What is Contingency Allowance in Construction Contracts?

Contingency allowance is provided in construction contracts to allow for miscellaneous unforeseen costs which cannot be classified under any other head, but is necessary for successful completion of the project. In construction contracts usually 3 to 5 percent of contract value is provided as contingency allowance. An example of such unforeseen cost is price escalation. If there is a saving in the contingency allowance, then this amount can be used for execution of extra items of work. That means when variation claims are raised, it is common that the employer will cancel the contingency allowance against variation claims, and pay the contractor.

More Articles in Civil Engineering

Are Contractors Entitled for Variations in Lump Sum Contracts? – Read Article

What is Day Work in Construction Contracts? – Read Article

How to Calculate Earthwork Volume Using Simpson’s Rule? – Read Article

What is Contingency Allowance in a Construction Contract? – Read Article

What is Clause 14 programme? – Read Article

What is FIDIC? – Read Article

What is Prime Cost Sum in Construction Contracts? – Read Article

What is Provisional Sum in Construction Contracts? – Read Article

What is TOR Steel? – Read Article

Search engine keywords
Contingency in civil contracts, Contingency allowance application, Contingencies in construction projects