Understanding the use of allowances and contingencies in your construction project agreement.
Allowances are used on almost all projects to provide for a hedge against uncertainty at the time of the original quote or bid. The quantity for an item of work might not be specifically known, or a product or material might not be selected. The use of allowances can provide a reasonable estimate of unknown items at the time of the original contract, subject to adjustment based upon requirements of future decisions by the owner. Contingencies provide funds for unknown costs for example at the time the parties agree upon a guaranteed maximum price on a cost plus fee amount. This material will discuss terms that determine the rights of the parties to use contingency amounts and the allocation of unused contingency savings at the time of completion.
ï Types of Allowances
ï Use of Allowances
ï Contractual Provisions Relating to Allowances
ï Changes Relating to Allowances
ï Payment for Allowances
ï Potential Disputes Concerning Allowances
ï Types of Contingencies
ï The Use of Contingencies
ï Contractual Provisions Relating to Contingencies
ï Changes Relating to Contingencies
ï Payment Relating to Contingencies
ï Potential Disputes Concerning Contingencies
Samuel H. Levine with Bryce Downey & Lenkov LLC, Justin L. Weisberg with Schuyler, Roche & Crisham, P.C.
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