Developing Budget Contingencies
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 ...
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