Blogs

In different countries, contingency costs in construction projects are approached in very different ways.

In some regions, it is still common practice to include a fixed percentage—typically around 2%—in the project estimate to cover potential risks. Interestingly, these unused funds are not always returned to the client at the end of the project.

In many public sector projects, contingency reserves are not included at all. The budget is strictly tied to approved estimates with little room for deviation—regardless of unforeseen issues that inevitably arise.

The U.S. approach is different. Contingency is not just a lump-sum percentage. Instead, a controlled reserve is created, and funds are released only with supporting documentation and formal client approval. Upon project closeout, unused contingency amounts are either returned to the client or reallocated with agreement. Transparency and accountability are not optional—they’re embedded in the process.

From real-world experience, the closing phase of construction projects often reveals how difficult it can be to justify unforeseen expenditures. Not all cost categories are equally easy to support—some require extensive documentation and pre-approval, especially if they border on scope changes or additional work.

Choosing between a fixed-percentage contingency and a rigorously documented reserve depends on the project type, contract conditions, and client expectations. But one thing is clear: tracking contingencies is not just about the numbers—it's about managing trust, scope, and expectations throughout the entire project lifecycle.

Oh, and let’s not forget: it’s equally important to recognize when a contingency item quietly turns into a change order—suddenly taking the project into new cost territory. 😉