Protocol
Build contingency from named residual risks
A round buffer is easy to add and hard to learn from.
When it fits
- A team adds 20% to every estimate because projects are uncertain.
When to avoid it
- Not every risk supports a credible numeric probability; qualitative contingency governance can be more honest than false precision.
Why it matters
List material risks that remain after planned mitigation. For each, state trigger, plausible impact and whether the impact is already inside the base estimate. Use these residual risks—plus empirical forecast error where appropriate—to justify contingency instead of hiding a generic pad in every task.
Steps
- Risk is named.
- Mitigation is named.
- Residual impact is described.
- Double counting against base estimate is checked.
- Contingency rationale is recorded.
An example
A migration reserve covers possible manual repair after a reconciliation failure, while normal validation effort remains in the base estimate.
Check your result
A reviewer can trace contingency to uncertainty rather than a habitually padded number.
Keep this limit in mind
- Not every risk supports a credible numeric probability; qualitative contingency governance can be more honest than false precision.
Connected ideas
Useful withKeep mitigation work out of the hidden buffer
Evidence and sources
The Green Book treats contingency as an allowance for residual risk and remaining optimism bias rather than as an unexamined extra percentage.
How contingency is funded, governed and released depends on organization and project type.
The Green Book (2026) · Contingency
IPA guidance treats identified risks, mitigation costs, residual probability and impact as part of estimating rather than hiding all uncertainty inside the base estimate.
Qualitative or poorly evidenced probability estimates should not be dressed up as precise expected values.
Cost Estimating Guidance · Accounting for risk
The Green Book distinguishes prevention or mitigation costs from contingency for risks that remain after mitigation.
Organizations may use different accounting labels; the useful distinction is planned work versus allowance for residual uncertainty.
The Green Book (2026) · Optimism bias and contingency