What does "contingency" refer to in the context of estimating?

In the context of estimating, "contingency" specifically refers to an amount added to the project budget to cover unforeseen expenses or risks that may arise during construction. This is essential because construction projects are often subject to various uncertainties, such as unexpected site conditions, design changes, or fluctuating material costs. By including a contingency amount, project managers can ensure that they have financial flexibility to address these unpredictable factors without jeopardizing the overall budget and timeline of the project.

For example, if during excavation a contractor discovers unstable soil that requires additional work, the contingency funds can help cover these extra costs without needing to halt progress or seek additional funding. Properly estimating and incorporating a contingency allows for more accurate project budgeting and risk management.