Overhead and markup are the least popular lines in any estimate and the least understood. They are also the lines that determine whether your project has a project manager, insurance, and a company still trading when you need the warranty.
What overhead pays for
Running a construction company costs money whether or not anyone is swinging a hammer: insurance, licensing, vehicles, an office, estimators, project managers, scheduling, payroll, safety. None of it appears in your finished kitchen and all of it is the reason the kitchen arrives.
What markup pays for
Markup is the company margin. It funds the warranty, the ability to absorb a mistake without arguing about who pays, and the continued existence of the business. A contractor operating on nothing has no capacity to fix anything.
Why the lowest bid is a warning
When one number is dramatically below the others, it usually means the scope was read differently, an allowance was set unrealistically low, or the overhead is not being carried. The gap does not disappear. It reappears as change orders.
How to compare estimates properly
Line by line, on identical scope. Check the allowances for tile, fixtures and appliances, because a low allowance makes any estimate look competitive until you go shopping. Ask what is excluded. Ask what happens when something unexpected turns up. Then compare.
