A budget reserve set aside to cover unexpected costs or scope changes during a project.
Contingency is a budgetary reserve added to a project cost estimate to cover unforeseen conditions, design evolution, and cost uncertainties. Owner's contingency covers scope growth and design changes; contractor's contingency covers field uncertainties and risk. Contingency is typically 5–15% of construction cost, decreasing as design completeness increases. Drawing down contingency faster than expected is a red flag for project financial performance.
The owner held a 10% contingency on the $15M project and approved the release of $450,000 from contingency to cover unforeseen soil conditions discovered during grading.
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