Allowance vs Contingency
An allowance is a placeholder amount for known but undefined scope; contingency is a reserve for uncertainty, risk, or incomplete information.
Allowance
- Known selections not finalized
- Undefined material choices
- Scope that will be reconciled
Contingency
- Unknown risks
- Design development uncertainty
- Budget protection
Key differences
| Point | Allowance | Contingency |
|---|---|---|
| Known scope | Usually tied to a specific item. | Usually tied to broader risk. |
| Reconciliation | Often adjusted to actual cost. | Used only when qualifying risk occurs. |
| Example | Tile allowance or hardware allowance. | Owner contingency or construction contingency. |
Example in context
A contract may carry a $50,000 lighting allowance and a separate contingency for unforeseen coordination issues.