ES Builders Group / In the Media

Why the Lowest Bidder Often Becomes the Most Expensive Decision on Your Construction Project

Every property owner who has ever solicited bids on a construction project has felt the same pull. Three or four proposals come in, and one number sits noticeably below the others. The temptation is obvious; save money up front, put the difference toward finishes, furniture, or the next phase of the build. On paper, it looks like a smart financial move.

In practice, it is often the most expensive decision an owner makes on the entire project. After more than a decade running construction and construction management work across New York and New Jersey, we can say with confidence that the cheapest bid rarely produces the cheapest project. More often, it produces a stalled job site, a contractor who walks, and a property owner who ends up paying for the same scope of work twice.

The data backs up what we see in the field. Below, we will walk through what actually goes wrong when owners default to the lowest number, what the research says about construction cost overruns, and what to look at instead before you sign.

What the Research Actually Shows About Construction Cost Overruns

There is a widely cited study by Bent Flyvbjerg and his colleagues at Aalborg University in Denmark, later expanded in his work at Oxford, that looked at 258 large infrastructure projects across 20 countries on five continents, built between 1927 and 1998. The researchers found that nine out of ten of those projects fell victim to cost escalation, with an average cost overrun of 28% across the full sample. The phenomenon held across project type, geography, and historical period.

That study focused on transport megaprojects specifically, but the pattern extends throughout the construction industry. A 2022 review in the Engineering Research Journal summarized the broader literature this way: up to 90% of construction projects suffer cost overrun, with overruns ranging from 5% to 200%. McKinsey’s analysis is similarly sobering, estimating that bridges and tunnels incur an average 35% cost overrun, and roads run about 20% over budget.

In other words, overruns are not the exception in construction; they are the baseline. And when a project starts with a contractor who underpriced the work to win the bid, the overrun curve starts from a worse position and climbs faster.

Why the Lowest Bid Is a Warning, Not a Discount

When one bid arrives meaningfully below the others, the most likely explanation is not that the low bidder is more efficient than everyone else in the market. Bidders are pricing against roughly the same labor rates, the same material costs, and the same code requirements. When one number is a clear outlier, it usually means one of three things, and we see all three regularly in the tri-state.

They cut something you cannot see in the proposal. It might be a thinner crew, cheaper subs, lower-grade materials buried inside generic line items, or contingency quietly trimmed to zero. Sometimes it is scope they are planning to claim was not included once they are already mobilized on your site. By the time those gaps surface, you are already locked in, the change orders start arriving, and the “low” bid quickly catches up to or surpasses the higher proposals you turned down.

They underestimated the job. Estimating is hard, and not every contractor is good at it. A bidder who genuinely does not understand the complexity of a project, the constraints of a New York or New Jersey site, or the realities of working through DOB or local permitting, will produce a number that simply does not reflect what the work costs. They are not trying to deceive you; they just do not have the experience to price it accurately. The bill still comes due, and it lands on you.

They do not have the cash flow to carry the project. This is the silent killer. A contractor who underbid to win the job is often the same contractor who cannot float payroll between draws, cannot pay subs on time, and cannot keep materials flowing to the site. Work slows. Trades walk off. Deliveries stop. Meanwhile, you are paying carrying costs, financing costs, and lost revenue on a building that is not producing income.

When a Contractor Cannot Finish the Job

The worst contractor left liens behind.

This is not a rare scenario. One of the testimonials on our own homepage is from an architect whose project had been abandoned by another contractor before ES Builders Group was brought in to rescue it. The research community has identified this pattern as well. A 2024 study in Applied Sciences on cost overrun risk factors found that awarding contracts to the lowest bidder ranked as the single highest cost-overrun risk factor in their analysis, ahead of change orders, design errors, and scope creep. Another peer-reviewed analysis identified the practice of selecting the lowest bidder as a professional skill deficiency that often lays hidden dangers before construction even begins.

How Owners Should Actually Evaluate Bids on a Construction Project

None of this means you should reflexively pick the highest bid, either. The goal is not to spend more; it is to evaluate the right things. Here is what we would push every property owner, developer, and project sponsor in New York and New Jersey to look at before signing.

• Read the spread. If one bid is significantly below the others, treat it as a signal, not a discount. Ask the low bidder to walk you through their assumptions line by line. Have them explain how they are pricing labor, what allowances they are carrying for unforeseen conditions, and where their contingency sits. The gaps usually show up within the first half hour.
• Verify financial health. A contractor who cannot show you bonding capacity, references from their bank, supplier references, and a clean track record of paying subs on time, is a contractor who may not make it to the end of your build. Ask. A reputable general contractor or construction manager will hand this over without hesitation.
• Look at completed work, not just renderings. Visit a finished project. Talk to that owner. Ask what went wrong, because something always does on a construction project; what you are listening for is how the contractor handled it. The contractors worth hiring are the ones who flag problems early, communicate honestly, and own the fix.
• Weight the relationship. The contractors who deliver are the ones who pick up the phone, treat your project as a partnership, and stay aligned with your budget and schedule rather than just their own. That is the part that does not show up on a bid sheet, and it is the part that protects your project more than any single line item.

The Bottom Line

The cheapest bid almost never produces the cheapest construction project. The right bid does, and the right bid comes from a contractor who has the experience to price the work honestly, the financial stability to carry it, and the discipline to finish what they start.

At ES Builders Group, we have spent more than a decade building, managing, and at times rescuing construction projects across the New York and New Jersey metro area. If you would like a second set of eyes on a bid package, or an owner’s rep perspective before you sign, get in touch.

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