Allowances


What are Allowances in Construction?

Definition: What Does the Term Allowances Mean?
This is, set aside money , in a bid or price , for a construction project. An allowance is normally stated by the owner of the project, to assure that money, is set aside for an element of the construction, not fully detailed and or specified. For example, in many instances there is a hardware allowance specified within a contract value. This allows the owner time to more specifically identify what they want, without holding up the entire sequence of construction. An allowance within a contract is normally identified as a specific value that is either added to or subtracted without any Overhead or Profit additives to the adjustment. The adjustment of this allowance is accomplished with a change order to the original contract value. The balancing of allowances and specifically identified products and material is a difficult process. If there are too many allowances, the actual contract value significance is reduced, due to all the allowances, however, it is a good alternative to provide money within the contract for unknown items. It is the responsibility of an architect or engineer to establish the value of allowances that are consistent with the needs of the specific product. For example, if a hardware allowance is established for a 10,000 SF formal colonial home, the hardware allowance should be set at a level that is consistent with the number of hardware sets required as well as the anticipated specifications of the hardware.