Category: Quantities & pricing
Prepared by Eng. Ahmed Fathy, Projects Manager ·
Definition
Contingency is a sum or percentage added to a cost estimate to cover risks and items unknown at pricing time, such as ground conditions or missing detail in the drawings. It is usually 5 to 10% on fully designed projects, and more at early stages.
Why it matters on a project
A budget without contingency usually overruns, forcing the owner to stop work or cut specification. Showing it openly is better than hiding it in the rates.
Measurement and pricing
A percentage of direct or total cost, or a lump sum, shown as a separate line in the owner's budget.
Worked example
A building budget of 2,375,000 SAR with 7% contingency: 2,375,000 × 7% = 166,250 SAR, a total budget of 2,541,250 SAR.
Common mistake
Spending the contingency on optional upgrades early, so nothing is left when a real problem appears.
Frequently asked questions
Does the contractor put contingency in his offer?
Contractors usually build a risk allowance into their rates; contingency is a line in the owner's budget.
How does it differ from a provisional sum?
A provisional sum is a known BOQ item for defined work not yet detailed; contingency covers what cannot be foreseen.
Related terms
- Provisional sumAn amount included in the contract for work not yet defined, spent on actuals.
- Risk assessmentIdentifying hazards in each activity, estimating likelihood and severity and setting controls before work starts.
- Engineer’s estimateThe cost estimate prepared by the consultant or owner to compare contractor offers.
- Cash flowThe timing of money coming in and going out over the project.
Read next
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