Reduce Construction Costs: Price Discovery & Optimization
This post is for any developer or institutional owner asking: how do I reduce construction costs?
Construction is the world’s largest industry, yet it delivers just 1% productivity growth per year—less than one-third the pace of the broader economy (McKinsey Global Institute, 2017).
Developers and institutional owners continue to struggle with a basic question:
“What should this scope really cost?”
The culprits are clear: price opacity, extreme fragmentation, legacy procurement workflows, and chronic estimating inaccuracy. This post unpacks each issue and explains why continuous ranking feedback loops are the missing link for credible construction price discovery.
The Opacity of Construction Costs
Ask five experienced general contractors to price the same drawings and you’ll likely see proposals that differ by around 30%. Dig a layer deeper and the disparity widens—our pilots show subcontractor quotes for identical scopes ranging 84% apart. Those gaps aren’t math errors; they reflect hidden assumptions, contingency cushions, and risk premiums baked into every line. Because quotes still arrive as isolated PDFs and spreadsheets, there’s no central source of truth—so bidders hedge and owners overbudget "just in case."
Data Snapshot — How Opaque Is It?
• 30% average General Contractor bid spread on large projects (C Street pilot data, 2025)
• 84% average subcontractor bid spread on identical scopes (C Street pilot data, 2025)
• $260B wasted annually in the U.S. from rework and bid variance (FMI, 2022)
• Only 12% of CRE developers report high confidence in their pre-construction estimates (KPMG Global Construction Survey, 2023)
This opacity leaves developers flying blind on real cost benchmarks.
The Fragmentation of Construction Industry
Construction isn’t a single market—it’s hundreds of micro-markets stitched together.
Too many nodes. The U.S. has approximately 40,000 general contractors and over 700,000 specialty trade firms (U.S. Census, 2024). Each GC works with a small circle of 20–50 subs; each sub relies on preferred distributors and manufacturers. The result: thousands of partially overlapping “pricing islands.”
Partial bidding. A recent Dodge Construction Network survey found 68% of estimators request quotes from the same 2–3 subs for critical scopes, even on large jobs. That leaves 97% of potential suppliers unheard—and true market lows undiscovered.
Relationship gravity. Long-standing ties and prequalification rules make it risky for GCs to bring in new subs mid-bid. Owners rarely see beyond a GC’s curated shortlist, limiting competition.
Illustration: Picture the bid universe as a Venn diagram: each GC covers a small oval of subs; those ovals barely overlap. To find the real market price, you’d need to query all ovals—or at least a statistically meaningful share (e.g., 20–30%).
Why Fragmentation Blocks Price Discovery
Hidden Floor Price – When only a slice of suppliers is queried, the lowest viable price remains hidden.
Benchmark Blindness – Without access to “outside-circle” quotes, developers can’t determine if a $1.10/lb steel quote is competitive.
Leverage Loss – Limited competitive tension weakens negotiating power. Subs price in relationship premiums and risk contingencies.
Bottom line: Until owners and GCs tap substantially broaden portions of the trade universe—ideally through a shared platform—true price discovery is mathematically impossible.
Legacy Procurement Is Built for Waste
At both the GC and subcontractor levels, legacy procurement practices minimize competition and maximize guesswork.
1 · General Contractor Level
McKinsey finds negotiated or single-stage bids can cost 8–12% more than multi-round competitive tenders (MGI Construction Productivity dataset, 2020).
2 · Subcontractor Level
Most GCs follow the rule of thumb: “Get three prices and ask the low sub for a best-and-final.”
Sampling error: Three quotes from hundreds of firms = <3% market coverage.
Anchoring bias: The first quote sets the benchmark. "Best-and-final" rarely moves the number.
Relationship tilt: Estimators stick to known subs, often ones who are owed a facor. New entrants—and lower pricing—are overlooked.
Result: Owners believe they've run a competitive process, but the odds of discovering the true market low are slim.
Modern platforms expand bid reach and allow for multiple rounds—transforming procurement from static event to dynamic market-making process.
Why Construction Estimating Rarely Reduces Costs
Estimating should reflect current market reality. Instead, most workflows recycle past comps—budgets from prior jobs that already embed the inefficiencies above.
Compounding Inefficiency – Legacy budgets built on narrow bidder pools push inefficiencies forward.
Anchoring Effect – Once a target budget is approved, the goal shifts to meeting it—not beating it.
One-Way Ratchet – Budgets rise with market spikes, but rarely fall when conditions ease. FMI’s 2024 Pre-Construction Survey found 74% of estimators revise upward mid-design; only 9% revise downward.
Reality Check: If your framing package landed at $16M last job, that number anchors the next—even if prices dropped and more bidders were available.
Legacy Estimating Misses Price Discovery
Bottom line: Traditional estimating stabilizes costs; it rarely discovers the market minimum. Without live, aggregated bid data and iterative feedback, budgets become self-fulfilling ceilings—not opportunities for savings.
Price Discovery Needs Feedback Loops
apital markets converge on fair value because every trade generates a signal. Buyers and sellers adjust in real time. Construction can borrow that playbook—if each pricing round gives contractors clear feedback on where they stand.
How the Loop Works
Issue a standardized scope to a wide pool of bidders.
Show real-time rankings. Contractors see where they stand—e.g., “3rd of 5” on labor hours.
Iterate and improve. Contractors react to data by adjusting assumptions, trimming contingencies, and negotiating harder.
Compound the data. Each iteration tightens the spread and pushes toward the market low.
Case Snapshot: A Boston 170-unit multifamily project ran three iterative pricing rounds. Overall construction costs fell 17%, and the spread tightened from 5.2% to 1.2% before contract award (C Street, 2025).
Continuous ranking feedback transforms static procurement into a dynamic market—exposing hidden lows and rewarding innovation until the true market price emerges.
The Path Forward: Transparent, Data-Driven Procurement
Replace email RFPs with an open, ranking-enabled bidding platform.
Provide real-time ranking feedback so contractors can improve.
Use AI to normalize bids, flag outliers, and surface savings.
Feed historical bid data and market indices into future estimates—and close the loop by capturing final contract pricing.
C Street’s construction cost-optimization platform replaces yesterday’s opaque workflows with a live data exchange—unlocking price discovery before construction starts.
Key Takeaways
Over $1T in global waste stems from opacity, fragmentation, and legacy guesswork¹.
20–30% bid spread on like-for-like scopes—even within the same market (C Street pilot data).
<3% market coverage when GCs solicit only three sub bids—leaving 97% of potential suppliers unheard (Dodge Construction Network, 2024).
Continuous ranking feedback loops reveal hidden lows and improve pricing accuracy.
C Street pilots cut median trade pricing by 12% after three feedback rounds (2025).
Ready to reduce construction costs?
Join CRE developers already saving 8–12% per trade. Discover how C Street delivers transparent, data-driven price discovery and slashes bid variance on your next project. Request a demo today.
About the Author
Marvin Lahoud is the founder of C Street, a platform that helps real estate developers uncover the true cost of construction through transparent bidding and feedback-driven price discovery. His work focuses on reducing waste in preconstruction, bringing market dynamics to procurement, and using data to drive down costs.
Sources
McKinsey Global Institute – Reinventing Construction: A Route to Higher Productivity (2017)
FMI Corp. – 2023 U.S. Construction Rework Report (2023)
KPMG – Global Construction Survey: Make It, or Break It (2023)
McKinsey – The Next Normal in Construction (2020)
Flyvbjerg, B. – How Big Things Get Done (Oxford, 2022)