Contingency Budget
Reserve funds set aside for unexpected costs during construction
Contingency Budget
Contingency budget protects against the inevitable unknowns in construction: hidden damage discovered during demolition, code compliance upgrades required when permits are pulled, design changes during construction, and material price fluctuations. Standard practice allocates 10-15% of project budget to contingency—higher for older homes or complex projects. A $100,000 kitchen remodel should include $10,000-15,000 contingency. This isn't extra profit for contractors; it's your protection against budget overruns.
Why Every Project Needs Contingency
Even meticulously planned projects encounter surprises. Opening walls reveals outdated wiring requiring upgrades, removing flooring exposes subfloor damage, or supply chain issues force material substitutions. Without contingency, these issues force: eliminating planned features, compromising quality, or going into debt. San Diego's older homes frequently hide knob-and-tube wiring, galvanized plumbing, or asbestos—discovery during renovation triggers contingency use. Plan for contingency from day one; you'll likely use at least part of it.
Common Contingency Uses
- Hidden damage: Rot, termites, water damage discovered during demo
- Code upgrades: Bringing old systems to current code when work is done
- Design changes: Owner-requested modifications during construction
- Material substitutions: Specified products unavailable, alternatives cost more
- Unforeseen site conditions: Difficult soil, underground utilities, rock
- Unused contingency: Returns to owner or applies to final payment if not needed