How Much Contingency Should an Owner Carry?

Owners use "contingency" for money set aside for different things. GSA's cost policy (P120) separates them, following the ASTM E2168 classification: allowances cover planned items not yet defined and are part of the construction estimate; contingencies cover unintended occurrences that are not directly controllable and are part of the project estimate; reserves are held by management for unforeseen changes in the project's requirements and are part of the program estimate.

• Design contingency: inside the estimate while the drawings are incomplete, for work that is expected but not yet drawn. It goes to zero when the construction documents are final.
• Construction contingency: on top of the construction contract, for changes during construction such as unforeseen site conditions and design coordination.
• Owner's reserve or scope money: for things the owner decides to add. P120 says scope changes are funded by approved revisions to the project funding, not from construction contingency.

An allowance is not contingency: it is a sum in the contract for a known item not yet selected, such as signage or finishes, and it is adjusted by change order when the real cost is known.

P120's Table 3-1 gives standard percentages for federal buildings. They are guidelines for GSA's own projects, not a rule for yours, and GSA says contingencies should be set by the level of risk in a project (GSA's Q&A on cost estimating, January 2024).

P120 also treats escalation, the allowance for prices rising before the work is bought, as its own line, not part of construction contingency. If your estimate is not escalated to the dates of construction, contingency is quietly covering inflation as well.

Start from a reference such as GSA's, then move it up or down for what you know about the job:

• Existing buildings: renovation and repair work hide conditions behind walls and below slabs, which is why GSA uses 10% rather than 7%.
• Design completeness: bidding from incomplete documents moves risk into the construction phase.
• Site and ground: little geotechnical information, utilities of unknown location, contaminated soil.
• Delivery method: if the contractor carries its own contingency inside a guaranteed maximum price or a design-build price, P120 reduces the owner's construction contingency accordingly, so the same risk is not paid for twice.
• Schedule pressure and long-lead equipment.

A risk register is the better method on large jobs: list the risks, price each one and its likelihood, and carry the sum. P120 requires at least a qualitative risk evaluation on every GSA project, and uses risk analysis to identify reasonable contingency levels; a percentage is the simpler starting point.

The project is fictional: "Juniper Flats Community Center", a new building. At design development, the direct cost estimate is $3,500,000. At award, the estimated cost of construction is $4,200,000. The owner uses GSA's percentages as its starting point.

The owner's new request to add a second meeting room is not paid from the $175,600: it is a scope change, funded separately.

Check: $294,000 − $118,400 − $46,250 = $129,350.

Contingency only helps if you know how much is left. Each month, put the approved and pending change orders against it, and look at what the remaining work could still bring: trades not yet bought out, below-grade work, inspections not yet passed. Review each change before it is charged to contingency; how to review a change order as an owner walks through the checks, and the contractor's side is how to price a change order.

If more than half of the contingency is gone with much of the risk still ahead, say so to whoever funds the project now, not at the end. A contingency that is not spent comes back to the owner; one that runs out becomes a funding request.

Carry two pots and keep them apart: a design contingency that shrinks to zero as the drawings are finished, and a construction contingency, sized to the risk, for what happens in the field. GSA's 7% for new buildings and 10% for renovation are a published starting point, not a norm.

Fund the scope you add separately, and report what is left every month.

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1. P120, Public Buildings Service Cost and Schedule Management Policy Requirements (GSA Order PBS 1000.6B, November 7, 2022), Table 3-1 Contingency Guidelines — U.S. General Services Administration, via the Whole Building Design Guide. Read October 16, 2026.
2. Client Enrichment Series Q&A: Cost Estimating and Cost Management Principles (January 18, 2024) — U.S. General Services Administration. Read October 16, 2026.