A contingency is a dollar amount built into your budget to cover unexpected costs during the design and construction process and it is typically expressed as a percentage of your total construction cost.
While much work is done in advance to learn the facts about your project, the property, and the parameters by which your project can be designed and constructed, sometimes there are unexpected or unforeseen conditions that are only revealed during demolition or construction. Some examples that we have encountered in previous projects include unacceptable soil materials, underground tanks or piping, structural damage, and insect damage. At the onset of the project discussion, we recommend to all owners that they leave extra room in their budget to cover the cost of resolving such problems. The amount of the construction contingency can vary due to the size, complexity, and known facts about the project; however, a reasonable construction contingency is between 5 and 10 percent of the total cost of construction.
When preparing your preliminary budget, it is prudent to also include a design contingency which would cover the cost of any changes you make to the design after construction has commenced. Sometimes, a great idea comes along later in the process or a need may change–it is better to have anticipated such a cost in the preliminary budget than to have to pass on such a great idea or change of need or mind.
Please remember and understand that changes occurring after construction has commenced are often costlier because of scheduling and possible re-work by your builder and architect; however, in most cases, you are doing this project once and you want to get it right and to your liking.
With thorough planning of your preliminary budget to include both a construction and design contingency, you will be more prepared to resolve the unknowns that can occur during the design and construction process.