Every bid has two decisions that need to be made separately:

Cost: What it will actually take to build the job

Margin: How much you choose to make

Most contractors blur these together. That's the problem.

When you mix cost and margin, you lose the ability to learn from your outcomes. You can't improve what you can't measure clearly.

The Two Components

Cost is an engineering problem:

• Quantities you'll actually put in place

• Realistic production rates with your crews

• Means and methods you'll use

• Equipment and labor and trucks you'll need

• Subcontractor and supplier scope

• Schedule reality

• Risk you can quantify

Cost should be grounded in facts, history, and real execution capability. It's what the job will cost you to build if you do everything right.

Margin is a business decision:

• Current backlog and capacity

• Market conditions

• Competitive landscape

• Risk appetite

• Strategic importance of the work

• Relationship with owner/GC

• How bad you need it

Margin is where you decide how aggressive to be. It's pricing strategy, not guesswork about costs.

Where Teams Lose Discipline

Here's what actually happens in most bid reviews:

The estimator presents a number. Someone on the team doesn't like it - too high, too risky, doesn't feel right. But not because of what it will cost to do the item. It’s instead driven by some outside factor like “we need the work” or “we’re tired of losing”.

So they start tweaking things:

• "Can we get that dirt crew down to 8 hours instead of 10?"

• "What if we assume better production on the paving?"

• "Let's sharpen our pencil on the excavation"

They're adjusting costs to arrive at a margin they're comfortable with. But they never actually said the margin number out loud.

Now you're guessing twice: once on cost, once on margin. And you've lost your reference point for learning.

Six months later when the job's bleeding money, you can't diagnose what went wrong. Was your cost estimate bad? Or was your pricing too aggressive? You'll never know because you mixed them together.

Why This Happens

Fear drives padding.

Estimators pad costs because they're afraid of missing something. Field adds buffer because they don't trust the estimate. Everyone's protecting themselves, but nobody's tracking how much protection they built in.

The result: You bid $2.2M on work that actually costs $1.9M to build, lose to a competitor at $2.0M, and convince yourself "we can't compete in this market."

Wrong. You just didn't know your real number.

Habit reinforces it.

"We've always done it this way" is the most expensive sentence in estimating.

You move money around in unit prices, you sandbag certain items, you load up mobilization. These habits feel like strategy but they're really just avoiding clarity.

Broken feedback loops seal it.

How many contractors actually compare their estimated costs to actual field costs by line item?

Most look at overall job profit and call it good. They never close the loop on whether their cost estimate was accurate because they never separated cost from margin in the first place.

What It Costs You

You can't learn.

When everything's blended together, you have no idea if you're getting better at estimating or just getting lucky with margin.

I've watched contractors bid the same type of work for years and never improve their accuracy because they never measured cost separately from final price.

You lose confidence.

When you don't know your true costs, every bid feels like gambling. You second-guess yourself. You add buffer on top of buffer. You become the contractor who's "safe" but never wins anything interesting.

You make bad strategic decisions.

Should you bid that $30M highway job?

If you don't know your costs clearly, you can't make that decision well. You might pass on work you should take or chase work that will bury you.

Your team stops trusting the system.

Field crews know when estimates are padded. They lose respect for the numbers. Then they stop trying to hit them.

"The estimate's always fat anyway" becomes the attitude. Now you've trained your people that the numbers don't matter.

The Separation

The best contractors I know run their bid reviews in two distinct phases:

Phase 1: Lock the Cost

This is where you pressure-test everything:

• Challenge quantities

• Debate production rates

• Question crew sizes

• Verify sub/supplier scope

• Identify risks and price them

Be ruthless here. This is where you earn your accuracy.

But the question isn't "Can we build this for less?" The question is "What will this actually cost us?"

Get to a number everyone believes represents reality. Write it down. That's your cost.

Phase 2: Decide the Margin

Now you look at the business decision:

What's our backlog look like? Are we hungry or full?

Who else is bidding? What's the competitive landscape?

How much do we want this work? Strategic value beyond just money?

What's our risk appetite on this one?

This is where you might decide to bid at 3% or 15% or even negative margin if you need to keep crews working.

But you're making that decision consciously, with your eyes open, knowing exactly what the work costs.

How to Actually Do This

Step 1: Change your bid review format

Stop presenting "a number." Start presenting two numbers:

• Estimated cost: $2,150,000

• Recommended margin: 8% ($172,000)

• Final bid: $2,322,000

Make the separation visible and verbal.

Step 2: Track cost separately from margin

When jobs close out, compare:

• Estimated cost vs. actual field cost

• Estimated margin vs. actual margin

This tells you if you're getting better at estimating (cost accuracy) or better at pricing strategy (margin decisions).

Step 3: Stop moving money for strategy during costing

If you want to front-load or unbalance the bid within the allowable rules, fine. But do that AFTER you've locked your costs.

Don't tell yourself the excavation "costs" $150K when you know it costs $200K just because you want to move money to mobilization.

Cost the excavation at $200K. Then make a strategic pricing decision about where to put margin.

Step 4: Create accountability

The estimator owns the cost estimate. They're measured on accuracy against field actuals.

The bid review team owns the margin decision. They're measured on whether strategic pricing decisions paid off.

Different accountability. Different skills.

The Discipline

This separation requires discipline because it's harder than blending everything together.

It forces you to:

• Take a clear stand on what work actually costs

• Make explicit decisions about how aggressive to be

• Own the outcomes of both decisions separately

Most contractors won't do it. They'll keep blending cost and margin, keep padding estimates, keep losing bids they should win and winning bids they shouldn't.

That's fine. More room for the contractors who build the discipline.

Start Monday

Pull up your last three losing bids. Ask yourself:

Did we clearly separate estimated cost from strategic margin? Or did we blend them?

If you can't answer that question, you're guessing.

And if you're guessing, you're not actually bidding - you're just hoping.

The best contractors don't hope. They know their costs, they make deliberate margin decisions, and they learn from every outcome.

That's not genius. That's just discipline. Build it.

Thanks for reading this week. If this resonated, leave a rating below - helps us know what's useful. Happy New Year!

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About the Author

Tristan Wilson is the CEO and Founder of Edgevanta. We make AI agents for civil estimating. He is a 4th Generation Contractor, construction enthusiast, ultra runner, and bidding nerd. He worked his way up the ladder at Allan Myers in the Mid-Atlantic and his family’s former business Barriere Construction before starting Edgevanta in Nashville, where the company is based. Reach out to him at [email protected]