When budgeting for a new building, whether it's a small outbuilding for your existing business or a whole new warehouse, it can be difficult to determine what is a fair bid for the materials. The common practice of getting at least three bids and going with the one in the middle may be easy, but you really don't know for sure if the price is fair. The following guide can help you make a more educated decision when determining which bid to accept.

Check on local labor averages

A big chunk of any bid is the labor cost. Before accepting bids, do a bit of research to see what type of labor will be necessary for your project. For example, do you simply need general laborers for the project or will the project also require skilled laborers such as electricians and plumbers? Once you have an idea of what kind and how many laborers are typically used for a project of your size and scope, find out what the average daily rate is for each type in your area. You can often find this information on a county, state, or federal labor statistics website.

Research permitting costs

Every construction project usually needs at least one permit, if not several. You can find out which permits are necessary for your project simply by calling your local clerk or building department and describing your project. The contractor you eventually hire will likely purchase permits and pay for inspections, so this will be figured into the bid. Once you know the permits and inspections necessary, you can check their costs on a county or city fee table to determine how much this aspect should add to a fair bid.

Know materials cost

Materials can rival labor in cost, so you need to have a ballpark figure for your project. Fortunately, most builders will provide a detailed materials list at the time of the bid. You can use this list to check on average costs. Your builder will generally get items at a discount, so ask for the contractor's price when calling building yards for general pricing. Keep in mind, some items are sold by weight. For example, structural steel can be priced by both weight and dimensions, so you can only get accurate pricing if the supply list has either the weight or the average dimensions required of each structural steel piece.

Once you have collected the above information, you can add them together for a rough idea of a fair building cost. Keep in mind that your bids may be higher than that amount, as the builder will need to figure in profit on top of the above costs. This number can mainly help you because you can see where a builder is way undershooting the necessary costs – which could be a red flag that the workmanship will suffer or that the project will run over budget. At the same time, knowing the cost can also protect you from builder's that overinflate the cost beyond what is required for the project.

For more information, contact a professional service, such as BIGBOSS ESTIMATING.