed as excluded, ask. Don't assume anything is included.

6. Timeline

Should include:

• Estimated start date
• Project duration
• Major milestones
• Estimated completion date
• Any factors that could affect timing

Red flag: No timeline, or vague "4-6 weeks" without start date.

7. Price

The price section can be formatted several ways:

Lump sum: Single total price for all work. Simplest format, but provides least visibility.

Example:

Total project cost: $45,000

Line-item breakdown: Separates costs by task or area. Better visibility, easier to compare.

Example:

Demolition and debris removal: $2,500
Rough plumbing: $4,200
Electrical work: $3,100
Framing and drywall: $5,500
Tile installation: $4,800
Fixtures and installation: $6,200
Painting and finishing: $2,700
Permits and inspections: $800
Cleanup: $400
Subtotal: $30,200
Project management (10%): $3,020
Total: $33,220

Time and materials (T&M): Pay for actual hours and materials used. Risk falls more on homeowner. Usually used when scope is uncertain.

Example:

Labor rate: $85/hour
Materials: cost plus 15% markup
Estimated total: $8,000-$12,000

Which is best? Lump sum or line-item for defined projects. T&M only when scope genuinely can't be defined upfront (like exploratory repairs).

8. Payment Schedule

Should include:

• Deposit amount
• Progress payment milestones
• Final payment terms
• Accepted payment methods

Standard structure:

• 10% deposit upon contract signing
• Progress payments tied to completed milestones (not calendar dates)
• 10% holdback until final completion and your approval

Red flag: Large upfront payment (more than 1/3), payments tied to dates rather than work completed, or final payment due before completion.

9. Terms and Conditions

Should include:

• Warranty information
• Change order process
• Dispute resolution
• Insurance requirements
• Who pulls permits
• Cancellation policy

10. Validity Period

Bids should state how long the price is valid. Material costs fluctuate, so contractors can't hold prices indefinitely.

Typical: 30-60 days

After expiration: Contractor may need to reprice.

How to Compare Multiple Bids

You should get 3+ bids for any significant project. Here's how to compare them effectively:

Step 1: Normalize the Scope

Before comparing prices, verify all bids cover the same work:

• Does each include the same tasks?
• Are materials comparable quality?
• Are allowances similar?
• Are exclusions the same?

Create a comparison chart:

Item	Contractor A	Contractor B	Contractor C
Demolition	Included	Included	Excluded
Tile allowance	$500	$800	$600
Permits	Included	Extra	Included
Fixture brand	Kohler	Moen	"builder grade"

Adjust for differences before comparing bottom lines.

Step 2: Evaluate the Details

For each bid, ask:

• Is scope specific enough to hold them to?
• Are materials clearly specified?
• Are allowances realistic?
• Is anything suspiciously missing?
• Does timeline make sense?

Step 3: Understand Price Differences

If bids vary significantly, understand why:

Lowest bid might mean:

• Less experienced (lower overhead)
• Cutting corners (inferior materials, fewer workers)
• Desperately need work (cash flow problems?)
• Made a mistake (will try to make it up in change orders)
• Actually more efficient

Highest bid might mean:

• Better materials
• More experienced/reputable
• Including items others excluded
• Premium reputation
• Higher overhead (fancy office, marketing)
• Overpriced

Best value is rarely the lowest price. It's the best combination of quality, reliability, and fair price.

Step 4: Ask Clarifying Questions

Contact each contractor with questions:

• "Your bid is significantly lower—can you explain what accounts for the difference?"
• "I notice you didn't specify [item]—what are you planning to use?"
• "The allowance for [item] seems low—what would that cover?"
• "Can you break down [line item] into more detail?"

Good contractors welcome questions. Evasive answers are a red flag.

Red Flags in Contractor Bids

Be cautious if you see:

Vague Language

• "Work as discussed"
• "Standard quality materials"
• "Approximately" (without range)
• "Labor and materials as needed"

Missing Information

• No license number
• No timeline
• No warranty mention
• No breakdown of costs

Pressure Tactics

• "This price is only good today"
• Unusually aggressive discounts
• Pushing you to decide before you're ready

Unrealistic Numbers

• Significantly below market rate
• Unrealistically short timeline
• Too-good-to-be-true allowances

Payment Red Flags

• More than 1/3 upfront
• "Cash discount"
• Payments not tied to milestones
• Full payment before completion

Questions to Ask About Any Bid

Use these questions to clarify unclear bids:

About scope:

• Can you walk me through exactly what happens each day/week?
• What happens if you find [common problem] during the work?
• Is [specific item] included or excluded?

About materials:

• What specific products are you planning to use?
• What grade/quality level is that?
• Can I see samples or specification sheets?
• Are these products in stock, or could there be delays?

About allowances:

• What would the allowance amount actually buy?
• What happens if I want to upgrade?
• When do I need to make selections?

About price:

• What could cause this price to change?
• How do you handle unexpected issues?
• What's your change order process?

About timeline:

• What could delay this project?
• How many workers will be on site?
• What hours do you work?

Sample Bid Review Checklist

Use this checklist to evaluate each bid you receive:

Company Info:

• License number listed
• Contact information complete
• Insurance/bond mentioned

Scope:

• Work clearly described
• Specific actions listed (remove, install, etc.)
• All discussed items included
• Exclusions clearly stated

Materials:

• Specific brands and models listed
• Allowances are realistic
• Quality level specified

Price:

• Total price clear
• Breakdown provided (line-item preferred)
• Compares reasonably to other bids

Terms:

• Payment schedule reasonable (no more than 1/3 upfront)
• Timeline included with dates
• Warranty terms stated
• Permit responsibility clear
• Change order process described

Overall:

• Professional presentation
• Questions answered clearly
• No pressure tactics
• You understand what you're getting

Converting a Bid to a Contract

Once you've selected a contractor, the bid becomes the basis for your contract. Make sure:

1. All details from the bid are in the contract (don't let them slip)
2. Any verbal agreements are documented (if they said it, put it in writing)
3. Payment schedule is clear with milestones
4. Change order process is defined
5. Start and completion dates are specified
6. Warranty terms are documented
7. You understand everything before signing

Getting Help Reviewing Bids

If you're overwhelmed:

• Ask a knowledgeable friend to review with you
• Consult with an architect or designer (if working with one)
• Hire a home inspector for a consultation on larger projects
• Use our directory to check contractor credentials

Our Washington Contractor Directory lets you verify each bidding contractor's L&I license, bond status, and complaint history—essential background before you compare their prices.

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Need help finding licensed contractors to bid your project? Use our free contractor search to find verified Washington professionals in your area.