General contractor bids eat up more time than most general contractors admit. You price the job, chase sub quotes, submit a number, and lose to someone who either knows something you don't, or is about to learn an expensive lesson. Nobody becomes a general because they love spreadsheets, but learning how to bid on construction jobs accurately is where work gets won or lost.
The real challenge isn't the bid form, it's the math under it: what overhead actually costs, how markup and contingency interact, whether your sub quotes are comparing the same scope, and which invites deserve your estimating hours. Each section below breaks down the numbers on a real job so the math is concrete, not theoretical, whether you're figuring out how to write a construction bid for a $75K remodel or a $500K commercial fit-out.
How Should a General Contractor Calculate True Overhead for a Bid?
Overhead mispricing usually shows up when a general contractor pulls last year's P&L to price a $200K kitchen-to-studs remodel and plugs in 10% because it feels close enough. What breaks is what you actually keep: once every non-job cost hits the list, actual overhead may run closer to 16%, not 10%. That 6-point gap comes straight out of the job.
Start by listing every cost that isn't tied to a specific job:
Vehicle payments
Insurance premiums
Office costs
Software subscriptions
Phone and internet
Bonding premiums
Continuing education
Add your owner's salary, since you're running an S-Corp and paying yourself on payroll. That full list, totaled for the trailing twelve months, is your actual annual overhead number.
Divide that annual overhead number by your total direct costs across all jobs for the same period. If overhead runs $400K against $2.5M in direct costs, the true rate is 16%. That percentage tells you what overhead adds on top of every dollar you spend on subs, materials, and labor. Overhead drifts upward as the business grows, because each new hire, truck, and software subscription adds cost before the jobs catch up.
When you can see exactly what overhead costs, you can price it into each bid instead of finding the gap at tax time. That's the link between overhead and job cash flow.
What Does the Markup Math Look Like on a Real Construction Bid?
Markup mistakes usually surface on jobs that look profitable on paper but leave almost nothing after overhead. A $250K fit-out lands on the desk. Direct costs run $95K in sub work, $65K in materials, and $40K in labor for the general contractor's own crew, totaling $200K in hard costs.
A 20% markup on $200K produces $40K in gross dollars above direct costs. But $40K on a $240K contract means you're only keeping 16.7% of the contract price, not 20%.
And that $40K has to cover overhead plus profit. If overhead runs at 16% of direct costs—roughly $32K on this job—the general contractor nets $8K on a job that took four months to build. That's not a rounding error. That's working for almost nothing.
A widely used industry benchmark is "10 and 10": 10% overhead and 10% profit as a share of the contract price. Hitting that target requires roughly a 25% markup on direct costs, not 20%. On that same $200K base, a 25% markup produces a $250K contract: $32K covers overhead at the true rate, and $18K is what you actually keep on the job. That gap between a 20% and 25% markup often marks the difference between building a business and subsidizing someone else's project.
How Much Contingency Should a General Contractor Carry on Top of Markup?
Contingency sizing gets real the first time a $180K bathroom-to-addition project hits an unmarked sewer lateral during demo that adds $9K in plumbing rework nobody saw coming. The bid had no contingency line, so that $9K comes straight out of the general contractor's $18K net on the job. Half the profit, gone before framing starts.
Contingency belongs on top of markup, not folded inside it. Burying contingency in your markup percentage means you're borrowing from profit to cover unknowns, and when nothing goes wrong, you never see that the profit number was understated all along.
How much depends on project type and document completeness.
Hard-bid commercial work with full construction documents: general contractors commonly carry 3-5% of direct costs to cover the standard unknowns, including minor scope clarifications, coordination gaps between trades, and material price shifts between bid day and buyout. On a $200K hard-cost base, that's $6K-$10K as a separate line.
Negotiated residential work where scope is still evolving at contract signing: contractors commonly target 7-10%.
Renovation work adds another layer: once walls open, the scope changes. A $150K whole-house renovation with 8% contingency carries $12K against unknowns, and that disappears fast if the framing behind the plaster doesn't match the original drawings.
Treat contingency as its own line in the bid, visible and intentional. That principle of separating money by purpose, the same idea behind profit first allocation, applies to bid math too. When contingency is buried inside markup, you can't track whether you used it, and you can't sharpen your estimates over time because you never know where the money went.
How Do You Level Sub Quotes to Build an Accurate Bid?
Three bids hit your inbox for the same drywall package and the numbers don't even look like they're pricing the same job. What breaks is comparison: more often than not, they're reading the scope differently.
| Sub A: $28K | Sub B: $34K | Sub C: $41K |
Metal framing | Excluded | Included | Included |
Fire-rated assemblies | Not included | Not included | Included |
Access panel allowance | Not included | $2K allowance | Not included |
Leveling sub quotes means normalizing every bid to the same scope before comparing price. Pull each sub's inclusions, exclusions, and clarifications. Line them up side by side on a scope spreadsheet. Where one sub excludes something the others include, either get a revised number or add the cost back in yourself. Where two subs include something the third doesn't, confirm whether the bid documents actually require it.
This process matters most on MEP trades, where scope interpretation varies wildly and the dollar amounts are large enough to swing the entire bid. For a $1.5M general contractor bidding a $300K project, getting three quotes per major trade scope forces genuine comparison. Fewer than three, and you're guessing.
When work falls between two subcontracts and nobody owns it, the general contractor absorbs the cost. The fix happens during bid prep, not after award. Every scope boundary between subs needs a line in the scope spreadsheet, assigned to someone.
Which Bids Should You Chase and Which Should You Walk Away From?
When jobs on the books shrink, every invite starts to look worth chasing. That's when estimating time gets expensive. What breaks is your take-home on the work you do win. Contractors commonly report winning roughly 1 in 5 competitive bids on private work, which means the cost of losing is baked into the cost of winning.
Contractors commonly report spending $2,000-$4,000 per bid on estimating time and sub coordination. At that rate, the four losing bids run $8,000-$16,000 in sunk cost. That entire amount has to come out of the dollars left on the one job you win.
When jobs on the books shrink, the instinct is to bid more. The math says bid better.
Before committing estimating hours, run through a short checklist:
Does this project type match your crew's strengths?
Have you worked with this owner or architect before, and do they pay on time?
How many other general contractors are on the bid list?
Can you fund mobilization if you win, given what's already committed across active projects?
Any "no" on the first three filters is a reason to pass. A "no" on the last one is a reason to check the bank balance before going further.
That last question ties bidding directly to cash you can actually touch right now. A $250K win that requires $40K in mobilization cash before the first draw arrives in 60 days is a different opportunity if you're already carrying $35K in outstanding draws on two other jobs. Banking platforms that let you open separate checking accounts for each active project make it possible to see what's genuinely available before you commit.
Price Bids With Money Already Spoken For
The core estimating problem is that committed money and available money can look the same when everything sits in one pile. That's where overhead, markup, sub leveling, and bid selection all connect. If operating costs, job costs, and tax reserves blur together, the bid number gets fuzzy fast.
Accurate bids start with separation. A clear overhead number, a real view of what each active job is consuming, and a clean picture of cash you can actually touch all make estimating less of a guess. Getting that picture gets easier when you separate accounts in a way that keeps operating costs apart from job costs and tax reserves.
Relay lets you open up to 20 checking accounts1 with no monthly maintenance fees, so each bucket has its own account instead of living in a spreadsheet. When a draw hits, automated transfers move the right percentages before the money gets spent somewhere else. Open a Relay account to see what's actually available the next time you sit down to price a bid.
1Relay is a financial technology company and is not an FDIC-insured bank. Banking services provided by Thread Bank, Member FDIC. FDIC deposit insurance covers the failure of an insured bank. Certain conditions must be satisfied for pass-through deposit insurance coverage to apply.
Frequently Asked Questions
How Do I Know if My Markup Is High Enough to Cover Overhead and Profit?
Start with the overhead calculation described above to get your real percentage. Then check whether your markup on direct costs produces enough gross dollars to cover that overhead and still leave profit. The 20% vs. 25% markup example in the body section shows exactly where the math breaks down and what target to aim for.
How Many Sub Quotes Should I Get per Trade Scope?
Three per major trade scope is the floor. That minimum matters most on MEP work, where the scope interpretation differences between subs are large enough to swing the overall bid number. The sub-leveling section above walks through what those differences look like in practice.
What's a Realistic Cost to Prepare a Competitive Bid?
For a $1M-$6M general contractor bidding a $250K-$500K commercial project, contractors commonly report spending $1,600-$7,400 per bid when you account for estimating time, sub quote coordination, plan review, site visits, and document printing. If the owner is also the estimator, the effective cost runs higher because those hours aren't going toward active projects already under way.
How Do I Decide Whether to Bid a Job or Pass on It?
The four-question checklist in the bid selection section above covers the key filters. The short version: project fit, owner payment history, competition level, and whether you can fund mobilization without straining active jobs. Passing on a bad-fit bid keeps your estimating hours focused on jobs where your win probability and take-home are both higher.
How Do You Bid Small Construction Jobs Without Losing Money on Overhead?
The same overhead math applies whether the project is $75K or $500K. The risk on smaller jobs is that a flat overhead percentage eats a bigger share of a thinner gross margin. If overhead runs at 16% and the job only produces $12K in gross dollars, there's almost nothing left. For smaller residential projects, tighten the estimate by getting actuals on every line item instead of using allowances, and keep contingency at the higher end of the range since scope tends to shift more on smaller, less-documented work.
Should I Price Retainage Into My Bid?
Yes. Retainage ties up part of every draw until project closeout, often for months after punch list completion. That withheld money has a real financing cost: if you carry a line of credit to cover the gap, the interest expense comes directly out of your net on the project. Factor retainage terms into your go/no-bid decision and, where the project justifies it, add the financing cost as a bid line item.
How Do I Handle Sub Quotes That Expire Before the Owner Awards the Job?
Build an expiration buffer into your bid. Most sub quotes are valid for a limited window, but public project awards can take much longer. If you're contractually bound to your bid price while sub pricing has expired, the difference comes out of your pocket. Flag long-award-cycle projects during bid prep, and add escalation language or a contingency line to cover potential repricing.
