How many different places can you typically find contingency in a development budget?

How many different places can you typically find contingency in a development budget?

• A. One
• B. Two
• C. Three
• D. Four

Answer: (C)

Contingency is built into several distinct risk areas in a development budget to ensure the project can weather unexpected changes. The typical three pockets are: - Construction (hard costs) contingency: cushions overruns in physical build, material price changes, or design revisions during construction. - Soft costs contingency: covers fees not tied to actual construction work, like architectural and engineering services, permitting, legal, and other professional expenses that can rise as the project progresses. - Financing/owner costs contingency: reserves related to financing gaps, interest during construction, lender fees, and other holding or carrying costs that can appear if timelines slip or loan terms shift. Having these three separate contingencies allows more precise budgeting and risk management across different risk domains. Some models may combine or add additional reserves, but three is the common framework for where contingencies appear.

Contingency is built into several distinct risk areas in a development budget to ensure the project can weather unexpected changes. The typical three pockets are:

• Construction (hard costs) contingency: cushions overruns in physical build, material price changes, or design revisions during construction.

• Soft costs contingency: covers fees not tied to actual construction work, like architectural and engineering services, permitting, legal, and other professional expenses that can rise as the project progresses.

• Financing/owner costs contingency: reserves related to financing gaps, interest during construction, lender fees, and other holding or carrying costs that can appear if timelines slip or loan terms shift.

Having these three separate contingencies allows more precise budgeting and risk management across different risk domains. Some models may combine or add additional reserves, but three is the common framework for where contingencies appear.