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5 Types of Contingency Budget

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A contingency budget is money that is set aside in a budget for unexpected costs. It is common for unexpected costs to be expected. As such, a contingency budget avoids the complexity of revising a budget with each unexpected cost and resubmitting it for approval. The following are common methods for calculating a contingency budget.

Standard Amount

Inclusion of a standard amount such as 10% of the budget based on the common practices of a firm or industry. By definition, contingency costs are unknown. As such, some firms see no point in estimating them with complex algorithms.

Management Comfort Level

Inclusion of an amount that is approved by management. Generally speaking, contingency budget isn't popular with management and it can be hard to sell.

Risk Management

Identifying risks and quantifying their impact and probability is a reasonably accurate way to estimate contingency cost.

Reference Class Forecasting

Looking at projects in your industry and how many go over budget. If projects commonly go over budget by 40% for similar projects, a contingency of 5% may be far too small.


Standard calculations for an industry or firm based on parameters that provide a reasonable approximation of estimation errors and risk.
Overview: Contingency Budget
Money that is set aside in a budget for unexpected costs.
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An overview of the common types of budget.

Budget Control

The common elements of budget control.

Strategic Budget

A definition of strategic budget with examples.

Budget Definition

A financial plan for a defined activity over a period of time.

Budget Variance

An overview of budget variance.

Flexible Budget

A definition of flexible budget with examples.

Fixed Budget

A definition of fixed budget with examples.

Static Budget

A definition of static budget with examples.


The common types of estimates.

Capital Budget

A definition of capital budget with examples.

Cash Budget

A definition of cash budget with examples.

Reference Class Forecasting

An overview of reference class forecasting as an estimation technique.


Projections of costs, task completion times and resource needs for a project.

Story Points

An overview of estimating with story points including planning poker.

Parametric Estimate

A definition of parametric estimate with examples.

Basis Of Estimate

A definition of basis of estimate with examples.

Cost Analysis

The common types of cost analysis.

Budget Estimates

A definition of budget estimate with examples.

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