Allowance
An allowance is a predetermined budget amount included in construction contracts for items not yet selected, such as fixtures, tile, or appliances, with final costs adjusted when items are chosen.
Allowances handle items requiring owner selection but needed for contract pricing: light fixtures, plumbing fixtures, tile, appliances, hardware, etc. Contracts specify allowance amounts—if actual selections cost less, you receive credit; if more, you pay the difference. Example: $5,000 lighting allowance. You select fixtures totaling $4,200—you save $800. Or you select $6,500 in fixtures—you pay the additional $1,500. Allowances let contracts proceed before every selection is made, but require careful tracking to avoid budget surprises.
How to Handle Allowances
Understand allowance amounts in your contract and what they include. Does tile allowance include labor or just materials? Is it per square foot or total? Shop early to verify allowances are realistic for your taste. If standard allowances won't cover your preferred finishes, negotiate higher allowances before signing. Track selections and costs carefully—maintain a spreadsheet showing allowance amount, actual cost, and remaining balance. If trending over budget, value-engineer selections or adjust other areas to compensate.
Common Allowance Items
- Plumbing fixtures: Faucets, sinks, toilets, tubs, showers
- Lighting fixtures: Interior and exterior lights
- Tile and countertops: Materials cost, sometimes including installation
- Appliances: Kitchen and laundry appliances
- Hardware: Cabinet pulls, hinges, door hardware
- Flooring: Hardwood species and grade, carpet quality
- Typical allowances: Clarify if they include labor or materials only
Related Terms
Scope of Work
Scope of work is a detailed document specifying exactly what work will be performed, materials used, quality standards, and deliverables included in a construction project.
Change Order
A change order is a formal written document modifying the original construction contract, detailing changes to scope, materials, price, or timeline.
Value Engineering
Value engineering is the systematic analysis of project components to identify cost savings opportunities while maintaining or improving quality, function, and performance.