How are differences between actual costs and allowances settled?

• A. Through separate negotiations
• B. It is paid by the owner from contingency funds
• C. Adjusted via Change Orders
• D. It remains unresolved

Answer: (C)

When a contract uses allowances, any gap between the actual costs and the budgeted allowance is settled by Change Orders. Allowances cover items not fully defined; once the work is actually priced, the contract sum is adjusted to reflect the real cost through a Change Order. If the actual cost is less than the allowance, the unused portion is credited to the owner; if it’s more, the owner pays the difference via the Change Order. This mechanism keeps the pricing transparent and signed off by both parties, rather than leaving differences unresolved or handled separately.