A Contingency is an event or occurrence that could affect the execution of a project and is often accounted for with a contingency reserve. Contingencies are identified risks that may or may not occur but have the potential to impact project scope, schedule, cost, or quality.
Key Aspects of Contingency
- Addresses Known Risks – Plans for uncertainties that have been identified.
- May Require a Reserve – Contingency reserves provide buffer resources to mitigate impact.
- Part of Risk Management – Included in proactive planning to minimize disruptions.
- Can Apply to Cost, Time, or Resources – Used to handle unexpected expenses, delays, or resource shortages.
Types of Contingencies
- Schedule Contingency – Extra time added to accommodate potential delays.
Example: A construction project includes two additional weeks for weather-related delays. - Cost Contingency – Additional budget allocated for unforeseen expenses.
Example: A software development project reserves $50,000 for unexpected technical challenges. - Resource Contingency – Extra personnel or materials planned for potential shortages.
Example: A manufacturing project pre-orders backup components to avoid supply chain issues.
Example Scenarios
Software Development
A development team allocates contingency time in case critical bug fixes delay the project.
Construction Project
A project sets aside a 10% cost contingency for unexpected material price increases.
Event Planning
A corporate event reserves additional seating in case of higher-than-expected attendance.
Why Contingency Matters
- Reduces Project Risk – Helps absorb unforeseen disruptions.
- Improves Budget & Schedule Accuracy – Provides realistic buffers.
- Enhances Decision-Making – Allows for flexibility in response to challenges.
- Ensures Stakeholder Confidence – Demonstrates preparedness for uncertainties.
See also: Contingency Reserve, Risk Management Plan, Schedule Buffer, Change Control.