An Additive bid is a body of work that the owner may award with the base bid if there is sufficient funding after the bids are received. By contrast, a Deductive bid is a body of work that the owner may delete from the base bid if there is insufficient funding to award the full base bid. The purpose of both Additive and Deductive bids is to build flexibility into the bidding process so that the owner can award the maximum amount of the project possible dependent on funding available. Additive and Deductive bids are often termed as bid protection tools.
The following is a potential bid form structure for requesting Additive bid prices:
| Additive No.: | Description of Additive Bid: | Additive Bid Amount: |
| 1 | | $ |
| 2 | | $ |
| 3 | | $ |
By contrast, an Alternate bid is a bid in which the owner asks for prices for an alternate method of constructing something in the base bid or using alternate materials. The alternate price would be the differential between the price included in the base bid and the price for the alternate method or material. In developing your bid form, it's important to make sure that you're clear that the alternate bid amount should be the differential price. An Alternate bid may be either an increased dollar amount or a reduction in dollars, depending on the nature of the alternate. In this sense, some people will refer to an Alternate bid as either an Additive Alternate (if the differential price is an increased amount), or a Deductive Alternate (if the differential price is a decreased amount). Personally, however, I think such terminology confuses the difference between Additives/Deductives and Alternates.
The following is a potential bid form structure for requesting Alternate bids:
| Alternate No.: | Description of Alternate Bid: | Additive or Deductive | Alternate Bid Amount: |
| 1 | | | $ |
| 2 | | | $ |
| 3 | | | $ |
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As a construction manager in the public arena, there is a big difference on the "back side" of the cost for either an 'Adder' or Deduct. Another factor in the equation is how time is affected in each line item.
The first factor is how how the contractor views ownership of the indirect costs. Typically in an additive situation, the contractor is faced with a base bid, then adds costs as prescribed by the owner, and their associated values of Overhead and Profit (for simplicity's sake, include taxes, bonds, insurances, fees in Overhead)
In a deductive situation, the contractor may or may not refund all overhead cost associated with a particular line item, based on how they view the job or how they want to protect their bottom line.
I could go on with a litany of reasons why a contractor will ALWAYS come out a winner in a deductive bid scenario. Another deciding factor for contractors as to how they view and bid projects is application of the P.I.T.A factor, also known as the, Pain-in-the-***, factor.
I am currently consulting with a contractor on several Veteran's Administration projects. With the VA facing a serious backlash of bad press, the American public would be outraged at the wonton waste occurred based on the VA's use of Deductive Alternates.
In order for any owner, public or private, to understand the true cost of their work is to avoid the use of Deducts and Deductive Alternates. It is hard to find a justification to use this type of pricing.
IMHO, adding is always easier and more efficient than subtracting.
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