Build contingency from real risks.
A flat percentage over-reserves the easy jobs and under-reserves the risky ones. List your risks, weight each by probability and impact, and let the expected value set the floor.
Risk-weighted contingency sizes your reserve from the risks themselves, not a flat guess. For each risk you multiply its probability by its dollar impact to get an expected value, then sum them. That total is a defensible floor for the reserve. Cross-check it against the contingency band for your estimate class, and expect the percentage to shrink as the design firms up.
Your risk register
The starter rows are illustrative construction risks. Edit the probabilities and impacts to your own project; only your numbers drive the result.
Expected value is the statistical average, not a worst case. It is a floor to defend, not a cap. High-impact low-probability risks may justify carrying more than the raw sum.
Is your reserve sane for your estimate class?
AACE ranks estimates Class 5 (concept) to Class 1 (near-complete). The looser the definition, the wider the contingency band. Pick your class and see where your risk-weighted number lands.
Below the typical Class 3 band. Check the risks below capture everything, or you may be under-reserved.
Contingency shrinks as the design firms up.
Early on you carry more because more is unknown. Pin your current phase to see the band you should be in, with your risk-weighted number plotted against it.
How this is calculated
The floor is a straight expected-value sum: each risk's probability times its dollar impact, added up, divided by your project value. The AACE class bands and the phase curve are class-typical ranges drawn from AACE cost-estimate guidance, shown as ranges rather than a single target. They are a sanity check, not a substitute for a project-specific risk model. A full analysis would also run the risks through a distribution (a Monte-Carlo style P50/P80), which the expected-value floor deliberately does not.
Worked example
A $4M renovation at the construction-documents phase lists four risks:
| Risk | Prob | Impact | Expected value |
|---|---|---|---|
| Weather / lost days | 60% | $40,000 | $24,000 |
| Subcontractor default | 15% | $120,000 | $18,000 |
| Design change / RFI rework | 45% | $60,000 | $27,000 |
| Material escalation | 50% | $80,000 | $40,000 |
| Floor | $109,000 |
$109,000 on $4M is about 2.7%. That sits below the 5–10% band typical of a Class-2/CDs estimate, a signal the register probably misses risks worth adding before the reserve is set.
Prefer a spreadsheet? Download the free risk register — real formulas and cited sources built in.
Download the risk register (XLSX)Setting the reserve is step one. Watching it burn is the job.
A contingency number is only useful if you track it as the project spends it. POD reads the cost and change data your team already records and shows the reserve drawing down in real time, so you know when it is running thin before it runs out.
Questions & answers
It depends on the work and how much is unknown. A straightforward new build often carries about 5 to 10 percent, a renovation 10 to 20 percent, and a complex or first-of-kind project 15 to 25 percent. Early design and uncertain conditions push the number higher.
Method & sources
The floor is a straight expected-value sum of probability times impact across the risks you enter. The AACE class bands and the project-phase curve are class-typical ranges from AACE cost-estimate guidance, shown as ranges, not a target for your specific job. Expected value is an average, not a worst case, so treat the floor as a number to defend and refine with a full risk distribution, not a cap.
Sources: AACE International RP 40R-08 (contingency estimating — expected value) · AACE International RP 44R-08 (risk analysis & contingency determination) · AACE International RP 17R-97 / 18R-97 (cost estimate classification) · ISO 31000 (risk management principles)
Methodology reviewed by the Plan of Day construction team · July 2026
A starting reserve, built from risks, not a number we pretend is precise.
Track your contingency as it burns.
POD draws your contingency down against real change orders and risks as the job runs, not just at closeout, reading what your team already reports to keep the reserve honest.
Last updated: July 2026