What makes up the contingency sum for a particular job?
In the last Tip we discussed that Contingency Sums are “just in-case figures” forming the information as to what makes up the Contingency Sums for a particular job needs careful consideration.
Calculating a reasonable contingency sum for any given job requires careful consideration, which means you need to decide on the best possible pricing method for forming the necessary calculation; the following are some methods implemented in the average job:
- Calculate the price of the job and add a fixed percentage against the total for Contingency Sums. This is the more common
- Identify and apply a number of Contingency Sums across the job, but each one by a set percentage on top.
- Assess each risk and calculate the worst case scenario for each contingency sum, and give detailed explanations within your pricing.
- Identify and tag out any areas that provide a large and unknown risk, and refuse to price for them, they become variations, even though they were visible at the time.
Those who are more aware about the rules of pricing will know that you cannot use a variety of these options in one job, once you choose one method you must stick with that method for all other areas. Now a question must be raised, are you trying to price a job, or are you trying to win a job? Pricing a job and winning a job are two different objectives. In the next Quick Tip we will discuss this difference and how the developing of Contingency Sums can affect the outcome.
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