If an allowance is exceeded, who pays for the difference?



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    David Kaplan

    I'm pretty sure this would be the Owner's responsibility.  When setting the amount for an Allowance during the drawing phase, it's really an educated guess, and I say "educated" because we're not just throwing a random number out there. Certainly a manufacturer or perhaps even a contractor could be called to obtain initial pricing for whatever it is being considered, and we can then say "based on what we're finding and reps that we've talked to, we think $50K should be a reasonable number to cover this."  This being said, it is generally understood that the nature of an allowance is that it is an estimate, and there is accepted risk on the Owner's end as you've pointed out that it could be exceeded.  I do not see contractual "fault" occurring here - meaning, there is no verbiage that explicitly states that in this instance, Party A is liable and must cover the cost.  In practice, when this situation would occur, the Owner would simply have to decide at that point do I want to pay the extra $10K or perhaps should I scale the project back so we're within the allowance amount?  Sure the Owner might look at us annoyingly and say "why didn't you figure a higher number?" but with respect to contractual liability, I see none.

    Hope that helps.

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    Afxentis Christoforou

    Hi David, I am under the same assumption too. I thought there would be something explicit so I suppose that is why I was getting hung up on this. Thanks for the response!

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