Allowance
A specific dollar amount built into a contract for an item that hasn't been fully selected yet, like flooring or light fixtures, so a project can be priced and started before every finish decision has been made.
Why it matters
Waiting until every tile and fixture is picked before signing a contract would stall projects for months. An allowance lets a contract move forward with a placeholder number, adjusted up or down once the owner actually makes their selection.
On a real project
A kitchen remodel contract includes a $3,000 allowance for countertops. The owner later selects a countertop that costs $4,200 installed, so the contract price increases by $1,200 to cover the difference.
Who this matters most to
An Estimator sets realistic allowance amounts during bidding; set one too low and it becomes a source of disputes later. A Project Manager tracks allowances during construction and processes the price adjustment, usually via a change order, once the owner's actual selection is known.
Where this goes wrong
An estimator sets a flooring allowance far below realistic market prices just to make the overall bid number look more competitive against other contractors. The owner picks an ordinary, mid-range floor and is blindsided by a large change order to cover the real cost, a number the estimator likely knew from the start was unrealistic.