DEVELOPMENT GUIDE
How Much Development Contingency Is Enough?
Contingency is a transparent allowance for defined uncertainty, not a substitute for missing scope.
In this guideWhat the analysis measuresCalculation frameworkUnderwriting reviewHow to use the result
What the analysis measures
Apply contingency to the cost categories genuinely exposed to uncertainty. Land, fixed fees and financing may require different treatment from construction work.
Calculation framework
Separate design, construction and owner contingency when stakeholders control them differently. Reduce contingency only as risk is resolved.
Underwriting review
Test both percentage and absolute contingency against design stage, procurement, abnormal conditions and schedule risk.
How to use the result
Show how contingency is funded and whether it is lender-eligible. An unfunded contingency can still become an equity requirement.