How do estimates differ from bids under construction law?

The average person in Louisiana might use the terms “estimate” and “bid” as synonyms. However, when it comes to construction law, these terms have very specific meanings, as they refer to different steps in determining what the contractor’s costs will be, and what the contractor will ultimately charge for their services.

Estimates are essentially costs incurred for completing the project the contractor is being hired to do, such as materials and labor costs. These price estimates are informative to project owners, but they do not constitute a binding contract between the parties. Estimates that a contractor presents to a project owner must be reasonably accurate. There may be preliminary estimates, square foot estimates, assembly estimates and ultimately, the final estimate.

Once an estimate is in place, the contractor can make a firm offer to the project owner. This is known as the bid. In a bid, the contractor promises to provide specific services at a specific price and usually by a specific date. If the project owner accepts this bid, the contractor must honor it.

So, it behooves contractors to make sure they have detailed, accurate estimates in place before bidding on a project. An inaccurate estimate could mean that the contractor cannot fulfill what they promised in their bid, which could affect the entire project. Moreover, the competency of the contractor could be called into question if they cannot deliver what they agreed to in their bid. Construction law attorneys understand what it takes to prepare a proper estimate and bid and may be able to advise clients on these topics.