Contingency

Three types of contingency

Design contingency is held during early stages (RIBA 0–3) to cover design development risk — costs that emerge as the design is detailed. Typically 5–10% of the cost plan; drawn down as design progresses.

Construction contingency covers risks during construction — typically 3–5% of the contract sum, held by the consultancy for the client. Used for variations driven by unforeseen events (ground conditions, weather, latent defects).

Employer's contingency is held by the client outside the contract sum. Used for client-driven scope changes — additional rooms, finish upgrades. Larger than construction contingency on most projects.

How contingency moves through the PCSR

At project start, contingency is in the forecast column. As risks materialise, contingency is "drawn down" — moved from forecast into anticipated, then committed once a variation is approved. By project end, drawn-down contingency should equal the variations it funded.

Unused contingency at out-turn is a saving for the client. Many consultancies track contingency drawdown as a separate metric in the PCSR — a key project-controls discipline.

Common pitfalls

• Contingency drawdown without proper governance. Contingency should be released against specific approved risks, not used to absorb general overruns. The "contingency just disappeared" pattern is a red flag.
• Mixing design and construction contingency. They cover different risks and live in different stages. A consultancy that treats them as one bucket loses visibility on cost performance.
• Not reporting unused contingency. The unused balance is a positive number for the client and a credibility builder for the consultancy. Underreport at your peril.

Related

• What is a provisional sum? →
• What is out-turn cost? →
• What is a PCSR? →