Buyout

Buyout is the process of awarding subcontracts after bid, negotiating final pricing and scope with the chosen subs to lock in the actual cost basis for the job.

The estimate that won the bid is built on assumed sub pricing. Buyout is where that assumption gets tested — negotiating with the actual subs who'll do the work, locking their scope and price into a signed subcontract, and finding out whether the job's real cost basis matches what was bid.

The gap between estimated and bought-out cost is where a lot of margin either gets protected or quietly disappears, depending on how tightly the scope in each subcontract matches what was assumed in the estimate.

Example

A GC's estimate assumed $85,000 for drywall based on a rough unit price. During buyout, the awarded drywall sub's contract locks in at $91,000 once their exclusions are reconciled against the original scope — a $6,000 gap the GC needs to absorb or recover elsewhere.

Related terms

Bid levelingBid leveling is the process of normalizing subcontractor bids onto a common scope basis so they can be compared apples-to-apples, since bidders routinely include or exclude different items.Scope of work (SOW)A scope of work (SOW) is the written description of exactly what a subcontractor is responsible for on a project — the boundary line everything else, including disputes, gets measured against.Change orderA change order is a signed, priced amendment to a construction contract that adds, removes, or modifies scope, cost, or schedule after work is already under contract.

Used in

Bid leveling for general contractorsGeneral contractors who need to compare subcontractor bids that never arrive in the same format.Bid leveling for remodelersRemodelers and custom builders comparing trade quotes that rarely use the same scope basis.Subcontractor scope of work for general contractorsGCs who need a formal, signed scope letter for every sub before they mobilize.Subcontractor scope of work for custom home buildersCustom home builders who need a written scope letter for every trade before the job starts.

Next step

Where this shows up in Datumel:

Sub Scope LetterFree

Describe the project and what the sub owns. Get a formal pre-mobilization scope letter with a sign-off line.

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Estimating & Scope-Gap SystemFrom $8,000 one-time

An estimating and buyout system in your own tools: a scope-gap check, a bid-leveling workbook, and tuned assistants that catch missed scope before it costs you.

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