Glossary
Contingency
A contingency is an allowance in a project budget for costs that cannot be predicted precisely, such as ground conditions, design changes or price increases. Lenders usually expect a contingency in development budgets.
An example
A developer's budget includes a contingency line. When unexpected rock is found during excavation, the extra cost is met from the contingency instead of requiring new equity.
Why it matters
A thin contingency can leave a project short of funds partway through. The lender's QS will comment on whether the contingency appears adequate for the project's risks.
Points to check
Ask whether the lender funds the contingency or expects it from your equity, and whether unused contingency can be redirected to other budget lines. Check how the lender's quantity surveyor judges whether the allowance is adequate for the design stage and contract type. A fixed-price contract and a cost-plus contract carry different risks, so the allowance a lender expects may differ. Track how contingency is spent during the build, because a depleted contingency early on is a warning sign that costs may run over.
Try it: Development feasibility calculator