You're overseeing a construction project for either your personal property or a business that you are involved with. You need to choose a contractor, and need to know how much the project will cost so that you can consider your budget, and you know that you can set up either estimates, or bids-but which suits you best and what does each mean?
An estimate for a project is never set in stone. It is a figure that is based upon a guess-an estimation of the materials that are likely to be used and the time that is likely to be needed to complete that project. Nothing is really known for sure, other than what the materials cost at the time that the estimate was put together, and how much time similar projects have taken.
The problem with an estimate is just that-the price is not certain. If prices of basic materials rise drastically you will pay a lot more and if there is a problem with the construction that doubles the time taken then you pay for double the man hours for the project. The calculations are done to the best ability of the contractors, but there will be unknowns. You may not have completed your plans for instance, or want an early estimate of the cost as the plans are being drawn up.
There are benefits too to this approach, namely in that with the price not having been set or the project paid for, you can choose to add or remove components to the project as you go along.
A bid on the other hand is similar to an auction. You as the person who wants the project completed will hire an architect to draw up the plans to your requirements. The architect then releases these plans to several contractors, or even publicly. There are variations upon the bid method that see a bid submitted and the plans drawn up whilst other aspects of the work are in progress-overlapping to save time, but the basic premise is the same.
The contractors will look at the plans of your project and maybe even talk over specifications with you. Everything is already down on paper and the desire is to reduce to a minimum the unknowns so that a cost can be worked out that will be as certain as possible for the contractor.
At the end of it the contractors tell you how much they are willing to complete the job for-this is their bid. The figure is set, you know how much you are going to pay and that the project will not go over that. If your budget is very set, and inflexible then with this method you are assured that you will pay only what you signed up for at the outset of the project.
The down side of this is that there have been horror stories of contractors bidding too low, being accepted and then running out of money. They can't pay the laborers, and they can't buy the raw materials so the work just grinds to a halt. You then have no choice but to hand over more money just to get your work completed (even if it's not completed by the same company).
Which you choose may depend on your preferences and your own approach towards managing your project.
