This contingency is usually calculated as a percentage. If the phase is 100 days of effort, the 20% contingency would be another 20 days. As the project progresses, the level of risk decreases as the requirements and problems are known, so the percentage will decrease. In the closing phase, the percentage added could be as low as 5% or none at all.
Home builders and remodelers typically allocate between 5% and 10% of a project budget for a construction contingency. This amount creates enough breathing space for unexpected expenses. Anyone who tracks estimates and costs manually calculates a contingency percentage on top of all costs, before profit margins are applied. Whether made on paper or calculated by hand, these methods offer familiar and accessible estimation options that put budgets and proposals in the hands of customers.
However, any price negotiation or recalculation requires careful follow-up and runs the risk of human error. Your general contractor should talk to you about a construction contingency. This contingency gives the contractor the ability to adapt and manage unexpected costs, while still ensuring success. It's important that you and your contractor agree that costs fluctuate and that there is a degree of unpredictability in each project.
The design contingency is usually up to 10% of the total construction cost. Although calculated and identified separately, the contingency amount must be an additional amount maintained by the owner in the project budget. The owner keeps the budget and withholds it for use by the architect and designers to ensure that the entire desired scope is covered.
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