What is Construction Contingencies and Why It is Required?

What Is Contingency In Construction

What Is Contingency In Construction?

The definition of contingency according to the Association for Advancement of Cost Engineering International (AACEI) is “an amount added to an estimate to allow for items, conditions, or events for which quantity can not be predicted in advance at the time of preparing the estimate.

The term `contingency’ represents any incidental or miscellaneous character that cannot be classified under any distinct item sub-head, yet pertain to the work as a whole.

contingencies in civil engineering are important when preparing estimates for any construction project.

While planning any construction project, finalizing a budget is one of the major steps in planning a successful project. Designing and planning to project considering where to spend money and budgeting for all the work takes both attention to detail and the complete scope of the project.

However, all estimate is correct and accurate there is some unforeseen issues or items that come up where additional work will be needed.

This is where a contingency budget becomes critical. Contingencies in estimation and costing are an amount added to the total estimate to balance incidental and miscellaneous expenses.

Read More: Types Of Engineering Contracts And Their Uses

What is the Amount of Contingencies Added?

To meet such unforeseen expenses in construction contingency estimates an additional amount of 3 to 5% of the estimated cost of the work is provided in the total estimates.

Miscellaneous incidental expenses that cannot be classified under any subhead item, are met the amount provided under contingencies. Estimating contingency is considered as 3 to 5 % of the total estimated cost of the project.

Examples of Contingencies In Construction

There is an item of work cement plastering in a 1:3 mix ratio with a neat cement finish, but during execution, it is desired to provide nosing at the end of steps.

As there is no allocation of funds for this small work, the cost of sub-work may be met up from the contingency fund.

In case expenditure is required for any intermediate design change or due to an increased volume of work, and that cannot be covered from the contingency fund, a supplementary or revised estimate is submitted for its sanction before taking up the work.

If there is any saving against the amount provided under contingencies amount may be utilized with the sanction of the competent authority, to meet expenses of extra items of work.

The provision for contingencies may not be diverted to ray new work or repair which is not provided in the estimate and of which cost exceeds Rs. 2000 without the sanction of superintending engineer.

List of Contingency Items In Construction

The following is a list of contingency Items in construction,

  • Extra work which is added after starting of work
  • Any correction after work started
  • Item whose cost can not be calculated in advance
  • Any mistake during constriction

Types of Contingency in Construction

Following are construction contingency examples and types used in construction.

1. Contractor Contingency

A contractor contingency is a fund into the contractor’s anticipated price for the project to account for various risk factors that cannot otherwise be accounted for in a schedule of values.

This money is set aside to account for any errors that occur on behalf of the contractor. Accordingly, contractors consider these funds spent money.

Adding this extra fund to the estimated cost of the project is the contractor accepting the fact that unpredictable costs are all part of the construction biz. Construction contingency is important before executing any project.

Read More: Estimation Of A Building With Plan

2. Owner Contingency

An owner’s reserve is an amount set aside for additions or modifications of the scope of the work. Owner contingency main utilized in guaranteed maximum price (GMP) contracts. Changes and mistakes are not always the contractor’s fault.

Any changes that are not included in the estimate or bid will have to be paid by the owner-funded contingency.

Incomplete plans or owner-directed changes are the leading causes of dipping into an owner contingency fund.

Watch Video: What is Contingency In Constriction (Contingency in Estimation)

Contingencies in Construction- An Important Definition in Estimation


Contingencies in Estimation

The definition of contingency according to the Association for Advancement of Cost Engineering International (AACEI), “is any incidental or miscellaneous item that cannot be classified under any distinct item sub-head, yet pertain to the work as a whole and lump sum amount added in the total estimate to balance incidental and miscellaneous expenses.

What is the type of construction contingency?

1. Contractor Contingency
2. Owner Contingency

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