Owner contingency is a budgeted reserve set aside by project owners to cover unexpected costs, design modifications, or unforeseen issues that arise during construction. Unlike contractor contingencies, which account for cost uncertainties within a bid, owner contingency funds are managed separately.
How Owner Contingency Supports Project Flexibility
By having contingency funds, owners can approve necessary scope changes or handle unexpected costs without jeopardizing overall project completion. This helps maintain progress while minimizing financial risks.
Best Practices for Managing Owner Contingency
- Set a realistic contingency percentage based on project complexity
- Monitor usage to ensure funds are allocated only when necessary
- Require approval processes for accessing contingency reserves
Related Terms: Contingency Budget, Change Orders, Risk Management, Construction Budgeting
FAQs
How much should an owner contingency budget be?
A: Typically, 5-10% of the total project cost, depending on project complexity and risk factors.
Can owner contingency funds be used for contractor-requested changes?
A: Yes, if the owner approves the changes and determines they are necessary for project success.