Contingency
An allowance included in an estimate for the cost of risks that are expected to occur but cannot yet be identified individually.
Contingency covers what experience says will happen without saying precisely what. It is not a general safety margin, and it is not an allowance for scope that is known but not yet priced, which belongs in the estimate itself.
The level matters more than the amount. AACE describes contingency as typically set to achieve roughly equal probability of overrun and underrun, which is a P50 position. Read plainly, a properly contingent estimate is expected to be exceeded about half the time. That is the design intent of the method rather than evidence of a failure, and an organisation treating a P50 estimate as a ceiling has misunderstood what it commissioned.
Sources
AACE International Recommended Practice 56R-08, revision of 7 August 2020, section 3 and Table 1.
Read the sources
- AACE International RP 56R-08, cost estimate classification for building and general construction, rev. 7 August 2020
rev. 7 August 2020; read 2026-09-05. A five-page sample of the 21-page RP, published free. It carries Table 1 (the classification matrix with the accuracy ranges) and the paragraphs that qualify it. The deliverables maturity matrix that determines the class, Table 3, is not among the sample pages. Until 5 September 2026 this entry called the sample a table of contents, which it is not.