HAVE A REALISTIC CONTINGENCY AND ACCEPT IT AS ALREADY SPENT BEFORE YOU START. The contingency is there to cover you for any surprises. Its like an insurance premium that you won't get back. 

We all know about insurance. The reason we have it is to help us out financially when something we didn't anticipate comes along and causes disruption to our well-laid plans. The thing is, there is no insurance company that will offer insurance for any unforeseen building items or situations. The reason is that they would go out of business because this happens often. And it can be expensive. The reality is that your building project may be going just as you expected and you may think that your organization will ensure that any unforeseen circumstances have been considered. 

I watched a couple literally pour their contingency into the ground, in the need for additional foundation strengthening that was required when the soil conditions where they were building were not what they had hoped them to be. One solution would have been adequate testing beforehand (as a disclaimer test were done but not as robustly as they needed to be) but the site was steep and the testing was minimal and the result was the entire project came to a grinding halt before they were even out of the ground. If they hadn't had that contingency sum, the reality could have been that their project would never have been completed. This certainly is an extreme example, but the reality is there are going to be costs and circumstances during your project that are going to surprise you. 

Typically the amount of the contingency is taken as a percentage of the build price. This can be allowed for in the initial project budget calculations that are done at the Design Advice Consultation stage. There are different recommendations depending on the size and nature of your project, but typically a new build should set aside contingency of up to 20%, however, the more developed and detailed the documentation and the more robust the pre-design tests are, the safer it is to reduce this. An alteration is more of an unknown so my recommendation is in the initial stages allow for 30% of your build budget (so that's 30% on top of your build budget) because as the design and documentation develop, other items that need upgrading and repair will become evident. Again this can be reduced once a detailed and clear set of drawings and calculations has been carried out in alignment with a robust inspection of the existing structure and building. 

By setting aside a sum and considering it spend, you invest in peace of mind. You know when something unexpected comes up you have the resource to keep your project on track. This also means that rather than engaging in the blame game, finding people to be accountable and trying to get financial compensation from others and destroying relationships with your project team, you can keep the project on track. By no means does this mean that professionals on your job are entitled to rely on your contingency for their lack of integrity in their work, but many arguments on site are often a result of something that simply is, and not someone else's fault.

With a realistic and healthy contingency in place, if such a situation comes up, your project doesn't become a wasted effort and grind to a halt. Keeping your project on track means that the tradesmen and professionals you have engaged can keep your project in their scope, rather than having to move to other projects and leave yours until you have secured the funds to continue. 

This can be one of the most stressful things that you can do in your life, but it can also be the most exciting. When you have contingency plans in place, some of that stress is taken off your shoulders, giving you more space and energy to enjoy the process. 


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Offsite NZ Member    Licenced Building Practitioner    New Zealand Green Building Council
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