Estimates, Bids and Proposals – Differences Among Offers in Construction

The construction industry uses three distinct terms to offer their services to customers. Estimates, bids and proposals are terms used to present a dollar value associated with construction work. For less sophisticated contractors, the terms are interchangeable. The reality is far different. Each term has an historical context and legal meaning. Thus, it is prudent for any contractor to understand the differences and use the correct term in an accurate way when offering their respective services. 

This article will explain and elaborate the differences between estimates, bids and proposals. In addition, some legal issues are explained; specifically, as they relate to contract law. As a contractor, it is your responsibility to understand the respective terms and when and how to use them. This knowledge greatly reduces your risks, especially risks associated with lawsuits. It all starts with understanding the most commonly used term in the industry – estimates.

Estimates

An estimate is the most broadly used term in the construction industry. However, it actually has two separate meanings. Estimates are divided into internal and external definitions. Internally, the term refers to the process of identifying the hard costs of construction. External use of the term refers to a verbal communication of how much the contractor will charge for their services. Take note,

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