Why does it cost so much to dig my hole?
You need a small excavation job done on your property, you figure it might take an hour or two at the most. Your expectation is that this is a small inexpensive job (in your mind, @2 hours of digging at @$200/hour).
But all three quotes you got from local contractors are more than double what you expected. Questions begin to form in your mind. Do they think I’m made of money? Are they trying to take advantage of me? Am I getting hosed?
Logic dictates that it doesn’t make sense for a contractor to knowingly price themselves out of a job they took the time to come look at. If they were too busy, they probably wouldn’t have come to look at it, and you would also (quite reasonably) expect that if it’s not their type of work they would just be upfront and tell you on the spot.
Also, if all the prices you were given are in the same dollar range, then it would be reasonable to believe that those prices must be fair.
Beware of taking the lowest bidder. If one of the quotes is considerably lower than the others you must look at it carefully.
You might think taking the lowest bid is a smart move, a “no brainer”, that it’s a stroke of luck that will save you money. Unfortunately, often, the opposite is usually the case.
I’ll explain. In public infrastructure bidding when contracts are awarded, the “tendering rules” commonly state something to the effect that: “the lowest and highest bids will be automatically discarded out of hand without any consideration”. As illogical as this may seem at first blush, this is done because both bids are considered “anomalous pricing”. Meaning the low bid is probably missing something or was miscalculated, and the high bid may be another mistake made in the math, a misinterpretation of some of the related costs, or simply a greedy bid.
It doesn’t take much imagination to understand why the high bid is discarded, but it may not be immediately logical to throw away the lowest bid too. Lowest bids are discarded because a contractor that bids too low on a job and is awarded that job has just four choices, and none of them are good choices for the job or the contractor.
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Cut corners wherever they can, getting the job done as cheaply as possible (even possibly unethically where they think no one will notice). This is the most common choice made in this situation.
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Throw their hands up and leave the job. This is the 2nd most common choice and can often lead to legal complications that tie the job up and cause extended delays.
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They can come back to the customer and say they need more money which is a very uncomfortable and humbling thing to do. The result is that often the customer will pay as much or more than the next highest bid was but now has doubts about his contractor’s competence. In this situation the customer is now probably realizing why he would have been far better off with one of the higher bidders.
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Complete the job and eat the shortfall, probably the least common choice, but definitely the “die on your own sword” honorable thing to do but sadly a practice that all too often puts honest and honorable companies out of business.
Regardless of the contractor’s choice in that situation, the ultimate result is that it’s now your new problem and the root cause of your newest problem stems from having accepted the lowest bidder.
When you own heavy equipment there are a few things (costs) that are at play when calculating a price for a customer. These costs are called “Overhead”. As the many types of businesses go, being an excavation contractor comes with a higher-than-average amount of overhead. These are the weekly, monthly, and quarterly line items that drive costs and by extension, job quotes beyond what seems reasonable to some customers for the “small job” they need done.
Examples of the most common overhead costs:
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Equipment payments
The monthly payment on a $180,000.00 mini excavator is in the range of $3,000.00 a month. Add to that a $120,000.00 one-ton truck and a $60,000.00 equipment trailer and those monthly payments look more like $6,000.00.
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Insurance policies
There are multiple types of optional insurance that a contractor could elect to carry, but the two types they must all carry and are not optional are Construction/Excavation insurance and Transportation Insurance. For a small company these will both start at around $1,200.00 a month.
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Fuel
I mean yeah… enough said. Prices for diesel are simply gross (thanks Donald), and to compensate for month-to-month price changes in the fuel market many companies now add a fuel surcharge (FSC) to their invoices (commonly around 6%-14% in 2026).
- Mobilization (getting the equipment on site)
One of the charges customers misunderstand and thus dislike the most is mobilization.
The unpopularity of this fee is caused not understanding the amount of time and work that goes into getting a piece or multiple pieces of equipment to a jobsite.
The equipment must be washed before it can be transported on a public road, this alone can take hours. Different companies may operate differently but generally speaking; the equipment should be fueled up and greased before it is loaded onto a trailer. The trailer and truck towing it must be thoroughly inspected, and those inspections must be properly documented with signed legal forms that must be kept available for inspection if the truck is stopped by transport enforcement. Alberta Transport does not play.
Then the equipment must be bound to the trailer, a process that usually takes about an hour of hefting around transport grade chains and chain binders. Sometimes wide-load or over-height placards and associated flagging must be mounted too, and in extreme cases a pilot car and traffic control arrangements may also be required. All of which will add cost to the process.
After that, there is travel time and the typical predictably unpredictable risks of transporting equipment in traffic on public roads.
Once on site, the equipment must be unloaded, and the truck and trailer often returned to base.
As you can see, there are quite a few time-consuming and costly steps (even some risk) involved, all done at the behest of the customer, just to get the equipment to and from the jobsite. It is quite rightly a cost that should be considered in the invoicing regardless of how some customers (without this knowledge) feel about it.
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Lubricants
Any equipment owner will tell you proper daily maintenance is the key to ensuring long service in their company. Every earthmoving machine they own must be greased daily if used daily. A small contractor will easily go through an $80 box of grease in a week per machine. Engine oil and hydraulic oil/fluid are occasional but regular cost as they do have to be replaced after a certain number of machine hours and can easily cost hundreds of dollars each because of the tremendous volumes of it used in equipment.
- Maintenance items (filters, filters, and more filters)
Earth moving equipment and the support equipment around it like trucks and trailers all require filters. Some like excavators, skid-steers, and compact-track loaders require many types of filters to be replaced regularly. Fuel, hydraulic, air, and cabin filters all cost far more than you would expect and must be replaced when they are due, under requirement of warranty, or to prevent the equipment from performing poorly and/or being damaged.
Hydraulic hoses and fittings are another overlooked maintenance cost. A single 6-foot hydraulic hose can cost $400.00 – $1,000.00 (depending on diameter, length, and pressure rating), and if new hydraulic couplers are needed, those can be $400.000 – $1,500.00 (again depending on their rating). Excavators and compact track-loaders move on tracks that only last for a few hundred hours of use before they require replacement. A reasonable set of rubber tracks will cost in the range of $1,200.00 – $2,200.00 and steel tracks cost far more.
- Employee wages/benefits (last but not least)
Companies with full-time employees need to compensate those employees fairly and on time to attract and retain them. Employers also provide benefits like pensions, vision, dental and medical care plans and make contributions to WCB, CPP, Employment Insurance, even RRSP matching. Employees who work out of the office are supplied with phones, trucks/cars, and high visibility work gear for working out in the weather on site safely.
Typically, the quote or estimate process starts with a thorough breakdown of the job, and a detailed accounting of all the costs listed previously and possibly a few I didn’t list, like waste remediation and disposal, that would be specific to the type of work being done.
Estimating and quoting require enough experience to mentally visualize every step of the job and factor in unseen obstacles/risks (underground utilities, buried debris or rock, hard pack earth). Visualization of that level is not a skill everyone has, and without it, construction work of just about any sort will be challenging or even nearly impossible. Outcomes are uncertain if a contractor cannot see what is being built in their mind first.
I hope it has been helpful for you to see just how many layers of hidden costs are baked into the prices those contractors gave you. The initial sticker shock of a quoted price may take a minute to get past, but you now have better grasp of some of the embedded costs involved in doing mobile excavation work. Those layers of cost require contemplation and evaluation and are why very few contractors can/will give you a price right on the spot.
Watch for my next blog post about how to interview potential contractors and SIX things you need to know before you hire anyone for your job.
R.Morben
