DEAR TIM: My contractor has included 'allowances' in my project for certain items. What are allowances and what is included in each allowance? S. W.
DEAR S. W.: Allowances are guideline budget numbers which indicate how much you can spend on certain items in your project. Generally, as long as you do not exceed this budget number, you will not cause an increase in your overall project cost. Examples of allowance items are electric light fixtures, plumbing fixtures, cabinets, etc. Allowances are frequently used in the planning or contract stage because the homeowner may not have yet picked out a particular item.
Allowances can include many items, so you should be very specific in your contract documents. The allowance for a particular item should include the sales tax and any delivery charges for that item. This can easily be checked when looking at the contractor's invoice.
For you to receive the best value, your allowance number should be the cost of the item which your contractor pays, not full retail price. Any markup which your contractor wishes to add to the allowance items should be included in his base bid price.
Labor to install allowance items should not be a part of the allowance. These costs should be included in the contractor's base bid. When you settle your bill with your contractor, it can be very difficult to identify labor costs if included with allowance items.
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