How to read an itemized contractor bid

Three contractors walk the same unit. The bids come back at $6,400, $7,150 and $8,200. Most operators read that as one cheap guy, one fair guy and one optimistic guy, and pick the middle.

That reading is usually wrong. Nine times out of ten the spread is not three prices for the same job — it is three different jobs. The cheap one is not including the thing that costs $1,800. And you will find out which thing in week two, when the crew is already on site and your leverage is gone.

Here is how to read the page in front of you.

There are only three kinds of money in a bid

Everything on a contractor's number is one of three things, and they behave completely differently when something goes wrong.

Labor is hours times a rate, and it is the line that absorbs surprises. Plaster that needed skim coating, a subfloor that was not flat, a shutoff that sheared. When a job goes over, it goes over here first.

Materials is product, and it is the line you can actually verify. It is also the line most likely to be vague on purpose — "flooring" instead of a product name and a wear layer.

Fees are permits, plan review, dumpsters, disposal. Small numbers that cause large arguments, because they are the ones most often left silent.

Ask for these separately on every bid. Not to squeeze anyone — because it is the only way to tell whether the gap between two numbers is scope or price. If one bid is $600 higher on materials, you are comparing product grades. If it is $600 higher on labor, you are comparing how much prep each contractor thinks the job needs. Those are completely different conversations, and a single bottom-line number lets you have neither.

What markup is, and why its absence is the alarm

Operators sometimes treat markup as the part they are trying to negotiate away. That instinct costs money.

In 2026 general contractors build an average combined overhead and profit of about 21% of total project cost into their pricing — roughly 13% overhead and 8% profit. Markup on direct costs commonly runs 10–20%, and total markup including profit often lands between 20% and 40%. After all of it, a well-run residential general contractor ends the year with a pre-tax net margin of about 6–8%.

Overhead is not a euphemism for padding. It is insurance, the truck, the phone that answers when you call, the person who schedules the inspection, and the warranty callback in March. A contractor who carries none of that is not cheaper than one who does. They are uninsured.

Worth knowing the arithmetic, because bids exploit the confusion: a 20% markup is a 16.7% margin. Marking up $10,000 by 20% gives $12,000, and $2,000 of $12,000 is 16.7%. Contractors quoting "20%" sometimes mean margin and sometimes mean markup, and the difference is real money on a large job.

A bid with no markup in it is not a gift. It is a forecast of a change order.

Allowances and exclusions: the two words that decide who pays

These are the most important words on the page and the least read.

An allowance is money set aside for something you have not picked yet. "Tile allowance: $4.50/sq ft." It means the contractor has budgeted that number and you pay the difference when you choose something else. Allowances are honest — they let a bid exist before every selection is made — but every allowance is a change order with a delay fuse on it. When you see one, ask what $4.50 buys in this market, and whether that is the tile you were imagining.

An exclusion is work the contractor is explicitly not doing. "Excludes plaster repair beyond 4 square feet." "Excludes lead-safe clearance." "Excludes appliance haul-away."

Operators tend to read exclusions as the contractor being difficult. Read them the other way round. A contractor who writes down what they are not doing has thought about the job. The bid with no exclusions has not been scoped — it has been guessed — and everything not mentioned becomes a negotiation at the worst possible moment.

Compare exclusion lists before you compare prices. That is where the $1,800 is hiding.

The permit line

Permits are pulled by the trade doing the work, and in Cleveland that trade must be licensed by the State of Ohio and registered with the city. This is not optional and it is not something you can do for them.

Two things belong on the bid: who pulls it, and whether the fee is in the number or on top of it. Either answer is fine. Silence is not. Cleveland charges plan review at $20 per 1,000 square feet of work, with a $20 minimum — trivial money that has ended real arguments purely because nobody wrote down who was paying it.

Then ask the question almost nobody asks: what happens if it fails inspection? Who pays for the correction, who pays the re-inspection fee, and who is standing there when the inspector arrives. Silence here resolves against whoever has less paperwork, and that is usually you.

The four questions that expose a thin bid

You do not need to be a builder to do this. Ask every bidder, in writing:

1. Who pulls the permit, and is the fee in this number? Establishes whether they are registered to work in the city at all.
2. What happens if it fails inspection? Establishes who owns rework.
3. What is excluded? Establishes the real scope, and it is the question that changes bids most often after it is asked.
4. What are labor and materials separately? Establishes whether you are comparing scope or price.

A contractor who answers all four is not necessarily the cheapest. But you now know what you are buying, which is the only condition under which "cheapest" means anything. A bidder who will not answer them is not offering a discount on the same product — they are offering a different product.

The lien question operators should ask sooner

Here is the part that catches owners who did everything right.

In Ohio, a party without a direct contract with you — a sub, a supplier — must serve a Notice of Furnishing, generally within 21 days of starting work, but only where you as the owner have filed a valid Notice of Commencement. On residential projects, meaning one- and two-family dwellings and residential condominiums, a mechanic's lien must be filed within 60 days.

The consequence: paying your general contractor does not automatically protect you from a sub who was never paid. Money can leave your account, stop somewhere in the middle, and still land on your title as a lien.

Which turns two administrative habits into real protection. Know whether a Notice of Commencement was filed on your job, and keep lien waivers attached to payments as they go out. This is boring, and it is the difference between a clean payoff at sale and a title problem discovered at the closing table.

Putting three bids on one page

Do not compare bottom lines. Build a grid — the same rows for every bidder:

Row	What you are looking for
Labor	Whether they priced the same amount of prep
Materials	Product names, not categories
Permit + plan review	In or out, and who pulls
Allowances	What each one buys in this market
Exclusions	Where the missing $1,800 lives
Start and finish dates	Vacancy is a cost, so the schedule is a price
Failed-inspection terms	Who owns rework

Nine times out of ten, the grid explains the spread before you have compared a single price. The cheap bid gets more expensive as you fill it in, and occasionally the expensive one turns out to be the only complete number on the table.

Get it on the record

A bid is not a document you read once and file. It is the thing you will be arguing from in six weeks when someone says "that was never in the scope."

Which means the version that matters is the written one, with the exclusions intact, the allowances named, the permit responsibility stated, and the answers to those four questions attached to it. Approve materials before they are bought, so cost conversations happen while the money is still yours. Get change orders in writing before the work, not after.

The contractor who writes all of that down is not being difficult with you. They are the one who has done this before.

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Verify before you rely on this. Markup norms, fee schedules and lien deadlines change, and lien law in particular is fact-specific — the summary here is orientation, not legal advice, and a title or construction attorney should answer anything that matters. Figures are drawn from published 2026 industry benchmarks for contractor overhead and profit, and from Ohio mechanics' lien guidance current at the time of writing. Confirm permit and plan review requirements with the City of Cleveland Division of Building & Housing — 601 Lakeside Avenue, Room 505; 216-664-2910 — before you commit a schedule.