Buyout: Locking in Subs & Suppliers

You won the job at a certain number. Buyout is how you keep that profit.

What buyout means

• Solicit and level subcontractor bids — compare them apples-to-apples for the same scope.
• Lock in pricing to (or below) your estimate.
• Hunt for scope gaps between subs — work that fell between two trades and isn't covered.

The stakes

Buyout savings drop straight to your bottom line; buyout overruns come straight out of it. This is one of the highest-leverage hours in the whole project.

Going Deeper (Intermediate)

Buyout happens right after you win: you lock in subcontractors and suppliers at or below your estimated numbers and issue subcontracts/POs. The gap between your bid and your buyout is where real profit is made or lost.

Advanced / Pro-Level

Doing buyout like a pro:

• Scope-level every sub bid (apples to apples) — the "low" sub is often low because they excluded something; normalize scope before comparing.
• Buyout savings drop straight to margin — beating your estimate on buyout is found money; blowing it erases your profit before you start.
• Avoid bid shopping (shrinking a sub's number by leaking competitors' prices) — it's unethical, wrecks your reputation, and gets you frozen out by good subs.
• Lock pricing before escalation, get flow-down terms, insurance/COIs, and schedule commitments in the subcontract before they mobilize.

Practice Challenge

Two electrical subs bid $90k and $78k. Before signing the cheaper one, what's the critical step? (Answer: scope-level the bids — the $78k may have excluded gear, fixtures, or permits the $90k included; compare equal scope before assuming it's a $12k saving, or the "savings" becomes a costly gap.)

In Practice

A GC wins a job, then takes the lowest sub quote without leveling — and it was missing half the scope. Leveling bids apples-to-apples and locking pricing is where bid profit is kept.

Common Mistakes to Avoid

• Not leveling sub bids to the same scope
• Missing scope gaps between subs
• Failing to lock pricing to the estimate

Takeaway: Level every sub bid and close the gaps — buyout is where bid profit is kept or lost.

Educational content — not legal, financial, or accounting advice. Run your numbers with your CPA.