Short answer
Three bids on the same job commonly vary by 40%, and it's almost never because one contractor is cheaper. It's because they're pricing different scopes. Read the exclusions and the allowances first — they tell you what's actually in the number — then compare line by line, not bottom line to bottom line.
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The anatomy of an estimate
A good estimate has five parts. If any are missing, that's information.
**1. Scope of work.** A written description of what will be done, by area and by trade. Not "remodel kitchen." Something closer to: demo existing to studs, replace subfloor as needed, relocate sink 4 ft to the north wall, install owner-selected cabinetry, and so on.
**2. Line items.** Costs broken out by trade or by area — demolition, framing, plumbing, electrical, drywall, tile, cabinetry, countertops, finish carpentry, paint.
**3. Allowances.** Placeholder dollar amounts for items you haven't chosen yet.
**4. Exclusions.** What is explicitly not in this number.
**5. Terms.** Payment schedule, change order process, warranty, timeline.
Allowances: where budgets quietly break
An allowance is a number standing in for a decision you haven't made. "Tile allowance: $6,000." "Plumbing fixture allowance: $4,500."
**Why they're a problem:** a contractor who wants the lowest bottom line sets low allowances. The bid looks competitive, you pick the tile you actually wanted, and the price goes up — through a change order, after you've signed.
**What to ask about every allowance:**
- Is this material only, or does it include labor, setting materials and waste?
- What specific product does this number buy? Show me one.
- What happens if I go over — is it the difference, or the difference plus markup?
- Is delivery included?
**The tell:** a tile allowance of $6 per square foot in a market where the tile people actually choose runs $12–$25 installed. That allowance isn't an estimate, it's a placeholder designed to keep a number low.
Comparing two bids where one has a $6,000 tile allowance and the other has $14,000 is not comparing prices. It's comparing assumptions.
Exclusions: read these first
The exclusions list tells you what a contractor has actually thought about. A thorough one is a good sign, not a red flag.
Common legitimate exclusions:
- Asbestos or lead abatement (unknown until tested)
- Unforeseen structural repair
- Permit fees (often passed through at cost)
- Appliances
- Window treatments
- Landscaping repair
- Utility company charges for a service upgrade
- Work outside the drawn scope
Concerning exclusions:
- Dust protection (should be included)
- Cleanup (should be included)
- Debris removal (should be included)
- Permits — meaning the contractor expects *you* to pull them
Overhead and profit
Contractors have overhead — insurance, vehicles, tools, office, licensing, unbilled estimating time — and they need profit to stay in business.
Some estimates show overhead and profit as a separate line, commonly 10–20% combined. Others build it into each line item. **Neither is wrong.** But if one bid shows a 15% O&P line and another shows none, the second one has it distributed into the line items, not omitted. Comparing them without understanding that leads to the wrong conclusion.
If a bid genuinely has no overhead or profit in it, that contractor is either mispricing or is not going to be in business long enough to honor the warranty.
Contingency
Contingency is a reserve for what's found once the walls open — not a slush fund.
**Where it belongs:** a named line in the estimate, held by you, spent only against documented discovered conditions with your approval.
**How much:**
- Newer construction, defined scope: 10%
- Pre-1980 house: 10–15%
- Pre-1960 house or a gut renovation: 15–20%
A bid with no contingency on a 1920s Seattle house is not a lower price. It's the same price with the surprises unaccounted for.
Why three bids differ by 40%
In order of frequency:
1. **Different scopes.** One includes new subfloor, another assumes the existing is fine. One rewires, another doesn't.
2. **Different allowances.** As above.
3. **Different quality levels.** Stock cabinets with particleboard boxes vs. plywood-box semi-custom. Both are "cabinets" on a line item.
4. **Different labor models.** Employees vs. lowest-bid subcontractors.
5. **Different exclusions.** The cheapest bid often has the longest exclusions list.
6. **Different contingency and O&P treatment.**
7. **Actual price differences.** Real, but usually the smallest factor.
The way to see through this: give all three contractors **the same written scope** and ask them all to price it. Then compare line by line. Where a line is dramatically lower, ask why — the answer is nearly always a scope difference.
The comparison worksheet
Put the three bids side by side in a spreadsheet:
