Updated advice from Tim Graham's article archive
The Three-Bid Myth: Why Getting Three Quotes Doesn't Work the Way You Think
The age-old practice of collecting three bids assumes every builder assessed the project the same way. In reality, that assumption is almost never accurate.
Is getting three bids always the best way to choose a custom-home builder?
Three proposals can be useful, but three bottom-line numbers are not automatically comparable. The familiar “get three bids” advice assumes that each builder priced the same design, scope, specifications, allowances, schedule, and contract terms. If those inputs differ, the lowest total may simply describe a different project.
When three bids are not apples to apples
In theory, comparative bidding isolates price: everything else is equal, so the buyer can evaluate which qualified builder offers the best value. That can work when the owner has complete construction documents and every bidder follows the same instructions.
In practice, early custom-home proposals often contain different assumptions. One builder may include substantial site work while another carries an allowance. One may price a particular window package, mechanical performance target, and finish level while another leaves those decisions open. Each may interpret an incomplete plan differently.
The resulting totals are not necessarily wrong. They may answer different questions. Comparing only the final number hides the differences that matter: what is included, what remains uncertain, how risk is allocated, and how the team will develop the project after selection.
When competitive bidding can work
Competitive bidding is most useful when the project is sufficiently defined and the comparison rules are explicit. Before treating proposals as comparable, check that each builder received and acknowledged the same package.
- The same dated drawings, specifications, addenda, and engineering information
- The same selection schedule and clearly defined allowances
- The same site, utility, permitting, and access assumptions
- The same requested alternates and unit prices
- The same schedule expectations and proposed contract form
- A common bid form that separates inclusions, exclusions, allowances, and contingencies
Even then, price is only one part of the decision. Verify qualifications, relevant experience, references, financial clarity, communication, warranty, safety, capacity, and the people who will actually manage the work.
A negotiated pre-construction approach
Another approach is to select a builder or design-build team based on fit and qualifications, then develop the design, scope, and budget together through a defined pre-construction agreement. The homeowner shares the budget constraint, and the team tests the evolving project against real scope and cost information.
The budget does not determine what the work will cost, and selecting one team does not remove uncertainty. Instead, the process creates a structured conversation: What does the current design cost? Which assumptions remain? What should be simplified, deferred, or specified differently to align the project with the owner’s priorities?
That approach can be especially useful when design and pricing need to evolve together, when the existing site or home creates substantial uncertainty, or when the owner values early builder and trade input. It still requires transparent fees, deliverables, pricing methods, checkpoints, and an off-ramp if the project cannot be aligned.
Compare the proposal, not just the price
- What exact scope and performance standard does this price buy?
- Which selections are fixed, which are allowances, and how were the allowances set?
- What is excluded, unresolved, or carried as a contingency?
- How are site risk, price changes, substitutions, and change orders handled?
- Who will communicate with us, and what will reporting look like?
- What evidence supports the proposed schedule and team capacity?
“Three proposals can create useful information. Three unexplained totals can create false confidence.”
The bottom line
The myth is not that you should never seek three proposals. It is that the number three makes them comparable. Define the project and the comparison first. Then choose the selection method—competitive bid, negotiated pre-construction, or another transparent process—that fits the project’s maturity, risks, and priorities.