What is the difference between an estimate, a quote and a bid?

An estimate usually gives an approximate price. A quote states a price for specified work. A bid is an offer submitted for a job that a buyer is awarding, often through a competitive process.

Businesses use these words differently. Explain what work the price covers, whether it can change and how the customer approves it. The title alone does not explain those conditions.

What do estimate, quote and bid mean?

A bid may include estimates or fixed prices. Estimating is about calculating a price. Bidding is about submitting an offer for a job.

How do you explain a price that might change?

For this example, a customer asks how much a repair will cost and sends photos of the damage. The photos help you understand the request, but you still need to inspect the work.

If you give an early price range, say what it is based on and what needs checking. For example:

This is an approximate price based on the photos you sent. We need to inspect the damage before confirming the work and price.

After an inspection, some conditions may still be hidden. Name the uncertainty, such as damage behind a wall. Explain what happens if you find additional work:

Repairs to damage behind the wall are not included. If we find damage, we will send a written description, price and any schedule change. We will obtain your written approval before doing the additional work.

If you list a rate for extra work, state its unit and when it applies. The customer should approve the extra work and resulting charge before you proceed. Calling the document an estimate does not explain these details for you.

How do you explain a fixed quote?

A fixed quote should describe the work covered by the price and name any exclusions. State the date until which the customer can accept the quoted price and terms.

For example:

The price is fixed for the work listed in this quote. Additional work requires a separate written price and your written approval before it starts.

Use wording that matches how you charge. If you will bill by the hour or by the quantity used, list the rate and explain how you calculate the final bill. Read fixed-price versus hourly work for that comparison.

What is different about submitting a bid?

When a customer or general contractor asks for a bid, read their instructions before preparing it. Check:

• The work and specifications you must price.
• The forms and documents you must submit.
• The submission deadline and how long you must honor your price.
• How the buyer will compare bids and choose a contractor.
• Any required guarantees, insurance or payment conditions.
• The rules for correcting or withdrawing your bid.

Public projects can have formal procedures. For example, the federal government's sealed-bidding rules set out submission, public opening, evaluation and award steps. Other buying processes use different rules; follow the instructions for the job you are bidding on.

Does an accepted estimate or quote create a contract?

An accepted estimate or quote can create obligations. What those obligations are depends on the document, the circumstances and applicable law. Do not assume that changing the title changes your responsibilities.

Check whether your location requires a particular contract or notices. California's contractor board, for example, explains its home-improvement requirements in its guide to contracts and binding agreements. The sample wording in this article does not replace any contract documents required for your job. Get local legal advice if you are unsure what an acceptance commits you to.

Keep the accepted version and any approved changes together. Both you and the customer should be able to check the work, price and terms that were approved.

How can DoneQuote help you prepare a clear quote?

DoneQuote drafts quotes using your service descriptions and prices. Review the included work, exclusions and payment terms. State whether the price is fixed or approximate and explain how extra work will be approved.

The customer can review the online quote and approve it. DoneQuote records the approval against the version they accepted.

If you also need help calculating costs, read the difference between estimating and quoting software.