Allowance
A budgeted line item in a construction contract for selections (finishes, fixtures) not yet specified at contract signing.
What allowance actually means.
Allowances reserve dollar amounts for selections the owner makes after the contract is signed — tile, fixtures, appliances, lighting. The allowance is set at a reasonable expected cost; if the owner picks selections that come in under, the savings refund to the owner (in GMP-style contracts) or the contractor absorbs the variance (in lump-sum contracts). Itemized allowances reduce surprise overruns vs. unitemized allowances bundled into the total.
- AIA A101/A102 — allowance treatment in construction contracts
- Construction Specifications Institute (CSI) allowance documentation
Adjacent definitions.
- Guaranteed Maximum Price (GMP)
A construction contract pricing structure that caps the total project cost while sharing visibility into actual costs with the owner.
See the definition - Change Order
A formal written amendment to a construction contract documenting changes to scope, cost, or schedule.
See the definition - Submittal
Documentation (shop drawings, product data, samples) submitted by the contractor to the owner or designer for approval before installation.
See the definition