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What are allowances in a construction bid?

An allowance is an amount the owner tells every bidder to include for work that is not yet defined. The final cost is adjusted later, up or down.

Why owners use allowances

Some decisions are not made by bid day. The owner has not picked a product, or the quantity is unknown. An allowance lets all bidders carry the same number. The bids stay comparable.

Kinds of allowance

  • Cash allowance. A stated dollar amount for an item, such as signage or a scoreboard.
  • Quantity allowance. A stated quantity of work, such as cubic yards of rock removal.
  • Contingency allowance. A stated sum the owner controls for unknown conditions.

Where to find them

Allowances are usually listed in Division 01, in section 01 21 00. A technical section can also name an allowance for one product. The bid form sometimes lists them again.

What the allowance covers

This is the question that matters most. The documents define what the allowance amount includes. Often it covers the material cost delivered to the site. Labor to install, overhead and profit then belong in your base bid and not in the allowance. Other contracts define it another way.

  1. Find the allowance description and read the definition of what it covers.
  2. Carry the stated amount exactly. Do not round it or change it.
  3. Add your installation labor, overhead and profit where the documents say to put them.
  4. State the allowance in your proposal so the general contractor can see it.

What happens after award

When the owner makes the selection, the actual cost is compared with the allowance. A change order adjusts the contract for the difference. If the product costs less, the owner gets a credit. If it costs more, the contract amount goes up.

An allowance is not the same as an alternate. An alternate is a price you set. An allowance is an amount the owner sets.

Bid documents · Updated 11 Nov 2026

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Run a real bid packet through it.