2.3 Alternates, Allowances & Unit Prices

Apply the actual procurement rules

Public procurement requirements vary by jurisdiction, funding source and solicitation. Read the stated receipt, attendance, responsiveness, award and protest rules. Examples in this section assume a competitive low-bid process with material requirements enforced as stated. Private negotiated work can use different selection criteria. AIA forms do not create a universal public procurement statute.

Scope and Cost Adjustment Mechanisms in Bidding

Designing a building to meet an owner's fixed construction budget requires flexibility during the procurement phase. If drawings and specifications are bid strictly on an "all-or-nothing" basis, an unexpected market spike can cause all bids to exceed the budget, forcing disruptive redesigns and costly rebidding delays. To proactively mitigate this risk, architects incorporate contractual cost-adjustment mechanisms into the bidding documents: alternates, allowances, and unit prices.

Each mechanism serves a distinct administrative purpose, operates under specific accounting rules, and carries legal and ethical considerations during contractor selection.

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Additive Alternates vs. Deductive Alternates

An alternate is a defined portion of the work described in the bidding documents for which the bidder submits a separate, discrete price that can be added to or deducted from the base bid sum depending on budget availability.

1. Additive Alternates

With additive alternates, the base bid includes the core, essential scope required for a fully functioning facility. Bidders submit add-on prices for optional features (e.g., Alternate No. 1: Add photovoltaic roof array; Alternate No. 2: Add finished basement). If base bids come in lower than the owner's budget, the owner can selectively add features.

• Advantages: Preserves an aggressive, lean base bid; provides transparent pricing for discretionary items; minimizes post-bid friction.

2. Deductive Alternates

With deductive alternates, the base bid includes the complete, ideal project scope with all desired features. Bidders submit deductive credits to delete specific items if base bids exceed the budget (e.g., Deductive Alternate No. 1: Delete polished concrete and substitute sealed concrete; Deductive Alternate No. 2: Delete south shading louvers).

• Disadvantages & Risks: Deductive alternates are notoriously problematic. Contractors rarely credit back the full value of deleted work because they retain their embedded overhead and profit on the baseline contract sum. Furthermore, bidders can submit "unbalanced deductive bids," offering minimal credits for items they suspect the owner must delete, thereby inflating the net contract sum.

Ethical Selection and Public Procurement Rules

In public bidding, the selection of alternates is strictly regulated to prevent corruption and bid manipulation. If an owner were allowed to select any combination of alternates after opening bids, they could selectively choose alternates specifically to manipulate the total evaluated prices and award the contract to a favored contractor who was not the low bidder on the base bid.

Apply the alternate-selection process actually published in the solicitation and required by law. If it states a priority sequence, evaluate the base bid plus accepted alternates in that sequence. Other procurements may state a different lawful selection method. A701 does not universally require a numbered sequence or anonymous bid selection. Do not change the announced method after seeing prices merely to favor a bidder.

Furthermore, architects must vigilantly prevent bid shopping (the unethical practice where an owner or contractor uses one firm's quote to coerce another firm into lowering their price) and bid peddling (where a subcontractor attempts to undercut a competitor after bids are opened).

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Specification Allowances (CSI MasterFormat Section 01 21 00)

An allowance is a specified dollar amount or quantity established by the architect in the procurement documents for a portion of the work whose precise design, material selection, or scope cannot be finalized prior to bidding. Allowances are defined under AIA Document A201-2017 Section 3.8:

1. Contingency Allowances

A fixed lump-sum amount (e.g., $50,000) reserved within the contract sum to cover unforeseen jobsite conditions, minor concealed conditions, or unquantifiable owner requests. A contingency allowance cannot be tapped by the contractor without the architect's written authorization and owner approval. Any unused balance at project closeout is returned to the owner via a deductive Change Order.

2. Cash and Material Allowances

A designated dollar amount per unit or lump sum allocated for specific architectural materials whose final selection is deferred (e.g., $45 per square yard for public lobby carpet tile; $25,000 for decorative lighting fixtures).

Contractual Cost Inclusions under AIA Document A201 Section 3.8.2

Candidates must understand the strict cost boundaries established in AIA A201 Section 3.8.2:

• What the Allowance Covers: The allowance covers only the net purchase cost of materials and equipment delivered to the site, including all applicable commercial taxes and trade discounts.
• What the Allowance Excludes: The contractor's costs for unloading, handling at the site, storage, installation labor, overhead, profit, and other operational expenses are already included in the base Contract Sum, not in the allowance amount.

Reconciling Allowances via Change Order

When final selections are made and actual invoices verified:

• If actual material cost exceeds the allowance, the Contract Sum is increased by Change Order strictly by the net cost difference. The contractor is not entitled to additional overhead and profit on the cost overrun unless the work fundamentally alters the installation scope, because their fee was already priced in the contract sum.
• If actual material cost is less than the allowance, the Contract Sum is decreased by Change Order by the net savings.

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Unit Prices (CSI MasterFormat Section 01 22 00)

A unit price is an agreed, predetermined monetary rate per unit of measurement (such as cubic yards, linear feet, or tons) for work whose precise quantity is unknown at the time of bidding. Common applications include site civil and foundation work:

• Mass rock excavation per cubic yard.
• Trench rock excavation per cubic yard.
• Unsuitable soil excavation and replacement with engineered structural fill per ton.
• Driven steel H-piles per linear foot.

Under standard specifications, unit prices are all-inclusive, covering material purchase, labor, equipment rental, hauling, disposal fees, permits, overhead, and profit.

Substantial Inequity Clause (AIA Document A201 Section 9.1.2)

Estimated quantities are included in the bid form to permit competitive total price tabulations (e.g., "Estimated 100 CY of rock excavation at $150/CY = $15,000"). However, actual field conditions may differ drastically from geotechnical borings.

AIA Document A201 Section 9.1.2 establishes an essential safeguard: If the actual quantities of work contemplated differ so significantly from the estimated quantities that applying the original unit price results in substantial inequity to either the owner or the contractor, the applicable unit price shall be equitably adjusted.

• If a contractor bids a high unit price expecting 20 cubic yards of rock, and the site actually requires 2,500 cubic yards, the contractor achieves massive economies of scale (mobilizing high-production equipment) that would yield an exorbitant, inequitable profit at the original unit rate.
• Conversely, if a contractor bids a low unit price expecting 2,000 tons of material, but only 10 tons are required, the contractor cannot recover their fixed equipment mobilization costs, creating an inequity for the contractor.

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Value Engineering (VE) Protocols Before Contract Award

Value Engineering (VE) is an organized, multidisciplinary methodology developed during World War II that analyzes building systems and components to achieve their required functions at the lowest life-cycle cost without sacrificing safety, quality, or performance.

True Value Engineering vs. Cost Cutting

Licensure candidates must distinguish between true VE and arbitrary cost cutting:

• True Value Engineering: Evaluates function, lifecycle durability, maintenance operating costs, energy efficiency, and construction speed. Example: Replacing a field-assembled copper plumbing manifold with a prefabricated modular piping skid that reduces site labor by 60% while maintaining identical pipe wall thickness, flow rates, and a 30-year warranty.
• Cost Cutting (Scope Deletion): Eliminating functional systems, substituting cheaper, inferior materials, or reducing building square footage to fit a budget. Example: Substituting 15-year asphalt shingles for 50-year standing seam metal roofing, shifting long-term maintenance costs onto the owner.

Architect's Professional Role in Pre-Award VE

When post-bid negotiations require cost adjustments to achieve the budget ceiling:

1. Maintain Professional Standard of Care: The architect must independently evaluate all contractor-proposed VE substitutions to verify compliance with applicable building codes, structural fire-resistance ratings, accessibility mandates, and acoustic criteria.
2. Assess Life-Cycle Impact: The architect must advise the owner regarding operational trade-offs, increased energy consumption, or shortened replacement cycles.
3. Formal Documentation: Accepted VE substitutions must be incorporated into the Contract Documents prior to contract execution, either through a formal Addendum (if re-bidding or finalizing before award) or an explicit Schedule of Value Engineering Modifications attached to the Owner-Contractor Agreement.

Source and application

A201-2017 official sample. Checked October 16, 2026. Apply the cited form edition and the actual project amendments, adopted codes and supplied scenario assumptions. Numerical examples are teaching inputs unless expressly attributed to a requirement.