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We typically use allowances for flooring, appliances, landscaping and things like that. Typically only 4 or 5 items in a contract. we base any markup on the total job, as bid. If they go over on allownaces, we typically do not mark that up, If they stay under, we refund the amount that they are under.
I typically don’t see allowances as people using them to try to find the cheapest thing they can to install, however I have seen it in a couple of instances over the years. Most of our clients know what they want and may shop for the best price, but they typically do not cut quality in the process.
I do what Robert does. I pick a reasonable allowance for the quality of the project and my markup is on that. If they pick a more expensive product but the installation takes the same time, then I don’t much care about marking it up more.
If there is a substantial difference in the product that you are installing you can always write a change order, due to installation differences, and then add your markup in there.
That is a good point Ethan, If a product that is covered by a markup takes a lot of extra time to research it, time to pick it up, or additional work on our part, I will include that in with the cost of the item.
I somehow seem to get a lot of customers who don’t quite know what they want, but want a price. I’ve tried to sell people on a design and proposal, which works sometimes, but doing allowances I think would help me get a price to then and get the contract sooner.
When I noticed that my clients did not know what they wanted and that it was costing me money and time lost also.
I decided to sell them the service of decision making (some people call this charging for estimates).
This has worked well for me- they pay me to help them make all the decisions about the job and then they hire us to do the work.
We know what we will need to complete the job because all decisions are made and we can also do the work faster which makes everyone happy.I have a project like that right now. Homeowner is slow in decisions so we cannot complete some parts. the project just sits there with nothing happening. We try to explain that decisions are critical, but they are very busy with other things also.
I have worked mostly on institutional projects such as schools or hospitals and allowances are not used. Bids are for the project as shown and specified and any changes are done by change order. I think allowances stink. They are like making and estimate of the unknown. You’re never right.
I have worked mostly on institutional projects such as schools or hospitals and allowances are not used. Bids are for the project as shown and specified and any changes are done by change order. I think allowances stink. They are like making and estimate of the unknown. You’re never right.
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