The commercial terms · Contingency
How Much, and Who Controls It
Contingency is not padding and it is not free money. It is a bounded provision for things nobody could reasonably have known, and it should be governed as such.
Bring the site, the unit count and the drawings at whatever stage. You get a range, the drivers, and an honest read on the pro forma.
Self-perform
Dewatering, SOE and deep foundations in house
Licensed
General contractor, licensed in the state of Florida
GMP
Open book, with the contingency visible to you
Draws
Documentation your lender can actually process
Two failure modes, opposite directions
Too little contingency and every discovery becomes a negotiation that damages the relationship and delays the job. Too much and it gets spent, because a contingency treated as available budget always finds a use. The governance matters as much as the amount.
Visibility also changes behavior on both sides. A contingency that everybody can see gets discussed before it is drawn against, because the drawdown is a conversation rather than an accounting entry. One that is buried in the trades gets consumed without anybody deciding to consume it.
How it should work
- Sized to the actual risk profile — a conversion carries more than a repeat garden product.
- Held as a visible line with a written drawdown process.
- Owner approval for each draw against it, not blanket access.
- Distinguished clearly from an owner change, which is not contingency.
- Reconciled monthly so the balance is never a surprise.
Sizing it to the actual risk
A repeat garden product on a site with a thorough geotechnical report carries far less uncertainty than a podium on a coastal site with limited borings, or a conversion of a building nobody has opened up. The contingency should reflect that difference rather than a standard percentage.
Ask what the largest uncertainties actually are and how much of the contingency is allocated against each. A contingency with no reasoning behind it is a round number, and round numbers are either wasteful or inadequate.
How we handle it
- 01Size it to the risk and explain the basis.
- 02Keep it visible and report the balance monthly.
- 03Seek approval for each drawdown with the reason stated.
- 04Never use it to absorb our own errors.
Contingency should never cover a contractor's mistake. If we get something wrong, that is ours, and it does not touch your contingency. That is a low bar and it is worth writing into the contract rather than assuming.
FAQ
Common questions
- How much contingency?
- It depends on the risk profile. A conversion needs materially more than a repeat garden product.
- Who approves drawdowns?
- You should, individually, with the reason stated. Blanket access gets spent.
- Is an owner change a contingency item?
- No. That is a change order. Keeping them distinct matters.
- Does it cover contractor errors?
- It should not, and with us it does not.
What we build
Garden Apartments
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Wrap & Texas Donut
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Podium
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Mid-Rise Concrete
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Mixed-Use
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Adaptive Reuse
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Next step
Find out what is actually wrong with it.
An inspection, photographs of what we found, and a written scope. If the honest answer is that it can wait another season, that is the answer you will get.