Allowance
An allowance is a fixed sum carried in a bid for work that is not yet defined well enough to price, to be reconciled against the actual cost later.
Also written as allowances, cash allowance.
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Reviewed by Eric Collin · President and Founder of Firmo Construction, 20+ years in preconstruction and bid evaluation
They exist because bidding rarely waits for a complete design. When a finish has not been selected or a system is still being coordinated, an allowance lets the package go out with a number in it rather than a hole.
The critical property, and the one most often misunderstood, is that an allowance is not a price. It is a placeholder that gets reconciled: if the work comes in above the allowance the contract goes up, and if below it comes down. A bid containing large allowances is a bid whose final cost is genuinely not yet known.
In leveling this matters twice over. Two bidders carrying different allowance amounts for the same undefined work are not actually pricing differently — the difference is an artifact and will vanish at reconciliation. And a bidder carrying an allowance against work another bidder has firmly priced looks cheaper than it is.
Distinct from a plug number, which is the estimator's own placeholder rather than a sum inside a bidder's price.
- Allowance vs contingency
What is the difference between an allowance and a contingency?
- Plug number
A plug number is a placeholder figure an estimator carries for a scope with no bid yet, so the overall estimate stays complete.
- Unit price
A unit price is a rate per unit of measure — per cubic yard, per linear foot — used for work whose quantity cannot be known when the bid is submitted.
- Alternate
An alternate is separately priced scope, added to or deducted from the base bid, that lets the owner decide at award whether to include it.
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