Articles Category

When Pricing a Job How Much Should You Allow For Contingency Sums!

Contingency Sums – a sum of money set aside for a future event or circumstance which cannot be predicted, usually seen as “Just in-case figures.” 

I will address this sometimes confusing topic over a series of Quick Tips, so keep an eye out for the rest of the articles.
How much should you allow for contingencies when pricing a job, when work can become disrupted by:

1.       Rain
2.      There is more to the job than was expected
3.      The product is not available
4.      Once digging commences, we don’t know what will happen
5.      No one has ever done this before etc.

Contingency sum

Above are just a few examples of why a contingency sum is important, but basically it is, in principle, an allowance for what is yet unknown, things which cannot be clarified until the job is underway. Having a contingency sum in place also allows for when, occasionally, the job must be started before all the due diligence is completed. The problem is, throwing a random sum on the end of every job may seem like a bonus for doing nothing, but it can come at a cost of losing jobs due to your prices no longer being competitive. Alternatively, an under-pricing mistake will occur when you lose faith in the contingency sums you set as a real figure and you let it go in negotiations. This raises the question; are contingency sums real? Well, yes and no. Look for the next Quick tips article to consider this point.

More information

Contact us on the below:

  • +64 3 281 7703
  • Lester@asqs.co.nz