It is tempting to build a budget for my project with very little spending contingency. I am also tempted to allocate that line item in the budget too quickly. It may seem as though project contingencies are free money, but that is the misunderstanding we want to discuss.
Contingency is money that we are virtually guaranteed to spend. However, we just don’t know where (or when). This is how we bail ourselves out (stay within budget) when:
- We forget to include tax and shipping in our original plan (could impact me >10%)
- The vendor thought we were installing the part ourselves (but we are not)
- The item someone quoted me is now discontinued (the new one costs more)
- A hurricane hits and building costs rise overnight
- The truck rental fee did not include fuel costs
- We need to next-day ship an overweight package to protect the schedule
- etc. etc. etc.
Contingency is not meant to cover me when the scope of the project increases (although I confess I have certainly used it that way. Far too often, I “pad” my budget because I know that someone will toss in additional expectations along the way). If I am asked to add new territory goals to my project, I need to provide an updated project estimate.
And – by all means – try to protect the contingency all the way to the end of the project. No one will mind if we actually spend less than we were given. In fact, underspending is a fast track to a bigger and better project next time!
Thanks for listening.