Allowance

An amount included in a contract or budget for a defined scope whose final selection, quantity, or cost has not yet been established. It is tied to an identified item rather than general uncertainty.

Why it matters

Understand what the allowance includes: material only, installation, taxes, fees, and contractor markup may be treated differently. Reconcile the final procurement cost and any adjustment through the contract’s agreed process. Do not treat an allowance as interchangeable with contingency.

In practice

A project example

A flooring allowance may cover the material purchase but exclude installation. Comparing it with an installed subcontract price without adjusting the basis can overstate the apparent overrun.

General educational guidance from KOW Building Consultants. Examples are illustrative, not project records. The applicable contract, standard, program, and jurisdiction control the requirements for a specific assignment.