Why headline prices are not comparable
Three bidders walk the same job and write three documents describing different amounts of work. One excludes the permit and the disposal. One carries a $5,000 tile allowance because you had not picked tile. One includes electrical that the others assumed you would hire separately. The base numbers on those documents are not measuring the same thing, and choosing between them by price alone is choosing by who wrote the narrowest scope.
Levelling means adding back, for each bid, the work you will still have to buy and the amount the allowances are short. What comes out is a comparable total. It is still not perfect — nothing captures a difference in workmanship — but it is a number that describes the same job three times instead of three different jobs.
Allowances are the part that moves
An allowance is a placeholder amount for something you have not selected yet: fixtures, tile, appliances, hardware, sometimes flooring. The contractor has to write down some number, and a low one makes the bid look better. It is not necessarily dishonest, because they genuinely do not know what you will pick, but the incentive runs one direction and the difference always lands on you.
The fix is unglamorous. Before you sign anything, go price the actual items you want, at the actual quantity, and put those numbers in the calculator above as the real allowance cost. A $5,000 tile allowance against $8,000 of tile you have already chosen is a $3,000 change order waiting to happen, and it will be priced at the contract change order rate rather than at the base bid margin. This is why two bids with identical base prices can differ by five figures at completion.
What the change order allowance is for
The percentage applied to every bid in the calculator is not a criticism of the bidders. It is your own reserve for scope nobody has thought of yet, and it belongs in your budget rather than in theirs. Renovation work on an older building carries more of it than new construction on a clear site, because opening a wall reveals things no walkthrough could. Setting the reserve at zero does not mean the changes will not happen; it means you will pay for them out of money you had allocated to something else.
When a change does come up, the pricing mechanism should already be in the contract, and both sides benefit from that being specific. What the labor rate is, what markup applies to added material and to added sub work, and how schedule impact is handled are all things to settle before there is a disagreement about them rather than during one.
The questions that matter more than the number
Price comparison is the easy part of choosing a contractor and it is not the part that determines how the job goes. Before the totals decide anything, the things worth establishing are what the scope explicitly excludes, who pulls and pays for permits, what the payment schedule looks like against actual progress, how long the work will take and what happens if it runs long, what the warranty covers and for how long, and who is on site daily supervising. A contractor whose comparable total is slightly higher but whose scope is complete and whose schedule is realistic is usually the cheaper outcome. Our guide to hiring a contractor works through the parts that are not arithmetic.
Deposits, progress payments and holdbacks deserve their own look, because a payment schedule that runs ahead of the work transfers risk to you. What is permitted or customary here varies by state and by contract type. Do not take a percentage you read anywhere, including here, as a rule; ask an attorney licensed where the work is happening what applies to your situation, and get the schedule written into the agreement either way.
Reading a bid that is much lower than the others
A bid twenty five percent under the field is telling you something, and it is worth working out what before treating it as a bargain. It might be a bidder who genuinely runs leaner, works out of a truck rather than a shop, and does this exact work weekly. It might be someone who missed a portion of the scope entirely and will discover it in week two. It might be someone pricing to fill a gap in their schedule. It might be someone who intends to make the margin back on changes. The way to find out is to ask them to walk you through their scope line by line and see whether the low number survives the conversation. If it does, it is real. If the conversation produces a list of things they had assumed were not included, you have your answer.
Questions people ask
How many bids should I get?
Three is the common answer and it is a reasonable one, because two gives you no sense of whether one of them is an outlier and four or more takes more of everyone time than it returns. What matters more than the count is that all of them are bidding the same written scope. If each bidder is working from their own interpretation of a conversation, you will get three prices for three jobs and comparing them is guesswork no matter how many you collect.
Is it fair to show one contractor another contractor bid?
It is common and it is also a good way to get a worse outcome. A bidder asked to beat a number will usually find the cut somewhere, and where they find it is normally in scope, in materials or in the contingency they were carrying for the parts nobody can see yet. If you want a lower price, a better route is to reduce the scope explicitly and ask everyone to rebid the smaller job. That way you know what you gave up.
What does an allowance not cover?
Typically it covers the material only, at a specified supplier or grade, and often not the labor difference if what you pick is harder to install. A tile allowance that assumes a straightforward layout will not absorb a herringbone pattern that doubles the setting time. Read what the allowance line actually includes, and if it is not stated, ask for it to be stated. The gap between allowance material cost and allowance installed cost is a frequent source of disputes.
Should I include my own time in the comparison?
If the bids differ in how much coordination they leave to you, then yes, and it belongs in the excluded work column. A bid that leaves you to hire and schedule the electrician is asking for hours of your time as well as the electrician invoice. Put a value on those hours and add them. The hourly value calculator gives you a defensible figure to use rather than a guess.
The comparable totals came out nearly identical. Now what?
That is a useful result rather than an inconclusive one, because it means price is not the deciding variable and you can choose on everything else: schedule, references you actually called, how they communicated during the bidding, whether their scope document was clear, and whether they carry the insurance the work needs. When totals are within a few percent, the differences between the contractors matter far more than the differences between the numbers.