Two builders price the same set of drawings. One comes back $400,000 lower. The natural conclusion is that one builder is expensive and the other is a deal.
Nine times out of ten that is not what happened. What happened is that the two estimates cover different scopes, and one of them was assembled to look competitive.
The Short Answer
A builder's estimate should be itemized by division with stated allowances, a written exclusion list, and a contingency. When comparing bids, normalize the allowances and add back every exclusion before you compare totals. A lower bid with thin allowances and a long exclusion list almost always finishes higher than a complete bid that looked more expensive on day one.
Here is how to read what is actually in front of you.
An estimate should have four parts
**1. Itemized costs by division.** Site work, foundation, structure, roofing, openings, mechanical, electrical, plumbing, insulation and drywall, interior finishes, cabinetry, exterior finishes, and general conditions. Each with a number.
**2. Stated allowances.** Every scope you have not yet selected, with the dollar amount being carried.
**3. A written exclusion list.** Everything the number does not include.
**4. A contingency.** Ten to fifteen percent on a custom home.
If any of these four are missing, you do not have an estimate. You have a proposal.
Allowances are where bids are made to look cheap
An allowance is a placeholder for something you have not picked yet. Tile at a dollar figure per square foot. An appliance package at a lump sum. Plumbing fixtures at a budget number.
Here is the problem. A builder can carry tile at $6 per square foot when the homeowner is clearly heading toward $22 stone. The bid looks lower. The house costs the same. The difference shows up as change orders in month nine, when you have no leverage and no ability to shop the job.
So do this with every allowance line. Ask what the number is, then go price what you actually want. If the allowance for the primary bath is a third of what your designer is showing you, that gap is real money that belongs in your budget today.
Common allowance lines to check closely: tile and stone, cabinetry and millwork, appliances, plumbing fixtures, lighting fixtures, hardware, flooring, countertops, and landscape.
Exclusions are the second place budgets hide
Read the exclusion list before you read the total.
Frequently excluded from a custom home estimate: landscaping and irrigation, pool and spa, driveway and hardscape, dock and seawall, generator, low voltage and audio visual, window treatments, furniture, and permit and impact fees.
None of those are optional in real life. You are going to have a driveway. The question is only whether it was priced now or later.
Add every excluded item back at a realistic number before you compare two bids. The bid that looked $400,000 lower frequently lands within a few percent of the other once you do.
General conditions and fee
General conditions cover the cost of running the job: supervision, temporary power and water, dumpsters, portable facilities, safety, cleanup, and the site management that keeps trades sequenced correctly.
A bid with unusually low general conditions is telling you something about how much daily supervision your project will get. That is not a place to shop for savings.
The contingency question
An estimate with no contingency is not a lower price. It is an unfinished sentence.
Custom homes uncover conditions. An old septic tank, unsuitable soil, a utility that is not where the plan showed it, a code interpretation that goes the other way. Ten to fifteen percent covers that without turning every discovery into a negotiation.
What matters more than where the contingency sits is that there is a written process for spending it: what qualifies, who approves it, and how you are notified. Our guide to what a custom home costs in Palm Beach County puts the contingency in the context of a full budget.
How to normalize two bids in one afternoon
- Confirm both builders priced the same drawings and the same revision date.
- Line up the allowances side by side and reset them to identical, realistic values.
- Add back every exclusion at a real number.
- Compare general conditions and fee structure.
- Confirm both carry a contingency, and at the same percentage.
- Now compare the totals.
The bid that survives that exercise is the honest one.
Why we itemize
Have bids on your desk?
Send them over. We will walk through what each one actually includes, even if you go with the other builder.
Get a Second ReadWe give clients a line by line budget because it is the only way to have a real conversation about money. You can see where every dollar sits, you can move dollars between categories deliberately, and nothing arrives as a surprise in month nine.
That is also why comparing us to another bid is easy. Ask for both itemized. The comparison makes itself.
If you have bids on your desk right now, send them over. We will walk through what each one includes, even if you end up going with the other builder.
Frequently Asked Questions
What is an allowance in a construction budget?
An allowance is a placeholder dollar amount for a scope you have not selected yet, such as tile, plumbing fixtures, or appliances. If your actual selection costs more, you pay the difference. Allowances set too low are the most common reason a budget grows during construction.
How do I compare two builder bids fairly?
Normalize them. Line up the allowances at the same values, add back anything one bid excludes and the other includes, and confirm both are pricing the same drawings. Only then compare the totals. Comparing headline numbers on unequal scopes tells you nothing.
What is usually excluded from a custom home estimate?
Commonly excluded items include landscaping and irrigation, pool and spa, driveway and hardscape, dock or seawall work, generator, audio visual and low voltage, window treatments, furniture, and permit and impact fees. Every one of these is a real cost you will pay somewhere.
Should the contingency be in the contract or held by me?
Either can work as long as it is explicit. What matters is that a contingency exists, that its size is stated, and that there is a written process for how it gets spent and who approves the spend.
Is a cost plus contract more transparent than fixed price?
It is more transparent about actual costs, but it gives you less certainty about the final number. Both structures work with an itemized budget and a disciplined change order process. Neither structure protects you if the underlying scope was never defined.
Planning a project in South Florida?
SouthShore Builders is based in Delray Beach and builds across Palm Beach County and Broward County.
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President, SouthShore Builders
Chase Lamson leads SouthShore Builders with decades of South Florida custom home experience. SouthShore is a licensed general contractor serving Palm Beach County and Broward County.
