5 Bidding Mistakes That Are Killing Your Construction Margins

If your construction bids keep coming in too high or too low, you're not alone. Most subcontractors leave significant money on the table because of a handful of common estimating mistakes. The worst part? These errors compound over time, slowly eroding your margins until you're wondering why you're working harder but earning less.

After analyzing hundreds of contractor bids, we've identified the five most damaging mistakes that destroy profit margins. Here's what to watch for and how to fix each one.

1. Labor Guesstimates Instead of Data-Driven Estimates

The most expensive mistake contractors make is "ballparking" labor hours instead of tracking actual productivity data. When you estimate that a task will take 4 hours because "that's what it usually takes," you're gambling with your profit margin.

The reality: Labor productivity varies dramatically based on site conditions, crew experience, weather, and project complexity. A task that takes 4 hours in ideal conditions might take 6 hours on a congested job site or with a less experienced crew.

The fix: Track actual labor hours on completed projects and build a database of productivity rates by task type. Use this historical data to inform future estimates rather than relying on memory or industry averages that may not reflect your specific operation.

2. Ignoring True Overhead Costs

Many contractors know their direct costs (materials and labor) but have only a vague idea of their overhead. They apply a flat percentage that was set years ago without ever verifying if it actually covers their costs.

Overhead includes your office rent, insurance, vehicle costs, equipment maintenance, software subscriptions, accounting fees, and your own salary. If you're not accounting for all of these, you're essentially subsidizing your clients' projects with your own money.

The fix: Calculate your true annual overhead costs and divide by your annual revenue to get an accurate overhead percentage. Update this calculation at least once a year. Many contractors are shocked to discover their overhead is 5-10% higher than they assumed.

3. Using Outdated Material Prices

Material costs have been volatile in recent years. Using prices from your last project, or worse, from a price book that's six months old, is a recipe for margin erosion. Copper, steel, PVC, and specialty items can swing 15-30% in just a few months.

The fix: Get fresh supplier quotes for every significant bid. Build relationships with multiple suppliers so you can quickly verify pricing. For long-duration projects, include material escalation clauses in your contracts to protect against price increases between bid submission and material purchase.

4. Failing to Account for Project-Specific Conditions

Standard pricing assumes standard conditions. But construction sites are rarely standard. Working in an occupied building, dealing with limited access, coordinating with other trades, or working unusual hours all impact your costs.

Contractors who use the same labor rates regardless of project conditions consistently underestimate difficult jobs. They win those jobs because their price is too low, then struggle to complete them profitably.

The fix: Create a site conditions checklist that you review for every bid. Develop productivity adjustment factors for common challenges. A 10-20% labor adjustment for a congested renovation versus a wide-open new construction site can make the difference between profit and loss.

5. Rushing Through Quantity Takeoffs

When bid deadlines are tight, the takeoff is often the first thing that gets rushed. Missing a run of ductwork, underestimating wire pulls, or forgetting about fittings can add up to thousands of dollars in unbid work that you'll have to complete anyway.

The fix: Build adequate time into your bidding schedule for thorough takeoffs. Use digital takeoff tools that help you track what you've measured and highlight areas you might have missed. For complex projects, have a second person review the takeoff before pricing.

Stop Leaving Money on the Table

These five mistakes seem simple, but they're responsible for the majority of margin erosion in construction estimating. The good news is that each one is fixable with better processes and the right tools.

Professional estimating software helps you avoid these pitfalls by organizing your data, tracking historical costs, and ensuring consistency across every bid. When your estimates are based on real data instead of guesswork, you win more profitable jobs and stop subsidizing your competition.