Contingency

Question

Can anyone explain how to handle contingency funds? I have a bid item called contingency (required by project owner) and it shows up on my schedule of values. Anytime we create a change order, the change order amount has to come out of the contingency. How do I represent this under my Prime & Budget change tabs? Thank you in advance.

smenard · Answer

Contingency funds are similarly related to retention, and often withhold 5-10% per pay application for this type of situation. Do you see any way that would credit the contingency fund as opposed to the change order debiting the fund, such as withholding a certain percentage per milestone/period of time? 
 
Once you determine where the other side of the equation is coming from, then I would just simply set up a cost code for the specific purpose in the budget, as a separate line item, and estimate what you believe the total value of the fund will be (maybe 5-10% of the project value). Then you would create your change order and reference the same contingency cost code on the "Prime Change Details" tab, but each amount entered on this tab would need to be a negative value (this would offset the budget value entered on the job, and result in the remaining 'budget' or value of the contingency fund available after said change orders. 
 
I'm sure there are several different ways to handle something like this, but if it were me, being the Sage "guy" when it comes to all our job management within the system. Happy to answer any further questions you might have.

Char DeLange · Answer

Contingency is like extra cash in the budget because you know there will be items that come up. 
To re-allocate funds simply create a change order that credits/reduces the contingency cost code and increases the new cost code. It's sort of like having a material allowance for plumbing because the client hadn't picked out fixtures yet but you know it will be about$20k. I have never heard of contingency being related to retention. 
Retention is when the payor holds back 5 or 10% of each payment to ensure the contractor doesn't walk off the job before its done. It provides leverage/incentive to finish the work. Unfortunately in the past some general contractors never paid out the retention at the end of the project to the subs. Because of this some of the rules have changed. And why lien releases are VERY important

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