In construction, we get in trouble for losing money on an item. We don't get in trouble for "picking up" in the field. So few contractors estimate real cost - and we pretend not to notice.

There are two common moves at the bid table. Both leak profit.

Move 1: Pad the cost.

The estimator doesn't fully trust the production numbers, so they round up "just in case." Cost line gets bloated. Margin stays normal. The crew wins the job and beats the padded estimate. They look like heroes. The estimator looks conservative. The company books 5% on a bid that should have made 10%.

Move 2: Pick at the margin.

Same job. The boss reviews it the last hour before the letting, gets nervous about getting outbid, and shaves margin "to win." Cost stays inflated. Margin drops to 2%. Crew still beats production. You book 3% on the same bid.

Both moves cost the same thing: real profit we could have earned and didn't.

Here's why it keeps happening.

Losing money on an item gets you called in. Pickup in the field makes the field a hero. The estimator is rewarded for being conservative. The boss is rewarded for winning the job. Every incentive in the system points away from a real number.

The danger isn't a bad estimator. It's entropy.

The discipline is one sentence. Estimate real cost. Bid real profit. Two clauses. Both take work.

Estimating real cost means getting the number right - not optimistic, not padded.

Real cost includes:

• Taking every item off.

• Productions your crew actually hits.

• A sound bid grounded in reason.

• All phasing, restrictions, timing requirements accounted for.

• Escalations for wages, subs, suppliers.

• Risk and contingency are defined line items - not padded across 52 items.

• Real overhead allocation.

If your number is wrong, fix the number - don't fix the bid. I am not advocating for losing money or being reckless, nor am I implying that the field should not try to beat the budget.

But bidding real profit means putting full margin on top of the real cost, and not flinching when someone says "we'll get outbid." If the work is worth 12%, ask for 12%. The discipline isn't in the courage - it's in trusting your number.

The math is straightforward.

Say you do $100M a year. Hold 2% more margin on every bid. That's $2M to the bottom line. You don't have to win one more job.

You won't win every one of those bids. You don't have to. You just have to stop padding cost and stop cutting margin. Bid the work you can win at a real number. Let somebody else have the work you can't.

Padded cost feels safe to the estimator if we’re winning, because the crew always picks up.

Thin margin feels safe to the boss, because we won the job.

Both feel safe. Neither makes money.

If you trusted your number, you wouldn't pad it. You wouldn't cut it either.

Two questions for the last 10 bids:

1. Did the crew beat the estimate? By how much?

2. Did you cut margin in the last hour? How much?

If the answer to either is yes more than half the time, the profit you're earning isn't the profit you should be earning.

What's the gap costing you this 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]