What is the purpose of an allowance in a construction project?

The purpose of an allowance in a construction project is primarily to estimate costs for unspecified items in project plans. This mechanism allows contractors to provide a budgetary amount for certain elements of the work that may not have been fully defined at the outset of the project. For example, allowances are often set for items such as fixtures, materials, or finishes, where the specifics may be decided upon later in the project timeline.

Using an allowance helps maintain project flexibility, allowing for changes without significantly disrupting the overall budget. When these unspecified elements are later quantified, the actual costs may be reconciled against the allowance, ensuring that both the contractor and client are aligned on expenses related to those items.

This feature is particularly important in construction, where the scope can often change due to client preferences or unforeseen conditions, making fixed pricing potentially challenging. The use of allowances thus helps manage costs while providing room for adjustments as the project evolves.