How to Spot a Construction Bid That Loses Money

Episode 189 of the Construction Accounting Podcast with George Ghazarian, CPA · 5 min 12 sec · Published 26 August 2026

You are busier than you have been in two years and your bank balance is lower. That is not bad luck and it is not your crew.

It is almost always the bid. Here is how a job goes upside down before anyone sets foot on site, and how to see it coming while you can still walk away from the number.

The Market Conditions Behind Bad Bids

Look at what the numbers are doing. ABC reported construction backlog slipped to 8.8 months in June. At the same time there were 305,000 open construction jobs at the end of June. In the 2026 AGC survey, 63% of contractors said they plan to grow headcount this year and more than 80% said they cannot find people.

Read that back. Less work in the pipeline. More expensive labor. The same crew you are trying to keep busy. Those are the exact conditions where good contractors quietly start buying jobs instead of winning them. And it is not easing off — ABC projects the industry needs 349,000 net new workers in 2026 alone, which is a polite way of saying labor stays expensive for the foreseeable future.

You Are Pricing Off Last Year’s Costs

Your cost side moved and most contractors never went back and rebuilt their pricing. They kept adding the usual markup to a cost base that is no longer real.

Materials are not moving together anymore either. ABC data showed nonresidential input prices surging at a 12.6% annualized rate in the first two months of 2026, the fastest since 2022. But the average hides the risk. Steel is one story. Copper was running around $5.76 a pound in March 2026, up 32% year over year. Switchgear lead times have stretched to two to four years in some markets. If you are an electrical or mechanical contractor pricing off a blended cost index, you are averaging away the exact line item that is about to eat your job.

Backlog Is a Revenue Number, Not a Margin Number

This one is subtle. You track backlog in dollars — $600,000 of work, a million two. That number tells you how busy you are about to be. It tells you nothing about whether you are about to make money.

Contractors carry a record backlog and a shrinking checking account at the same time, constantly. Backlog measures volume. Margin measures survival. They are not the same report and one does not substitute for the other.

You Find Out at Closeout

The third mistake is running jobs without cost to complete. You have billed, you have costs to date, and you are doing the math in your head on the drive home. That is not a system. That is hope.

If you are not updating estimated cost to complete every single month, you do not find out a job went upside down until the retention check does not cover the punch list. By then you cannot reprice it, you cannot rescope it, and the money is already spent.

You Are Giving Away Change Orders

The fourth one is pure profit walking off your site. The plans changed. The GC asked for one more thing. The homeowner wanted the outlet moved. You did it, because you are a good contractor and you do not want a fight.

Change order work is the highest-margin work in construction when you actually charge for it. It is also the fastest way to turn a 9% job into a 2% job when you do not.

The Four Fixes

1. A real monthly WIP schedule with estimated cost to complete updated every month. Not quarterly. Monthly.
2. Gross margin by job type, not company-wide. Service calls, change orders and new construction are three different businesses living inside one profit and loss statement.
3. A walk-away number. Before you bid, you decide the margin below which you do not sign, and you put it in writing — because in the truck at 6 a.m. you will talk yourself into it.
4. An escalation clause on anything delivering past 90 days. AGC recommends it on every contract now, and ConsensusDocs 200.1 is the standard amendment for it. That is not aggressive. That is refusing to eat a tariff you did not cause.

Usually It Is a Mix Problem

Here is a composite that plays out constantly. An HVAC contractor around $4 million in revenue, proud of a record backlog. Real job costing by job type showed new construction running about 4% gross while service work was over 30%. He had been chasing new construction because the ticket sizes were bigger, and using service profit to pay for it.

Nothing about that was an expense problem. Not a single cost got cut. What changed was which jobs he bid. His margin problem was a mix problem, and he could not see it because every job was averaged into one company-wide number.

The short version

• Backlog measures how busy you will be, not whether you will profit
• Update estimated cost to complete every month, not every quarter
• Set a written walk-away margin before you start pricing the job
• Break out gross margin by job type; a company-wide number hides losers
• Add escalation language to anything delivering more than 90 days out
• Unpriced change orders can drop a 9% job to a 2% job

Related episodes

• Why Your Cost to Complete Number Hides Job Losses
• How Your WIP Schedule Drives Taxes and Bonding Capacity

Browse the full Construction Accounting Podcast archive

This episode is general information about how these rules work, not advice for your situation. Tax law changes and the right answer depends on your entity, your income and your circumstances. Talk to a CPA before acting on it.