How much contingency might be included in a cost estimate for a risky project?

In the context of cost estimating for a risky project, including contingency allows for uncertainty and potential fluctuations in costs. The inclusion of a contingency budget is a common practice to mitigate the financial impact of unforeseen expenses or challenges that may arise during the project's lifecycle.

A contingency of 15-20% is often considered appropriate for projects characterized by a higher level of uncertainty or risk. This percentage strikes a balance between sufficient coverage for potential issues while also being reasonable in relation to project costs. It reflects the understanding that for risky projects, there are many variables that can influence costs, including changes in materials, labor, or unexpected site conditions.

While lower percentages like 5-10% may be suited for projects with well-defined scopes and minimal uncertainty, and while percentages as high as 25% might cater to extremely volatile circumstances, 15-20% is typically deemed a safer range for many risky projects. It allows project managers to account for the inherent unpredictability while not excessively inflating the budget. This rationale supports the choice of including 15-20% contingency in cost estimates for projects designated as risky.