Contingency by project stage

The uncertainty margin is not an expense. It expresses the fact that a sketch-stage estimate can be wrong in either direction. When the estimate becomes a price, the margin disappears: either the price fits within the budget, or it exceeds it and the problem changes in nature. That case is covered in the article The estimate exceeds the budget: what to do before tendering.

Site contingency is the only reserve that covers genuine risks. An unpleasant surprise in the ground, an element of the existing building that was not surveyed, a constraint discovered on opening up: these are facts nobody could price with certainty, but whose likelihood can be reasoned about.

The brief reserve is not contingency. It is the money the client sets aside for its own changes. The code of ethics of the Ordre des architectes (Order of Architects) of 16 November 2022 (art. 16) provides that any change to the brief "must be the subject of an additional agreement stating its financial impact" (unofficial translation, as are the other quotations below). On the contractor's side, in a private lump-sum contract, art. 1793 of the old Civil Code rules out any price increase for changes that have not been "authorised in writing, and the price agreed with the owner". Each change therefore has a written price, which is deducted from this reserve and not from the contingency.

Mixing the three produces two errors. Site contingency gets used up on choices about the brief, and the first real risk reveals that nothing is left. Or an uncertainty margin is kept after award, and the budget looks more comfortable than it is.

None of the texts cited in this guide sets a contingency rate. A single percentage has the advantage of being simple and the drawback of saying nothing: it shows neither whether the reserve is enough nor when it can be released.

The method is to keep a risk register. For each risk: its description, the stage at which it is removed or confirmed, its possible effect on cost, its reasoned likelihood, and the reserve it belongs to. The contingency is the reasoned sum of these lines, rounded, and it is reviewed at each stage.

Entirely fictitious example, round figures. A new office building, works budget of €2,000,000 excluding VAT at the value of the month it was set. The register records: ground conditions not yet investigated (possible effect €80,000, removed by the soil survey at preliminary design); a high-capacity electricity connection (possible effect €40,000, removed by the network operator's quotation); an old party wall needing underpinning (possible effect €60,000, removed only when the site opens); miscellaneous execution risks (€50,000). The client adds a brief reserve of €60,000 for partitioning it knows it will have to adapt to its future tenants. The contingency is not "10%": it is the sum of lines that anyone can discuss, and it is known when each one can be released.

The register also protects the relationship with the architect. An estimate presented with its named risks can be checked; an estimate uplifted by an overall coefficient cannot.

Homegrade, in the Brussels-Capital Region, recommends allowing a reserve for unforeseen items "of the order of 10% of the works amount" (brochure "Maîtriser son chantier", 2022). This is the recommendation of a Brussels regional body, in a brochure intended for the general public, not a standard, nor a rule applicable in Wallonia or Flanders.

This benchmark is useful as an order of magnitude for the site reserve, once prices are known. It says nothing about the uncertainty margin of a sketch-stage estimate, nor about the brief reserve of a professional client. Adopting it as it stands for a complex project, or for a simple and well-documented one, amounts to giving up on reasoning it through.

At each stage, some of the risks are removed or confirmed. The contingency is recalculated, and the released share is reallocated by a written decision of the client, or returned to the budget.

The contingency does not have to fall steadily. It falls when risks are removed. A project may keep a large reserve until the site opens if the major risk is only removed then, such as ground that cannot be reached before demolition.

Release is a decision, not an observation. If a line in the register did not materialise, the amount goes back to the budget or is reallocated in writing. Without that decision, the "free" reserve dissolves into small choices of finish that nobody has weighed up.

On an existing building, the site reserve weighs more, because the existing fabric is discovered during demolition. The method stays the same, but the risks and clauses change: they are covered in the article Pricing with a contingency, and the way discoveries are allocated in the contract in the article on discovery clauses.

For a pouvoir adjudicateur (contracting authority), contingency is not just a management choice. Every modification of a contract in progress is funded from a budget reserve, and public procurement law governs its form and extent.

Modifications are ordered in writing. The Royal Decree of 14 January 2013 laying down the règles générales d'exécution (general implementing rules) provides that modifications are ordered in writing and valued at the unit prices of the tender (art. 80).

The ceilings in the general implementing rules are not budgets. Additional works (art. 38/1) and modifications made necessary by circumstances that "a diligent contracting authority could not foresee" (art. 38/2) are limited to 50% of the initial amount per modification; a low-value modification (art. 38/4) must remain below the European threshold and below 15% of the initial amount for works, in cumulative value. These figures say what the law allows, not what the budget can absorb. A contracting authority's contingency is reasoned with the same method as in private work, and successive modifications add up.

The contract estimate remains the basis. The Act of 17 June 2016 (art. 16) requires the value of the contract to be estimated, excluding VAT. The contingency comes on top of that estimate, in the approved budget; it must not be buried in the estimate itself, or the comparison with the tenders will be distorted.