Why Are Two Contractor Bids for the Same Project So Far Apart? A Denver Homeowner's Guide to Comparing Construction Bids
Quick answer: Two bids on the same Denver project can land far apart because they are almost never pricing the same scope. The gap usually comes from allowances, excluded work, structural and engineering scope, mechanical systems, and how each builder handles the unknowns behind your walls. A lower bid is rarely a discount on the same house. It is either a different house, or the same house with the difference deferred into change orders.
If you are holding two bids for a custom home or a high-end renovation in Arvada, Golden, Wheat Ridge, Westminster or Broomfield, you are probably not looking at one honest builder and one greedy one. You are looking at two documents built on different assumptions. Here is how to find those assumptions and compare the bids on equal footing.
The low bid is usually a different project
Construction is not retail. There is no manufacturer setting a price that builders mark up or discount. Every bid is a prediction about labor, materials, subcontractor availability, site conditions and risk. That means there are only a few ways one builder comes in dramatically lower than another on identical work:
If you are holding two bids for a custom home or a high-end renovation in Arvada, Golden, Wheat Ridge, Westminster or Broomfield, you are probably not looking at one honest builder and one greedy one. You are looking at two documents built on different assumptions. Here is how to find those assumptions and compare the bids on equal footing.
The low bid is usually a different project
Construction is not retail. There is no manufacturer setting a price that builders mark up or discount. Every bid is a prediction about labor, materials, subcontractor availability, site conditions and risk. That means there are only a few ways one builder comes in dramatically lower than another on identical work:
- Something was left out of the scope, on purpose or by accident
- Cheaper subcontractors, cheaper materials or a lower standard of workmanship
- Less supervision and less project management standing behind the number
- A plan to make up the difference in change orders after you sign and demo starts
Where bids actually diverge
Allowances
An allowance is a placeholder for a selection you have not made yet. Tile, plumbing fixtures, lighting, appliances, cabinetry and countertops are the usual suspects, and they are the easiest place to make a bid look competitive without saying anything untrue. Ask both builders for an allowance schedule with a per unit basis. "Tile: $30,000" tells you nothing. "Tile: $14 per square foot installed, 1,850 square feet" is something you can check against the tile you actually want.
The exclusions page
This is the most important page in any construction bid and the one almost nobody reads. Watch for testing and abatement, structural engineering and architectural drawings, permit and plan review fees, sewer scope and line replacement, electrical panel upgrades, landscaping and site restoration, temporary power and dumpsters, window coverings and closet systems, and final cleaning. None of that disappears because it was excluded. You will pay for it either way. The only question is whether it was in the number you compared or in an invoice you get in month four.
Structural and engineering work
This is where the biggest gaps live on renovations. Removing a bearing wall to open a kitchen is not a demo line item. It is a beam, posts, a load path down to the foundation, and sometimes new footings. A pop top on a Northwest Denver ranch often needs foundation reinforcement the original slab was never designed for. A builder who has walked the crawlspace, checked the framing direction and had an engineer review it will price that work. A builder who bid off a floor plan sketch will not, and it shows up the week the wall comes down.
Mechanical, electrical and plumbing
MEP is invisible in the finished house, which makes it easy to under scope. Look for whether each bid covers full HVAC replacement with a load calculation, panel capacity for your new load including EV charging and induction ranges, a whole house repipe versus patching into old supply lines, and the sewer line, which on an older Wheat Ridge or Berkeley home is a real risk.
How the unknowns get handled
Every older home has surprises behind the walls. A builder who raises that up front, with an allowance for unforeseen conditions written into the contract, is being straight with you about renovation risk. A builder who ignores it looks cheaper on paper and simply hands the risk back to you, priced later, on the day it is discovered, when your kitchen is already gutted and you have no leverage.
The contract type changes the number too
Two bids can also be structurally different agreements, which homeowners rarely get explained to them.
Lump sum (fixed price)
Pricing is based on the final approved plans and material selections. Cost changes come only from scope changes or unforeseen conditions as defined in the contract. One number, predictable, and the most common structure for custom homes and renovations.
Guaranteed maximum price (GMP)
Also priced off the approved plans, with a set fee and a ceiling. An allowance for unforeseen conditions is built in, and what is not spent is often split through a shared savings clause. Similar predictability to lump sum, with upside if the job runs efficiently.
Cost plus
You reimburse actual costs plus a fee, with open invoicing on every receipt. It carries significant added bookkeeping and administration on both sides, and that cost lands in your project. There is also no ceiling. A cost plus proposal will usually show a lower headline number than a lump sum bid for the same work, because nothing in it is guaranteed yet. Comparing the two on headline price alone is comparing an estimate to a commitment.
A closer look at shared savings
On a guaranteed maximum price job, the allowance carried for unforeseen conditions either gets spent or it does not. A shared savings clause says what happens if it does not. Instead of the builder absorbing the leftover or the money quietly disappearing into the project, the unspent balance is split between you and the builder on a percentage agreed up front, commonly an even split or with the larger share going back to the owner.
That matters more than it sounds. It gives the builder a direct reason to solve problems efficiently rather than spend the allowance because it is sitting there. It also gives you a clear paper trail at closeout, because the split only works if actual costs and approved changes are documented well enough to prove the savings are real. If a builder offers a GMP, ask how unused allowance is handled and get the answer in writing.
How to level two bids in one afternoon
1. Read both exclusions pages before you look at a single dollar figure. Write down every item excluded by one builder and included by the other.
2. Add the excluded items back into the low bid at market rates. This alone usually closes half the gap.
3. Normalize the allowances. Get real pricing on your top three or four selection categories and plug the same numbers into both bids.
4. Confirm both bids account for unforeseen conditions. If one does not, add an allowance for it.
5. Compare what is left. If a real gap remains, ask each builder to explain it. A good builder will have a specific technical answer rather than a sales answer.
What to actually judge a builder on
It is easy to get deep into numbers and percentages and still pick the wrong builder. A bid is a prediction, and a prediction is only as good as the person making it. Once the bids are apples to apples, the questions that matter are about the next eight to twelve months of working together:
- Did they listen to what you actually want, or walk in with their own plan?
- When something in your plan did not work, did they bring a solution or just a price?
- Did they show you where you could save money without giving up what you cared about?
- Is the scope written clearly enough that both of you will read it the same way in month five?
- Do their past clients say the job ended the way it was described at the start?
A builder who handles those things well is worth more than the gap between two bids. A builder who does not will cost you the gap and then some.
Questions to ask every builder before you choose
Questions to ask every builder before you choose
- Are you licensed in the specific jurisdiction where my home is located, and can I see the current license?
- Can I see certificates for general liability and workers compensation coverage?
- Do you require every subcontractor to carry insurance and provide signed lien waivers at each payment?
- What is your allowance schedule, broken down per unit, and has a structural engineer reviewed this scope?
- What is specifically excluded from this bid?
- How are unforeseen conditions handled, and what happens to any unused allowance?
- Who is on my site every day, and how often will I get a written update?
- How are change orders priced, documented and approved, and how fast will I see the cost impact?
- Can I speak with three clients whose projects you finished in the last two years?
Frequently asked questions
Why are contractor bids so different for the same project?
Because they are rarely pricing the same scope. Differences in allowances, exclusions, structural and engineering work, mechanical systems and how unforeseen conditions are handled routinely create large gaps on high-end Denver renovations, even when both builders are working from the same drawings.
Should I always go with the lowest construction bid?
No. A bid well below the others usually has scope missing, and that scope comes back as change orders once demo has started and you have no leverage. Level the bids first by adding excluded items and normalizing allowances, then compare.
How many bids should I get for a high-end renovation?
Three is the practical maximum. Beyond that you are collecting numbers that are not comparable anyway. Shortlist two or three builders you would genuinely hire, then invest the time in leveling those bids properly.
What is an allowance in a construction contract?
An allowance is a dollar placeholder for a selection you have not finalized, such as tile, lighting, plumbing fixtures or appliances. Low allowances are the most common way a bid is made to look competitive. Always ask for allowances broken down per unit rather than as a lump sum.
Do contractors need a license in Colorado?
Colorado does not issue a statewide general contractor license. Licensing is handled by individual cities and counties, so a builder may be licensed in one jurisdiction and not in another. Arvada requires a contractor license for construction, remodeling, alteration and repair work, renewed annually. Electrical and plumbing contractors are licensed statewide through DORA.
What is a guaranteed maximum price contract?
A GMP is priced off the approved plans with a set fee, plus a ceiling the total will not exceed. Cost can still change through approved scope changes or unforeseen conditions, and an allowance is typically carried to cover the unknowns. If that allowance is not spent, a shared savings clause commonly splits the balance between the owner and the builder.
Can a subcontractor put a lien on my house if I already paid my builder?
Yes. In Colorado, unpaid subcontractors and suppliers can file a mechanics lien against your property even if you have paid the general contractor in full. That is why signed lien waivers collected at every payment matter, and why you should ask every builder whether they enforce that process.
Compare the scope, not just the number
The bid comparison that saves you money is not the one where you pick the smallest number. It is the one where you understand what each builder is promising to do, what they are assuming, what they are excluding and who carries the risk when the walls come open. After that, it comes down to whether you trust the person standing behind the number.
Bird Dog Construction is a custom home builder and design-build firm serving Arvada, Golden, Wheat Ridge, Westminster, Broomfield and the greater Northwest Denver metro. We price off approved plans and real selections, document what is included and what is not, and bring you cost saving options instead of surprises.
Have two bids in hand and no idea how to compare them? Reach out and we will walk you through what to look for, whether or not you build with us.
Why are contractor bids so different for the same project?
Because they are rarely pricing the same scope. Differences in allowances, exclusions, structural and engineering work, mechanical systems and how unforeseen conditions are handled routinely create large gaps on high-end Denver renovations, even when both builders are working from the same drawings.
Should I always go with the lowest construction bid?
No. A bid well below the others usually has scope missing, and that scope comes back as change orders once demo has started and you have no leverage. Level the bids first by adding excluded items and normalizing allowances, then compare.
How many bids should I get for a high-end renovation?
Three is the practical maximum. Beyond that you are collecting numbers that are not comparable anyway. Shortlist two or three builders you would genuinely hire, then invest the time in leveling those bids properly.
What is an allowance in a construction contract?
An allowance is a dollar placeholder for a selection you have not finalized, such as tile, lighting, plumbing fixtures or appliances. Low allowances are the most common way a bid is made to look competitive. Always ask for allowances broken down per unit rather than as a lump sum.
Do contractors need a license in Colorado?
Colorado does not issue a statewide general contractor license. Licensing is handled by individual cities and counties, so a builder may be licensed in one jurisdiction and not in another. Arvada requires a contractor license for construction, remodeling, alteration and repair work, renewed annually. Electrical and plumbing contractors are licensed statewide through DORA.
What is a guaranteed maximum price contract?
A GMP is priced off the approved plans with a set fee, plus a ceiling the total will not exceed. Cost can still change through approved scope changes or unforeseen conditions, and an allowance is typically carried to cover the unknowns. If that allowance is not spent, a shared savings clause commonly splits the balance between the owner and the builder.
Can a subcontractor put a lien on my house if I already paid my builder?
Yes. In Colorado, unpaid subcontractors and suppliers can file a mechanics lien against your property even if you have paid the general contractor in full. That is why signed lien waivers collected at every payment matter, and why you should ask every builder whether they enforce that process.
Compare the scope, not just the number
The bid comparison that saves you money is not the one where you pick the smallest number. It is the one where you understand what each builder is promising to do, what they are assuming, what they are excluding and who carries the risk when the walls come open. After that, it comes down to whether you trust the person standing behind the number.
Bird Dog Construction is a custom home builder and design-build firm serving Arvada, Golden, Wheat Ridge, Westminster, Broomfield and the greater Northwest Denver metro. We price off approved plans and real selections, document what is included and what is not, and bring you cost saving options instead of surprises.
Have two bids in hand and no idea how to compare them? Reach out and we will walk you through what to look for, whether or not you build with us.
Figures and practices described in this article reflect 2026 Denver metro market conditions and are intended for planning purposes. Every project and scope is different. Contact us for a project specific estimate.