Construction Contingency vs. Design Contingency: How Budget Reserves Work in Architecture

Every Construction Project Budget Should Include Contingency - the Question Is How Much and What Kind
Experienced owners and architects know that the budget for a construction project is not a fixed number - it is a range that reflects uncertainty. The uncertainty decreases as the design progresses: there is more uncertainty about total project cost in schematic design than in design development, and more in design development than in construction documents. Contingency is the explicit budget reserve that acknowledges this uncertainty and provides a financial cushion for scope changes, unforeseen conditions, and the natural evolution of design decisions. Understanding the different types of contingency, how much to carry at each project phase, and who controls each type is tested on both the ARE PjM exam (owner's budget management in project management) and the ARE CE exam (owner's contingency during construction).

Design Contingency

Design contingency is a budget reserve held during the design phase to absorb the cost impact of design scope development, design changes, and cost estimate uncertainties. It is controlled by the owner (in consultation with the architect) and decreases as the design becomes more defined. Typical design contingency percentages by phase:

Project Phase	Typical Design Contingency
Feasibility / Programming	20–30% of estimated construction cost
Schematic Design	15–25%
Design Development	10–15%
Construction Documents (at bid)	5–10%

Construction Contingency

Construction contingency is a budget reserve maintained during the construction phase to absorb change orders, unforeseen conditions, and scope additions that arise during construction but were not anticipated in the contract documents. Construction contingency is distinct from design contingency: by the time construction starts, the design is (theoretically) complete, and the remaining uncertainty is about unforeseen field conditions (soil conditions, concealed existing conditions in renovation), contractor claims, minor scope additions requested by the owner, and testing and inspection costs not included in the contract. Typical construction contingency: 5-10% of the construction contract sum for new construction, 10-15% or more for renovation projects (where concealed conditions are a greater risk).

Who Controls Each Contingency

Design contingency is controlled by the owner, with the architect's input. The architect should track the estimated cost implications of design decisions against the design contingency and alert the owner when the contingency is being consumed faster than expected. Construction contingency is also controlled by the owner. The contractor does not have access to the owner's contingency; the contractor may carry their own contingency (sometimes called "general conditions contingency" or built into their bid price), but this is a separate reserve. Change orders are paid from the owner's construction contingency. When the construction contingency is consumed, the owner must either reduce scope or find additional funding.

Key Exam Points

Design contingency: buffer during design for scope development and estimate uncertainty; decreases as design progresses.
Construction contingency: buffer during construction for change orders, unforeseen conditions; separate from design contingency.
Typical construction contingency: 5-10% new construction; 10-15%+ renovation.
Owner controls both; contractor's bid contingency is separate and the contractor's own reserve.
Architect tracks design contingency consumption; alerts owner when approaching limits.

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