Project Management: Achieving Competitive Advantage, Fifth Edition

Developing Budget Contingencies

1. LO 8.4 Recognize the appropriateness of applying contingency funds for cost estimation.

Budget contingencies symbolize the recognition that project cost estimates are just that: estimates. Unforeseen events often conspire to render initial project budgets inaccurate, or even useless. (Suppose a construction project that had budgeted a fixed amount for digging a building’s foundation accidentally discovered serious subsidence problems or groundwater.) Even in circumstances in which project unknowns are kept to a minimum, there is simply no such thing as a project developed with the luxury of full knowledge of events. A budget contingency is the allocation of extra funds to cover these uncertainties and improve ...