Allowances are applied to all classes of estimates. Depending upon the class of estimate, some allowances may be hidden or lumped with some other line items.

In case of detailed estimates (Class 3 and higher), it is good practice to identify the allowances as stand alone line item(s).

1. Owners
• uses contingency to account for risk. It is impossible to produce perfect construction documents which leave room for errors and omissions. Contingency for owners is a way of preparing for changes in scope or errors/omission. May view it a lost cost.
2. Engineering Consultants
• it is the amount that is additional to the contract the owners holds to ensure that all desired scope is covered.
• the design contingency should be used:
• to resolve unforseen issues in initial design period
• provide balance between scope and initial budget if problems occur, eliminating "cost cutting"
• enhances project as recommended by the consultants and owner approval during design to eliminate "scope creep"
3. Contractor uses the contingency as a tool to allow flexibility with onsite modifications like moving a wall or creating an opening. The use of contingency for contractors varies with the type delivery method.

Allowances cover incremental resources included in estimates to cover expected but undefined accounts or sub-accounts. 

Engineering Equipment Allowance

Bulk MTO Allowance

Overbuy Allowance

Shipping Damage

Frieght

Poorly Design Items

Contingencies are special monetary provisions in project budget to cover uncertainties or unforseeable elements of time/cost in the estimate associated with the normal exectuion of a project.(ie Labour Rates and Design Development)

• allowances to cover extra work due to engineering quality:
• this usually caused by level details of engineering design (are they 50% complete or 100% complete
• calculated as a percentage of direct costs calculations
• applied to each discipline
• percentage depends upon the project definition
• can range from 1% to 25%

• it is determined by the % of the design maturity level
• is determined by the confidence in pricing (firm quotes attract lower %)
• only calculated for the tagged equipment
• vary from 1% to 25%

• wastage
• loss of materials
• breakage

• Earthworks 
• Shoring
• Dewatering
• Hydrovac
• Surveying
• Site Testing
• Allowance for Productivity
• Congestion
• Working Heights
• Wind Allowances

• is a written document that lays out parameters and basis of estimate
• forms the foundation of the estimate
• sometimes referred to Estimate Preparation Plan
• regardless of estimate class should have a BOE
• examples of traditional methods are DBB(Design-Bid-Build), DB (Design-Build), CM-Fee (Construction Management for a Fee)
• high level description of the estimate for the executives
• eliminates estimator assumptions and guesswork
• developed/written by estimator manager or lead estimator
• done early in the estimate process
• key information to the various discipline estimators for their use in developing estimate details

1. Introduction
1. Project Description
2. Scope Definition
3. Key Milestone Dates
4. WBS and Coding of Estimate
2. Methodology
1. Estimate Methodolgy
2. Estimated Man-Hours for Production of Estimate
3. Estimate Classification
3. Design Basis
1. Types and Status of Engineering and Design
2. MTO and Methodology
4. Planning Basis
1. Project Management
2. Engineering
3. Procurement
4. Fabrication and Construction Approaches
5. Contracting Strategy
6. Workweek Schedule
7. Planned use of overtime
5. Cost Basis
1. Methods and sources used for Material, Labour and Sub-Contracting pricing
1. Major Equipment
2. Bulk Material and Commodity Pricing Sources
3. Pricing Sources for Labour Hours, and Labour Adjustments
4. Pricing Sources for Construction indirecst, start-up costs, home office costs, owner costs
5. Currency exchange rates, escalation, location factors
6. Allowances
1. Level and Types of allowances engineering
2. Lump-sum allowances for specific areas of scope
7. Exclusions
• Potential items of cost that might be associated with project but there are no costs in estimate
8. Assumptions
• Any made by estimator to calculate estimate
9. Risks and Opportunities
• Supported by a formal risk analysis study identifying areas of costs associated with high or very high risk or opportunity values

• dictates how the costs will be organized and summarized
• conceptual uses simple structures
• definitive uses more detailed structure (WBS)
• WBS feeds into the estimate structure, project control and project scheduling so in-proper WBS wil impact project control
• WBS needs to link with the control accounts

• typically qualitive
• ensure that it meets technical requirements
• determines if estimate is:
• developed using required practices, tools and data
• covers scope
• free from errors or omissions
• structured and proper format

• typically quantative
• benched marked against cost metrics, third party data and company data
• micro level review
• consistent, clear and reliable documentation
• team members should accept ownership of those parts

1. making a person responsible and managing of review process
2. lead estimator will assign review team (anyone involved in major inputs to estimate)
3. management is involed in final review or when intermidiate decisions are made
4. owner/client may request a representative to attend review
5. project planning team needs to ensure that BOE document is reflected in estimate

1. Technical (Engineering/Design/Scope) Reviews
2. Estimating Team Reviews
3. Project Manager/Project Team Reviews
4. Management Reviews

• first review
• detailed evaluation of estimate and BOE for accuracy
• listing of all drawings, sketches, specifications and other technical deliverables used in estimate preparation to ensure completeness and current
• correct quantity take-off
• team needs to buy into these costs-this will be the budget moving forward

• validating of scope and BOE documents
• math checks on quantities, prices and summaries are completed
• other team members may be involved for the 'cold-eye' review

• get buy-in and feedback from project team
• understanding from Project Manager as he/she is responsible for presenting and defending the estimate
• agree on risks and their costs and contingency
• Basis of Escalation and Management reserve is decided on
• estimate is reconcilled with past estimates
• deviation amount and nature will create new reviews for reconcillation

• frequency and details of reviews will depend on the importance of project on company strategies
• high-level presentation of estimate
• validation of estimate is main focus
• key risks are discussed and their costs - management reserve is explained
• discussion of alternatives and their savings