There is a specific, sinking feeling that every General Contractor knows.
You spent three months bidding on a custom home. You finally signed the contract with the homeowner for $1.2M. You turn around to issue the subcontracts, and your lumber supplier says: “Sorry, that quote was from 60 days ago. Plywood is up 15%. The new price is +$8,000.”
Who pays that $8,000?
Unless you have very specific language in your prime contract, you do. You “eat” the cost. Your profit margin just shrank, and you haven’t even broken ground.
In an economy defined by supply chain volatility and labor shortages, relying on “handshake pricing” is financial suicide. Here is how to lock in your costs and protect your margin.
The first line of defense happens before you bid.
Every subcontractor proposal has an expiration date, usually found in the fine print: “Pricing valid for 30 days.”
If your sales cycle with the client takes 90 days, you are bidding with “expired data.” You are promising a price you can no longer honor.
The Fix:
Many GCs wait until they need a trade on site to sign the contract. They won’t issue the Drywall subcontract until the Framing is almost done.
This strategy gambles on future inflation.
The Fix: Execute an Early Buyout. As soon as the owner signs, issue “Letters of Intent” (LOI) or Subcontracts to all trades immediately.
Sometimes, you cannot lock in pricing (e.g., commodity markets like steel or lumber). In these cases, you must shift the risk to the Client.
The Fix: Include a Material Escalation Clause in your contract.
Many GCs are afraid to push back on subs.
If you do this 20 times on a project, you lose $10,000. You are running a business, not a charity.
If a sub has a signed contract, they are obligated to perform for that price. It is not your job to subsidize their poor planning. If they don’t have a signed contract, and you are relying on an old email, that is your poor planning.
Implementing a “Bid Validity” tracking system in Excel is painful.
You have 40 bidders on a project.
Keeping a “tickler file” or a calendar reminder for every single bid is impossible for a busy Project Manager. As a result, this step gets skipped, and the price hikes surprise you later.
Bid Bench turns “Bid Validity” into a tracked data point, not a guessing game.
Protect your margin before you sign.
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