- Project plans
- Project activities
- Legislation and standards
- Industry context
Last edited 05 Apr 2018
Contingencies in construction
Typically, contingencies refer to costs, and are amounts that are held in reserve to deal with unforeseen circumstances. However, they may also refer to other aspects of the project, for example, the programme may include a contingency where it is important that a specific completion date is achieved.
Monetary contingencies are typically referred to in relation to the overall client for a project. However, other parties in the supply chain are also likely to include contingencies in their cost planning.
Whilst it is advisable for clients to hold a contingency, they might no wish to share this information with the rest of the project team, who may see a contingency as a license to exceed the budget in the knowledge that the client has a reserve that can be spent.
Contingencies are often expressed in terms of percentages. The percentage contingencies applied are at their greatest in the early stages of the project when there are the greatest number of possible risks. But they can then be reduced as better particulars about the project become available and some risks have passed or been overcome.
An example of how a contingency might be reduced during a project is set out below:
- At the preliminary business plan stage, total cost estimates might include a 15% contingency.
- In the elemental cost plan this might reduce to 10% of fees and construction costs.
- On awarding the contract, 5% of the contract value might be included as contingency in the cost plan.
In addition to a contingency, the client is likely to hold retention. Retention is a percentage (often 5%) of the amount certified as due to the contractor on an interim certificate, that is deducted from the amount due and retained by the client. The purpose of retention is to ensure that the contractor properly completes the activities required of them under the contract. Retention can also be applied to nominated sub-contractors, and the main contractor may also apply retention to domestic sub-contractors.
 Related articles on Designing Buildings Wiki
Featured articles and news
A survey of Leicester’s historic buildings resulted in local listing being taken more seriously.
Demolition is the most high risk activity in the construction sector. Read our introductory article here.
BSRIA report on the domestic boiler market, with China recording the most 'dynamic market uptake'.
Do we really know everything important about the impacts of our infrastructure projects? And if we don’t, does it matter?
Former Chief executive Richard Howson blames government for being 'poor payers'.
An environmental plan is an essential tool for setting and managing environmental objectives for a project.
CLC call for an 'outcome-based, transparent and efficient' industry with new report.
The first NIC assessment suggests there is a golden opportunity to provide low-carbon energy.
It's featured prominently as the backdrop to the World Cup coverage - read about the most iconic building in Russia.
Report highlights growing need for soft skills and digital skills among civil engineers.