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What Type of Bid is Right for Your Project?

Builders charge for their time and expertise. Here’s what it means to you.

Written by Charles Bevier


Photo: Oleg Magni / Pexels
 
When building your dream log home, you don’t want to waste time or money. You will be contracting with a builder to provide labor and materials in one of three ways: fixed bid; cost plus (also known as time-and-materials or an hourly rate); or a combination of the two.
 
Which is best? Only you can decide. Each has advantages and disadvantages, which we'll break down for you below:
 

FIXED BID

This is the exact amount it will cost to build a home. The bid will specify the total amount you will pay, as well as the home’s completion date. In theory, you get what you want and the contractor gets paid what he wants.
 

Pros:

The more straightforward the project, the easier it is to contract for a fixed bid. Plus, a contractor will be looking for the best deal on all materials to be competitive. Trade contractors, such as electricians, HVAC installers and plumbers, use fixed bids.

Cons:

Log homes often are built on rugged terrain. If you insist on a fixed bid, the builder will have to charge far more to cover a wide range of issues that may (or may not) crop up. So you might not get the best price.   
 

COST PLUS

A contractor will base an estimate on the time and labor it will take to complete the home, plus a percentage markup on every material that goes into it. This tactic is used on projects where costs are harder to predict. Many builders use this formula because there are so many unknowns when building a log home.
 

Pros:

If you and your builder keep track of your budget and avoid change orders, this can be the most competitively priced way to get your home built. 
 

Cons:

There is no incentive to do the job with any speed or wisely purchase materials, simply because the builder marks up everything that goes into the home.
 

COMBO DEAL  

A combination of these two is common in log home construction. Some parts of the house are done on a fixed bid, some on an hourly rate and other parts on a time-and-materials basis, plus a percentage.
 

Pros:

If you invest your time in choosing cabinets, why should a builder receive a percentage of the cost for just ordering them? A combination bid can help make the process easier for both builder and buyer, while building trust.
 

Cons:

Not all builders offer this option. Log home builders are specialists, and if you find a reputable one who is available, you’d be wise to compensate him for his expertise.