Alternates and Breakouts are both additional requests for pricing to the base bid. So what’s the difference between an Alternate and a Breakout and when do you use one versus the other?
This Tip will cover Alternates; Breakouts were discussed in Tip #51.
A bid may require one or more alternate prices in addition to the base bid usually because the customer is restricted by a budget. For example, the customer has a bid requirement for a 250KW generator. However, they expect to replace it with a 350KW generator as their business grows, so they request an Alternate price for the larger unit. If the budget allows, they will likely install the larger generator.
Another example of a bid that would include alternates is the scope of the project or the areas of a building that will be included. Let’s say the bid asks for completing 40,000 square feet of a 54,000 square foot building, and the customer asks for two alternate bids to finish the remaining 14,000 square feet in two sections of 8,000 square feet
(Alternate Add 1) and 6,000 square feet (Alternate Add 2). Your base bid for 40,000 square feet is $670,000.
Alternate Add 1 is $100,000 and Alternate Add 2 is $70,000. The customer has a $750,000 budget for electrical, so they decide to accept the Base Bid and Alternate Add 2 to finish a total of 46,000 square feet.
You can also use Alternate Deducts to arrive at the same conclusion. In this case, the customer would have asked for a Base Bid for the entire 54,000 square feet and then alternates for the 8,000 square foot and 6,000 square foot areas that would be deducted from the Base Bid. In that case your base bid would have been $840,000 with Alternate Deduct 1 of $100,000 and Alternate Deduct 2 of $70,000. The customer would have accepted the Base Bid and Alternate Deduct 1 leaving the 8,000 square foot area unfinished.
Alternates are a part of the bid that will or will not be accepted in their entirety – it’s a simple decision. See ‘Tip #36‘ for the effective way of setting up your phases to include the Alternate estimate in your job.