AEC definitions
An allowance is a fixed sum or quantity written into the contract for a part of the work that is not fully selected or designed. The contractor includes that sum in the price. When the actual cost is known, the contract sum is adjusted up or down by the difference.
Definition
Division 01 and the bid form should list each allowance, say what it includes, and say whether it covers material only or material and labor. A cash allowance for stone that omits installation will be argued. Allowances are not contingency. Contingency is a reserve for unforeseen cost. An allowance is a placeholder for a known category of work. Unused allowance belongs to the owner unless the contract says otherwise. Overruns are a change to the contract sum, documented, not absorbed in silence.
In depth
List the allowance by name and amount on the bid form and in the specifications. State inclusions: material, delivery, tax, installation, design assist. A lump of 'interiors, $200,000' without a boundary invites both sides to claim the tile.
Quantities can be allowances too: a unit price times an assumed quantity, reconciled when the quantity is measured. That is an allowance only if the contract calls it one. Otherwise it is a unit-price item.
The architect approves the selection. The contractor prices the actual work with the agreed markups. The change order, or the allowance-adjustment form the contract names, moves the contract sum by the difference.
Waiting until the end of the job to reconcile a dozen allowances produces a fight about labor rates. Adjust each one when it is selected.
An allowance for lobby stone does not pay for an unforeseen utility. That is contingency or a change. Using the wrong bucket hides the cost report.
The owner's contingency and the contractor's contingency are different reserves. Neither is an allowance unless the GMP agreement defined it that way, and even then the draw rules differ.
The bid form states the amount so bidders do not compete by cutting a guess. A bidder who replaces the allowance with their own number is nonresponsive if the instructions forbade it.
Trade scopes should say who carries the allowance. Two trades each excluding it, and the GC assuming one of them has it, leaves a hole.
Quotes, quantity takeoffs, and the selection approval are the backup for the adjustment. A final number with no invoices will not satisfy an auditor or a lender.
If the allowance was quantity-based, the measured quantity needs the same dignity as any other unit-price measurement.
Examples
The bid form includes a $75,000 allowance for lobby stone, material only. Installation is in the base bid. The purchase costs $90,000. A change order adds the $15,000 difference.
A quantity allowance of 500 feet of undercut is reconciled at 420 feet. The contract sum is reduced by the unit price times 80.
A bidder substitutes their own carpet number for the stated allowance. The bid is nonresponsive.
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