Contingency and the Unknown

One of the most important parts of pricing a project, I typically recommend, is a separate contingency.  A contingency can be take a lot of pressure off both, the Contractor and the Owner, if it is included and understood from the very beginning.  It can be considered an Owner’s contingency, a Contractor’s contingency, or both.

The reason a contingency is important is because pricing a project is not an exact science.  There are a number of different items to consider when providing an estimate based on an Owner’s scope of work.  Specification and material decisions are very important since costs can vary greatly depending on what is selected (see blog 1/7/14 regarding the sequence of activities to get to a price).  Also important, is the understanding that an Owner and Contractor should have regarding changes and unforeseen conditions.  A Contractor can’t always predict or know what may be behind walls, under floors, or damaged beyond repair if something is hidden.  We have to make assumptions or estimating would take too much time and money.  I typically recommend a contingency between 10-20% depending on the type and size of the project.

Working with a known contingency is a simple way to budget and plan for issues, if they arise.  Whether it is unforeseen conditions, changes, upgrades, or finalizing spec changes, using a contingency should always be considered for a project.

Brandon Leske
Hybrid Construction LLC
Tampa Area General Contractor