Buyout
Buyout is the process, after a project is won, of converting each estimated scope into a signed subcontract at an agreed price.
Also written as subcontractor buyout, bought out.
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Reviewed by Eric Collin · President and Founder of Firmo Construction, 20+ years in preconstruction and bid evaluation
The estimate is a prediction; buyout is where it meets reality. Every line that was carried at a bid, an allowance, or a plug number becomes a real contract with a real number, and the difference between the two is buyout savings or buyout overrun.
It is also where scope problems become expensive rather than theoretical. A scope gap that survived leveling surfaces here, and it surfaces without competitive pressure — the work still has to be done, but now there is one contractor in the conversation instead of five.
Which is the argument for careful leveling stated in financial terms: the point of leveling is not a tidier spreadsheet, it is a buyout with fewer surprises in it.
It is also where inadequate prequalification comes due. A bidder that cannot bond the work, staff it, or survive the payment terms fails at the point of signing a contract, and the package goes back out to a market that has already seen everyone else's number.
- Bid leveling
Bid leveling is the process of adjusting subcontractor bids onto a common scope so their prices can be compared like for like.
- Scope gap
A scope gap is work required by the project that no bidder included in its price, because every bidder assumed someone else was carrying it.
- Plug number
A plug number is a placeholder figure an estimator carries for a scope with no bid yet, so the overall estimate stays complete.
- Subcontractor prequalification
Subcontractor prequalification is the process of vetting a subcontractor's capacity, financial standing, and safety record before inviting it to bid.
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