Risk allowance

The New Rules of Measurement (NRM) are published by the Royal Institute of Chartered Surveyors (RICS). They provide a standard set of measurement rules for estimating, cost planning, procurement and whole-life costing for construction projects.

According to NRM1: Order of cost estimating and cost planning for capital building work, the term 'risk allowance' refers to:

'...the amount added to the base cost estimate for items that cannot be precisely predicted to arrive at the cost limit.'

Where the 'base cost estimate’ means:

‘…an evolving estimate of known factors without any allowances for risk and uncertainty, or element of inflation. The base cost estimate is the sum of the works cost estimate, the project/design team fees estimate and the other development/project costs estimate.’

ICMS: Global Consistency in Presenting Construction Life Cycle Costs and Carbon Emissions, 3rd edition, November 2021, published by the ICMS (International Cost Management Standard) Coalition, defines risk allowance as: ‘A quantitative allowance set aside as a precaution against risks and future needs to allow for the uncertainty of outcome. This may include an allowance for optimism bias and a contingency sum.’

[edit] Related articles on Designing Buildings

• Base cost estimate.
• Building works estimate.
• Cost breakdown structure.
• Cost estimate.
• Cost per functional unit.
• Cost plan.
• Elemental cost plan.
• Enabling works.
• Inflation.
• Initial cost appraisals.
• NRM1.
• RICS.
• Works cost estimate.

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