How to read a builder's bid (and what California law already protects you from)

Three bids arrive. They are all formatted differently, none of them line up, and the cheapest is 30% below the most expensive. Here is how to make them comparable.

Start at the exclusions, not the total

Every bid has an exclusions list, usually near the back, often in smaller type. It is the most informative page in the document. A builder who excludes site drainage, utility connections, and any structural work required by conditions found during demolition has quoted you a number that cannot survive contact with your project.

Read all three exclusion lists side by side before you look at a single price. What one builder excluded, another may have carried — and that alone can account for most of the spread.

Then find the allowances

An allowance is a placeholder: a sum carried for something you have not chosen yet. Plumbing fixtures, tile, appliances, lighting and hardware are the usual suspects. Allowances are legitimate and unavoidable early on. They become a problem in two ways.

• —They are set unrealistically low, so the bid total looks competitive and the project finishes over.
• —They are not itemised, so you cannot tell what standard of product the number assumes.

Ask what each allowance actually buys. If the tile allowance is $8 a square foot and you have been sending your designer images of large-format stone, the number is fiction and everyone in the room knows it.

Protections you already have

California regulates home improvement contracts more tightly than most states, and several protections apply automatically. You do not need to negotiate for them.

The down payment cap

For a home improvement contract, the down payment may not exceed $1,000 or 10 percent of the contract price, whichever is less, excluding finance charges. This is set by Business and Professions Code section 7159.5 and enforced by the Contractors State License Board. The contract must state it, under a heading, in at least 12-point boldface type.

A contractor asking for 30% up front on a home improvement contract is not driving a hard bargain. They are describing a violation.

Written contracts

A written contract is required for home improvement projects over $500. Progress payments are also restricted — payments should not run ahead of the value of work actually completed and materials delivered.

License verification

Every California contractor's licence status, classification, bond and any disciplinary history is public. Check it before you sign, not after. Ours is General Contractor licence #1146815.

Questions worth asking every bidder

1. 01What is explicitly excluded from this number?
2. 02Which line items are allowances, and what product standard does each assume?
3. 03How are change orders priced, and what is the approval process before work proceeds?
4. 04What contingency is carried, and who controls it?
5. 05Who is my day-to-day point of contact, and how often will I hear from them?
6. 06Which subcontractors have you used before on projects like this one?

The answers matter less than the willingness. A builder who resents being asked these questions during the bid will not become more forthcoming once they hold your deposit.

This is general information, not legal advice. Confirm current requirements with the Contractors State License Board or your own counsel.