TOPIC 3: CONSTRUCTION CONTINGENCY

What is Construction Contingency?

Reserve money or time for unforeseen costs, risks, events, or scope changes.

What is an Allowance?

Budget for a known item whose exact cost or selection is unknown.

Contingency vs Allowance?

Contingency = unknown risk; Allowance = known item, unknown cost.

What is a Contingency Reserve?

Reserve for identified or known risks.

Who controls the Contingency Reserve?

Project manager.

What is Management Reserve?

Reserve for unidentified or unknown risks.

Who controls Management Reserve?

Senior management.

What is Owner's Contingency?

Reserve for owner risks like scope changes and budget overruns.

Owner's Contingency for new construction?

Typically 10–15%.

Owner's Contingency for renovation?

Typically 15–25%.

What is Design Contingency?

Architect's fee reserve for redesign and coordination issues.

Typical Design Contingency?

5–10% of the architect's fee.

What is Contractor Contingency?

Bid reserve for cost fluctuations, delays, minor changes, or missed items.

What is Subcontractor Contingency?

Reserve for labor shortages, material price swings, and coordination issues.

What is Schedule Contingency?

Time buffer built into the schedule to absorb delays.

What is Hard Cost Contingency?What is Hard Cost Contingency?

eserve for unexpected physical construction expenses.

What is Soft Cost Contingency?

Reserve for unexpected administrative or professional expenses.

What is the Golden Rule of Contingency?

Less information and confidence = higher contingency.

What happens to contingency as details become clearer?

Contingency generally decreases.

Conceptual/Feasibility contingency?

15–25%.

Schematic Design contingency?

10–15%.

Design Development contingency?

7–10%.

Construction Documents contingency?

5–10%.

During Construction contingency?

3–5%.

First step in determining contingency?

Identify construction risks.

Second step in determining contingency?

Plan solutions before problems occur.

Third step in determining contingency?

Track and update risks continuously.