E512: Estimating Contingencies

Build a solid safety net into your estimates with contingencies.



  1. Contingency = money added to an estimate to cover a potential risk
    1. We often see allowances in contracts – contingencies are a little different
      1. They cover potential risks that may or may not occur like unsuitable materials
    2. I put them in all my estimates
    3. It’s a great way to create solid estimating data and cover potential risks
  2. Make them part of your sound estimating practices
    1. How do you cover the potential risks encountered when working in a new area?
      1. I used to adjust my actual estimate – maybe add some time to the crew to cover potential costs
      2. That doesn’t produce a good solid estimate or good historical data
    2. Price each job properly based on the project itself and not the incidental risks
    3. Cover the incidental risks using contingencies
  3. Make them a standard item in your estimates
    1. Price your projects as you should
    2. Add your standard markups
    3. Add contingencies – there are many things that you might add them for like:
      1. Travel / New Owner / Hard Owner / A/E Team / Weather / Location / Inspectors / etc.

Episode 39 – Estimate Contingency

Today on the Coachcast we discuss using a Profit contingency to help protect your profits.