Niche substance · contracts
Allowances, fixed price, and the arithmetic in between
Most renovation disputes are not about quality. They are about a number that moved and nobody explaining how. This page publishes the mechanics we use, including the worked example.
What this allowance covers
The contract carries 1,100 square feet of tile across three bathrooms, a mudroom and a laundry. That figure already includes 12 percent waste for cuts and pattern.
The allowance is for delivered material only. Setting material, waterproofing membrane, trim and bullnose pieces, and all labour are fixed-price lines elsewhere in the contract, so they do not move when your selection moves.
At $18,000 for 1,100 square feet, the allowance buys material at $16.36 per square foot.
Inside the allowance
- Field tile, delivered to the site
- 12 percent waste already counted
- Sales tax on the material
Fixed price elsewhere
- Setting material, membrane and grout (fixed price)
- Trim, bullnose, schluter and transition profiles (fixed price)
- Tile setting labour (fixed price)
- Any change in labour rate caused by a harder material or a larger format (priced as a change order)
- Selection
- Porcelain, 12 x 24 in, rectified
- Rate
- $11.80 / sq ft
- Material total
- $12,980
- Against the allowance
- -$5,020
Labour effect: No change. Same format, same setting time.
A credit of $5,020 appears on the next progress billing. Allowance credits are returned in full. We do not keep the difference.
- Selection
- Honed marble, 24 x 24 in, with a book-matched feature wall
- Rate
- $24.50 / sq ft
- Material total
- $26,950
- Against the allowance
- +$8,950
Labour effect: +$3,400. Natural stone needs back-buttering, a flatter substrate, sealing and slower setting.
A change order for $8,950 material plus $3,400 labour, then 15 percent overhead and profit on the added cost, giving $14,202.50 added to the contract. It is signed before the tile is ordered.
| Material at $24.50 x 1,100 sq ft | $26,950.00 |
|---|---|
| Less the allowance carried in the contract | -$18,000.00 |
| Material overage | $8,950.00 |
| Added setting labour for natural stone | $3,400.00 |
| Subtotal of added cost | $12,350.00 |
| Overhead and profit at 15 percent | $1,852.50 |
| Change order total | $14,202.50 |
Three ways to price a renovation
Fixed price, allowance, cost plus
All three are legitimate. Each one puts the risk in a different place, and the honest question is not which is cheapest but which is honest for the work in front of you.
| Fixed price | Allowance | Cost plus | |
|---|---|---|---|
| What the number means | A price for a defined scope, drawn and specified. It does not move unless the scope moves. | A placeholder for one item that genuinely cannot be selected yet. It is expected to move. | An estimate. You pay actual cost plus an agreed fee, whatever the actual turns out to be. |
| Who carries the risk | We do. If a subcontractor prices higher than we carried, that is our problem. | You do, but only on that one line, and only against a number you can see. | You do, on everything. |
| When it is honest | When the drawings and the finish schedule are complete enough to price against. | When a selection depends on something that has not happened yet, such as stone slabs not yet in the yard. | On genuinely unknowable work, such as a fire repair behind undamaged finishes. |
| How we use it | The default for our whole contract. | Used sparingly, usually for stone slabs, appliances and decorative lighting. | Only for agreed investigative work, by written exception. |
When something changes
The change-order ladder, in six steps
Nothing is ordered or built against an unsigned change order. That single rule removes most of what people dread about renovation contracts.
- 1
Something changes
Either you ask for it, a selection lands outside an allowance, or we open a wall and find a condition nobody could have priced.
- 2
We stop and photograph
Work in that area pauses. Concealed conditions are photographed before anything is altered, and the photos go in the change order.
- 3
We price it
Subcontractor quotes or measured labour and material, plus 15 percent overhead and profit on the added cost. Credits are returned at full value with no deduction.
- 4
Schedule impact is stated
Every change order names the days it adds, including any inspection or lead-time consequence. A three-day change can cost three weeks if it pushes past an inspection window.
- 5
You sign, then we order
Nothing is ordered or built against an unsigned change order. Turnaround is two business days from our side.
- 6
It appears on the next billing
Change orders are billed with the progress draw for the month the work happens, never as a surprise at the end.
Before you sign anything
Seven questions to ask any contractor about their number
- Where is the exclusions page, and what is on it?
- How many allowances are in this contract, and what does each one cover exactly?
- Is structural engineering a line item, or is it missing?
- Is temporary shoring priced, and are new footings included?
- How are change orders priced, and what is the markup on added cost?
- What happens, in writing, when you open a wall and find something?
- Does the schedule include the jurisdiction's permit review queue as a real range?
A contractor who answers all seven without hesitating has done this before. One who is annoyed by the questions is telling you something too.
Two or three in a whole-home contract is normal, usually stone slabs, appliances and decorative lighting. Fifteen allowances is not an estimate, it is a wish, and the final number will be nothing like the front page.
The full difference is credited back on the next progress billing. Credits are returned at face value with no deduction. We do not keep the balance.
It is ours, and it is stated in the contract before you sign. The important part is not the number, it is that it applies to added cost only and is disclosed up front rather than discovered later.
Yes. Deletions are priced the same way, and the credit appears on the next billing. Removing a scope rarely returns the full original line, because some of it has already been designed, ordered or begun.
Two business days from our side for anything that does not need a subcontractor quote, five to seven if it does. Work in that area pauses until it is signed.
Eight to twelve percent on a house built before 1980, five to eight percent on newer stock. Hold it separately from the contract sum, and be pleased if you keep it.
Next step
Start with a walk-through, not a price
Ninety minutes in your house. We look at the crawlspace, the attic and the panel before we look at the kitchen, and you leave with a budget band you can plan around.