How much contingency to add to a bid
A blanket percentage is a habit, not an assessment. Contingency should be sized against what you could not inspect.
The short answer
Contingency should be split in two: a small general allowance for the ordinary surprises on any job, and named allowances for the specific things you could not inspect. A single blanket percentage either overprices simple work or leaves you carrying a risk you never priced.
The formula
general contingency = direct cost x small % (2-4% on well-understood work)
named allowance = likely cost of a specific unknown, carried separately
carried contingency = general + sum of named allowances
exposure = worst realistic cost of the named item - its allowance
Exposure is the line worth writing down. It is what you lose if the named risk lands at the bad end, and if you cannot survive that number the answer is a survey, not a bigger percentage.
Worked example
A $42,000 refurbishment where the roof could not be inspected and the wiring age is unknown:
general contingency 3% = 1,260
roof: 40% chance of work, 6,000 if needed
named roof allowance = 2,400
wiring: 25% chance, 3,200 if needed → allowance 800
carried = 1,260 + 2,400 + 800 = 4,460 (10.6%)
blanket 5% would have carried 2,100
exposure if the roof lands = 6,000 - 2,400 = 3,600
The blanket 5% is not smaller because the job is safer. It is smaller because nobody looked. The named version costs $2,360 more to quote and tells you the real number at risk is $3,600.
Contingency is not padding and it is not profit
Padding is what you add because the estimate feels thin. That is a symptom of an estimate you do not trust, and the fix is a better takeoff, not a bigger cushion.
Profit is what you keep for carrying risk and running a business. Contingency is money set aside for a specific event that may not happen. Mixing them means a job with no surprises looks unusually profitable and a job with surprises looks like a failure, when both were priced the same way.
Keeping contingency as its own line also makes it returnable. On cost-plus and on many negotiated contracts, unspent contingency going back to the client is a strong position, and you cannot offer it if it is buried in your rate.
How to size a named allowance without pretending to know
You do not need a probability to two decimal places. You need a rough likelihood and a realistic cost, and the discipline of writing both down.
The number this produces is deliberately not the full cost of the risk. Carrying the whole $6,000 for a roof that probably does not need work makes you uncompetitive on every job. Carrying nothing makes you insolvent on the one where it does.
The middle is uncomfortable and correct, and the reason to write the exposure line is so the discomfort is a decision rather than a surprise.
When the answer is not contingency at all
If the exposure is large enough to threaten the business, do not price it. Survey it, or exclude it in writing and price the work around it as a provisional sum.
Clients accept exclusions far more readily than most contractors expect. What they do not accept is a number that changes after they have committed, which is exactly what an unnamed risk produces.
What this leaves out
- Probabilities are judgement, not data. Two experienced estimators will size the same risk differently and both can be defensible.
- Assumes a fixed-price contract. On cost-plus, contingency behaves differently and is often held by the client.
- Excludes design change and scope creep, which are change-order territory rather than contingency.
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Open the free calculatorCommon questions
- Is 10% contingency too much?
- It depends entirely on what you could inspect. Ten percent on a new build from a cleared site is high and will cost you work. Ten percent on a Victorian refurbishment with a hidden roof structure may not be enough, and quoting the same figure for both is the actual mistake.
- Should I show contingency to the client?
- On negotiated and cost-plus work, usually yes, because a named allowance is easier to defend than a vague uplift and unspent contingency returned builds trust. On competitive fixed-price tenders it is normally carried inside the price.
- What if the contingency is not used?
- On fixed price it stays with you and that is the compensation for carrying the risk. This is why it should not be treated as profit in advance: some jobs pay it out entirely and the arithmetic only works across a portfolio.
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The formulas above, already built and checked — so you fill in your numbers rather than the arithmetic.
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Last reviewed 22 August 2026