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Allowance
What is an Allowance?
In construction, an allowance is a predetermined dollar amount included in a contract to cover materials, fixtures, or finishes that haven’t yet been selected. Allowances are typically used for flooring, lighting fixtures, plumbing fixtures, appliances, or other finish materials (things that contribute to the project’s aesthetic) where the owner may want flexibility to make selections as the project evolves.
Here’s how allowances work: When contractors bid on a project, they’ll include specific allowance amounts (e.g., $5,000 flooring allowance). Once construction begins and the owner chooses actual materials, the costs are reconciled against the allowance. If the materials cost less, they receive a credit. If more, the owner pays the difference via a change order.
Siteline can help you track and manage those change orders, ensuring you get paid for that difference. Learn more about how Siteline streamlines change order management here.
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Other construction terms
What is Net D?
Net D, in the context of the construction industry, refers to the "net deliverable" square footage or area of a constructed property. It applies to the actual usable space that remains after the subtraction of communal areas such as shared hallways, staircases, and residential utilities from the gross square footage. In commercial real estate, it typically excludes areas reserved for mechanical systems, structural elements, elevator shafts, and similar components. This figure is critical as it impacts the leasing or selling value of a property and also informs space allocation, cost assessment, and planning considerations during a construction project. Therefore, understanding Net D is key to optimizing building layouts and the planning of space allocations within any construction project.
What is a Project Budget?
A Project Budget, in the construction industry, refers to a financial plan that estimates the costs associated with each phase of a construction project. It includes direct costs such as materials, labor, equipment, and subcontractor charges, as well as indirect costs such as site overheads, insurance, permits, and contingencies. A well-prepared project budget aids in determining the financial feasibility of the project, managing costs effectively, and minimizing financial risks. It serves as a financial guide during the project execution and helps in tracking deviations between projected and actual costs. It is a critical tool for project managers to ensure a project is completed within the calculated cost framework.
What are Direct Costs?
Direct costs in the construction industry refer to the expenses directly related to the actual building process. These essential expenditures are easily traceable to a specific project and vary based on the size or scope of work. Examples include raw materials (like concrete, steel, wood), labor costs that involve wages for the construction crew, equipment hire, and subcontractor fees. If a cost can be directly allocated to a particular construction job and affects the final total bid price for the project, it is considered a direct cost. Management of direct costs is crucial for financial efficiency and profitability.
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