What does Savings Clause Mean?
Definition of Savings Clause in Construction
A savings clause is a contractual term that describes, if there is savings on a project, how the savings will be split between the contractor and the owner. In many contracts, the incentive to save money is stimulated by a savings clause. This identifies the sharing of any cost savings on the project due to construction efficiency, value engineering ideas or changes, cost effective ways of performing the construction, acceleration that results in a project’s early completion date, the use of less management personnel, the use of alternate materials or equipment.
Any item that saves money without specific focus on any one individual party, that may have saved the money, is included within the savings clause. If a savings clause is included within the contract, then the contractor is incentivized to save the owner money, because the contractor will share in this savings. Without the inclusion of a savings clause, there is no reason for the contractor to try and save money or time on the project.