Contingency allowances

Cost of contractor s fees plus contingency allowance... 

Engineering expenses Legal fees and license or permit costs Start-up and shake-down costs Contingency allowances... 

Contingency allowance, this is an allowance built into the capital cost estimate to cover for unforeseen circumstances (labour disputes, design errors, adverse weather). Typically 5 per cent to 10 per cent of the direct costs. 

It has already been noted that the only other item that might be affected is the process piping cost. If necessary, the contingency allowance can be increased to account for this. 

The financial appraisal is normally undertaken quite early in the life of the project, well before the final designs are complete, so a great deal of the cost calculation is based on the skill of the estimator, and much of it is done by factoring on known figures (such as how much a similar plant cost in another place or at another time). As it is an estimate, the final figure will prudently include a contingency allowance - the better the estimate is believed to be, the lower this contingency needs to be. 

Notwithstanding their effectiveness, these preventive measures are not infallible and must be complemented with a contingency allowance consistent with the stage of project development and the quality of the available information. 

The Project Manager must also make an in-depth review of the resolution and contingency allowances included in the estimate, understand the estimator s rationale, and be satisfied that they are consistent with the estimating approach and not over- or understated. 

All cost forecasts must include resolution and contingency allowances to reflect the current level project definition. 

Conceptual and preliminary estimates normally would not contain sufficiently detailed information for making any meaningful productivity correction to the labor accounts. Exposure to low productivity should be covered by the judicious evaluation of the contingency allowance. 

Additions and deletions must be handled by adjusting the number of work hours. In the case of additional work this can be done either with overtime or increasing the work force. If it becomes apparent that these measures cannot keep the project on the right track at a reasonable cost (within the contingency allowance) it is time to bite the bullet and inform management of the schedule delay and the cost impact and risks of trying to maintain schedule at all costs. 

The contingency allows for the battery being in a partial state of charge before the loss of supply. The rated AH capacity and voltage are now known. Reference 3 gives other examples plus a general description of battery charging principles. 

Establishment of a contingency allowance. A contingency allowance provides for unexpected needs. However, consideration can be given to inserting contingency items into plan priorities, in which case such items would displace planned items. 

What is a failed project It is a project that exceeds budget and/or schedule by the extent of its contingency allowances. At that point the project is now essentially unfunded, and its... 

This aspect of human nature bedevils the use of performance statistics for project risk analysis, and for the setting of contingency allowances for project budget and schedule. The subject is further discussed in Chapter 9, Studies and Proposals. 

Interconnections and upstream failures must be considered and contingencies allowed tor. 

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