How much construction contingency you should carry depends on which contingency you mean and how far the design has progressed. Owners who carry one blended "10% contingency" from concept to closeout are usually either over-reserved early or exposed late.
Three different pots of money
The U.S. General Services Administration's P-120 cost and schedule policy is one of the clearest public frameworks on this, and it separates three things that owners often lump together:
- Design contingency is "an allowance to cover expected but undefined permanent construction elements." It covers what the drawings don't show yet.
- Construction contingency covers "changes in the contract cost during construction": site conditions, coordination gaps, errors and omissions after award.
- Escalation is a separate allowance for future cost increases from market inflation and changes in code or practice.
On top of those sits the owner's reserve. GSA describes reserves as money held by management for unforeseen changes in project requirements, part of the program budget rather than the project estimate. That distinction matters: P-120 says cost impacts from scope change must be handled through approved funding revisions, not construction contingency.
GSA also says allowances and contingencies must always be separately identified, and that "contingency is not to be used to avoid making an accurate assessment of expected cost." If your estimate has a known item and no number, that is an allowance problem, not a contingency.
How much: published benchmarks
P-120 sets design contingency as a percentage of direct cost that steps down as design advances. For capital new construction it runs from 10% at planning, to 7.5% to 10% at concept, 5% to 7.5% at design development, 2% to 5% at 75% construction documents, 1% to 3% at 90%, and 0% at final documents. Repair and alteration work carries higher ranges at each stage, up to 10% to 15% at concept.
Construction contingency is then set on the estimated cost at award: 7% for new capital construction and 10% for modernization and repair and alteration work.
Canadian public owners use similar logic. The City of Edmonton's open space consultant manual says design contingency "should progressively diminish as further clarity in design is achieved" and should be nil at 100% construction documents. Its construction contingency definition uses an allowance of 10% to 15% for changes during construction.
These are benchmarks from public owners, not rules for your project. A retail fit-out in an older building, with unknown conditions behind every wall, deserves the high end of the repair and alteration ranges. A repeat prototype on a clean pad does not.
Drawdown rules that actually work
Contingency that nobody governs gets spent. Transit agency Sound Transit's 2023 contingency overview is a useful public model: drawdown is forecast in a baseline risk and contingency plan, tied to milestones, and tracked against a minimum contingency line. When remaining contingency falls below that line, recovery actions are required. Approval authority is tiered, with small transfers at project level and larger ones escalated to executives and the board.
The owner-side version of that is simple:
- Split the pots. Separate lines for design contingency, construction contingency, escalation and owner's reserve. Never let one quietly fund another.
- Retire design contingency on schedule. At each design milestone, move it into the estimate or release it. Anything left at tender is a sign the estimate isn't finished.
- Treat scope change as a budget decision. New requirements go to the owner's reserve with an explicit approval, not into construction contingency.
- Set a minimum contingency line. Forecast drawdown by phase and agree in advance what happens when you cross it.
- Tier the approvals. Define who can approve what dollar amount before the first change order arrives.
- Report remaining contingency against remaining risk, not against percentage complete. Mechanical rough-in and commissioning often carry more risk than the first half of the job.
Escalation deserves its own treatment. GSA escalates to the midpoint of construction and expects a market study to support the number. For a current read on Canadian input costs, see our construction cost inflation update.
Frequently asked questions
What is a typical construction contingency percentage?
GSA uses 7% of the award value for new construction and 10% for modernization and repair work. The City of Edmonton's manual uses 10% to 15%. Your number should reflect your project's actual risk.
What is the difference between design contingency and construction contingency?
Design contingency covers elements the drawings haven't defined yet and should reach zero at final documents. Construction contingency covers changes in contract cost after award.
Should contingency cover scope changes?
No. GSA requires scope-driven cost impacts to go through approved funding revisions. Hold a separate owner's reserve for that.
The bottom line
The right contingency is several numbers, not one, and each should shrink on a plan. Separate the pots, tie drawdown to milestones and keep scope change out of construction contingency.
If you want an independent view of your contingency before the next funding gate, book a 30-minute call.
Sources: U.S. General Services Administration, P-120 Public Buildings Service Cost and Schedule Management Policy Requirements (2022); City of Edmonton, Open Space Consultant Manual, Volume 1 (2023); Sound Transit, Capital Project Cost Contingency Overview (February 2023). This article is general information, not financial or legal advice.