Bid Alternates Give Owners Flexibility at the Moment When Bid Prices Become Reality
Construction bidding is the moment when an owner's budget estimate meets market reality. Frequently the reality and the estimate do not align - bids come in over budget, or bids come in under budget and the owner wants to add scope that was cut during design to stay within the estimate. Bid alternates are the tool that allows this flexibility to be built into the bidding process systematically. By defining specific alternate scope items in the bidding documents - with separate pricing - the owner can accept or reject specific items at bid opening based on where the base bid price falls relative to budget. The ARE CE exam tests bid alternates as part of the bidding and procurement content area.
Deduct Alternates
A deduct alternate defines scope that is included in the base bid but can be removed to reduce the total contract price. For example, a school project base bid might include a gymnasium addition; a deduct alternate might remove the gymnasium and replace it with a structural shell. If the base bid comes in over budget, the owner can accept the deduct alternate to reduce the contract price while still maintaining the project's essential functions. Deduct alternates must be fully designed and documented in the contract documents - the architect must have detailed drawings for both the base bid scope and the deduct alternate scope to allow accurate pricing by all bidders.
Add Alternates
An add alternate defines scope that is NOT included in the base bid but can be added if budget allows. The contractor prices the add alternate separately; if the base bid plus selected add alternates falls within the owner's budget, the owner selects those alternates for inclusion. Add alternates are used for desirable program elements - upgraded finishes, additional site improvements, equipment that is beneficial but not essential - that were cut from the base scope to keep estimated costs within budget. If bids come in below estimate, the owner has pre-designed, pre-priced items ready to add without a separate procurement process.
Pricing and Evaluation of Alternates
Alternates are priced by each bidder separately from the base bid. Alternate prices are not automatically binding - the owner selects which alternates to accept at the time of contract award. This is important: the contractor cannot refuse to honor an alternate price if the owner selects it, but the owner is not obligated to accept any alternate. Because the general contractor bids the entire project (including their own markup on subcontractor prices for alternate work), alternates must be fully defined in the contract documents with the same level of detail as the base bid scope.
Sequencing Alternate Acceptance
When multiple alternates are included, the order in which alternates are accepted matters. Each alternate was priced by each bidder in the context of the base bid - accepting alternates changes the work scope and potentially changes the competitive ranking of bidders. Most contracts address this by specifying that alternates will be accepted in a defined order (Alternate 1 first, then Alternate 2, etc.) or that the lowest bidder is determined by base bid alone. Public procurement regulations often specify how alternates must be evaluated and in what order to ensure fair competition and equal treatment of all bidders.
Key Exam Points
- Deduct alternate: scope included in base bid that can be removed to reduce contract price.
- Add alternate: scope NOT in base bid that can be added if budget allows.
- All alternates must be fully designed and documented - same level of detail as base bid scope.
- Alternate prices: separately priced by each bidder; owner selects which to accept at award.
- Public procurement: specific rules on alternate acceptance order to maintain fair competition.
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