A13.9 - Contingencies

Contingencies

Significant cost risks which cannot be realistically reduced by other means are covered by contingencies in the cost estimate. These contingencies reduce the likelihood of a cost over-run. Worksheet A13.3 should be used to specify identifiable specific contingencies against the 'high' risks identified in worksheet A13.1(a) (and, if appropriate, any other smaller risks). The overall contingency allocated should be specified and an indication given of the confidence attached to the contingency, in terms of the likelihood of a cost over-run greater than the contingency.

Concerning the relevant contingencies, if the following 6 types are distinguished:

1. changes in scope definition arising from omissions
2. changes in scope definition arising from client instruction
3. estimating inaccuracy
4. identified risks which are not managed
5. known but undefined risks
6. unknown risks

Then generally we can expect the contingency table to focus on items 4)-6), while for most projects items 1) and 3) would be allowed for in uniform factors on costs; item 2) is excluded.