A contingency allowance is a reserved portion of a project budget set aside to cover unforeseen costs, such as hidden damage discovered once walls or floors are opened up.
Experienced owners and contractors build one in on most renovation projects.
What Does a Contingency Allowance Cover?
- Hidden structural or water damage
- Unexpected code-required upgrades
- Material price fluctuations
- Unforeseen site conditions
Why Are Contingency Allowances Important?
A homeowner renovating a century-old house might set aside a contingency specifically for unknown structural or plumbing issues likely to surface once demolition begins. Projects without a contingency allowance are more likely to stall or go over budget when the inevitable surprise appears, often at the worst possible time.
Contingency Allowance vs. Allowance
A standard allowance covers known finish selections the owner hasn’t made yet, while a contingency allowance covers genuinely unknown problems that might not happen at all. One is a placeholder for a choice; the other is insurance against surprises.