A premium roof contract should contain three financial line items. The names vary between contractors but the structure is consistent. Knowing what each one covers makes a contract easier to compare and easier to manage.
The estimate
The estimate is the price of the work as scoped. It covers:
- The material, at the specified quantity
- The labor to install it correctly
- The standard flashings, fasteners, and underlayment
- Permits, inspections, and overhead
The estimate should be a fixed price for the scope described. "Time and materials" pricing is rarely appropriate for a residential roof.
The allowance
The allowance covers items where the actual cost cannot be known until the work is underway. The most common allowance lines:
- Deck repair: how much rotted plywood will be found beneath the existing roof. The deck cannot be inspected until the field comes off.
- Structural repair: any framing issues discovered during deck exposure.
- Specialty flashings: hand-formed copper or zinc pieces for unusual conditions.
The allowance is a budgeted dollar amount that is applied against actual costs. If less is spent than budgeted, the difference is credited. If more is spent, the difference is an additional charge.
Allowances should be reasonable, not generous. A $10,000 deck repair allowance on a 4,000 sq ft Florida home is normal; a $30,000 allowance suggests either the deck is in known bad condition or the contractor is padding.
The contingency
The contingency is a percentage held in reserve against the unknown unknowns. Different from allowance: allowance covers items you know will happen but cannot estimate; contingency covers items you do not know will happen at all.
Typical contingency on a premium roof: 5-10% of the total estimate.
Contingency is used for:
- Material substitutions if the specified product becomes unavailable
- Weather-driven delays affecting tarping or temporary protection
- Discovery items during construction (asbestos, lead paint on flashings, etc.)
Unused contingency at closeout is typically credited or partially credited to the owner. Read your contract for the specific terms.
A reasonable contract
Estimate: $180,000 Allowance: $12,000 (deck repair) Contingency: $15,000 (8%) Total possible exposure: $207,000
The owner's worst-case is the total possible exposure. The likely actual closeout is somewhere between the estimate and the worst case.
Red flags
- No allowance line: deck repair will become a change order at premium prices.
- Allowance more than 15% of total: either the project is unusually risky or the bid is padded.
- No contingency: any surprise becomes an emergency change order conversation.
- "Time and materials": the owner has unlimited downside.
- A single round number with no detail: the contractor has not actually estimated the project.
A clean contract on a premium roof should be 8-15 pages including the specification, drawings, schedule, payment terms, and warranty. Two pages is too few. Forty pages is overkill.
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