What is Bid Leveling?
Bid leveling (also called bid normalization or scope leveling) is the process of adjusting contractor bids to account for differences in how they interpreted the project scope, priced inclusions and exclusions, valued alternates, and applied allowances. Even with the same drawings and specifications, contractors often submit bids that are not directly comparable. One contractor might include temporary power and another exclude it. One might use a higher allowance for unforeseen conditions. Bid leveling creates an 'apples-to-apples' comparison by adjusting each bid to a common baseline. Without leveling, you risk choosing a contractor who simply priced less scope—and then paying for the difference through change orders.
Why Bids Need Leveling
Several factors cause bid variations: SCOPE INTERPRETATION - Drawings and specifications are never perfect. Different contractors interpret ambiguous requirements differently. One might include finish hardware and another assume it's by owner. INCLUSIONS/EXCLUSIONS - Contractors list exclusions to limit risk. 'Excludes demolition of existing conditions' or 'excludes permit fees' are common examples. These must be adjusted for fair comparison. ALLOWANCES - Specifications often include allowances for items to be selected later (e.g., '$50,000 allowance for finish materials'). Contractors may carry different allowance amounts. ALTERNATES - Bid documents often request alternate prices (add/deduct) for specific scope changes. Contractors price these differently based on their means and methods. QUALIFICATIONS - Contractors add conditions to their bids such as 'subject to site access by date X' or 'assumes 8-hour workdays only'. These qualifications may have cost implications.
The Bid Leveling Process
Follow this systematic approach: STEP 1: CREATE BASELINE - Establish the complete scope of work as defined in the bid documents. This is your comparison standard. STEP 2: REVIEW EACH BID - Carefully read each bid package, noting all exclusions, qualifications, allowances, and assumptions. Create a checklist for each bidder. STEP 3: IDENTIFY GAPS - Compare each bid against the baseline. Identify items that are excluded or priced differently than the baseline scope. STEP 4: QUANTIFY ADJUSTMENTS - Estimate the cost of each gap. Use historical data, unit costs, or request pricing from other contractors. Document your methodology. STEP 5: APPLY ADJUSTMENTS - Add costs for excluded items, adjust for allowance differences, and normalize alternate pricing. Create an 'adjusted bid' column. STEP 6: DOCUMENT THOROUGHLY - Record every adjustment with rationale. This creates an audit trail and supports negotiations with the recommended contractor.
Common Leveling Scenarios
EXCLUDED WORK ITEMS - Contractor A excludes overhead doors ($45,000). Add this to Contractor A's bid for comparison. Verify scope with the contractor before finalizing. ALLOWANCE DIFFERENCES - Bid documents specify $100,000 mechanical allowance. Contractor B carries $80,000. Adjust Contractor B's bid up by $20,000. ALTERNATE PRICING - Alternate #1 (upgraded flooring) prices vary from add $15,000 to add $35,000. Decide which alternates will be accepted and create total including alternates for comparison. UNIT PRICE ITEMS - For unit price items with quantity estimates, verify all bidders used the same quantities. Adjust if necessary for consistent comparison. BOND AND INSURANCE - Some bids include bonds and some exclude. Standardize by adding bond costs to bids that exclude them. TEMPORARY FACILITIES - Trailer, utilities, and site office requirements vary. Ensure all bids include required temporary facilities or adjust accordingly.
Documentation Requirements
Thorough documentation protects your procurement decision: BID COMPARISON MATRIX - Create a spreadsheet showing original bid, each adjustment, rationale, and adjusted bid. Format for clarity and auditability. ADJUSTMENT BACKUP - Maintain supporting documentation for each adjustment: how was the cost determined? What source data was used? Are there similar items to reference? BIDDER COMMUNICATION LOG - Record clarifications requested from bidders and their responses. Maintain written records of all communications. RECOMMENDATION MEMO - Summarize the leveling analysis and contractor recommendation. Explain why the recommended contractor represents best value even if not the lowest original bid. AUDIT TRAIL - Organize all documents for potential review. Public projects and many private organizations require defensible procurement records.
Best Practices and Pitfalls
BEST PRACTICES: (1) Start leveling immediately after bid opening - memories are fresh and bidders are available for clarifications. (2) Use a standard template - consistency improves accuracy and efficiency. (3) Involve estimating expertise - leveling requires cost knowledge. (4) Request clarifications in writing - verbal clarifications should be confirmed via email. (5) Be conservative with adjustments - when uncertain, err on the side of adjustments. PITFALLS TO AVOID: (1) Assuming lowest bid is best - the lowest bid often has the most exclusions. (2) Over-adjusting - making too many or too large adjustments can distort the analysis. (3) Inconsistent methodology - apply the same standards to all bidders. (4) Ignoring qualifications - qualifications often have material cost implications. (5) Rushing the process - thorough leveling takes time but prevents costly mistakes.