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Refer to the Fairfield Inn case study documents, particularly the document Types of Contingencies PDF, address the following in your initial post:
• List at least three examples of items that could come up on this project that would need contingency dollars to cover.
• How can you determine the correct percentage to use?
• How will you incorporate this knowledge into your final project?
Cite from the articles and the case study documents to support your answers.
Respond to the two peers below (at least1 paragraph each), comment on their examples and compare them to your own. Provide any additional examples from your own experience, perhaps situations where having contingency either helped or would have helped (if you did not have it in your budget).
To complete this assignment, review the Discussion Rubric.
Peer #1 Jon
Contingency in Construction Projects
Contingency is a critical component of construction project planning. Hart (2007) defines contingency allowance as the portion of the project budget—either a set amount or percentage—reserved to address unforeseen changes in work or tasks. While its primary purpose is to cover unpredictable changes, contingency is sometimes misused to address errors caused by carelessness, depleting funds that might be required for more significant, unforeseen issues. Poor management of contingency funds can lead to cost overruns and even project failure.
Examples of Items Requiring Contingency Funds
Several scenarios could arise during the Fairfield Inn project that would necessitate using contingency funds, including:
• Unknown Conditions: Subsurface issues, such as unexpected soil composition or buried obstructions, could increase costs significantly. These conditions are common in construction and often impossible to identify during initial planning.
• Project Owner-Requested Changes: Project owners frequently request changes during construction that weren’t initially accounted for. For example, an owner might decide to shift or remove a wall to enlarge a room. Such changes typically increase costs, especially when requested later in the construction phase.
• Design Clarifications or Modifications: Requests for Information (RFIs) from builders may reveal the need for additional work beyond what is shown in the construction documents. Newell (2011) highlights that fulfilling the design intent can sometimes require modifications, even in design-build projects. While Procon’s design-build approach may minimize such changes, having contingency funds ensures these adjustments can be addressed.
Determining the Appropriate Contingency Percentage
For a design-build project like this, the contingency percentage should be tailored to the specific risks, complexity, and challenges faced. Hart (2007) suggests that contingency percentages typically range from 5% to 10%, depending on the contractor’s experience and the project’s difficulty level. Given that this project will occur in the Northeast during winter, inclement weather poses a significant risk. Therefore, setting the contingency percentage at the higher end of the range would provide Procon with the necessary flexibility to address potential weather-related delays and additional costs.
Incorporating Contingency Knowledge into the Final Project
The insights gained about contingency will be directly applied to the final project plan. With the Fairfield Inn project likely to face challenges such as inclement weather, owner-driven changes, and potential cost escalations due to the pandemic, a well-calculated contingency percentage is crucial. By accounting for these factors, an appropriate contingency allowance can be established to help the project remain within budget while accommodating unforeseen changes. This proactive approach ensures the project’s success and financial stability, even in the face of unexpected events.
References:
Hart, D. H. (2007, September). Managing the contingency allowance. AIA.
http://www.aia.org/aiaucmp/groups/secure/documents/pdf/aiap026970.pdf
Newell, K. (2011, October 14). Fire stations: The Construction Contingency Allowance. Carolina
Fire Rescue EMS Journal. https://www.carolinafirejournal.com/Articles/Article-Detail/
articleid/1781/fire-stations-the-construction-contingency-allowance
Peer #2 Liz
Considering the construction industry constantly faces unforeseen challenges throughout a project lifecycle, it’s important to have a contingency plan to cover additional costs in the event any issues arise. Setting aside a reserved amount of money ensures the project can proceed without greatly impacting the budget. Four major categories of change that a project can face are unknown conditions, building inspector’s modifications, project owner requested changes, and design clarifications or modifications (Newell, 2021). For Fairfield Inn, possible changes that would require construction contingency dollars include weather conditions, material issues, unforeseen site conditions. Depending on the time of year, weather delays can greatly impact a project as well as the schedule. Cold temperatures can impact the setting time of concrete, which would delay installation of wood doors, while high temperatures reduce strength and longevity, which would still set back other trades needing to continue after the concrete subfloor is installed (K&E Flatwork, 2024). Along with weather conditions affecting materials, there are also other concerns with material issues. Delayed material deliveries could set back the schedule. This could also include material deliveries of other trades that could hold back door installation as well. Unforeseen site conditions could include underground utilities, or contaminations that could delay the project while these issues are resolved (Slowey, 2018).
The Deterministic Method calculates 5-10% of the base estimate to allow room for error. This number would also need to be determined by establishing a contingency table with predetermined guidelines (Ghorbani, 2024). Considering the impact that weather conditions could pose on the project, I think it would be beneficial to set the contingency percentage at 10% to allow for potential issues.
Considering this is a larger project and changes to the scope as well as weather and material issues may be a risk, I would include a 10% contingency to the estimate. Understanding different types of potential changes will also help me plan better for unforeseen problems.
References:
Ghorbani, S. (2024, July 10). How cost contingency is calculated?. Project Control Academy. https://www.projectcontrolacademy.com/cost-contingency-calculation/
LLC, K. F. (2024, August 29). The impact of weather on concrete paving, repair, and maintenance: Commercial concrete contractor in Kansas City: K&E Flatwork. Commercial Concrete Contractor in Kansas City | K&E Flatwork. https://www.keflatwork.com/blog/the-impact-of-weather-on-concrete-paving-repair-and-maintenance/#:~:text=Temperatures%20at%20extremes%20pose%20a,in%20Warm%20and%20Hot%20Weather
Newell, K. (2021, December 27). Planning for the unplanned: The Construction Contingency Allowance. Carolina Fire Rescue EMS Journal. https://web.archive.org/web/20230329121140/https://www.carolinafirejournal.com/planning-for-the-unplanned-the-construction-contingency-allowance/
Slowey, K. (2018, September 25). The dotted line: Mitigating the risk of unforeseen site conditions. Construction Dive. https://www.constructiondive.com/news/the-dotted-line-mitigating-the-risk-of-unforeseen-site-conditions/532519/
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