Significance and Use
4.1 When preparing construction, project, and program cost estimates, it is often necessary to make monetary provision for change or risk, or both, or other exigencies where information is incomplete.
4.2 Such allowance, contingency or reserve sums are employed by many persons engaged in the planning, delivery, and financing of construction work.
4.3 These users include owners, developers, facilities programmers, cost planners, estimators, schedules, architects and engineers, specification writers, operating and maintenance staff, manufacturers, educators, financial managers, and comptrollers.
4.4 Usage:
4.4.1 These sums are especially appropriate when performing the following activities:
Cost budgeting;
Conceptual, design, and construction cost estimating;
Preparing complete forecast cost for economic evaluation,
investment analysis, and approval; and
Controlling cost during planning, design, and construction.
4.4.2 In any of these activities a needed requirement, or component, of the planned construction can be known while the defined solution, design or specification, for providing this may not. The usual, and appropriate, response in these situations, is the inclusion of a monetary sum, within an estimate, to provide for this (these) requirement(s).
4.4.3 Such sums may be general or specific in scope, may be planned to be spent or may only be included as possible mitigation for unplanned events and requirements.
4.4.4 To distinguish between these sums, and in recognition of their differing purpose, they are described, and classified here, using the terms allowance, contingency, or reserve.
NOTE 1: Section 5 includes a generic statement of purpose for each of the three terms and provides a sub-classification that distinguishes between sums included for specific purposes and for non-specific, that is, general purposes. In cost budgeting, conceptual and design estimating especially, an estimator may intuitively recognize the need for a general purpose sum. This recognition comes in the absence of any known specific requirement other than the need to ensure the estimate total is a reasoned forecast of a reasonable bid result.
4.5 This classification defines allowance, contingency, and reserve sums as items common to construction, project, and program estimates through planning, design, construction, and completion. The terms are sufficiently generic to be applied in all forms of construction work.
Scope
1.1 This classification establishes a classification for allowance, contingency, and reserve sums used in construction, project, and program estimating.
1.2 This classification applies to all construction work.
1.3 This classification is not based on permanent physical elements of construction (as defined and classified in Classification E1557). Rather, the classification items are cost components common to construction, project, and program estimates.