Why We Charge for Estimates

A builder named David Gerstel wrote something years ago that’s still worth reading: he stopped giving free estimates in 1977, and never gave one again. His reasoning was simple. A meaningful estimate takes real work – sorting out specifications not shown on a sketchy plan, pricing options, thinking through buildability – and doing that work for free, on the chance you might get hired, meant homeowners and architects were effectively using builders’ unpaid labor to shape their projects, then sometimes using those numbers to negotiate down whichever builder they’d already decided to hire. He called the alternative “cost planning”: a paid preconstruction service built on multiple estimates, clear specifications, and full transparency about where every dollar goes. You can read his original piece at Fine Homebuilding.

We don’t give free bids either, and for the same core reason. But our answer to the problem goes a step further than his did.

The problem with free estimates isn’t just the free part

Gerstel’s real point wasn’t about money – it was about what “competitive bidding” actually produces. Owners solicit multiple bids on the same sketchy plans, so architects over-draw everything to avoid blame for omissions, wasting time and money. Builders who want the job quote only what’s shown on the drawings and stay quiet about what’s missing, because those omissions become billable change orders later. The result is a price that looks fixed on signing day and doesn’t stay fixed once construction starts.

That’s a fair description of what competitive bidding produces even when everyone involved is acting in good faith. The incentives are just pointed the wrong way.

Our version: the Feasibility and Construction Agreement

Before we ever start pricing a project, we sign a Feasibility and Construction Agreement (FCA) with the owner – and before that happens, we send it to the owner’s architect first, so all three of us are aligned on how the relationship works before anyone commits to anything. The FCA covers how costs get tracked and disclosed, how change orders get handled, how the final budget gets confirmed, and what warranty coverage kicks in at completion. Your project manager walks you through every section before you sign anything.

If, after that planning phase, you decide not to move forward, you’re not left holding a bill for nothing: you get your estimates and schedules delivered in a project folder, and we don’t proceed into construction. The paid preconstruction work buys you something real either way – plans and pricing you can take anywhere – not just a locked-in relationship with us.

Where we go further than fixed-price cost planning

Here’s the difference worth naming. Gerstel’s cost planning is still, in the end, a fixed-price model – a more honest process arriving at a number that then gets locked in. We use Open Book Cost-Plus instead. You pay the actual, documented cost of construction – labor, materials, subcontractors, consultants – plus our overhead and profit, disclosed as separate line items you can see, not folded into a lump sum you can’t. There’s no marked-up material price quietly absorbing risk, because there’s nothing to mark up in the first place.

The number we build toward is what we call a Bid-Backed Budget: a line-item budget built from actual bids by our licensed subcontractors and suppliers, not a general estimate. You review it, ask questions, and approve it before we break ground. If the real cost comes in under that number, you keep the difference. If something changes mid-build, it goes through a written change order you see and approve before any work starts on it – not a surprise on next month’s invoice.

Why this matters more than it sounds like it should

Gerstel spent forty years watching what free estimates and fixed-price bidding do to trust between owners, architects, and builders – the adversarial posture, the incentive to hide information, the anxiety of watching a “fixed” price move anyway. Paying for the planning phase isn’t really about the fee. It’s what that fee buys: a process where nobody’s incentives point toward hiding anything from you, on a project where hiding things is usually how costs get out of control in the first place.

If you’re weighing a custom build and want to understand how this actually works for your project, we’re happy to walk you through it. Get in touch, or take a look at our full seven-step design/build process.