Introduction: Why Contingency Matters

No matter how carefully you plan, no project goes 100% according to script. Unexpected conditions, design refinements, shifting priorities, or even supply chain issues can throw off the best-prepared budget. That’s why contingency in design budgets is so important.

For facility managers, government agencies, and AEC industry professionals, contingency is more than a safety net—it’s a proactive strategy for project risk management, construction cost control, and budget planning. Understanding how contingency works can mean the difference between a successful, on-budget project and one that runs into costly delays.

What Is Contingency in Design Budgets?

In the architecture, engineering, and construction (AEC) world, contingency refers to a line item in the budget set aside for unknowns. These aren’t frivolous extras—they’re funds reserved to address the risks that can’t be fully predicted during early design.

Key points about contingency:

• It accounts for uncertainty, not poor planning.
• It gives teams flexibility to adapt as a project evolves.
• It ensures that risks don’t derail scope, schedule, or quality.

Think of it as the project’s “buffer zone”—a practical cushion that keeps the budget resilient in the face of change.

The Different Types of Contingency

Not all contingency is created equal. Different types are built into project budgets for different purposes.

1. Design Contingency

• Applied during the planning and design phases.
• Covers adjustments that arise as design documents evolve from schematic to construction-ready. See our Design-Build vs. CMAR comparison
  for how early decision-making affects budgets.
• Typical for scope clarifications, system refinements, or code-driven changes.

2. Construction Contingency

• Held during the construction phase.
• Covers unforeseen site conditions, schedule accelerations, or small changes that weren’t foreseeable during design.
• Managed by the contractor and often negotiated as part of the contract.

3. Owner’s Contingency

• Reserved by the owner for discretionary decisions.
• Used when priorities change mid-project (e.g., upgraded finishes, added scope).
• Provides the owner flexibility without impacting the contractor’s or architect’s budgets.

Together, these contingencies create a balanced safety net, distributing responsibility across stakeholders while protecting project outcomes.

Common Misconceptions About Contingency

A frequent mistake is assuming contingency is just “extra money” sitting in the budget. In reality, it’s much more strategic.

Misconception 1: Contingency = Overspending

Truth: Contingency isn’t a blank check. It’s carefully managed and only used when justified.

Misconception 2: If You Don’t Use It, You’ve Failed to Plan

Truth: The best projects may not need to use the full contingency. That’s a success, not a failure.

Misconception 3: Contingency Means the Budget Isn’t Accurate

Truth: Even the most detailed cost estimates can’t predict every variable. Contingency acknowledges reality rather than undermining accuracy.

By reframing contingency as a risk management tool, stakeholders can better appreciate its value.

Best Practices for Including Contingency in Design Budgets

To make contingency effective, it needs to be planned, managed, and communicated clearly.

1. Define Contingency Early

• Establish percentages at the start of design based on project type, complexity, and risk profile.
• Typical ranges:
  • Design contingency: 5–10% of construction cost
  • Construction contingency: 3–5% of construction cost
  • Owner’s contingency: varies, often 1–5%

2. Adjust as the Project Advances

• As design details firm up, contingency percentages should decrease.
• Early unknowns shrink, but risks never disappear entirely.

3. Document and Track Usage

• Keep a log of contingency draws. Transparency helps maintain trust between owners, designers, and contractors.

4. Communicate Purpose Clearly

• Ensure all stakeholders understand the role of contingency.
• Position it as part of a broader project risk management strategy, not a slush fund.

5. Align with Industry Standards

• Reference guidance from groups like AACE International or the VA PG-18-15 for consistency in government and institutional projects. Learn how we apply these standards in our VA Healthcare projects.

Conclusion: Contingency as a Strategic Tool

At its core, contingency in design budgets is about building resilience. For facility managers, government agencies, and AEC professionals, it ensures that projects can adapt to surprises without compromising scope, quality, or cost.

Far from being “extra money,” contingency is a disciplined, forward-thinking practice—an investment in budget planning, cost control, and project success.

When used correctly, contingency keeps projects on track, teams confident, and stakeholders aligned—turning uncertainty into opportunity.