Contingency
A contingency is money carried in a budget for costs that are expected to arise but cannot yet be identified, as distinct from a specific scope whose price is not yet known.
Also written as construction contingency, contingency allowance.
Last updated
Reviewed by Eric Collin · President and Founder of Firmo Construction, 20+ years in preconstruction and bid evaluation
It covers the unknown unknowns: conditions discovered in an existing building, coordination the drawings did not anticipate, and the ordinary accumulation of small surprises every project produces. It is sized as a percentage of the estimate — often three to ten percent, higher on renovation and early-stage design — and drawn down as those surprises materialize.
The distinction from an allowance is the one that causes trouble, and it is worth stating plainly: an allowance is a placeholder for known scope at an unknown price, and a contingency is a reserve for scope that is not known at all. An allowance for door hardware means the doors will have hardware and the selection is pending. A contingency names nothing.
Whose contingency it is matters as much as its size. An owner contingency, a design contingency, and a contractor contingency are three different pools with three different rules about who may spend them and what becomes of the remainder at closeout.
Contingency is not a substitute for leveling, though it is often used as one. Carrying an extra five percent because the bids are hard to compare hides a scope gap rather than closing it, and the gap is still there when the contingency is gone.
- Allowance vs contingency
What is the difference between an allowance and a contingency?
- Allowance
An allowance is a fixed sum carried in a bid for work that is not yet defined well enough to price, to be reconciled against the actual cost later.
- Scope gap
A scope gap is work required by the project that no bidder included in its price, because every bidder assumed someone else was carrying it.
- Bid leveling
Bid leveling is the process of adjusting subcontractor bids onto a common scope so their prices can be compared like for like.
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