ABSTRACT
This chapter looks at what contingency is and how it can be estimated. Contingency is a cost or schedule element of an estimate to cover the occurrence of unforeseeable events within the defined project scope and within the control of the project manager. Contingency is the amount added to an estimate to allow for items, conditions or events for which the state, occurrence or effect is uncertain and which experience shows will likely result in additional cost or time. The contingency is under the control of the project manager, whereas the management reserve is controlled by the Project Executive Officer or sponsor. In reality, the float of a non-critical activity represents a schedule contingency for that particular activity. Association for the Advancement of Cost Engineering has developed a set of recommended practices to guide the selection and development of contingency estimating methods. S. Ghorbani discusses contingency calculation and distinguishes between deterministic and probabilistic methods.
