April 2, 2026 · Updated October 7, 2026

Construction contingency percentages for each project stage

A sensible construction contingency percentage depends on how much of the project is still unknown, so it changes with the stage. The Royal Architectural Institute of Canada’s handbook says contingencies “may be as high as 25% at the early stages of a project” and “will decrease to 2%–5% as the degree of uncertainty is reduced”, and that construction contingencies for renovation work are higher (RAIC Canadian Handbook of Practice, chapter 4.2). The federal government sets similar ceilings for the design part alone: no more than 20% at a Class D estimate, stepping down to 5% at Class A (PSPC estimate classes, RAIC CHOP appendix A).

So 5% and 10% can both be right, at different points in the project. Below is how to set the figure at each stage, split it, assign it in the contract and run it on site.

Construction contingency percentage by stage

Canadian public owners, and most experienced private ones, tie the budget to a class of estimate. Each class matches a stage of design and carries a known level of accuracy. Where the sources below give no figure, the last column says what drives the number instead.

Sources: design allowance ceilings from Public Services and Procurement Canada’s class definitions (2020), reproduced in RAIC CHOP appendix A. Accuracy ranges from the Canadian Construction Association’s 2012 Guide to Cost Predictability in Construction, as cited in RAIC CHOP chapter 4.2.

Two things about this table are worth knowing before you use it.

First, the PSPC figures are ceilings on the design allowance, which is what federal estimating calls design contingency. They describe how complete an estimate should be at each class, not how much construction contingency a project should hold on site. A Class A estimate that needs more than a 5% design allowance isn’t really a Class A estimate yet.

Second, the accuracy range and the contingency are different numbers. A Class C estimate at ±15% to ±20% says the true cost could reasonably land that far either side of the estimate. The contingency is how much of that spread you choose to fund. Owners with little room to absorb an overrun carry more. Owners who can trim scope if prices come in high can carry less, provided the scope they would trim is identified in advance.

The CCA guide also reminds owners how wide real tender results can be. Its task force had no common national database, but members shared internal data showing up to 40% of tenders with low bids more than 30% away from the pre-tender estimate, and fewer than 20% within 10% (CCA, 2012). That’s a reason to keep a measured contingency through tender rather than releasing it at the end of design, and to keep the cost consultant involved while bids are out, which the guide also recommends.

Why one blended contingency number doesn’t work

RAIC notes that most government agencies, banks and other lenders “expect a single contingency amount to be shown at the bottom of a budget” so it can be plainly seen, while some project managers also apportion it by line item (RAIC CHOP 4.2). Showing one total to a lender is fine. Managing the project on one total is where the trouble starts.

A single “10% contingency” line holds several different risks that behave differently over time. Design growth should shrink steadily as drawings mature. Site surprises cluster early in construction, in the ground and behind walls. Market movement depends on dates and the economy. Owner changes depend on decisions you haven’t made yet. When all four draw on one pot, the total goes down and nobody can tell which risk is consuming it, so nobody learns anything until it’s gone.

RAIC’s guidance is to “distinguish between design contingencies and construction contingencies, and identify both in any estimate in addition to any escalation amount”. We go one step further and carry four named lines on every project we manage.

Design contingency

This covers the drawings maturing: the difference between what’s drawn today and what a complete, coordinated set will need. It should be largest at the functional program and close to zero by tender, following the PSPC steps in the table above. If design contingency isn’t shrinking as design moves forward, the design is growing, and that’s worth a conversation with the design team while it’s still cheap to have.

Construction contingency

This covers what the ground and the building hide once work starts: soil and groundwater, existing services, coordination clashes the drawings missed, and conditions in an existing structure. It exists for the construction period, so it doesn’t burn off during design the way design contingency does. Its size depends on how much has been investigated. A geotechnical report, a designated substances survey and a condition assessment of an existing building all reduce it, because each one turns an unknown into a priced item.

Escalation

This covers the market moving between the date of the estimate and the date the work is bought. RAIC tells architects to “always include an allowance for escalation as a line item in the project budget” and to put a reference date on every estimate (RAIC CHOP 4.2). The CCA guide splits it in two: market escalation up to the bid, and the escalation contractors build into their prices for labour and material during construction (CCA, 2012). Statistics Canada publishes building construction price indexes quarterly by building type and census metropolitan area, which is a reasonable place to check how fast costs have been moving in your market. Carry escalation to the schedule you actually believe, not the one in the first presentation.

Owner contingency

This covers your own changes, which you’ll make and are entitled to make. A tenant’s requirements shift, operations want a different layout, a finish gets upgraded. Keeping it separate matters because it’s the only line entirely within your control, and the only one where spending it can improve the building rather than just fix a problem.

Contingency vs allowance vs escalation

These three are often confused, and the confusion costs money because each one is closed out differently at the end of the job. A contingency covers what you don’t know yet. An allowance is a placeholder for something you know you need but haven’t designed or selected. Escalation is a forecast of price movement over time.

The cash allowance rules in the table come from CCDC 2, the standard Canadian stipulated price contract. Under GC 4.1, expenditures under cash allowances are authorized by the owner through the consultant, the contractor’s overhead and profit sit in the contract price rather than in the allowance, overruns on one allowance are first covered by unspent amounts on the others, and the net unspent amount is deducted from the contract price by change order (CCDC 2 – 2020, GC 4.1; see the CCDC 2 document page).

The most common problem we see with allowances is under-scoping. An allowance for a lobby finish carried at a figure nobody tested will be overspent, the overrun gets moved into contingency, and both lines stop meaning anything. Reading the allowances is one of the first things we cover in how to read a construction estimate: each one should say what it includes and how the figure was reached.

One more use of the word causes confusion on commercial projects. A tenant improvement allowance is the landlord’s contribution to a tenant’s fit-out under a lease. It helps pay for the fit-out and says nothing about how much contingency the fit-out needs. We explain how it works in how tenant improvement allowances work in Ontario.

Who holds contingency under different contracts

Who holds the contingency, who approves spending it and who keeps what’s left are contract questions, and the answer changes with the form of contract. The notes below describe the standard CCDC forms in general terms. They’re not legal advice, and any amended contract should be read by your lawyer.

Stipulated price (CCDC 2)

On a stipulated price contract, the contractor’s price already carries its own allowance for risk, inside its numbers and out of sight. That’s the contractor’s to manage. Separately, CCDC 2 lets the owner put a contingency allowance into the contract. Under GC 4.2, it’s included in the contract price, it includes the contractor’s overhead and profit on it, spending from it is authorized and valued through the change provisions in GC 6.1 to 6.3, and the contract price is adjusted by change order for the difference between what was authorized and the allowance (CCDC 2 – 2020, GC 4.2; CCDC 2 document page). In practice, that means unspent contingency allowance comes back to the owner. Our guide to the CCDC 2 stipulated price contract walks through the rest of the form, including how changes and payment work in Ontario.

Some owners prefer to hold all contingency in their own budget, outside the contract. Either approach works if everyone knows which is in use.

Construction management (CCDC 5A and 5B)

CCDC publishes two construction management forms: 5A, for services, and 5B, for services and construction, both updated in 2025. Under 5A, the construction manager provides services and the owner holds the trade contracts, so the owner carries the risk on each trade package and the contingency sits in the owner’s budget. Under 5B, the construction manager contracts the trades and carries out the work on a cost basis plus a fee. Where the parties opt for a guaranteed maximum price, Langlois Lawyers’ 2026 summary of CCDC 5B describes a contingency added to the Class A estimate to set it, with savings shared between the parties in a way tied to the portion of the CM’s fee that’s at risk (Langlois, 2026). We compare the two forms in more detail in owner’s rep or construction manager. How a guaranteed maximum price is set and when to elect one is covered in CCDC 5A vs 5B.

On a guaranteed maximum price, the contingency inside it is often a large figure the owner hasn’t seen broken down. Ask to see it, ask what it’s meant to cover, and agree how it will be reported.

Cost-plus (CCDC 3)

Under a cost plus contract, the owner pays the actual cost of the work plus a fee. Every unknown flows straight through to the owner, so the whole contingency belongs in the owner’s budget and should be sized on the basis that the owner carries all of the risk.

What to put in the contract

Whatever the form, settle these before signing:

1. Who holds each contingency line. Owner, contractor or shared, named line by line.
2. What it may be used for. Unforeseen conditions and coordination gaps, yes. Scope the owner added, only from owner contingency. Contractor errors, normally not.
3. Who approves each use, and up to what amount. A single approver with a dollar limit, and a second signature above it.
4. How each use is documented. The same change order or change directive paperwork as any other change, so the record is complete.
5. How it’s reported. A monthly statement of the original amount, approved draws, pending draws and the balance.
6. Where unspent amounts go. Back to the owner, shared, or kept by the contractor, stated as a rule, not left to a conversation in the last month of the job.

The last point causes the most trouble at closeout, and a paragraph in the contract settles it. Our five questions to ask before you sign covers the other commercial terms worth settling at the same time.

Renovation, heritage and occupied buildings

RAIC is direct about this: “Construction contingencies for renovation work are higher” (RAIC CHOP 4.2). The CCA guide makes the same point at the earliest estimate, noting that Class D accuracy depends partly on whether the project is new construction on a greenfield site or a renovation (CCA, 2012). Neither source gives a single uplift, and the right one depends on what’s been investigated. These are the conditions that push it up.

Existing buildings

An existing building can only be surveyed so far before walls, ceilings and floors are opened. Structure that doesn’t match the record drawings, services that were never documented, and old work that doesn’t meet the current code all appear during demolition, after the contract is signed. The more intrusive the investigation before tender, the smaller the construction contingency can be. In Ontario the owner must also have a report on asbestos-containing material prepared before tendering alteration work, which we describe in our office renovation planning guide for Toronto. A thorough survey at design stage moves a large unknown into the base price.

Heritage buildings

Heritage work adds conservation requirements, specialist trades and approvals that can shape how a repair is done once the condition is exposed. The quantity of masonry, timber or plaster that needs repair is rarely clear until it’s opened up and examined. Carry a construction contingency that reflects how much of the historic fabric will be disturbed, and budget time as well as money for the approvals.

Occupied buildings and tenant spaces

When people keep working, shopping or living in the building, the work is phased, done after hours, or both. Each phase adds temporary protection, moves and coordination, and each phase boundary is a place where something unplanned can turn up. In a leased space there’s also the landlord’s construction rules and approvals to work within. Our guide to retail store build-outs in Toronto covers how an “as is” unit can carry far more unknowns than a delivered shell, and the office renovation guide covers phasing a floor while staff stay in it.

A smaller build follows the same pattern. On a garden or laneway suite, most of the unknowns sit underground and in the existing house’s services, which is why what a garden suite costs in Toronto treats contingency as a separate line sized to the lot.

Managing the contingency drawdown

Setting the right figure is half the work. The other half is controlling how it’s spent, and the discipline is straightforward:

1. Log every use. Record what it paid for, which line it came from, why the item wasn’t in the base scope, and the balance left. A log with a cause recorded against each entry becomes one of the most useful records on the project.
2. Approve before it’s spent. Someone with authority says yes before the line shrinks. Finding out at month end that contingency was used is too late to ask whether it should have been.
3. Compare the burn to progress every month. Put the share of construction contingency spent beside the share of construction complete. Spending ahead of progress early in a job is normal, because the ground and demolition carry most of the surprises. Spending well ahead of progress once the building is closed in is an early forecast of the final cost and deserves a look at what’s driving it.
4. Release what’s no longer at risk. When the foundations are complete, the risk they carried is gone. Moving that money from construction contingency to a forecast saving, with the owner’s agreement, keeps the remaining balance honest.
5. Keep scope out of it. New wishes go through owner contingency, priced and approved as owner changes. Construction contingency is for what the team didn’t know.
6. Report it plainly. Show the original amount, approved and pending draws, the balance and the forecast at completion on one page in the monthly report, and say clearly when the news isn’t good.

Most of the change orders that consume contingency start well before construction. We trace the main sources, and how to code them so the log is useful, in where change orders actually come from.

What a healthy contingency looks like over the job

On a well-run project, design contingency steps down at each class of estimate, escalation is replaced by real prices as packages are bought, and construction contingency draws down fastest during excavation, foundations and demolition, then slows through finishes. Owner contingency moves only when you decide something. A project that drifts from that pattern is worth a closer look while there’s still time to act.

Setting the contingency on your project

The figure in the first budget is the one everyone remembers, so it’s worth setting carefully. Our article on why the first budget matters most covers how early budgets go wrong. For contingency in particular, a short checklist covers most of it:

• Which class of estimate is the budget, and does the design allowance sit within the PSPC ceiling for that class?
• Is construction contingency shown separately, and does it reflect the investigations done so far?
• Is escalation carried as its own line, with a reference date and a realistic schedule?
• Is owner contingency separate, so your own changes don’t consume risk money?
• Does the contract say who holds each line, who approves its use and where unspent amounts go?
• Is there a monthly report that shows the balance against progress?

Sizing those lines against the project’s real risk, and setting up the reporting before tender, is core preconstruction work. Our experience was built over more than 20 years at PCL Constructors and Oxford Properties, across office, residential, retail and industrial projects, and the contingency line is one of the first places we look when asked to review a budget. If yours carries one blended figure and you’d like a second read before it goes to tender, get in touch.

Frequently asked questions

What is a good construction contingency percentage?

It depends on the stage. RAIC’s handbook says total contingencies may be as high as 25% at the early stages and fall to 2–5% as uncertainty is reduced, with renovation work higher. Federal estimating caps the design allowance at 20% for a Class D estimate, 15% at Class C, 10% at Class B and 5% at Class A. A good figure is one sized to what the project still doesn’t know, set separately for design, construction, escalation and owner changes.

What is 20% contingency?

It means 20% of the estimated construction cost is held in reserve for unknowns, so on a $4 million estimate that’s $800,000. At the functional program stage, before design starts, it’s in line with the federal ceiling of 20% for design allowance at Class D. On a project with complete drawings and site investigations done, it would be well above what the Canadian guidance suggests is needed.

What does 5% contingency mean?

It means 5% of the construction cost is held for unknowns: $100,000 on a $2 million job. That’s the federal ceiling for design allowance at a Class A, pre-tender estimate, and within the 2–5% RAIC describes once uncertainty is reduced. It suits new build with complete documents and a well-investigated site. For renovation or an early-stage budget, 5% is usually too thin.

Is 20% contingency too much?

At concept stage, usually not. It matches the federal design allowance ceiling for a Class D estimate, and RAIC puts early contingencies as high as 25%. By tender it’s high, and worth asking why. Either the documents are less complete than the estimate class suggests, or there are known risks that should be investigated and priced as base scope rather than held as contingency.

Should the contractor hold contingency too?

Every contractor carries an allowance for its own risk inside its price, whether or not it’s visible. Under construction management and guaranteed maximum price arrangements, ask to see the contingency inside the price, what it’s intended to cover, who approves its use and where unspent amounts go, and have the answers written into the contract.