What does contingencies mean in construction?
Contingencies. A contingency is an amount added to an estimate to allow for items, conditions, or events for which the state, occurrence, and/or effect are uncertain and that, in the contractor’s experience, will likely result in additional costs.
What is the order of precedence in construction contracts?
An order of precedence clause is a term which identifies the order in which the various contract documents are prioritized when resolving a conflict or ambiguity within said contract documents. Not all construction contracts contain such a clause.
Why contingencies are required?
contingencies in civil engineering are important when preparing estimates for any construction project. While planning any construction project, finalizing a budget is one of the major steps in planning a successful project.
Who owns construction contingency?
When an owner procures a project with the result being a fixed-price arrangement, the contingency is owned exclusively by the project delivery firm. With a GMP compensation arrangement, the contingency is almost always controlled by the project delivery firm to address certain cost elements included in the GMP.
What is a GMP in construction?
GMP stands for the guaranteed maximum price. That refers to the highest amount of labor, materials and profit costs the contractor can charge the customer in the construction industry.
Do plans supersede specs?
If there is a conflict between the Drawings and Details on Drawings and the Specifications, then the Specifications will prevail. The higher “Order of Precedence of Documents” governs or prevails. It is sort of like a poker hand where 3 of a kind beats 2 pairs, etc.
Do drawings or specifications take precedence?
Supplement 5252.236-9312, Design Build Contract-Order of Precedence, which showed that specifications took precedence over concept drawings. General requirements, which stated “in case of differences between project specifications and the accompanying drawings, the specifications will govern.”
What is a construction contingency?
A construction contingency is an amount of money set aside to cover any unexpected costs that can arise throughout a construction project. This money is on reserve and is not allocated to any specific area of work. Essentially, the contingency acts as insurance against other, unforeseen costs. Determining…
How can a contingency be reduced during a project?
An example of how a contingency might be reduced during a project is set out below: At the preliminary business plan stage, total cost estimates might include a 15% contingency. In the elemental cost plan this might reduce to 10% of fees and construction costs.
What should you look for in a construction contingency clause?
When encountering a construction contingency clause in your contract, it is essential to keep an eye out for a few things. First, it should detail both the owner’s contingency and the contractor’s contingency.
What are the different types of construction contingency funds?
There are two main types of construction contingency funds: contractor contingency and owner contingency. A contractor contingency is an amount built into the contractor’s anticipated price for the project to account for various risk factors that cannot otherwise be accounted for in a schedule of values.