Sometimes you’ll see a line in a remodeling estimate labeled contingency. If you don’t know what it means, it can look suspicious.
Why am I being charged thousands of dollars for something you can’t even tell me we’re going to need?
Fair question.
A contingency is money set aside for reasonable uncertainty in the project.
It isn’t supposed to be extra profit.
It isn’t a miscellaneous fee.
And it shouldn’t be a blank check for the contractor to spend however he wants.
It’s money that’s there because we’re remodeling an existing house, and existing houses don’t always tell us everything until we open them up.
I’m a big believer in figuring out as much as possible before construction starts. That’s one of the reasons our estimates can sometimes be higher than another contractor’s. I’d rather account for work we can reasonably anticipate now than give you a great-looking number and start handing you change orders after demolition.
But there’s a limit.
What we can’t do is tear half the house apart while we’re estimating it. So on certain projects there is still some uncertainty. That’s what the contingency is for.
Say we’re remodeling a bathroom and the shower has been leaking. Before we start, I already know there’s a reasonable possibility we’ll find some damaged framing when we tear it apart. That’s not exactly a surprise.
So I’m not interested in giving you a price that assumes every piece of wood behind that shower is going to look brand new. We may include some money in the project contingency for repairs we reasonably expect could be necessary.
Then demolition happens.
Maybe everything looks better than expected. Great.
Maybe we replace a couple of studs and some subfloor. That’s what the contingency was there for.
Or maybe we open the wall and find years of water damage extending ten feet into the house. Now we’re talking about something different.
A contingency is there for reasonable uncertainty. It isn’t there to absorb an unlimited amount of additional work.
These two get confused. A contingency is money already identified in the project budget for reasonable unknowns. A change order changes the actual scope or contract.
If we included a contingency because we’re working in an older house and encounter a small amount of expected repair work, we may already have money allocated for it.
If you decide halfway through the project that you want to move a wall, add six lights and upgrade the flooring, that’s not contingency. You changed the project. That’s a change order.
The same applies to a genuinely major unforeseen condition that goes well beyond anything the contingency was intended to cover. We wrote a separate article explaining what change orders are and when they should actually be issued, because the distinction matters.
I don’t like meaningless numbers in estimates. If there’s a $7,500 contingency sitting in your project budget, you should have some idea why it’s there.
Those are real risks, and the amount of contingency should make sense relative to them. “Just in case” isn’t much of an explanation.
This is probably the biggest thing homeowners should understand. If your project has a contingency, that doesn’t mean we’ve been given permission to find a way to spend it.
Suppose your contract is $100,000 and part of that budget includes a $7,500 contingency. We finish the job and only $2,000 of legitimate contingency work was necessary. That remaining $5,500 shouldn’t magically become contractor money simply because it was sitting in the budget.
A contingency is an allowance for risk, not a spending target. How unused contingency is handled should be clear in the agreement before the project begins.
Because then we’re back to the change-order game.
| Same project, two estimates | Price |
|---|---|
| Contractor A | $92,500 |
| Contractor B — including a clearly identified $7,500 contingency | $100,000 |
Contractor A looks cheaper. Then construction starts.
$2,500 change order.
$1,800 change order.
$3,200 change order.
Suddenly the two projects cost about the same. Except one homeowner knew before signing the contract that the money might be needed. The other found out while his house was torn apart.
I’d rather talk about risk before we start than use it as an excuse for why the project costs more later.
This is just as important. A contractor can’t leave obvious work out of an estimate and call it contingency when it comes up.
If we’re building an addition and I forgot to account for insulation, that’s not contingency. I forgot insulation.
If the plans clearly show a beam and I didn’t price the beam, that’s not an unforeseen condition. That’s my mistake.
If I know we’re replacing the plumbing but didn’t include plumbing labor, I don’t get to raid your contingency to fix my estimate.
Contingency is for uncertainty we couldn’t reasonably eliminate before construction — not work the contractor should have priced from the beginning.
This matters particularly in Central Pennsylvania. We work on houses from a lot of different eras. You might open one wall and find beautiful framing that’s been untouched for 70 years. Open another and find three generations of remodeling stacked on top of each other.
Experience helps us anticipate a lot of it. Experience does not give us X-ray vision.
That’s why larger renovations and work on older homes — the kind with horsehair plaster behind the paint — sometimes need more room for uncertainty than straightforward work in newer construction.
That’s really the point. I don’t think the goal of an estimate is to produce the smallest possible number. The goal is to give you the most realistic picture we can of what the project is actually going to cost.
Sometimes that means telling you: “We don’t know exactly what we’re going to find here, so I think you should have this much money available in case we need it.”
That’s not as exciting as pretending everything will go perfectly. But it’s a much better conversation to have before construction starts.
Nobody likes spending contingency money. If we don’t need it, that’s a good thing. But when something legitimate turns up, having money already accounted for means the project doesn’t immediately become a financial emergency.
That’s what the line is doing in the estimate. It acknowledges that there are things we know, things we can reasonably anticipate, and occasionally things we simply cannot see yet.
Good planning should reduce that uncertainty as much as possible.
A contingency handles what’s reasonably left.
And anything outside of that should be discussed, documented and agreed to before the additional work is performed.
On the 1844 restoration in Trevorton, two other contractors never produced a price at all. We gave a firm number. Then the cabinets came out and the entire floor structure underneath was rotted through and had to be reframed. It came out of the contingency line item that had been in the estimate from the first day — and over six months, the job had exactly one change order.
Fifteen minutes on the phone. You’ll have a realistic range before we hang up — and if we’re not the right people for it, I’ll tell you.