Free Contingency Plan Templates
By Joe Weller | March 25, 2021 (updated April 24, 2023)
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Contingency plans offer organizations a proactive strategy for resuming daily functions and operations following unforeseen events. We’ve compiled the most useful contingency plan templates and tips on using them for various industries.
On this page, you'll find free contingency plan templates, including a simple contingency plan template , a software contingency plan template , a business contingency plan template , and a project management contingency plan template . Plus, learn how to use a contingency plan template .
Simple Contingency Plan Template
Use this simple contingency plan template to help your organization return to daily operations after unforeseen circumstances. Find sections for business impact analysis (BIA), recovery strategies, plan development, and testing and exercises. By completing these areas, you can stress-test your contingency plan. Assign contingency plan tasks to team members. Share the document with stakeholders to keep everyone apprised of the organization’s fail-safe contingency plan.
Download a Simple Contingency Plan Template for Microsoft Word | Adobe PDF | Smartsheet | Google Docs
For more resources on emergency response and contingency planning, see “ Free Risk Management Plan Templates .”
Simple Contingency Plan Presentation Template
Use this simple contingency plan presentation template to highlight the details of your contingency plan to your team members and other stakeholders. Slides include details for business impact analysis (BIA), recovery strategies, contingency plan development, and plan testing and exercises. It also includes a comprehensive version history slide including your presentation plan’s version, approved by, revision date, descriptions of changes, author, prepared by, and approved by sections. Keep everyone in the loop with this easy-to-use contingency plan presentation template.
Download a Simple Contingency Plan Template for PowerPoint
To learn more, read this comprehensive guide on contingency planning.
Software Contingency Plan Template
Use this software contingency plan template to identify, describe, and categorize risks, create an impact level and impact description, and create a contingency plan for each, in order to mitigate risks. For each risk, the template also includes a Trigger Points column (e.g., “What triggers the contingency scenario?”) and End Plan Trigger column (e.g., “What triggers the end of the contingency plan?”), so that team members understand the need for the contingency plan. Software project managers can use this template to create contingency plans related to data security, user privacy, geographically discrete data centers, or apply it to software development and software testing.
Download a Software Contingency Plan Template for Microsoft Excel | Google Sheets
Read this guide to contingency planning to find tips for improving your contingency preparedness.
Information Technology (IT) Service Contingency Plan Template
This easy-to-fill template focuses on keeping IT operations up and running in the event of a disruption. Use this template to document details of the scope, recovery objectives, recovery team, recovery strategy, and return-to-plan strategy of your IT department’s contingency plan. Be fully prepared for any incidents that cause downtime by using the proactive steps in this all-inclusive IT service continuity planning template.
Download an Information Technology (IT) Service Contingency Plan Template for Microsoft Word | Adobe PDF | Google Docs | Smartsheet
IT Service Contingency Plan Presentation Template
This easy-to-use information technology (IT) contingency plan presentation template is the perfect solution for presenting your IT contingency plan to key stakeholders. Slides include scope (service area, service offerings, and service areas that depend on the service at risk), recovery objectives (recovery time objectives, RTO; and recovery point objective, RPO), recovery team (service / role / function, responsibility, dependencies, and expected response time), and recovery strategy (initial recovery and overall recovery strategy). Easily gain buy-in from team members, management and other stakeholders with the all-in-one, IT-specific solution for outlining and refining your IT department’s service contingency plan.
Download an Information Technology (IT) Service Contingency Plan Template for PowerPoint | Google Slides | Smartsheet
Business Contingency Plan Template
Keep tabs on your organization’s comprehensive business contingency plan (BCP) with this distinctive business contingency plan template. It guides you through your business function recovery priorities, relocation strategy, alternate business site, recovery plan, recovery phase, records and backup details, restoration plan, recovery teams, and recovery procedures. This BCP template is useful for determining accurate planning and courses of action to ensure the success of your business’s contingency plan.
Download a Business Contingency Plan Template for Microsoft Word | Google Docs | PowerPoint | Adobe PDF | Smartsheet
Business Contingency Framework Template
This one-page template features a broad-strokes framework for performing a business impact analysis (BIA), along with working out your recovery strategy, plan development, and testing and exercises. You’re never far from the big-picture vision of your business contingency plan with this efficient one-page business contingency framework template, available in Microsoft Word, PDF, Google Docs and Slides, and presentation-friendly PowerPoint formats.
Download a Business Contingency Framework Template for Microsoft Word | Adobe PDF | Google Docs | Google Slides | PowerPoint
For more resources on business contingency planning, see “ Free Business Continuity Plan Templates .”
Project Management Contingency Plan Template
This project management contingency plan template is ideal for creating a comprehensive contingency plan for any type of project. The template enables you to create a high-level executive summary of your project’s contingency plan, including risk evaluation, a synopsis of your risk-prevention mitigation strategies process, and roles and responsibilities. Use this template to define risks and their events or triggers, consider budgetary implications, and define your potential plans of action.
Download a Project Management Contingency Plan Template for Excel | Google Sheets
Visit our article on contingency planning in project management for more information.
Small Business Contingency Plan Template
It’s critical for small businesses to have a comprehensive contingency plan that team members can reference in the event of a debilitating event or emergency. Designed specifically for small businesses, this template uses a pre-built, all-inclusive contingency plan to provide guidance for modestly sized organizations. Take the guesswork out of creating a contingency plan from scratch, and leverage the advantages of this small-business-specific template.
Download a Small Business Contingency Plan Template for Microsoft Word | Adobe PDF | Google Docs
For more resources on emergency response and contingency planning, check out our roundup of disaster recovery plan templates .
Contingency Plan Checklist Template
This two-part, fully customizable contingency plan checklist template contains a pre-built contingency plan checklist based on disaster-recovery steps, and a step-by-step, linear recovery procedure section. Use the latter section to ensure that everyone is aware of your contingency plan, if there is an event or occurrence that triggers the need to implement your plan. Then, use the checklist section to ensure that all steps in your contingency plan are in place, should you need to execute your contingency plan.
Download a Contingency Plan Checklist Template for Microsoft Word | Adobe PDF | Google Docs
What Is a Contingency Plan Template?
A contingency plan template provides a step-by-step process to communicate actionable items in the event of a disaster or disruption. The document takes the guesswork out of emergency planning, so you can protect resources, minimize interruptions, and identify go-to team contacts.
You can begin the contingency planning process by completing a contingency plan template so that you’re adequately prepared. By recording accurate and thorough information to ready yourself for an emergency, you can determine your priorities, relocation strategy, and recovery plan details. A contingency plan also helps you plan your organization’s recovery phases, work to ensure records backup, create a restoration plan, establish a recovery team, and assign roles to key individuals.
When to Use a Contingency Plan
You should use a contingency plan if there is the risk of an unexpected event that could impact your project’s success. A contingency plan is a backup plan that outlines steps for you to take in case the original plan encounters unforeseen obstacles.
The following provides a list of typical scenarios where you should use a contingency plan:
- Risky or Uncertain Situations: When there are potential risks or uncertainties that could impact the success of your project, it's a good idea to have a contingency plan in place to mitigate those risks.
- Time-Sensitive Projects: When you have a tight deadline or critical timeline that you must meet, a contingency plan can help ensure that your project is completed on time, even if unexpected issues arise.
- Resource Limitations: When you have resource constraints, such as budget or personnel, a contingency plan can help you effectively allocate resources.
- Emergency Situations: When emergencies (e.g., natural disasters, pandemics, or other crises) can impact your ability to complete your project, a contingency plan can help you and your organization respond quickly and efficiently.
Overall, you should use a contingency plan whenever there is a potential risk or uncertainty that could impact the success of your project or goal, or when there is the possibility of emergencies. When unexpected events occur, it's always better to be proactively prepared by having a plan in place, instead of scrambling to come up with a solution.
Sections of a Contingency Plan Template:
While your contingency plan will vary to meet the needs of your project, below are the common elements of a contingency plan:
- Recovery Priorities: Enter contingency plan priorities, including recovering essential operations and restoring critical functions.
- Relocation Strategy: Add the relocation strategy when your contingency plan requires moving your primary services.
- Alternate Site: Document alternate site details when you determine the secondary site where you can continue operations.
- Recovery Plan: Enter the step-by-step recovery-plan details to get your organization operational again.
- Disaster Occurrence: Use this phase to identify what constitutes a disaster that requires your organization to activate the contingency plan.
- Plan Activation: In this phase, your organization puts your contingency plan into effect, which continues until your organization secures an alternate site and can relocate operations.
- Alternate Site Operation: Operations continue at the secondary facility until you can restore them at the original site.
- Transition to Primary Site: The organization prepares to move operations back to the original site.
- Records Backup: Enter contingency plan details about how you’ll back up records and make them accessible in the event of a disaster or disruption.
- Restoration Plan: Add your plan for ensuring that all operations, records, etc., are able to be operational in the event of a facility disruption or disaster.
- Recovery Teams: List the recovery team(s) and members. Assign contingency plan tasks based on job role and title.
- Recovery Procedures: Enter details of specific activities or tasks required to adequately recover normal and critical operations.
Additionally, a contingency plan template enables you to track changes to your plan through a section for version history, comprising the following data:
- Version: Enter the unique version number for the most up-to-date iteration of the plan.
- Approved By: Ensure that department heads or other stakeholders have approved the contingency plan.
- Revision Date: Provide the date when a substantial revision was made to your contingency plan.
- Description of Change: List details of the change(s) made to the plan.
- Author: Record the name of the plan’s primary author.
How to Create a Contingency Plan
When creating a contingency plan, be proactive, thorough, and adaptable. By anticipating potential risks and developing a well-documented plan of action, organizations can minimize the negative impact of unexpected events and ensure continuity of critical functions and key services.
Here are some key steps to follow when creating a contingency plan:
- Identify Potential Risks: First, identify potential risks or unexpected events that could impact the success of your project. Brainstorm with stakeholders and team members to identify as many potential risks as possible.
- Assess the Impact: Once you have identified potential risks, assess each risk’s potential impact. This will help you prioritize risks and determine which ones require immediate attention.
- Develop Response Strategies: Based on your impact assessment, develop response strategies for each potential risk. This may involve developing alternative solutions or workarounds, identifying additional resources, or establishing clear communication protocols.
- Assign Responsibilities: Determine who will be responsible for executing the contingency plan if and when it is necessary. Assign specific roles and responsibilities to stakeholders or team members to ensure that everyone knows what they’ll need to do.
- Establish Communication Protocols: Establish clear communication protocols so that team members and stakeholders know how to report potential risks or unexpected events and receive updates on the status of the contingency plan.
- Test and Refine Your Plan: Test the contingency plan periodically to ensure that it works effectively. Make adjustments as needed.
- Document Your Plan: Document the contingency plan in a clear and concise manner and make it easily accessible to all relevant parties.
Keep in mind that a contingency plan is only effective if you regularly review and update it to reflect changing circumstances and new risks that may arise.
Drive Results With Effective Contingency Planning in Smartsheet
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Developing a Business Continuity Plan for Construction Companies
Would you know how to keep your construction business running if a major weather-related event destroyed your headquarters? What if there’s an extended power outage and you can’t conduct business for days or even weeks?
In addition to natural disasters, there are other incidents that can threaten your operations. Equipment, machines or technology that are critical to your operations can break down or be infected with malicious ransomware. Or, a key employee with highly specialized skills required to complete a job suddenly leaves your company, leaving you scrambling to find a replacement or find more workers .
You may not be able to prevent such incidents, but you can prepare by creating a business continuity plan to help you conduct business as usual when the unexpected happens.
What is a Business Continuity Plan?
A business continuity plan is a deliberate strategy for resuming and maintaining your normal business functions in the midst of a major disruption. The plan provides detailed instructions, procedures and tasks that your employees need to deploy in the event of a disaster or other interruption.
You may have also heard the term “disaster recovery plan” used synonymously with business continuity plan. However, a disaster recovery plan merely focuses on restoring your IT infrastructure. That said, it should be included in your overall business continuity plan as part of an all-encompassing strategy. A business continuity plan will guide the way you handle your assets, human resources, communications, processes, vendor relationships and more.
The Need for a Business Continuity Plan is Real
It’s easy to think, “It will never happen to me.” But record-breaking, weather-related disasters are on the rise . So-called “100-year floods,” for example, seem to happen every few years instead of once a century.
Not surprisingly, some organizations never recover from a catastrophic event. The Federal Emergency Management Agency (FEMA) estimates that 40 – 60% of small businesses never reopen following a disaster, and 90% of smaller companies fail within one year unless they can resume operations within five days.
Sadly, organizations that experience a data breach or cyberattack face a similar outcome. Studies indicate that 60% of small and medium-sized businesses that become victims of cyber attacks never recover and shut down within six months.
How to Develop a Business Continuity Plan
Gather resources.
While you may have a running list in your head of all your employees, contractors and other important contacts, compile them into a document along with their contact information. That way, you can immediately reference the information rather than spend time tracking down phone numbers and email addresses when you need them.
Likewise, take an inventory of all your equipment and include model numbers and contact information for those who service and sell the machines. This will allow you to get the ball rolling for repairs or replacements faster and will also smooth out the process of filing construction insurance claims.
Designate temporary work locations so employees can continue working in the office. It’s also important to know where to secure rental equipment to continue work on the jobsite if your machinery was damaged or destroyed.
Ensure that your computers and networks are backed up regularly so you can get your systems up and running quickly. Because of the reliance on technology, quickly recovering business data and records is critical for sustaining operations.
Establish Processes
Your plan should outline the who, what, when, where and how for getting systems back up and running, making phone calls, working with vendors, and handling general business functions. Determine how you will continue working if major tools, equipment, technology or people are no longer available.
Likewise, you’ll want to determine how to cover your employee payroll to ensure your workers are taken care of and that they can focus on getting your business back up and running. Many employees may end up working overtime during a crisis, so make sure you also have policies in place so they know what to expect and so you’re financially prepared.
Following through on various procedures can be difficult if much of your business technology isn’t available due to a power outage, so it’s a good idea to keep a hard copy of your business continuity plan on hand in addition to a digital version.
Assign Roles
Your team not only needs to know what should be done, but who should do it. Assign roles to individuals in your organization who will be responsible for essential business operations. Identify those with responsibilities by name to eliminate ambiguity, and make sure they are aware of their roles in the recovery process ahead of time.
Develop a Communication Plan
Establish a clear plan for communicating next steps with your employees. This requires informing your workforce about your business continuity plan ahead of time. Conduct periodic meetings to talk through your plan and any updates so that everyone knows what to expect and how to proceed.
Some business disruptions come with unexpected consequences. For example, if an explosion occurs on your jobsite, various law enforcement and government agencies will likely get involved. Who will work with them? Such an event could also capture the attention of the media. Identify who will speak with news outlets and what steps need to be taken to protect your business reputation. Will you need a press release? Is someone monitoring social media? Make sure managing PR is part of your plan.
Consider that some communication lines may be down during a power outage, so establish a backup plan for communicating with employees, whether through a mass text, email, private social media group or even a designated meeting place. Outline every possible scenario and establish communication protocols to ensure no one is left in the dark.
Getting Started with a Business Continuity Plan
By following these tips, you’ll be able to get a great start on the basics of your business continuity plan. You’ll likely find that the unique risks surrounding the construction industry fall outside a typical company’s situation. It’s important to make sure you’ve covered all the bases and don’t overlook critical details.
You’ll also find benefit in working with an experienced risk advisor who specializes in providing services to construction companies. The team at McClone would be happy to guide you through this process and discuss options. Click the link below to get the conversation started.
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What is Construction Contingency? | Construction Accounting
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Creating a Construction Contingency Budget
When encountering a construction contingency clause in your contract, it is essential to keep an eye out for a few things. First, it should detail both the owner’s contingency and the contractor’s contingency. They should list any and all predetermined costs that the contingency should be used for.
The list could include anything from incomplete designs, construction project delays , substitute subcontractors, price increases, and any other number of unexpected costs. This is generally referred to as the contingency budget.
New to construction budgets? Download free templates for almost any project .
The contingency budget should also include a well-drafted process of how to access contingency funds. It’s best to have a detailed procedure concerning notices, paperwork, and approvals.
The contingency budget should also prepare for unspent portions of the contingency fund. Are the remaining funds shared among the contractor or subs as an incentive? Or does the money revert to the one funding the contingency? It’s a good idea to clarify how the contingency funds will be managed from the jump. Otherwise, deciding how to manage unspent contingencies could create some headaches.
Is Contingency the Same as Retainage?
A construction contingency fund is not the same as retainage, but the concepts are similar. Both retainage and contingency provide what are essentially “emergency” funds. When something on the project goes awry and costs some extra money, paying to fix the issue may come from the contingency fund, or it may come from the retainage being withheld from the contractor or subcontractor who created the issue. Plus, retainage and contingency both represent about 5-10% of the construction price.
Related: The ultimate guide to construction retainage
However, retainage represents an amount of the contract price that has been earned but remains withheld. It serves a purpose, but at the end of the day, it’s payment owed that’s being withheld. Construction contingency, on the other hand, is actual inflation of the contract price to plan for the unexpected. That, or it’s funding set aside by the owner for the unexpected issues.
It might sound a bit like semantics, but that’s a huge, fundamental difference between the two. Retainage represents dollars earned and unpaid – and that amount could be the difference between a construction business turning a healthy profit or losing money on a job. Contingency isn’t owed to anyone, and it could even turn into a positive if the contingency fund goes unused and gets dispersed to project participants.
Related Resources
- Defects in Construction: How to Identify and Avoid Them
- Construction Delay Claims: Delay Types, Claims, and Defenses
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What Is Contingency Planning? Business & Project Contingency Plans
Contingency plans are used by smart managers who are aware that there are always risks that can sideline any project or business. Without having a contingency plan in place, you don’t have a risk management recovery plan, which reduces the chances of project success, even if that project plan was made with planning software.
Contingency planning applies to any business venture. Governments, for example, use them to prepare for disaster recovery or economic disruption, such as those caused by the coronavirus pandemic. However, we’ll focus on business and project management contingency plans. Let’s start by defining what a business contingency plan is.
What Is a Business Contingency Plan?
A business contingency plan is an action plan that is used to respond to future events that might or might not affect a company in the future. In most cases, a contingency plan is devised to respond to a negative event that can tarnish a company’s reputation or even its business continuity. However, there are positive contingency plans, such as what to do if the organization receives an unexpected sum of money or other resources.
The contingency plan is a proactive strategy, different from a risk response plan , which is more of a reaction to a risk event. A business contingency plan is set up to account for those disruptive events, so you’re prepared if and when they arrive.
While any organization is going to plan for its product or service to work successfully in the marketplace, that marketplace is anything but stable. That’s why every company needs a business contingency plan to be ready for both positive and negative risk management.
ProjectManager has everything you need to build plans for your company, contingency or otherwise. Make project timelines on Gantt charts, assign work to your team and collaborate in multiple views. Plus, there are dashboards and reports so you can tell the ROI on your projects instantly. Get started today for free.
Contingency Planning In Project Management
In project management, contingency planning is often part of risk management. Any project manager knows that a project plan is only an outline. Sometimes, unexpected changes and risks cause projects to extend beyond those lines. The more a manager can prepare for those risks, the more effective his project will be.
But risk management isn’t the same as contingency planning. Risk management is a project management knowledge area that consists of a set of tools and techniques that are used by project managers to create a risk management plan.
A risk management plan is a comprehensive document that covers everything about identifying, assessing, avoiding and mitigating risks.
On the other hand, a contingency plan is about developing risk management strategies to take when an actual issue occurs, similar to a risk response plan. Creating a contingency plan in project management can be as simple as asking, “What if…?,” and then outlining the steps to your plan as you answer that question.
Related: Free Action Plan Template
How to Create a Contingency Plan
A contingency plan is an action plan, and like any plan, it requires a great deal of research and brainstorming. And like any good plan, there are steps to take to make sure you’re doing it right.
1. Identify and Prioritize Resources
Research your company and list its crucial resources, such as teams, tools, facilities, etc., then prioritize that list from most important to least important.
2. What Are the Key Risks?
Figure out where you’re vulnerable by meeting with teams, executives and stakeholders to get a full picture of what events could compromise your resources; hire an outside consultant, if necessary.
3. Draft a Contingency Plan
If you can, write a contingency plan for each risk that you identified in the above steps, but start with what’s most critical to your business. As time permits you can create a plan for everything on your list. Whatever the plan, the thought behind each should be the steps necessary to resume normal business operations, thinking about communications, people’s responsibilities, timelines, etc.
4. Share the Plan
When you’ve written the contingency plan and it’s been approved, the next step is to make sure everyone in the organization has a copy. A contingency plan, no matter how thorough, is not effective if it hasn’t been properly communicated.
5. Revisit the Plan
A contingency plan isn’t chiseled in stone. It must be revisited, revised and maintained to reflect changes to the organization. As new employees, technologies and resources enter the picture, the contingency plan must be updated to handle them.
Using ProjectManager for Contingency Planning
ProjectManager has the project planning and risk management tools you need to make a reliable contingency plan that can quickly be executed in a dire situation.
Use Task Lists to Outline the Elements
Use our task list feature to outline all the elements of a contingency plan. Since a contingency plan likely wouldn’t have any hard deadlines at first, this is a good way to list down all the necessary tasks and resources. You can add comments and files to each task, so everyone will know what to do when the time comes.
Dashboard to Monitor the Contingency Plan
Our dashboard gives you a bird’s eye view of all of the critical project metrics. It displays live data, so you’re getting a real-time look at how your project is progressing. This live information can help you spot issues and resolve them to make sure that your contingency plan is a success. Which, given that it’s your plan B, is tantamount.
If you’re planning a project, include a contingency plan, and if you’re working on a contingency plan then have the right tools to get it done right. ProjectManager is a cloud-based project management software that helps you create a shareable contingency plan, and then, if you need to, execute it, track its progress and make certain to resolve whatever problems it’s addressing. You can do this all in real-time! What are you waiting for? Check out ProjectManager with this free 30-day trial today!
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The Basics of Contingency on Construction Projects
Best practices for calculating, managing, and tracking contingency on construction projects.
Allocating contingency funds is crucial to project risk management. Real estate project managers factor contingency into the development budget to cover unknowable unknowns. (This is not to be confused with allowances which are the known unknowns. Basically allowances cover items that you know will happen but you don’t know exactly what they will cost yet.) Development projects have associated risk and having a contingency reserve can protect a project from some of the repercussions of these risks.
What kind of costs can contingency reserves cover?
Construction contingency covers any unanticipated construction costs such as:
- abnormal weather caused delays;
- cost overruns where the actual cost of an item exceeds the amount allocated to such item
- design errors
- unanticipated price of materials or interest rate increases
- contractor coordination issues and errors
- unforeseen soil conditions
- And many more
Where do I start when establishing my contingency reserve?
We recommend starting by answering the following 3 questions:
How much contingency do I factor in?
Industry standard for construction risk contingency is 3-10% of total hard costs. Some developers budget contingency for soft costs as well, typically 1% percent of total project costs or 10-20% of total soft costs. According to the DAE Group , “in addition to the actual dollar amount of the contingency budget, a construction contingency should also include a well-drafted process of how to access contingency funds, what conditions do and do not warrant using the funds and a detailed procedure concerning notices, paperwork, and approvals.”
What are my unknowns?
Unknowns are where a great deal of your risk is hiding. Weather, scheduling, and other factors that are out of your control are a good place to start.
Can I eliminate any of these risks before factoring them into my contingency reserve?
Strong communication with your vendors and subcontractors, detailed contracts, walkthroughs, drawings, etc are all ways to mitigate risk and unknowns.
A positive outcome of maintaining and tracking contingency is predictability.
According to the Project Management Institute , “by pooling the risk contingency costs together so the cost of any risk occurrence can be absorbed, it is easier to track risk occurrence. Data representation, such as charts and graphs, can be used to track the use of the reserve over time and how it affects the project schedule and budget. Without the contingency reserve, those extra days and money come out of the actual schedule and budget, causing delays and cost overruns. If this happens, then the project will be derailed. With this data, it is also easier to see where risks are coming from. For example, if time delays due to training cause eight days to be spent from the risk contingency reserve, that can become a lesson learned for future projects.”
When you’re tracking contingency usage, set yourself up for success in the future by also tracking the “WHY.”
Now that the importance of keen contingency planning has been established, the last thing you know about tracking a development budget, is the importance of tracking WHY contingency has been used. This helps developers plan contingency needs throughout the remainder of the project. Long term, tracking the “why” behind contingency usage helps better plan for future projects.
Where do I manage contingency?
There are tools available to help calculate, track, and manage contingency reserves. These tools are helpful when development managers are communicating budget and risk to relevant stakeholders. Our favorite tool for tracking and managing contingency usage is Rabbet. (no surprise there!)
Tracking contingency usage in Rabbet
Answering “where did the contingency go?” is now easier than ever with visualizations on the project-level budget. These new charts readily compare project progress with total contingency usage as well as provide a consolidated view of all budget reallocations across the project.
Rabbet’s contingency usage section shows:
- Adjacent visualization of project completion % and total contingency usage %
- Visualization of contingency usage (reallocated) by line item
- Visualization of line item adjustment totals across all draws
When development managers are tracking this outside of Rabbet, they are creating an excel graph or chart of the contingency total usage and project completion. This is not difficult, but requires maintenance and deliberate sharing. With Rabbet, the completion and contingency graphs are updated in real time based on the familiar workflows already occurring in Rabbet. Rabbet can also track which adjustments are reallocations between line items and which are users of contingency.
To learn more about how Rabbet can enhance the calculation, tracking, and management of your contingency reserve, schedule a demo of our platform today !
About the Author
Trisha patel.
Trisha is Rabbet's Demand Generation Manager and a seasoned content strategist. She focuses on driving engagement for companies via helpful content that is relevant to their audiences.
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What Is a Construction Contingency, and Why Do You Need One?
Table of Contents
You’ve looked at every detail of your construction project and made estimations based on your careful planning and knowledge.
But you’re worried about what you don’t know.
How can you adequately or precisely prepare your budget when there are a variety of unforeseen events that can happen anywhere along the way?
You can’t remove all risk from your project, but you can minimize risk by considering a construction contingency.
If you’re not sure you need a contingency for construction, continue reading to learn:
- A construction contingency definition
- Why having a contingency plan is important
- How to create a contingency construction budget; and
- The types of construction contingencies utilized
Flexbase: Streamlining Analytics Is One Part of Our Construction Contingency Budget Solution
Every construction project involves estimating the costs of every part of the job — and that’s a lot of details. Incorrect or incomplete estimations can ruin your budget, let alone extra costs that come when unforeseen issues arise.
Wouldn’t it be amazing if there was a way to plan for unexpected issues and costs?
That’s what construction contingencies are for, and Flexbase can help you know when to use those funds that you’ve set aside for surprises.
We can track cost analytics, so contractors know exactly when they need to use their contingency funds.
In addition to streamlining cost analytics, Flexbase makes construction administration easier by:
- Managing your cash flow
- Sending invoices
- Generating compliance documents
- Accessing working capital
- Sending payment reminders and legal notices
- Tracking expenses with Flexbase Cards
Flexbase has everything you need to successfully run your construction business — and it’s all in one place and is easy to use.
What Is Contingency in Construction?
Construction contingency definition:
A project contingency for construction is a specific amount of money, usually a percentage of the total cost, that is set aside in case any unforeseen or extra costs arise during the construction process .
When you’re hit with surprises, construction contingencies act as a sort of insurance policy that will help you stay on budget and finish the work according to agreed-upon time commitments.
Contingencies for construction are not allowances or extra cash on hand that must be spent .
If your contingency isn’t used, that’s a plus, meaning you planned, estimated, and used funds well.
Contingencies should be considered part of your budget from the beginning rather than an add-on expense later on.
Contingency Plan Example for Construction Project
Construction contingencies happen for a variety of reasons such as:
- Issues with supplies (price increases or shortages, etc.)
- Weather delays
- Personnel costs
- Subcontractor changes
- Design changes or incomplete designs
- Incorrect scope estimations
- Inaccuracy in price estimates
- Bankruptcies
- Funds not reimbursed by a change order
In 2020, during the Covid-19 pandemic, many construction contingency funds may have been used when the price of lumber skyrocketed, causing an overage in the price of supplies needed.
The National Association of Home Builders estimates that “lumber prices have skyrocketed more than 300% since April 2020,” surely causing some contractors to dip into their contingency funds.
When it comes to construction contingencies, knowing when to use them is critical.
Flexbase accurately manages your cost analysis and can help you know when it’s time to dip into the contingency.
Types of Construction Contingencies
There are three types of construction contingencies:
No matter which type you may end up using, everyone agrees that construction contingencies are necessary for every project.
Contractor Contingency
Everyone understands that:
- Prices increase
- Unexpected problems occur; and
- Mistakes happen
A contractor contingency takes these things into account and allows the contractor to manage funds when problems occur out of the blue.
A contractor contingency is an amount included in the contractor’s estimated price for the project.
This amount goes beyond what is included in the schedule of values and is set aside for unanticipated costs or other problems that fall to the contractor.
Owner Contingency
Changes in the project are not always because of contractor oversights or errors.
Sometimes the owner may want to make modifications to the ...
- Design; or
… that were not included in the initial bid.
In this case, the owner contingency is an amount set aside to cover any changes that the owner requests along the way.
Owner contingencies are often used with guaranteed maximum price (GMP) contracts.
What if the owner contingency isn’t used?
Most owners will request for remaining owner contingency funds to be used for project improvements like:
- Adding items back in that were removed because of budget constraints
- Adding wish-list items that were initially “on hold”
- Other betterments to materials or supplies
Design Contingency
Designers do their best to create thorough designs before a project is underway.
Oftentimes, though, design elements may change throughout the project because of:
- Unavailable materials
- Scope creep
- Required upgrades
When these issues come up after construction has begun, the designer may decide to use the design contingency to cover the costs of these issues that are outside the “as-bid” plan.
How Is Construction Contingency Calculated?
Typically, most construction projects use a contingency rate of 5% to 10% from the total project budget. This is typically enough to cover any unexpected costs that may arise throughout the project.
Why Is Construction Contingency Important?
Even though everyone involved on the planning end of a project makes a thorough analysis of what it will take to complete the job, many things contribute to the need for contingencies, like:
- Budget issues
- Design plans
- Timelines; and
- Resource schedules
The construction contingency acts as a sort of insurance policy in the case of unforeseen changes or additions — like weather delays or materials shortages .
Having a construction contingency lets you plan for the unexpected, allowing you to stay on budget and on time with your project.
3 Benefits of Construction Contingency
Though construction contingencies shouldn’t be considered as “extra cash,” a contingency benefits everyone involved when things out of your control happen — things like:
- Supply issues
- Materials shortages or cost increases
- Personnel cost increases
Construction contingencies help you:
- Deal with surprises
- Stay on budget; and
- Manage your risk
Benefit #1: Handling Surprises
Surprises often throw us for a loop, but the cost of those surprises can derail your project — unless you have a construction contingency .
A construction contingency allows you to manage the unexpected and can even help keep you on budget.
Since the contingency is an amount built into the cost estimate, unforeseen costs can be handled without putting a major dent in the budget.
Benefit #2: Staying on Budget
All kinds of things can threaten your budget:
- Inaccurate estimations
- Cost increases
- Need for more personnel
- Material shortages
- And much more
But with a construction contingency budget inclusion, your budget remains safe even when unexpected changes and costs occur.
And the construction contingency is part of the budget, not an add-on, so your budget isn’t inflated, assuring you that you’ll be able to handle the surprises when they come.
Benefit #3: Managing Risk
Risk is high in the construction industry, there’s no doubt about it.
Adding construction contingencies to the pricing estimate is just one of the ways to minimize risk and deal with unexpected issues and costs.
How Much Should a Construction Contingency Be?
In general, most construction projects use a rate of 5-10% of the total budget to set the construction contingency amount.
Setting the amount of the construction contingency can be tricky.
You want to make sure you have enough set aside to handle the unanticipated issues, but you also need to make sure you keep enough cash on hand to keep the project moving along.
Managing cash flow is challenging in the construction industry because of the rate of cash flowing in and cash pouring out.
Flexbase not only has the tools to help you know how much cash you actually have on hand, but when you need working capital, we can help you access it in just one click.
How to Create a Construction Contingency Budget
Including a contingency clause in a contract is essential, and setting the proper amount is crucial.
Construction contingencies should outline:
- The contractor’s contingency
- The owner’s contingency; and
- The designer’s contingency
Each contingency should outline the set aside amounts decided upon and what types of costs the contingency should be used for.
In addition, the contingency clause should spell out how the contingency funds are to be accessed and what the approval and paperwork process may include. The clause should also contain wording that explains how unspent contingency funds will be handled.
Identify Potential Risks
When creating the construction contingency budget, plan for the worst and hope for the best.
Factoring in risks ahead of time like ...
- Substitute subcontractors
- Partial design plans
- Other project delays
- Added personnel costs
… can help you know where you may need to allocate contingency funds and what the amount of those set-aside funds should be.
Minimize Risks
Identifying potential risks is necessary, but minimizing risk is a way to be proactive .
Communicating well with your team and performing careful and detailed planning will go far in minimizing risk.
When attempting to minimize risk, it’s important to:
- Have a clear idea of the scope of the work
- Do a complete walk-through with:
- Engineers; and
- Contractors
- Enter the bidding process with a complete set of drawings
All of these will foster good communication with the whole team, so everyone knows their roles and duties.
Is a Construction Contingency the Same as a Retainage?
Though a construction contingency and a retainage are similar concepts, they are not the same thing.
How are they similar?
- They both act as a sort of “emergency fund,” meaning that when things don’t go as planned and there are extra costs, those costs may be paid from a contingency fund or a retainage that is withheld from the one who is responsible for the issue — either a contractor or subcontractor .
- Both a retainage and a contingency are made up of about 5 to 10% of the total cost of the construction project.
That’s where the similarities end and the differences begin.
- A retainage is an amount that is being withheld even though it has been earned.
- A contingency is an amount added to the estimate of the price of the project to cover unexpected costs.
The biggest difference between the two is that a retainage consists of monies that are earned and are owed to someone, and a contingency is not owed to anyone.
A contingency can end up being a positive thing if the funds aren’t used for unanticipated issues.
Frequently Asked Questions About Construction Contingency
Shouldn’t the basis of estimate process eliminate the need for a construction contingency.
No, the Basis of Estimate (BOE) is not designed to cover surprise costs. Instead, the BOE accounts for the expected time, resources, and money needed to complete the construction project.
Shouldn’t Value Engineering Prevent the Need for a Construction Contingency?
No. The goal of value engineering is to provide a detailed analysis of what is needed to best meet the goals of the construction project. A construction contingency is still needed to cover unpredictable costs.
Are Construction Contingencies Guaranteed to Prevent Cost Overruns?
Yes. While a construction contingency will allow you to manage unexpected costs and delays that can help mitigate cost overruns, professional independent review is also vital in preventing cost overruns.
How Do I Know My Construction Contingency Won’t Be Abused?
You have to rely on an honor system. For this reason, it’s vital that you trust your team and partners to not take advantage of your construction contingency.
Will Having a Construction Contingency Inflate My Budget?
No, a construction contingency can actually help you do the opposite and stay within your budget and project schedule.
Manage Your Contingency With Flexbase’s Built-In Analytical Tools
Having a contingency is great, but knowing how much money you have on hand and when it’s time to dip into the contingency is the challenge.
Flexbase has what you need not only to keep your cash flow positive but also to give you the knowledge you need to know how and when to use those funds.
Flexbase has built-in analytical tools that help you track:
- How much money you have
- How much money you owe; and
- How much money you should be expecting to come in
You’ll know exactly when you need to use your contingency with easy-to-interpret analytical reports.
The Flexbase app is easy to use, and you don’t pay anything until you are paid. You only pay 0.5% when you receive money.
There are no licenses or subscriptions, and the full Flexbase platform is available for you to use immediately.
The Easy Guide to Creating a Business Contingency Plan
Updated on: 2 November 2022
How to avoid disasters? Be prepared for them.
When things are going well, you often forget to plan for the bad times. But when disaster strikes, you could lose everything in a heartbeat.
An earthquake can bring your whole shop to the ground, your biggest client can choose your competitor over you, your system suddenly can crash making you lose important data etc. There are endless possibilities of disasters if you really think about it.
That’s why lack of a plan can be a disaster of its own.
Let’s see why you need a business contingency plan and how to create one in a few simple steps.
What is a Business Contingency Plan?
But first, let’s define what a contingency plan is.
A contingency plan is a proactive strategy that describes the course of actions or steps the management and staff of an organization need to take in response to an event that could happen in the future. It plays a significant role in business continuity , risk management and disaster recovery.
It helps you stay prepared for unforeseen events and minimize their impact. It also outlines a plan for carrying out the normal business operations after the event has occurred.
It’s also known in names such as plan B, backup plan, and disaster recovery plan. In case your primary plan doesn’t work, it’s time to execute the plan B.
Benefits of a Contingency Plan
Without a contingency plan you’re opening yourself to unnecessary risks. Here are some important benefits of a contingency plan that you cannot look away from.
- Helps react quickly to negative events. As a contingency plan lists the actions that need to be taken, everyone can focus on what to do without wasting time panicking.
- Having a contingency plan in place allows you to minimize damage that could happen from a disaster and minimize the loss of production. For example if you have emergency generators set up, even during a blackout, your team can work seamlessly.
How to Make a Contingency Plan
An effective contingency plan is based on good research and brainstorming. Here are the steps you need to follow in a contingency planning process.
Step 1: List down the key risks
Identify the major events that could have a negative impact on the course of your business and on the key resources, such as employees, machines, IT systems etc.
Involve other team heads, subject experts, and even outsiders like business consultants to get a deeper understanding of things that may cause problems and jeopardize the direction.
Use a mind map to organize and categorize the information you gather from the brainstorming session with the staff. You can easily share this with everyone in the organization to get their input as well.
Step 2: Prioritize the Risks Based on Their Impact
Once you have created a list of all the possible risks that could occur in different areas of your business, start prioritizing them based on the threat they pose.
The risk impact probability chart is a handy tool you can use here. It helps you evaluate and prioritize risks based on the severity of their impact and the probability of them occurring.
Step 3: Create Contingency Plans for Each Event
In this step you’ll create separate plans that outline the actions you need to take in case the risks you identified earlier occur.
Consider what needs to be done in order to resume normal operations after the impact of the event.
Here you’ll need to clarify employee responsibilities, timelines that highlight when things should be done and completed after the event, restoring and communications processes and the steps you need to have taken in advance to prevent losses when the event has taken place (i.e. insurance coverage).
You can use a visual format here to highlight the course of actions. It would be easier for everyone to comprehend.
Step 4: Share and Maintain the Plan
Once you have completed the contingency plans , make sure that they are quickly accessible to all employees and stakeholders.
Review your contingency plans from time to time and update them as needed. And it’s a best practice to inform your employees of the changes as well, as it may include updates to their roles and responsibilities.
What’s Your Take on Contingency Plans?
That is how you make a detailed contingency plan. List down the major incidents that could harm your business operations, prioritize them based on their impact and probability, create an action plan explaining what you should do in case they occur, and review and update them frequently.
What is the contingency planning process at your organization? Let us know in the comments section below.
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What Is Contingency Planning? [+ Examples]
Published: January 13, 2023
The COVID-19 pandemic has shown, more than ever, the importance of being prepared with a contingency plan for the unexpected, especially when it comes to business continuity.
While some unexpected interruptions can be due to situations outside of your control, some issues arise that may be caused by internal errors. Unexpected problems can also be positive, like a sudden influx of interest in a new product.
Regardless of the scenario, it's essential to prepare for everything, and contingency planning helps you do so. This post will explain what contingency planning is, outline the steps you can follow to create your own plan, and give examples that you can use for inspiration.
- Contingency Planning
- Business Contingency Plan
- Making a Contingency Plan
- Contingency Plan Timeline
- Contingency Plan Example
Contingency Plan Definition
What is a contingency plan? Simply put, a contingency plan is an action plan designed to help organizations respond to a potential future incident. Think of it as a backup plan, or plan B to guide organizations through a worst-case scenario.
Contingency plans are helpful for all types of organizations, from businesses to non-profits, to government organizations. While these scenarios may never come to fruition, it’s important to have a plan in place so that your team isn’t panicking or scrambling to deal with an unfavorable event at the last minute.
What is contingency planning?
Contingency planning is a proactive process of creating a strategy to help you prepare for any scenario that can affect your business, regardless of the likelihood of its occurrence.
These plans shouldn't focus solely on situations that may harm your business. For example, you may experience a significant increase in revenue during a specific period due to changes in market behavior. This is a good scenario, but you will still need to adapt your operations to scale and appropriately meet the new demands of your growing audience.
Contingency Planning vs. Crisis Management
Contingency planning is also different from crisis management , as it is not a reaction to something that has already happened but more so a plan for if and when something may happen. However, a contingency plan can help you with crisis management when issues arise.
Contingency Planning vs. Risk Management
Risk management is the identification, mitigation, and assessment of potential risks that may affect your organization. This process helps an organization prevent losses before they occur and aids in assessing whether or not certain risks are worth taking. Contingency planning can be a component of risk management since that process helps organizations survive these potential risks.
To ensure your business is prepared for everything, it's crucial to understand how to create a contingency plan.
What is a business contingency plan?
A business contingency plan is a strategy that outlines the steps your business’ teams will take in the event of a crisis occurring. It is essentially the backup plan that goes into action when the worst-case scenario occurs. The goal of your contingency plan is to help your business stay up and running after an issue arises.
Business Continuity Plan vs. Contingency Plan
Although their names vary by few letters, business continuity and contingency plans are different concepts. Continuity is the ability of your business to continue functioning after an incident that has disrupted operations occurs. A contingency plan is an action plan that goes into place if an incident were to happen.
Contingency plans can significantly impact whether your business can achieve continuity. Being able to react and take action during a crisis can dictate whether or not your business can emerge from the other side and continue normal business operations.
You can think of it like this: your continuity plans contain five sections: program administration, governance, business impact analysis, strategies and requirements, and training and testing. If your business also uses contingency plans, it could be part of the strategies and requirements section, which dictates how your business will respond to a crisis if it occurs.
Contingency Planning: How to Make a Business Contingency Plan
Creating a contingency plan is responding to the question of "What if?"
What if your storefront floods? Or what if your supplier goes out of business? The responses to the what-ifs are contingency plans. These scenarios aren't necessarily going to happen, but if there is a possibility that they'll affect your business, you're prepared if they do.
Below we'll discuss the steps that go into contingency planning.
Contingency Planning in 7 Steps
1. identify critical business functions..
This first step is the most important aspect of your planning, as it sets the tone for why your plans need to exist in the first place.
During this phase, identify all critical areas essential to keeping your business up and running every day. As these operations are imperative to success, you need to have plans to ensure that these operations continue, regardless of whatever scenarios arise.
You can think of it like this: these critical areas keep your business up and running on a day-to-day basis. Other areas are important, but these are the main functions that keep you afloat. Given this, you want to be prepared for anything and everything that may happen that can affect the critical areas, whether positive or negative. Contingency planning is exactly that.
Identifying these areas helps you move on to the next step as you begin brainstorming possible scenarios that can impact them.
2. Conduct a scenario assessment.
Once you've identified the critical operations of your business, you'll want to conduct a scenario assessment to identify situations that will affect these functions and put stress on your day-to-day operations.
For example, if your business operates out of a storefront, keeping your storefront up and running is a critical area of your business's success. Maybe you launch a new product that attracts more interest than you thought, and you need to deal with higher in-store traffic and a lack of products to satisfy the market. While it is a positive situation that will draw in more revenue, it can still have negative repercussions for your business if you don't deal with it when it happens.
You can think of this stage as similar to a risk assessment, but the possibilities are positive and negative. It may be helpful to meet with people who work in these critical areas and understand what they think may cause interruptions to their job duties and barriers to their success. Ask them how they feel situations will impact them and how they would deal with each scenario.
If you come up with a long list of threats, you can prioritize them based on their likelihood of occurring and how significant their impact would be on your business.
3. Create contingency plans for each scenario.
During this phase, you'll create contingency plans. Begin with the highest priority "threats," or those most likely to occur and most likely to cause significant stress to your business.
Outline the scenarios, people to inform, and the roles and responsibilities involved parties will have when they respond. We'll go over an example below, but a helpful template to follow can be:
- Outlining the scenario,
- Determine the probability of it occurring,
- Explain how you'll prepare ahead of time,
- Detail what the response will be if and when it happens.
Once you've created your plans, distribute them to key stakeholders in each scenario, so everyone understands what they are responsible for and can prepare ahead of time.
4. Get your plan approved.
Once you’ve come up with a desired plan of action, it’s time to get approval from stakeholders and management. If you’re creating both department-level and company-wide plans, this is especially important. Your plan won’t be a success unless there is buy-in from key members of your team and management. Once all parties agree that the course of action described in the contingency plan works for everyone, you can move forward with confidence.
5. Share the plan with your team.
Once your plan is approved, it’s time to distribute it. Putting it in a shared folder accessible to everyone creates transparency and makes it readily available if the time comes.
Make sure the parties involved know what they’re responsible for in the plan, that way you can execute the plan seamlessly should the worst-case scenario occur.
6. Test your plans.
As with all plans, it's essential to continuously test (more on that in the next section) and update them over time. As businesses scale and change, your business needs will likely change, and specific scenarios will no longer have as significant of an impact. There may also be new scenarios to plan for that you hadn't anticipated or thought of when you were a smaller operation.
It can be helpful to create a timeline that you'll use to spend dedicated periods reviewing your plans, testing them, and communicating with the necessary stakeholders about any changes you've made to the plans.
7. Update your plan as needed.
Consider your contingency plan a work in progress. You’ll need to adapt it as new risks arise and to ensure it still makes sense for your business needs. Whenever a new manager or executive joins the team, be sure to share it with them as needed so they know what (if anything) is expected of them.
Contingency Planning Timeline
As planning is always an involved process, you may be wondering how much time you should devote to each step. Let's discuss a timeline below.
Week One: Identify Key Operations
Give yourself about a week to identify the operational areas essential for business function. You likely already know what these areas are, but you want to do enough research to identify them all.
Weeks Two & Three: Brainstorm Scenarios
Take two to three weeks to brainstorm the scenarios you're going to create plans for. Spend as much time as possible speaking to the necessary stakeholders to understand their ideas about the scenarios and how they'd like them dealt with. You'll want to conduct probability assessments and market research to understand if your competitors have ever dealt with something similar. You want to make sure you have all the necessary information before drafting your plan, so this step should be the longest.
Week Four: Draft Plan
Give yourself a week to draft your plans. The first two steps should give you all the information you need, so the third step is simply fine-tuning your research and creating the final plan. You can also share what you've created with your stakeholders and iterate on what you have based on their feedback.
The final step to creating your plan, maintaining and testing, is a continuous effort. As mentioned above, your business will likely be impacted by different things at different times, so it's always important to review plans and ensure they still relate to your needs. For example, maybe you plan to do quarterly reviews and training so new hires, and existing employees, are all on the same page.
Contingency Planning Example
It may be helpful to have an example of a contingency plan, so we'll go over one below. The examples are of a positive and negative situation, so you can get a sense of how a plan applies to both.
Contingency Planning Mistakes to Avoid
Even with the best intentions, your contingency plan may get off to a rocky start. Here are some common mistakes to avoid when creating one of your own.
Not securing executive buy-in first.
Before you can get your team or department onboard, you must get buy-in from the executive team. Otherwise, you risk creating a doomed plan from the start.
Get their feedback on potential risks and other factors that may impact guidelines in the plan. Having executive support from the start ensures the plan put forth is approved and also can motivate those at the department level to buy-in as well.
Failure to cover multiple scenarios.
When assessing potential risks and scenarios, it’s important not to cut corners or slack. Scenario planning is key to your contingency plan’s success. All potential risks should be taken into account. You can rank them by likelihood, but you should by no means leave less likely events out. Otherwise, you leave yourself vulnerable should the event happen.
Think about how many businesses were affected by supply chain issues during the pandemic. Most probably never predicted such a catastrophe, but the ones that had a plan in place for such an obstacle were better prepared.
Set it and forget it.
It’s really easy to get comfortable once your contingency plan is in place — after all, if you did your due diligence from the start, you’re ready to tackle any obstacle thrown your way.
Unfortunately, it’s not a one-and-done process. A contingency plan should be looked at as a living document and updated as needed. Your business needs will change over time and so will its obstacles and risks.
Create Business Contingency Plan
All in all, contingency plans help you prepare for a host of what-if scenarios, whether they happen or not. As you never want to be caught in a challenging situation, being prepared is the best thing you can do to ensure your business continues to succeed, regardless of whatever happens along the way.
As the saying goes, better safe than sorry .
Editor's note: This post was originally published in November 2021 and has been updated for comprehensiveness.
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Contingency Planning for Failed Construction Projects
- Small Business
- Running a Business
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The Definition of a Bonded Business
What is a professional surety bond, the advantages of a cost plus contract.
- Termination of Contract by Default of Principal
- How to Manage a Subcontractor
A failed construction project can cost your business thousands of dollars on wasted materials and payments to contractors. Before you embark on any construction project, you must devise a specific and clear contract outlining your policy for payments and construction standards as well as how money and property will be divided if the project is canceled.
Financial Agreements
If you agree to pay a contractor an hourly rate, you'll typically lose everything you've paid if the project fails. But if you offer a contingency or fixed-fee pricing structure, adding language to your contract about how funds will be disposed if the contract fails can protect your financial health. You might, for example, agree to make payments at four different milestones and cease payments if the milestones aren't completed on time.
Right to Cancel
Every contract needs a clause outlining the circumstances under which you can cancel. This is because all parties to a contract don't necessarily agree on when a contract has failed. You might be disappointed with the quality of work, but your construction firm might want to continue working. Establish a clear procedure for canceling the contract. For example, you might schedule weekly evaluations of the project and give the construction firm two weeks to remedy any problems. If it fails to do so, you can cancel the contract. You'll also need to outline the specific circumstances under which the construction firm can cancel the contract and whether any penalties apply if they cancel the contract for no apparent reason.
Construction Standards
Your contract should clearly outline any specific construction standards the project must meet. At a minimum, this should include ensuring the project meets local zoning and building codes and that the building is structurally sound. You might also require that the project be completed by a certain date or that specific progress must occur according to a set of milestones. If your contractor violates these standards, he has violated the contract, giving you the right to cancel.
Municipal Zoning and Building Codes
Local ordinances affect how and where your project can be built and may require inspections by city employees. Address how violations of local ordinances will be handled, particularly if the project fails. For example, a construction firm that does not build up to code could be required under the contract to tear down the building, pay any fines you receive or refund a portion of the project fees.
No-Fault Project Failures
A natural disaster isn't the fault of either party to the contract, but it can undermine the progress of your project. Add language to your contract addressing how you'll handle delays or halts in construction when neither party is at fault. You might note that either party has the right to cancel if the project is delayed due to natural disasters, or you could mandate that the project continue after it's safe to work again. Your contract should also note that the construction firm is not permitted to work when weather makes it unsafe to do so. Similarly, a failed delivery from a supplier is not either party's fault, so ensure you list specific circumstances in your contract under which neither party will be penalized.
- American Society of Civil Engineers: Cost Overruns and Failure in Project Management -- Understanding the Roles of Key Stakeholders in Construction Projects
Van Thompson is an attorney and writer. A former martial arts instructor, he holds bachelor's degrees in music and computer science from Westchester University, and a juris doctor from Georgia State University. He is the recipient of numerous writing awards, including a 2009 CALI Legal Writing Award.
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A contingency plan for construction is a document that outlines the actions and resources that will be used to deal with unforeseen events or situations that may affect the project's performance ...
Contingency planning is a must in today's project management world because of the timing when a contingency must be executed. Related Control Risks on Construction Projects to Maintain Profits in 2022
Simple Contingency Plan Template. Use this simple contingency plan template to help your organization return to daily operations after unforeseen circumstances. Find sections for business impact analysis (BIA), recovery strategies, plan development, and testing and exercises. By completing these areas, you can stress-test your contingency plan.
A construction contingency helps you plan for unforeseen expenses, but the BOE serves a different function. The BOE allows your construction team to define the money, time and resources you need to complete your project on schedule and within budget. Construction contingency, however, focuses on allocating funds for unexpected costs.
A contingency plan example may be positive like when there's an unexpected surplus in the cash flow. But more often than not, the contingency planning process mostly refers to negative events. The events which might have a bearing on the organization's financial health, reputation or on its ability to continue with business operations.
A business continuity plan is a deliberate strategy for resuming and maintaining your normal business functions in the midst of a major disruption. The plan provides detailed instructions, procedures and tasks that your employees need to deploy in the event of a disaster or other interruption. You may have also heard the term "disaster ...
A construction contingency is an amount of money set aside to cover any unexpected costs that can arise throughout a construction project. This money is on reserve and is not allocated to any specific area of work. Essentially, the contingency acts as insurance against other, unforeseen costs. Determining the amount of contingency is a ...
Here's how to create a contingency plan in seven steps: Step 1. Create a Policy Statement. A policy statement is the outline of the authorization that exists to develop a contingency plan. This ...
Here's an example contingency plan for several aspects of a manufacturing company: Risk: machinery breakdown. Impact: This event may interrupt production throughout the assembly line. Preparation: Regularly inspect machinery for any faults. Obtain spare parts and have them available in case of any incident.
Deterministic Method. A good construction contingency percentage is 5-10% of the contract value. You would then calculate the amount using the deterministic method. The percentage is selected based on project size, complexity, and level of risk. Your upper management will usually be the one to determine the percentage.
A business contingency plan is an action plan that is used to respond to future events that might or might not affect a company in the future. In most cases, a contingency plan is devised to respond to a negative event that can tarnish a company's reputation or even its business continuity. However, there are positive contingency plans, such ...
Construction contingency covers any unanticipated construction costs such as: abnormal weather caused delays; cost overruns where the actual cost of an item exceeds the amount allocated to such item. design errors. unanticipated price of materials or interest rate increases. contractor coordination issues and errors. unforeseen soil conditions.
The construction contingency acts as a sort of insurance policy in the case of unforeseen changes or additions — like weather delays or materials shortages. Having a construction contingency lets you plan for the unexpected, allowing you to stay on budget and on time with your project. 3 Benefits of Construction Contingency
Business Contingency Plan (Click on the template to edit it online) Step 4: Share and Maintain the Plan . Once you have completed the contingency plans, make sure that they are quickly accessible to all employees and stakeholders. Review your contingency plans from time to time and update them as needed. And it's a best practice to inform ...
Abstract and Figures. Contingency provision on a construction project is one of the risk management techniques embraced by project owners to deal with project unanticipated expense (spending) and ...
A business contingency plan is a strategy that outlines the steps your business' teams will take in the event of a crisis occurring. It is essentially the backup plan that goes into action when the worst-case scenario occurs. The goal of your contingency plan is to help your business stay up and running after an issue arises.
Financial Agreements. If you agree to pay a contractor an hourly rate, you'll typically lose everything you've paid if the project fails. But if you offer a contingency or fixed-fee pricing ...
In residential construction, a contingency refers to a percentage or fixed amount of money set aside to cover unanticipated costs that may arise during a project. A contingency provides an extra margin in the project budget so home builders and remodelers can keep their projects profitable when new or unexpected costs come up or prices change.
Merton Construction Merton provides full scope of services for commercial, industrial, and public buildings with a firm commitment to safety and timely project completion - i.e. warehouses, shopping malls, hyper/supermarkets, hotels, residential buildings, hospitals, schools, industrial plants, retail complexes, showrooms.
Construction supervision during capital construction, reconstruction and re-profiling Dmitriy Topchiy1, Alexey Yurgaytis1,*, Evgeniy Babushkin1, and Diana Zueva1 1Moscow State University of Civil Engineering, Yaroslavskoe shosse, 26, Moscow, 129337, Russia Abstract. This article raises problems related to the shortcomings in the
Construction Contingency means the amount agreed upon in the GMP Amendment, and adjusted as set forth in Section 8.2, to cover costs that are properly reimbursable as Costs of the Work but not the basis for a Change Order. Construction Contingency means the aggregate of the amounts allocated as a Hard Cost contingency reserve and those ...
Because the entire project is happening within one company, Elektrostal' design-build services are able to overlap the design and construction phases of the project, which often speeds up the project significantly. In addition, these firms work to minimize risks for the project owner through single-point responsibility contracts.
But the most important paradigmatic change would be to associate RM with development planning, separate from " disaster management ". IAEG10.indb 89 IAEG10.indb 89 7/1/2010 2:13:37 PM 7/1/2010 2 ...