How do you manage project contingency?

Rules for contingency

• Name one owner who can release it.
• Link each use to a risk in the risk register.
• Record every draw with a date and a reason.
• Do not use it for scope growth the client asked for.
• Report the balance every week.

Checklist each month

• Compare the share of contingency used with the share of work done.
• Match each draw to a risk in the risk register.
• Move any client change out of contingency and into the change register.
• Release money only for risks that have passed.
• Report the balance to the project owner.

A client change is new scope, with its own price and approval. If contingency pays for it, the balance falls and the real cost is hidden.

If half the contingency is gone and a quarter of the work is done, raise it at once. Releasing money only when a risk has passed stops early spending.

Keep contingency on its own line in the cost report. A draw hidden inside another budget is hard to find later. If the client and the contractor each hold contingency, track the two pots apart.

A worked example

Say a warehouse job holds 100 units of contingency. Ground conditions are the biggest risk in the register, with 40 units set against them.

The footings go in with no surprises, so the ground risk passes. The contingency owner closes the risk and releases those 40 units. Had the ground been worse, the draw would go against that risk, with a date and a reason.

In the same month the client asks for a larger office. The site team wants to pay for it from contingency. The owner refuses, and the office goes to the change register with its own price. The balance still shows the real cover for the risks left.

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