HOW TO CRAFT A DIY CONTINGENCY FUND (2 MINUTE READ)
The importance of contingency planning
For the first-time DIYer and the experienced renovator alike, budgeting for a renovation project can be a daunting task. Impulsive decisions taken on a whim will quickly add to unplanned expenses, turning your dream home renovation into bloated beast of burden. The rule of thumb is that, no matter what, there should always be room to accommodate hidden and unexpected costs. Setting up a contingency budget is not just a good idea - it is absolutely essential.
A contingency budget is a budget that covers unexpected expenses such as unforeseen increases in costs and labour. Should problems arise, not having a contingency plan in place could delay the whole project or even prevent work from being completed.
In this article we’ll give you the basic outline of the contingency planning process and what it should contain.
Start by asking “What can go wrong?”
Be prepared by considering all the risk areas and unmeasurable aspects of your renovation project and ensure that you have a back-up plan in place. A prudent approach will prove profitable in the long run, so when drawing up your contingency plan, try to undertake the following:
- Contractors & Subcontractors - It’s a good idea to have a backup list of subcontractors ready - just in case one backs out at the last moment, or is not working out. Communication is key between you and the contractor especially prior to the project, this will ensure that everyone is on the same page regarding expectations and outcomes.
- Hidden obstacles - Consult your home’s building plans and do a property inspection with a professional builder before you start budgeting. There may be some underlying issues within the walls, plumbing, ceiling or foundation that will require extra planning and materials to avoid disaster.
- Materials - Ensure that your contractor and subcontractors provide you with a complete breakdown list of all materials needs for every aspect of the project. If you need help projecting material costs, visit our instore Contractor’s Counter to speak to one of our specialists. We also provide project management for larger projects, as well as online quotes.
TIPS & INSIDER INFO:
Know the lingo and process:
There are 3 different ways to request pricing, to ensure the correct relationship is established between you & the contractor/subcontractor.
- RFQ (Request For Qualifications) – Simply requesting paperwork concerning qualifications or a portfolio of completed projects.
- RFP (Request For Proposal) – This is the next step and concerns requests about pricing, etc.
- Hard Bid – This is when all bid documents are complete and a lump sum is decided on.
IMPORTANT: Waiting for paperwork can be frustrating, especially when you’re running over schedule. It’s a good idea to factor in at least 6 weeks extra into your renovation schedule, to make room for resource and building consents.
HOW TO CALCULATE CONTINGENCY COST - THE 10% RULE
Calculating contingency is not an exact failproof science, however as a rule of thumb, most construction projects use a construction contingency percentage rate of between 5% and 10% of the total budget. That being said, it is always better to have a bigger margin – as mentioned before, not having a contingency plan in place could prevent work from being completed and delay the whole project.
Whether your renovation project is colossal or conservative, it’s always best to put a contingency plan in place. Luckily at BUCO, our cost estimation experts can assist you in the process of setting up a renovation budget, with all the contingencies in place. Check out our host of specialised services here.