What Is Allowance in Builder Quote

duluxe2000 on 08/07/2023 - 09:39
Last edited 08/07/2023 - 09:40

Hi wise folks of Ozbargain,

In the formal quote from the builder has the Allowance section where it says something like this:
Allowances:
1. Demolition $5000 include GST
2. Extra plumping work costs $2000 include GST
etc…
The the quote is a fixed price contract. I pay the whole amount the fixed price contract now the builder asks me to pay these "allowance", i.e 2000 + 5000.

Which is really strange because my understanding is that Allowance means that certain money (included in the fixed price) is set aside for that work. And if the actual cost is over that amount of money, then the owner has to pay the difference.

So which understanding is correct ? Also is there any formal definition of Allowance in a quote that I can send to the builder?

Thank you

Home & Garden

Comments

  • Jimothy Wongingtons on 08/07/2023 - 09:46
    +1

    Allowance is an estimate or provision made for a specific item or work that has not yet been defined in detail (so it’s not a fixed cost)

    • duluxe2000 on 08/07/2023 - 09:49

      But is it included or on top of the fixed price contract ? That's what I'm arguing with my builder. Thank you

      • Jimothy Wongingtons on 08/07/2023 - 09:51
        +3

        I always understood it to be on top - they don’t know 100% the final price of this variable component until it’s actually done.

  • spychiatrist on 08/07/2023 - 10:12

    Ask the builder if these allowances are the guaranteed maximum. You don't want to hand them a blank check, the $5,000 demo allowance ending up as $20,000

    • duluxe2000 on 08/07/2023 - 10:19

      Unfortunately this is a finished project, and the builder now asks for the (extract) amount in Allowance. Yes, I should have asked before the project begins but everything has its 1st time…

      • pharkurnell on 08/07/2023 - 10:32

        Unfortunately this is a finished project

        then pay up

        • duluxe2000 on 08/07/2023 - 11:27

          That's also an option but least preferably when all other options are exhausted.

        • oscargamer on 08/07/2023 - 13:17

          What form of contract did you use?

  • Paul Atreides on 08/07/2023 - 10:20
    +1

    The provision was in your quote, but when you paid for the full price of the fixed price contract, was this part of it?

    If not, then a bit different to my process (where I paid for it as part of the initial contract), but any provisions that aren't used is credited back to me later on (or so I'm promised).

    Sounds like you paid for the contract excl. provisions, now you're being asked to pay for it

    • duluxe2000 on 08/07/2023 - 10:25

      "The provision was in your quote, but when you paid for the full price of the fixed price contract, was this part of it?"

      How do you know if your payment includes the Allowance or not? In my quote, the sum of, lets say 200k, is paid by stages. Now the project is finished, I was asked to pay the final invoice, which is 5% of the above sum AND the allowance items.

      • Paul Atreides on 08/07/2023 - 10:33

        Look at your contract, it should have the total amount and all the line items that add up to it. Maybe manually add it up and see if the total there includes the provisions.

        • duluxe2000 on 08/07/2023 - 11:20

          Well my contract does not have the line items… It only has the total sum…

          • Paul Atreides on 08/07/2023 - 12:23

            @duluxe2000: Interesting, try the tender then if you have one.

            I thought all building contracts should have a breakdown of what you're actually paying for.

            Without knowing any other details, I would say that the provisional costs should have been included as part of the payment schedule.

            Only thing that should come at the end is any post contract variations

    • upended on 08/07/2023 - 11:02

      Exactly, this! I am also building and allowances (called PC for provisional costs) are part of my fixed price contract. For an item that has a PC, if the actual costs incurred is lower, the difference is credited to my account. Likewise, I only pay the difference when the actual costs incurred are higher.

      I suggest that you look at all the costs and add them up to confirm if you allowances are included in the final costs.

      Also, your builder should have brought up any cost differences at the time they are incurred, not when everything is done and then ask you to pay up. Any cost increase or decrease is captured as a variation which both you and the builder have to sign.

  • MrThing on 08/07/2023 - 10:21

    "allowance" but guaranteed to be exceeded

    • duluxe2000 on 08/07/2023 - 12:18

      In my case, the actual cost is lower than the allowance. But the builder asks for the full amount of allowance anyway.

  • try2bhelpful on 08/07/2023 - 10:56

    https://www.contractsspecialist.com.au/articles/typical-allo….

    From what I can see your interpretation is correct. The builder would need to argue that the costs of doing these works went beyond what had been allowed for. Given how much costs of materials have increased I would be happy the house has been finished. Maybe sit down with the builder and find out what cost increases he has been dealing with and reach an agreement.

    • duluxe2000 on 08/07/2023 - 11:22

      Yep, that's what I read in the NSW building contract as well https://www.fairtrading.nsw.gov.au/housing-and-property/buil… under chapter 10. However chapter 10 says about provisional sum n in the quote it is Allowance so the terms do not match …

      • try2bhelpful on 08/07/2023 - 13:12

        I would read this as what was allowed for these works as part of the contract and there may be more money owing if the works go above these costs. I would also assume the builder would talk to you about the costs being different at the time they do the works.

  • freefall101 on 08/07/2023 - 12:21

    Did they have to do any demolition or extra plumbing work beyond the scope of the original project?

    • duluxe2000 on 08/07/2023 - 12:27

      Yes they did the work. However this is discussed in the beginning before signing the contract so I'm not sure if they are in or beyond the scope of the project. This is what is not clear to me.

  • thatonethere on 08/07/2023 - 12:46

    it might vary depending on the contract type - ie fixed cost vs cost plus. If you are already in dispute, you should get legal advice.

  • Grunntt on 09/07/2023 - 11:20

    This is the stage where someone has to ask - what did your solicitor say when you asked them?

  • kiitos on 10/07/2023 - 09:51

    Was there "extra plumbing" work that you needed done over what you originally expected?

    I guess you should ask for a breakdown of the work done that comes under these allowances.

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