The word “contingency” has many different meanings, depending on the industry you serve or your point of view. In construction, contingency refers to a percentage of money reserved to cover unanticipated project costs. A contractor, an owner, or a design professional (aka architect, engineer, etc.) all likely feel that the proper use of contingency within a project stems from different, but justifiable causes.
For instance, a designer undoubtedly assumes responsibility for planning and designing a building that complies with all building codes and regulations. However, to draft a complete project that indicates every possible section or detail, and also encompasses every possible combination of material, model, or manufacturer is inconceivable. Therefore, in the designer’s eyes, it may be perfectly acceptable during the construction phase to use contingency spend to accommodate variations or updates that need to be made to the “as-bid” plan set.
In contrast, if an owner is fortunate enough to have any contingent funds left in their budget, they are likely to prefer that they are used on project betterments. Perhaps to add items to the project that had been eliminated during design or value engineering, or maybe just to incorporate items from their wish list that hadn’t made it into the project initially. It is conceivable to see the justification for this case as well.
Lastly, a contractor may take the stand that the use of contingent funds is reserved for unforeseen or differing conditions than those outlined in the plans and specifications from which they based their bid on. For example, old foundations or utility piping buried on a project site that wasn’t documented on the as-builts (record drawings) of a particular property. The contractor had no way of knowing the subsurface conditions of the entire project site and therefore should be entitled to additional compensation, drawn from the project contingency. It seems fair to me…I may, however, be biased.
Whatever your viewpoint, one thing is clear. Every project should have some measure of contingency included and its acceptable uses defined and agreed upon at the onset, you’re going to need it!
Author: Rob Davis | Vice President of Operations | Bush Construction
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