A contingency is not an extra
The distinction is essential and often poorly understood by clients. A contingency is not a profit margin.
An extra corresponds to a choice. The client decides to add or improve something, and the budget rises accordingly.
A contingency corresponds to a known risk whose occurrence is uncertain. It covers what could not be determined before opening up the building.
An unspent contingency returns to the client. It is neither a contractor's margin nor a comfort cushion, and saying so plainly changes how it is perceived.
A budget without a contingency is not a lower budget. It is an incomplete budget.
How to calibrate it
Four criteria, to be cross-referenced rather than applied in isolation. They determine the level of contingency to adopt.
The scale of the intervention. Refreshing surfaces exposes little; work touching structure or services exposes a great deal.
How well the building is known. A property investigated, with original drawings and surveys, justifies a lower contingency than one discovered during a viewing.
Age and history. A building altered several times without documentation presents more unknowns, as the article on structural unknowns explains.
The rigidity of the brief. A brief allowing trade-offs absorbs a discovery better than a fully fixed one.
The contingency is therefore a dial, not a standard percentage. A rate applied mechanically to every project reflects no analysis at all.
| Criterion | What it indicates | Effect on the contingency |
|---|---|---|
| Knowledge of the existing fabric | Surveys and trial openings available | Lower contingency where documented |
| Age of the building | Likelihood of structural surprises | Higher contingency on older fabric |
| Extent of strip-out | How much will be opened up | Higher contingency as strip-out grows |
| Site constraints | Occupation, access, party walls | Higher contingency on constrained sites |
Where to place it in the budget
Three principles of presentation, avoiding misunderstandings. They make the contingency legible in the quotation.
On a separate visible line, rather than diluted into unit rates. A hidden contingency becomes a suspect margin once discovered.
Tied to identified risks, stating what it is meant to cover, rather than presented as general contingency.
With a rule of use, stating who decides its application and by what procedure, connecting with the article on addenda and additional works.
A contingency without a rule of use is consumed without decision, which makes it useless as a management tool.
What actually consumes it
Four items recur, and they are not the ones anticipated. They concentrate most of the overruns observed.
Substrate preparation. A substrate found to be unsuitable requires unplanned preparation, and that concerns whole areas rather than isolated points.
Junctions with the existing. Joints, thresholds and interfaces between renovated and retained parts absorb a disproportionate share of time.
Compliance work discovered. An older installation may require work the original brief did not envisage.
Standing time. A project halted pending a decision or third-party intervention costs without producing, covered in the article on periods and interruptions.
Spectacular discoveries are rarer than those four items, which erode the contingency steadily.
How to present it to the client
Three useful formulations, tested in practice. They express the contingency without weakening the offer.
Separate the price of planned works from the contingency, presenting the two figures apart.
Explain what the contingency avoids, namely renegotiation mid-project, when the client has least room for manoeuvre.
State that it is returned if unspent, which clearly distinguishes it from a margin.
An informed client accepts a contingency. They do not accept an unforeseen revision of the same amount, although the financial outcome is identical.
What this means for a professional
Four rules.
Never quote a firm price on an uninvestigated building, or state the limits explicitly.
Calibrate the contingency by risk analysis, not by applying a standard rate.
Present it separately and explain its rule of use.
Reassess the remaining contingency at each discovery, since it determines the room for manoeuvre left on the brief.
This article sets out principles of professional method and serves as orientation. It does not replace technical advice or assessment of the individual case.