How to Read a Renovation Bid: Line Items, Allowances, and What a Lump Sum Hides
Three bids for the same kitchen came back $30,000 apart. The spread is almost never about price, it is about what each contractor assumed you meant.
Why two bids for the same job are almost never comparable
You send the same set of drawings to three contractors and get back $48,000, $61,500 and $79,000. The instinct is to assume the low bid is a bargain and the high bid is padded. Usually neither is true. The spread is almost always telling you that the three companies priced three different jobs, because the drawings left something open and each of them filled the gap differently.
Before you can judge a price you have to make the bids describe the same work. That means reading past the total and into the line items, the allowances and the exclusions.
The line items a usable bid contains
A bid you can actually evaluate breaks the project into pieces you can price independently. At minimum, look for these:
- Scope narrative. A short description of what is being built, in plain language, referencing the drawing set and revision date. If a bid does not name the drawing revision it priced, you have no way to know whether it included last week's change.
- Demolition and disposal. Dumpster rental, hauling and dump fees. On a gut bathroom this can be $1,200 to $2,500 by itself, and it is the single most common thing a low bid leaves out.
- Permits and fees. The permit fee, plan review, and any engineering letter the building department will require. See below on why this matters more than the dollar amount.
- Labor, by trade. Framing, electrical, plumbing, HVAC, drywall, tile, paint, finish carpentry. Subcontracted trades should appear as their own lines.
- Materials, split from labor. A single "materials" number for an entire kitchen is not a line item, it is a guess wearing a suit.
- Allowances. Every item you have not selected yet.
- General conditions and overhead and profit. Supervision, site protection, portable toilet, insurance, and the contractor's markup. Expect roughly 10 to 20 percent for overhead and profit on residential remodeling. A bid that shows it is being honest with you, not overcharging you.
- Schedule. Start date, substantial completion date, and what happens if either slips.
- Payment schedule. Tied to milestones, not to the calendar.
Allowances are where budgets quietly break
An allowance is a placeholder for something you have not picked. The bid might say "tile allowance: $6 per square foot, material only." That number is doing a lot of work. It excludes the setting materials, the labor to install a pattern more complex than a straight lay, the waste factor, and the delivery.
Three questions turn an allowance from a trap into a real number:
- Does the allowance include labor, or material only? Material-only allowances are normal, but you need to know, because a $14 per square foot tile you fell in love with may also carry a higher install price.
- What quantity is the allowance based on? An allowance is a unit price times a quantity. If the quantity is short, you will blow through it even choosing exactly the product the contractor assumed.
- Where is the reconciliation? The contract should say that unused allowance money is credited back to you, in writing, not absorbed.
Walk a showroom before you sign. If the allowance for plumbing fixtures is $2,400 and the faucet you want is $900 on its own, you have found a $3,000 problem while it is still free to fix.
What a lump sum hides
A one page bid that says "Kitchen remodel per discussion: $72,000" is not a contract, it is a handshake with a number attached. It hides three things in particular.
It hides the assumptions
Did the contractor assume the existing subfloor is sound? That the panel has capacity for a new circuit? That the wall coming out is not load bearing? Those assumptions become change orders the moment reality disagrees.
It hides who is responsible for what
Appliance delivery, countertop templating, cabinet assembly, final cleaning and paint touch up all belong to somebody. In a lump sum they belong to whoever gives in first.
It makes change orders unpriceable
If you later delete the pantry, what is the credit worth? Without unit pricing there is no arithmetic to do, only a negotiation, and you will be negotiating with someone who already has your deposit.
Read the exclusions first
The most informative paragraph in most bids is the exclusions list, and most homeowners never read it. Common exclusions that turn into real money: asbestos or lead abatement, mold remediation, structural repair discovered after demolition, upgrading an undersized electrical service, code required smoke and carbon monoxide detectors throughout the house, window well or egress requirements, and landscaping repair after equipment access.
None of those are unfair to exclude. They are unknowable until walls open. What is unfair is discovering them at week three. Ask the contractor which exclusions they think are most likely to become real on your specific house, and what each would cost. A good remodeler will answer that question in detail, because they have been surprised before.
Normalize the bids before you compare them
Put the three bids side by side in a spreadsheet with one row per line item. Where a bid is silent, write "not included" rather than zero, then go back and ask for that number. Two rounds of that and the $48,000 bid frequently becomes $59,000, which tells you something very different than it did on day one.
Then compare the allowances at equal values. Set every bid to the same tile, fixture and appliance allowances so you are comparing construction cost, not shopping assumptions.
Warning signs worth acting on
- A bid delivered verbally, or a bid with no drawing reference.
- A deposit larger than roughly a third of the contract, or one due before any material is ordered.
- An allowance schedule with no quantities.
- A start date that depends on you signing today.
- Refusal to break out a line item on request. If the number is defensible, it can be shown.
The bid you want is rarely the cheapest. It is the one that is specific enough that you can tell, months later, whether you got what you paid for.
This article is general information about home renovation, not legal, financial or construction advice. Building codes, licensing rules and lien law differ by state and by city. Confirm anything that affects your project with your local building department and, where money or contracts are involved, with a qualified professional.
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