Many are familiar with the concept of project contingency, but may not know how the value is initially calculated, when it is drawn from, and how to effectively generate an appropriate draw down curve. First let’s review the general concept of project contingency and its purpose.
When estimating the cost of a project, there exists a level of uncertainty ranging from cost of equipment, execution strategy, unspecified scope of work, or even local work conditions. Cost Contingency is defined as the amount added to an estimate to allow for items, conditions, or events that are uncertain but will likely result in cost increase. However, there are some key items that contingency is not typically intended to cover (although sometimes is):
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