Is Contingency Counted as Part of the Total Cost?

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Yizhou Wang

November 09, 2022 17:32

I have been running a test question asking to calculate the hard cost contingency expressed as a percentage of the hard cost. I got the figure of hard cost contingency correct, but when calculating the percentage, the answer key does not include the hard cost contingency itself as part of the total hard cost. Could someone help to explain this rationale? The Architects' Handbook of Professional Practice does include the construction contingency as part of the total hard cost. Thanks!

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  Rebekka O'Melia November 22, 2022 14:30

  Hi Yizhou,

  I think the contingency should be part of the estimate, and the funds for it should be available.  Sometimes they cannot be financed until they arise too.

  The contingency may or may not wind up being part of the total construction cost in the end though.  I think technically contingency costs could be 'hard costs' or 'soft costs'.  Hard would be those for unforeseen construction materials and labor; soft costs would be unforeseen expenses for legal fees, extra consultant fees, or permit fees.

  Hope this helps!

  Rebekka O'Melia, Registered Architect, NCARB, NOMA, B. Arch, M. Ed, Step UP ARE 5.0 Courses

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  Yizhou Wang November 29, 2022 21:32

  Thanks, Rebekka! I think it will be part of the hard cost and part of the total cost, but not counted as part of the construction cost. That's what I read from the Architects Handbook of Professional Practice. Thanks for your answer!

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  Michael Ermann November 30, 2022 02:08

  You are correct, Yizhou, as far as the contracts are concerned, contingency does not count as a part of the "cost". . . to geek out, this issue was long a point of confusion, until the 2017 version of the contracts cleared this up by changing the language of the AIA Documents from “Cost of the Work” to “Owner’s budget for the Cost of the Work.” So, as design progresses, the Owner's budget for the Cost of the Work reflects the fluid nature of construction costs by basing the "cost" on the right-now owner’s budget. Contingency is not part of this calculation (unless/until a portion of the contingency is actually needed to finish the project). If an exam question asks you to calculate the "cost" or wants you to base the architect's fee as a percentage of the "cost," you should assume that this "cost" does not include contingency. Good luck. --Michael Ermann, Amber Book creator.

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