Concept

Bidding

What it is

A bid is a contractor’s offer to do a defined piece of work for a set number. On its face it’s a price with a scope. Underneath it’s a pile of assumptions: how many days the job will take, how risky the contractor thinks the work is, how busy they are right now, how confident they are they’ll actually get paid when it’s done. Which is why the same house can come back from one crew at $35K and another at $80K for the same scope.

Why it matters

Most investors read bids like they’re truth. They aren’t. They’re offers. A high bid often means fear tax: the contractor doesn’t know the job well enough and pads the number, or they don’t know you yet so they build in a risk premium. A low bid can mean scope misunderstanding, bad math, or a the hostage setup where the scope balloons mid-project and you’re stuck with their crew on your site.

Your job is to read the bid, not just accept it. “High bids often mean fear tax. Break the job into smaller tasks and the bid comes down.”

How it shows up

Sanity-check every bid with the man day formula: man-days times eight hours times an hourly rate, plus materials, plus roughly 20% markup. If the bid is two or three times that, the contractor is pricing in uncertainty. Break the job into smaller defined tasks and ask them to rebid. The fear tax deflates when the unknown shrinks.

Bundle when you can. A costco bid (give one contractor the whole bathroom, whole kitchen, or whole house) almost always beats a dozen one-off quotes. Subs would rather be on site for six weeks than six afternoons.

Build relationship capital over repeated jobs and your bids get cleaner. The contractor knows your pay schedule, knows your scope is straight, knows you’ll have the next job ready. Their uncertainty drops and so does the price.

Always get three bids. Not because you’re picking the lowest (the lowest is usually the worst), but because the range tells you what the real number is. High is fear tax, low is misunderstanding or trap, middle is usually the truth.

man day formula, fear tax, costco bid, the hostage, scope of work, relationship capital