Decoding Remodeling Terms: The Difference Between Estimates, Bids, Quotes, and Proposals

You’re ready to begin remodeling your home. You’re excited and maybe a little nervous, and you can’t wait to get started. You begin talking to contractors and remodeling companies, and suddenly, you’re hit with a lot of new terms: the contractors are talking about estimates, bids, quotes, and proposals, and you don’t understand exactly what they mean. Sometimes it seems like they’re being used interchangeably or differently from one professional to another. It’s confusing and you’re lost. What’s the difference between a proposal and an estimate? How can you understand this contractor terminology?

These aren’t terms you likely use every day, but they’re important to the remodeling process. Understanding what these terms mean can turn you into a savvy and confident client, ready to navigate the remodeling process like a pro.

Estimates

Estimates are generally educated guesses (think: “estimate guesstimate” to help you remember). Contractors give you an estimate when they know the basics of your project, but they haven’t yet answered all the questions. For example, they know you want a total primary bathroom remodel and they know about what size your bathroom is, but they don’t know whether you want a marble or granite vanity, what the configuration of the room will be, and what plumbing and electrical work are needed.

A more exact number can’t be determined yet because the scope of work hasn’t been defined. Until that happens, the estimate is a good baseline to let you know about what to expect, but it won’t be a final number.

Bids

A bid is the number associated with the scope of work. A contractor gives you a bid when they know more details about what you want and are trying to win the project. (Think about auction bids to help you remember–one bidder wins the item.) Many companies will give you a bid upfront and then iron out the details and adjust the price after the fact. McLennan Contracting does not actually bid on jobs the way other contractors do–we put a lot of work and planning in at the front end of the project, in order to give you an accurate quote and proposal instead.

Quotes

Understanding remodeling quotes is easy when you realize that a quote is a fixed number that is presented to you after the design details are all ironed out. It’s the exact amount that you can expect to pay. (Think about how quoting a person means saying the exact thing they say, to help you remember.)

It takes some time and effort to go from the estimate stage to the quote stage because you need to fill in all the blanks with your contractor. You will have to think through and decide on exactly what you want in your remodel because each decision will impact your final cost. This means your contractor has visited your home and measured the space. You’ve explained exactly what you want and he has determined what it will take to do it. You’ve chosen the cabinets you want, the flooring you love, and all the other finishes your remodel requires. And your contractor has calculated all costs.

Quotes often have an expiration date. The cost of labor and materials is constantly changing, so a quote that was provided for you two years ago or even last year won’t be accurate anymore. 

Proposals

Proposals are the whole package. After providing the initial estimate, defining the scope of work needed, and outlining the cost of labor and materials, your contractor will put all of this information into this one master document. All the details have been nailed down, all the plans have been made, and everyone–you, your contractor, all subcontractors–is clear on what this project will entail (think: all the parts of the project are pooled in the proposal, to help you remember). Proposals often include timelines, detailed scope of work, and methodology, as well as prices.

Your proposal is the last piece of the puzzle before demolition and construction begin on your home. But the good thing is that a lot of the work–the decision-making, the planning, and the design–has already happened. You’re well on your way to a finished project before the first hammer is swung.

What the Process Looks Like

Design-build companies like McLennan Contracting differ greatly from traditional companies (also known as design-bid-build contractors) in how they handle these factors. Design-build is the fastest-growing method of remodeling in North America. One big reason for this is that so much of the planning is handled upfront. This leads to more accurate proposals and more client satisfaction with both the process and the outcome. There’s an old saying, “You either plan for it upfront, or you pay for it later.” We believe that thorough planning at the beginning of a project will lead to a much better result.

At McLennan Contracting, we have a tried-and-true system for walking you through the process from estimate to proposal to finished project, and it’s not what you’d get from a traditional contractor. Let’s follow Homeowner Helen through her kitchen remodel to better understand the process.

Helen Homeowner and the Design-Bid-Build Contractor

Helen decides she wants to renovate her kitchen. She does her research and contacts three contractors. When she calls them, each one tells her about how much they think the project will cost. This is the ballpark estimate. Then they come out to her home and discuss the project. Each contractor looks at the space and briefly discusses what Helen wants. They give her a basic amount they believe the project will cost, based on what they see–these are bids. Helen chooses a contractor based on the bids she receives and work begins.

Then her contractor will give her what he calls a quote. But it’s a quote based on the contractor’s ideas–not Helen’s desired finishes. You see, because Helen was not very involved in the design or project development process, the contractor is defining the scope of work for her. This means that decisions will be made as the project goes along. And these decisions will change Helen’s bottom line through a series of change orders or add-on elements that increase the original quoted price. Suddenly what should be a reliable quote is changing drastically– because the project was quoted based on the contractor’s ideas (assumptions) of what it would take to get Helen to commit to the project.

But there are problems. The undefined scope of work has led Helen to receive an incomplete proposal and now change orders are piling up. Helen has two choices. She can pay more than she was initially told and had planned on, in order to get exactly what she wants out of the project. Or she can settle for a less-than-desirable finished project to keep her costs down. 

Luckily, there is another way.

Helen Homeowner and the Design-Build Contractor

Helen decides she wants to renovate her kitchen. She does her research and contacts McLennan Contracting–a design-build company. Either by using our online cost guide or by speaking to us on the phone, she receives a ballpark estimate which is very broad but helps her know if we’re a good fit for her.

Someone from the team comes out to her home. They have an on-site meeting with Helen to see the actual space and learn about what she wants. Usually, they can give her a more accurate estimate at this time, which they sometimes call a guesstimate, based on what they see there.

Next, Helen’s project enters the preliminary design phase. She’s assigned a dedicated Project Developer who works closely with her to determine the optimal layout for her space, propose solutions tailored to Helen’s specific needs and wants, and establish a more defined budget range for her project. This phase of project development is all about setting the stage: making sure that the plan aligns with her needs and desires. All of this work leads to the estimate. You can see how much more accurate this estimate is than the traditional contractor’s estimate.

Now the project enters design development. This part of the process turns the estimate into a quote. As everything is clearly defined and decided, we can assign accurate and factual numbers to the project. Her Project Developer shifts focus to the finer details of the project that will determine the look and feel of Helen’s kitchen. Helen is involved in every step of this deeply interactive and creative stage. Her Project Developer listens to her and helps her select materials, colors, textures, and finishes. At the front of the Project Developer’s mind is Helen’s personal style, defined budget, and the needs of the space. As more and more questions are answered and decisions made, a complete plan and picture of Helen’s new kitchen is being formed. Accurate numbers are assigned, a complete proposal is produced and approved, and construction begins.

This time, there aren’t any surprises. Helen and her Project Developer have already made all the decisions and defined the complete scope of work. If unexpected challenges come up, change orders may be necessary, but the comprehensive planning that happens before work begins makes this unlikely. The proposal is accurate, the scope of work is clear, the designs are perfect, and the result? Helen is satisfied with the process and loves her new kitchen.

You’re Ready to Begin

Now that you understand the basics of estimates, quotes, bids, and proposals as well as how they are used by traditional and design-build companies, you can decide how you want your project to be handled. You’re ready to discuss the various parts of the process with confidence. If you have more questions, feel free to contact us. We’d love to help you remodel your home from designing to building, so it’ll be the home of your dreams.