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Risks of a Low Bid on a Construction Project

As a homeowner comparing bids on a remodel or home building project, it can be tempting to select the lowest bid to keep costs as low as possible. However, there are some serious risks of a low bid on a construction project – if it’s too low. A higher, more accurate bid could actually save you money and hassle in the long run.

Low bids may indicate poor or reduced quality of work. This is one of those instances where ‘you get what you pay for’. The top-level contractors charge what they’re worth, while less experienced ones may try to win a bid by cutting their margins. Not only are there likely to be quality issues with the work delivered, inexperienced contractors are far more likely to have delays due to deficiencies in productivity. A low bid on a construction project may also be an indicator that substandard materials or improper methods may be used to help keep costs low – two things that certainly affect quality. And a poorly constructed project isn’t just less appealing or less durable; it may also be unsafe.

Costly change orders, claims and pricing disputes are caused by nonexistent or minimal margins. With a slim (or nonexistent) margin on a project, there’s no room to absorb minor impacts to the work. Therefore, there’s a greater frequency of change orders, which are most commonly caused by an incorrect estimate or bid in the first place. An overly low bid on a construction project sets the undertaking up for pricing disputes, since it is the number-one result of poor planning. Low bids are sometimes the symptom of miscalculations, omissions, or even misrepresentation.  

Deficient quality, constant changes, and increased prices result in costly delays. Inefficient productivity and increased change orders assuredly result in delays to completion of the construction project. When prices have to be re-negotiated, or quality has to be inspected, the work stops. In the long run, these delays and the additional costs associated with poor quality and multiple unforeseen changes may surpass the cost of a better bid – and certainly, the hassle could likely have been avoided.  

While the initial price tag of a low bid on a construction project may be appealing, you should do your research and weigh the risks to protect yourself and your wallet.

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