# Cash Allowances & Contingency Allowance



## Jason Jones (Jul 31, 2016)

Is there a general rule of thumb when estimating in a Cash Allowance and a Contingency Allowance when giving a general estimate on a SD plans?


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## wcord (Jan 23, 2011)

Two different allowances
Sometimes a “Cash Allowance” is confused with a “Contingency Allowance”. The key difference between the two, is that a Cash Allowance covers the “known”, whereas the Contingency Allowance covers the “unknown” costs in a project just like a “ rainy day fund”.

Keep in mind that the Cash Allowance is still only an estimate, and once the actual cost of the work is known the Contract price must be adjusted by a separate Change Order that records the difference between the cash allowance and the actual amount payable. This can result in either a credit or increase to the final construction cost.

Even though a Cash Allowance seems pretty straightforward great confusion can result unless the scope or work and costs included are clearly defined and listed in the contract specifications, usually General Conditions. For example a Cash Allowance wouldn’t normally include the General Contractor’s overhead, and profit however it could include:

Actual cost of Materials.
Applicable taxes,
Delivery to site.
Handling on site.
Labour and all other costs related to installation.
Where applicable, all Subcontractor’s and Sub-subcontractor’s overhead and profit related to the cash allowance

A Contingency Allowance is defined as a fixed amount to cover increases in costs for changes in the work that the contractor cannot be expected to know in advance and are not defined

The level to which the project has been defined will determine how large the contingency allowance should be. Obviously a design that is only 75% complete will have more unknowns than a project that's 95% designed.

Normally, the Engineer or Architect are the ones who determine the size of the allowances. AND more importantly, these allowances are usually carried by the General Contractor, so check the bid documents very carefully


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