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What is construction contingency.

Last Updated Nov 16, 2023

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A construction contingency is an amount of money set aside to cover any unexpected costs that can arise throughout a construction project. Risk management is the name of the game in construction, and including a construction contingency in your budget is the first step to protecting yourself against any unforeseen risks. Read on to learn the basics of the construction contingency budget, including types of contingencies, and a short guide to using one.

Table of contents

What is construction contingency?

A construction contingency is a part of a project's budget put aside to cover any unforseen costs, risks, events, or changes in scope that may affect the project's cost over the course of its life. This money is on reserve and is not allocated to any specific area of work . Essentially, the contingency acts as a sort of insurance against other, unforeseen costs.

Determining the amount of contingency is a balancing act. On the one hand, it's a good idea to have enough contingency funds to cover any uncertainties. On the other hand, it is important for business need enough cash on hand to keep construction going. Most projects will use a rate of around 5-10% of the total budget for contingencies.

Types of construction contingencies

There are two main types of construction contingency funds: contractor contingency and owner contingency .

Contractor contingency

A contractor contingency is an amount built into the contractor's anticipated price for the project to account for various risk factors that cannot otherwise be accounted for in a schedule of values .

This money is set aside to account for any errors that occur on behalf of the contractor. Accordingly, contractors consider these funds spent money.  Building this extra funding into an estimate is the contractor accepting the fact that unpredictable costs are all part of the construction process.

Owner contingency

A project owner's reserve is an amount set aside for additions or modifications of the scope of the work. These types of contingencies are used mainly in guaranteed maximum price (GMP) contracts .

Any changes not included in the initial bid will have to be paid by the owner-funded contingency. Incomplete plans or owner-directed changes are the leading causes of dipping into an owner contingency fund.

How to use the contingency budget

When encountering a construction contingency clause in your contract, it is essential to keep an eye out for a few things. First, it should detail both the owner's contingency and the contractor's contingency. They should list any and all predetermined costs that the contingency should be used for.

The list could include anything from incomplete designs, construction project delays, substitute subcontractors, price increases, and any other number of unexpected costs. This is generally referred to as the contingency budget.

The contingency budget should also include a well-drafted process of how to access contingency funds. It's best to have a detailed procedure concerning notices, paperwork, and approvals.

The contingency budget should also prepare for unspent portions of the contingency fund. Are the remaining funds shared among the contractor or subs as an incentive? Or does the money revert to the one funding the contingency? It's a good idea to clarify how the contingency funds will be managed from the jump. Otherwise, deciding how to manage unspent contingencies could create some headaches.

Is contingency the same as retainage?

A construction contingency fund is not the same as retainage , but the concepts are similar. Both retainage and contingency provide what are essentially "emergency" funds. When something on the project goes awry and costs some extra money, paying to fix the issue may come from the contingency fund, or it may come from the retainage being withheld from the contractor or subcontractor who created the issue. Plus, retainage and contingency both represent about 5-10% of the construction price.

However, retainage represents an amount of the contract price that has been earned but remains withheld. It serves a purpose, but at the end of the day, it's payment owed that's being withheld. Construction contingency, on the other hand, is actual inflation of the contract price to plan for the unexpected. That, or it's funding set aside by the owner for the unexpected issues.

It might sound a bit like semantics, but that's a huge, fundamental difference between the two. Retainage represents dollars earned and unpaid — and that amount could be the difference between a construction business turning a healthy profit or losing money on a job. Contingency isn't owed to anyone, and it could even turn into a positive if the contingency fund goes unused and gets dispersed to project participants.

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Alex Benarroche

24 articles

Alex Benarroche serves as Associate Counsel for Procore. His legal expertise includes construction, contracts, business, and intellectual property. Alex is bilingual in English and Spanish. He earned a J.D. from Loyola University College of Law and an M.S. in Intellectual Property and Internet Law from the University of Alicante in Spain. Originally from South Florida, Alex has called New Orleans home since 2003.

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What Is Contingency Planning? Creating a Contingency Plan

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Table of Contents

What is contingency planning, what is a contingency plan, contingency plan example, how to create a contingency plan, business contingency plans, project contingency plans.

Contingency plans are used by smart managers who are aware that there are always risks that can sideline any project or business. Without having a contingency plan in place, your organization won’t be well prepared for risk management .

The term contingency planning refers to the process of preparing a plan to respond to any risks or unexpected events that might affect an organization. Contingency planning starts with a thorough risk assessment to identify any risks and then develop a contingency plan to resolve them or at least mitigate their negative impact.

Contingency planning takes many shapes as it’s used for helping businesses and projects across industries. Even governments use contingency plans to prepare for disaster recovery or economic disruption, such as those caused by natural disasters.

A contingency plan is an action plan that’s meant to help organizations mitigate the negative effects of risks. In simple terms, a contingency plan is an action plan that organizations should execute when things don’t go as expected.

contingency plan for construction company

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Action Plan Template

Use this free Action Plan Template for Excel to manage your projects better.

Now that we’ve briefly defined what contingency planning is, let’s take a look at a contingency plan example involving a manufacturing project.

Let’s imagine a business that’s planning to manufacture a batch of products for an important client. Both parties have signed a contract that requires the manufacturer to deliver the products at a certain date or there may be negative consequences as stated on the purchase agreement. To avoid this, the business leaders of this manufacturing company start building a contingency plan.

To keep this project contingency plan example simple, let’s focus on three key risks this company should prepare for.

  • Supply chain shortages: The supply chain is one of the most important business processes for this manufacturing company. Therefore, one of the most impactful risks is a raw material shortage which may occur if their main supplier is unable to deliver the materials they need on time. To prepare a contingency action for this risk, the business owners decide to reach out to other suppliers and place standing purchase orders which give them the opportunity to ask for a certain quantity of materials at some point in the future. If the risk of a supply chain shortage occurs, they’ll have multiple sources of raw materials available in case their main supplier can’t keep up with their demand levels.
  • Machinery breakdown: Another risk that might halt production is the malfunction of machinery. To prepare for this, business leaders hire extra maintenance personnel and order spare parts for their production line machinery as part of their contingency plan. If the risk of machinery breakdown becomes a reality, the organization will have the labor and resources that are needed to mitigate it.
  • The team is not meeting the schedule: If the manufacturing team members are failing to meet their goals on time for whatever reason, the manufacturing business will need to allocate more resources such as extra labor and equipment to complete the work faster. However, this contingency action will generate additional costs and reduce the profitability of the project.

ProjectManager has everything you need to build contingency plans to ensure your organization can respond effectively to risks. Use multiple planning tools such as Gantt charts, kanban boards and project calendars to assign work to your team and collaborate in real time. Plus, dashboards and reports let you track progress, costs and timelines. Get started today for free.

ProjectManager's Gantt chart

Like a project plan , a contingency plan requires a great deal of research and brainstorming. And like any good plan, there are steps to take to make sure you’re doing it right.

1. Identify Key Business Processes and Resources

To create an effective contingency plan you should first identify what are the key processes and resources that allow your organization to reach its business goals. This will help you understand what risks could be the most impactful to your organization. Research your company and list its crucial processes such as supply chain management or production planning as well as key resources, such as teams, tools, facilities, etc., then prioritize that list from most important to least important.

2. Identify the Risks

Now, identify all the risks that might affect your organization based on the processes and resources you’ve previously identified. Figure out where you’re vulnerable by brainstorming with employees, executives and stakeholders to get a full picture of what events could compromise your key business processes and resources; hire an outside consultant, if necessary. Once you’ve identified all the risks, you should use a risk log to track them later.

3. Analyze Risks Using a Risk Matrix

Once you’ve identified all the risks that might affect your processes and resources, you’ll need to establish the likelihood and level of impact for each of those risks by using a risk assessment matrix . This allows you to determine which risks should be prioritized.

4. Think About Risk Mitigation Strategies

Now, write a risk mitigation strategy for each risk that you identified in the above steps. Start with the risks that have a higher probability and higher impact, as those are the most critical to your business. As time permits you can create a plan for everything on your list.

5. Draft a Contingency Plan

Contingency plans should be simple and easy to understand for the different members of your audience, such as employees, executives and any other internal stakeholder. The main goal of a contingency plan is to ensure your team members know how to proceed if project risks occur so they can resume normal business operations.

6. Share the Plan

When you’ve written the contingency plan and it’s been approved, the next step is to ensure everyone in the organization has a copy. A contingency plan, no matter how thorough, isn’t effective if it hasn’t been properly communicated .

7. Revisit the Plan

A contingency plan isn’t chiseled in stone. It must be revisited, revised and maintained to reflect changes to the organization. As new employees, technologies and resources enter the picture, the contingency plan must be updated to handle them.

Contingency Plan Template

We’ve created an action plan template for Excel to help you as you go through the contingency planning process. With this template, you can list down tasks, resources, costs, due dates among other important details of your contingency plan.

contingency plan for construction company

A business contingency plan is an action plan that is used to respond to future events that might or might not affect a company in the future. In most cases, a contingency plan is devised to respond to a negative event that can tarnish a company’s reputation or even its business continuity. However, there are positive contingency plans, such as what to do if the organization receives an unexpected sum of money or other project resources .

The contingency plan is a proactive strategy, different from a risk response plan , which is more of a reaction to a risk event. A business contingency plan is set up to account for those disruptive events, so you’re prepared if and when they arrive.

While any organization is going to plan for its product or service to work successfully in the marketplace, that marketplace is anything but stable. That’s why every company needs a business contingency plan to be ready for both positive and negative risk management.

In project management, contingency planning is often part of risk management. Any project manager knows that a project plan is only an outline. Sometimes, unexpected changes and risks cause projects to extend beyond those lines. The more a manager can prepare for those risks, the more effective his project will be.

But risk management isn’t the same as contingency planning. Risk management is a project management knowledge area that consists of a set of tools and techniques that are used by project managers to create a risk management plan.

A risk management plan is a comprehensive document that covers everything about identifying, assessing, avoiding and mitigating risks.

On the other hand, a contingency plan is about developing risk management strategies to take when an actual issue occurs, similar to a risk response plan. Creating a contingency plan in project management can be as simple as asking, “What if…?” and then outlining the steps to your plan as you answer that question.

Using ProjectManager to Create a Contingency Plan

ProjectManager has the project planning and risk management tools you need to make a reliable contingency plan that can quickly be executed in a dire situation.

Use Task Lists to Outline the Elements

Use our task list feature to outline all the elements of a contingency plan. Since a contingency plan likely wouldn’t have any hard deadlines at first, this is a good way to list all the necessary tasks and resources. You can add comments and files to each task, so everyone will know what to do when the time comes.

Task list in ProjectManager

Reference Dashboards to Monitor the Contingency Plan

Our dashboard gives you a bird’s eye view of all of the critical project metrics. It displays live data so you’re getting a real-time look at how your project is progressing. This live information can help you spot issues and resolve them to make sure that your contingency plan is a success. Which, given that it’s your plan B, is tantamount.

ProjectManager’s dashboard view, which shows six key metrics on a project

If you’re planning a project, include a contingency plan, and if you’re working on a contingency plan then have the right tools to get it done right. ProjectManager is online project management software that helps you create a shareable contingency plan, and then, if you need to, execute it, track its progress and make certain to resolve whatever problems it’s addressing. You can do this all in real time! What are you waiting for? Check out ProjectManager with this free 30-day trial today!

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Plan B for Success: Contingency Planning in Construction

contingency plan for construction company

In the high stakes world of construction, success often hinges on the ability to navigate through uncertainties and unforeseen events. That's where contingency planning comes into play. By developing a well-thought-out backup plan, construction projects can stay on track, minimize disruptions, and achieve timely completion. In this article, we'll explore why contingency planning is crucial in construction projects and delve into the key elements of an effective plan. We'll also examine how to implement and manage a contingency plan, using real-life case studies to illustrate successful strategies.

Why Contingency Planning is Crucial in Construction Projects

Construction projects are inherently complex, with numerous variables that can impact timelines, budgets, and overall project success. Understanding the risks and uncertainties associated with these projects is the first step towards effective contingency planning.

By identifying potential risks and hazards, construction teams can proactively develop strategies to mitigate these risks and minimize their impact. However, failing to have a contingency plan can lead to dire consequences for both the project and stakeholders involved.

Understanding the Risks and Uncertainties in Construction Projects

In construction, risks and uncertainties come in various forms. These can include unpredictable weather conditions, delays in material delivery, labor shortages, regulatory changes, and budget overruns, to name a few. Each of these factors has the potential to disrupt construction schedules and escalate project costs.

For construction professionals, it's imperative to assess these risks comprehensively and anticipate potential impacts. By doing so, they can prepare a contingency plan that acts as a safeguard against adversity, ensuring that the project can adapt and progress smoothly even in the face of unexpected challenges.

The Consequences of Failing to Have a Contingency Plan

Imagine a construction project that encounters a sudden delay in material delivery. Without a contingency plan in place, the project timeline is at risk of being thrown off course. Workers may be left idle, equipment may go unused, and valuable time may be lost.

Furthermore, without a backup plan, the delay in material delivery can cause a ripple effect, impacting subsequent construction activities and potentially leading to further project delays. This, in turn, can lead to increased costs, dissatisfied clients, and damage to the reputation of the construction company.

These consequences highlight the importance of having a comprehensive contingency plan that addresses various potential risks. With a well-prepared plan in place, construction teams can effectively navigate unforeseen events, maintain project momentum, and mitigate the negative impacts of unexpected situations or circumstances.

Key Elements of an Effective Contingency Plan

An effective contingency plan encompasses several key elements. Let's take a closer look at each of these elements and their importance in ensuring project success.

Identifying Potential Risks and Hazards in Construction Projects

The first step in developing a contingency plan is to identify potential risks and hazards specific to the construction project at hand. This requires a thorough analysis of the project scope, site conditions, stakeholder expectations, and other relevant factors.

Construction professionals should ask themselves questions such as:

  • What are the common risks associated with similar projects?
  • Are there any unique risks that arise from the project's location?
  • How might changing regulations impact the project?

By conducting a comprehensive risk assessment, construction teams can identify potential threats and ensure that their contingency plan addresses these specific areas of concern.

Assessing the Probability and Impact of Potential Risks

Not all risks carry the same probability and impact. Some risks may have a higher likelihood of occurring, while others may have more severe consequences if they do occur.

When developing a contingency plan, construction professionals must assess the probability and impact of potential risks. This involves evaluating the likelihood of an event occurring and the extent to which it could disrupt the project if it does happen.

By categorizing risks based on their probability and impact, construction teams can prioritize their mitigation efforts, allocate resources effectively, and ensure that the contingency plan adequately addresses the most critical risks.

Developing Strategies to Mitigate Risks and Minimize Impact

Once potential risks have been identified and their probability and impact assessed, construction professionals can move on to developing strategies to mitigate these risks and minimize their impact on the project.

For example, if adverse weather conditions are a known risk, the contingency plan may include provisions for scheduling flexibility, alternative work plans, or the use of protective measures. Similarly, if budget overruns are a potential risk, the plan may outline strategies for cost control, value engineering, or renegotiating contracts.

By developing proactive strategies, construction teams can reduce the likelihood of risks occurring and effectively manage them if they do arise. This enhances overall project resilience and increases the likelihood of successful project outcomes.

Implementing and Managing a Contingency Plan

A contingency plan is only effective if it is properly implemented and managed throughout the duration of the construction project. Let's explore the key considerations for effective implementation and ongoing management of a contingency plan.

Assigning Responsibility and Accountability for Contingency Planning

Contingency planning should not be the responsibility of a single individual or department. It requires collaboration and coordination among various stakeholders, including project managers, engineers, contractors, and subcontractors.

By assigning clear responsibilities and establishing accountability for contingency planning, construction teams can ensure that all necessary actions and precautions are taken to address potential risks effectively.

Open questions for consideration:

  • How can collaboration be encouraged among different stakeholders in the construction industry?
  • What mechanisms can be implemented to hold individuals accountable for contingency planning?

Establishing Communication and Reporting Protocols

Effective communication is vital for the successful implementation of a contingency plan. Construction teams should establish clear communication protocols to ensure that relevant information regarding potential risks and the execution of contingency strategies flows smoothly among team members.

Regular reporting and updates on the status of the contingency plan can help identify emerging risks and validate the effectiveness of implemented strategies. These reports can also facilitate informed decision-making and timely adjustments as necessary.

  • How can communication be improved among different teams and departments within a construction project?
  • What reporting mechanisms can be utilized to ensure the contingency plan remains dynamic and responsive to changing circumstances?

Regularly Reviewing and Updating the Contingency Plan

A contingency plan is not a static document; it should evolve throughout the construction project's lifecycle. Regular reviews and updates are essential to account for new risks that may arise, changes in project scope, or other external factors that may impact the original plan.

Construction teams should schedule periodic assessments to evaluate the effectiveness of the contingency plan and identify any gaps or areas requiring adjustments. Additionally, it's crucial to document lessons learned from previous projects and incorporate them into future contingency planning efforts.

  • How frequently should a contingency plan be reviewed and updated?
  • What mechanisms can be put in place to ensure the continuous improvement of the contingency planning process?

Case Studies: Successful Contingency Planning in Construction

Real-life case studies provide valuable insights into the practical application of contingency planning in the construction industry. Let's explore three examples where effective contingency planning played a pivotal role in ensuring project success.

Case Study 1: Overcoming Unexpected Delays in Material Delivery

In this case study, a construction project faced unexpected delays in material delivery due to supply chain disruptions. However, the construction team had a contingency plan in place that allowed them to quickly adapt to the situation.

They leveraged close relationships with alternative suppliers, resequenced project activities, and implemented accelerated delivery methods. As a result, the project experienced minimal downtime and was able to maintain its original schedule.

  • How do construction teams establish strong relationships with alternative suppliers?
  • What strategies can be employed to expedite material delivery in the event of unexpected delays?

Case Study 2: Dealing with Adverse Weather Conditions on the Construction Site

Adverse weather conditions can significantly impact construction projects, leading to costly delays and safety risks. In this case study, a construction project faced severe storms that rendered the site temporarily inaccessible.

However, the project team had anticipated this risk and developed a contingency plan that included provisions for weather-related interruptions. They deployed protective coverings, adjusted work schedules, and optimized resource allocation to ensure work could resume as soon as conditions improved.

  • What are some common strategies for protecting construction sites from adverse weather conditions?
  • How can construction teams optimize resource allocation during weather-related interruptions?

Case Study 3: Managing Budget Overruns and Unforeseen Expenses

Budget overruns are a significant concern in construction projects, often leading to financial strain and compromised project outcomes. In this case study, a construction project encountered unforeseen expenses due to changes in regulatory requirements and unforeseen site conditions.

Fortunately, the project team had a robust contingency plan that included cost control measures and built-in project buffers. By closely monitoring expenses, implementing value engineering strategies, and negotiating with suppliers, the team successfully managed the budget overruns and completed the project within the allotted funds.

  • What are some effective cost control measures that can be implemented in construction projects?
  • How can construction teams negotiate with suppliers to optimize project costs?

In the world of construction, having a well-developed contingency plan is essential for navigating uncertainties and ensuring project success. By understanding the risks and uncertainties associated with construction projects, developing strategies to mitigate them, and effectively implementing and managing the contingency plan, construction teams can minimize disruptions and achieve timely completion.

Real-life case studies demonstrate the value of contingency planning in overcoming unexpected challenges in construction projects. By learning from these examples and continuously improving the contingency planning process, construction professionals can increase their project resilience and deliver successful outcomes even in the face of uncertainty.

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A practical guide to creating a contingency plan

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The vast majority of failed projects and bankrupt companies had a plan and followed it. So why do these projects and companies end up failing?

Unexpected things happen that companies don’t plan for, and many fail to adapt in time.

The key: having a sound contingency plan. A contingency plan is all about expecting the unexpected and preparing to deal with worst-case scenarios ahead of time. This article will cover why you need a contingency plan, and walk you through step-by-step instructions for creating one. We’ll also provide a contingency planning template you can implement and use on monday.com immediately.

What is a contingency plan?

A contingency plan is a predefined set of actions that you will implement in response to specific future events that put your project or business at risk.

A simple example of a contingency plan is to back up all your website data. That way, if your website gets hacked, it will be easy to restore the data after regaining access and changing passwords.

Without that backup, the team might have to recreate the entire website from memory or build a website from scratch . That’s a significant expense and can mean several extra days (or weeks!) of downtime.

A contingency plan is about managing and lowering risk and setting yourself up for speedy disaster recovery.

What are the two types of contingencies in project management?

monday.com makes budget contingency planning visual

There are two types of contingencies that you should plan for: budget contingency & schedule contingency.

  • Budget contingency is an additional amount of money that you allocate to your budget, so you can cover extra costs that might come up as the project progresses. If you don’t have a contingency budget, you might run into an unexpected cost that could send you over budget and risk the profit margin of your project.
  • Schedule contingency is an additional amount of time that you bake into your project schedule, to allow for any unexpected delays or hiccups in your project progress. Without schedule contingency, you risk running over your project deadlines and disappointing stakeholders.

Contingency plan examples

Here are a few examples of how contingency planning could help save the day, no matter what happens:

Project contingency plan

Imagine that a key team member unexpectedly leaves the project. If you were contingency planning for this scenario, you might outline the following steps you could follow if you lost a key project team member:

  • Identify who will take over the tasks of the departing team member, and what tasks still need doing
  • Assess if any additional resources will be needed (such as an additional part-time project member from another team)
  • Provide training sessions for other team members to ensure they can step in effectively
  • Notify any stakeholders about the change and how it will be managed to minimize disruption and offer reassurance.

Business continuity plan

How about if a natural disaster disrupted operations at your primary office location? Could your business cope? With a continuity plan in place, you’ll turn things around quickly:

  • Make sure all your employees have access to the necessary tools and systems so that they can work remotely if necessary
  • Regularly back up all essential data to the cloud, and have a data recovery plan in place, in the event of loss of the hardware in your primary office
  • Identify backup office space or plan for remote work options if the primary location becomes inaccessible
  • Define communication channels that you’ll use in the event of a major disruption so that you can reach your employees to provide updates and instructions on how to proceed

Supply chain contingency plan

Do all your logistics depend on a few key suppliers? Then you should have a supply chain contingency plan in place, in case of unexpected production or shipping delays.

  • Have more than one supplier for critical components, so this becomes less of a business risk.
  • Maintain a buffer stock of your essential components, so that production won’t be held up by supplier delays
  • Find a shipping company that offers expedited shipping options in case you have an urgent need
  • Update your supplier contract to include penalties for delays and a procedure for resolving any disputes

Why contingency planning is important

contingency planning is easier with monday.com boards

Murphy’s Law specifies that anything that can go wrong will go wrong. And any experienced project planner knows how true that is! Contingency planning can make or break your business:

It helps mitigate risk.

Contingency planning helps to identify potential risks and get ahead of them with a proactive plan. That way, even when things go wrong, you can minimize the disruption to operations and reduce your financial losses.

It makes your business more resilient.

Having a contingency plan in place enables you to respond to the unforeseen more effectively, adapt to changing conditions, and recover from setbacks more efficiently.

It keeps you compliant.

In many industries, contingency planning is mandated by regulatory requirements, so you’ll need these plans in place to avoid penalties and maintain good legal standing.

It increases customer trust.

Customers trust businesses that handle disruptions effectively. The ability to respond quickly and effectively when things go wrong will help build your reputation for great customer service.

Looking for a tool to make contingency planning easier? With monday.com, you can store all your contingency plans in a central location, communicate changes with stakeholders, and create automated workflows in response to unexpected events.

What are the characteristics of a good contingency plan?

Your contingency plan should include the following components:

List of risks

Begin by making a thorough identification of potential risks that could realistically occur. Depending on what kind of contingency plan you’re putting together, these could be all the risks that could impact your business, or the risks that could delay or disrupt a specific project or product.

For example, in terms of business-level contingency planning, you could list out:

  • Natural disasters
  • Technological failures
  • Economic downturns
  • Supply chain disruptions
  • Sudden market changes

Response options

Your plan should then outline various responses that you could choose between, for each risk you’ve identified. These might be:

  • Actions to mitigate the risk
  • Ways to transfer the risk to another party (e.g. by buying insurance)
  • Ways to accept and manage the risk

Plan of action

For each risk and response option, you should then add in a plan of action, including:

  • Steps to take
  • Who is responsible for each step
  • Any resources you’ll need
  • Any need to coordinate with other stakeholders or third parties

Communication management protocols

You’ll also want to make sure that you have a plan in place to communicate effectively with all stakeholders, including:

  • Who needs to be notified
  • The channels you’ll use for communication
  • How often you’ll send out updates
  • Any useful templates to use for messages

Trigger points

Decide in advance when you’ll activate a specific contingency response. For instance, you might have a particular threshold beyond which you’ll move to a contingency plan — such as the severity level of a natural disaster. You should also define who has the authority to make these decisions, and how the decision will be made (by committee or by chain of command, for instance.)

Testing and review

To keep your plan up to date, you should schedule regular tests and reviews. For instance, for a natural disaster contingency plan, you might want to run a drill once a year, to practice your response procedures and make sure that everything works as it should.

How to create a contingency plan

Let’s cover the basic contingency planning process and detail how to get yours up and running.

1. Map out essential processes.

What processes are essential to your business and safely delivering your product or service to customers?

If you’re a manufacturing company that ships directly to consumers, a simplified process list might look something like this:

  • Getting raw materials from suppliers
  • Manufacturing process
  • Freight and shipping
  • Packaging and warehousing
  • Last-mile delivery

Looking at this list, you can see how vulnerable it is to natural disasters or even minor human errors.

Create an overview of every crucial process in your organization.

2. Create a list of risks for each process.

Once the process list is created, consider what might disrupt business continuity.

What can go wrong with each of these critical processes?

Let’s look at an example of what could go wrong with “last-mile delivery” …

  • The driver can deliver single or multiple packages to the wrong address.
  • The package can be damaged during delivery.
  • The package could get lost at a distribution center.
  • A truck full of packages could be involved in an accident.
  • A flood could cripple the road system in a specific area.
  • The driver could get delayed because a moose wants to lick salt splatter off the car (seriously, it’s a thing ).

And that’s only a preliminary list. Once you start thinking about it, you’ll realize how many things you rely on to avoid going wrong, even for fundamental processes.

Every business process is vulnerable to some sort of emergency or human error and requires a solid risk management process .

3. Evaluate the potential impact and likelihood of each risk.

Once the risks are identified, it’s essential to determine how they could impact your business.

Are they likely to happen? How large will the impact on your business if they do occur?

Most companies use “qualitative risk assessment” to do this.

PMI uses the following risk exposure assessment table — also called the probability impact matrix — to evaluate … the probability and impact of potential risks.

Risk impact probability table from PMI

( Image Source )

First, rate the severity of the impact on a scale from 1–100. Then, multiply with a percentage based on how likely it is to occur.

4. Calculate costs and contingency reserves, and identify issues to mitigate.

The quantitative risk assessment approach is less common — but more practical — to assess the potential cost of each risk.

How much would each risk potentially cost your business? To get a better overview, add these 4 columns to the risk register template :

  • Full potential loss from the event
  • Expected loss from the event
  • Cost of response (post-event)
  • Cost of mitigation (pre-event)

Quantitative risk register example in monday UI

This means you can make an educated decision when budgeting contingency reserves into project plans and yearly budgets.

During the risk analysis , estimate the potential costs of the adverse event.

EXAMPLE: if your online store goes down, multiply the average online sales revenue per hour with expected downtime. Make one pessimistic and one realistic estimate.

Your hosting service may also have a flat fee for restoring sites, which would be your response cost. If these costs are unreasonably high and the event is likely, estimate the costs of a mitigation effort. In this case, it could be a firewall and extra procedures, like 2-factor authentication, an important security system , for all employees.

Budget in those costs. An accurate budget is the first part of emergency response and prevention. Without enough cash, your team won’t be able to put any response plans into action.

5. Create a response plan for prioritized events.

Create a response plan for events by exploring the following questions:

  • What can be done ahead of time to minimize any adverse effects on the event? For example, backing up data, carrying extra stock, or having more employees on call.
  • What can be done immediately after the event to minimize the impact? For example, ordering more from a secondary supplier, rerouting another vehicle, or bringing in on-call staff.

The specifics depend on your company’s unique processes and situation.

6. Share the contingency plan.

A contingency plan only works if it’s used when things go wrong—and that means that everyone in your organization knows to reach for the plan in times of trouble. To make sure that happens:

  • Identify who needs to be aware of and involved in contingency planning.
  • Choose appropriate communication methods for each stakeholder group. For instance, department heads may need specific meetings to focus on their section of the plan. Key employees might need a training session.
  • Create the plan in an accessible, centralized location, such as a monday.com board. That way, everyone involved can access the plan, and you can keep it updated at all times.
  • Encourage feedback on the plan, such as running an employee survey to check understanding and seek ideas for changes and improvements.
  • Post reminders and updates on your shared internal communication channels.

7. Monitor and review the contingency plan.

If you want your contingency plans to protect your business, you have to keep them up to date. That means you’ll need to schedule regular reviews of the plan to check that it’s still relevant and aligned with your changing business.

Remember to communicate updates or revisions to all relevant stakeholders, and provide opportunities for additional training if needed.

Manage your contingency planning process with monday.com

Having your business contingency plan on paper is an excellent place to start. But it won’t translate to how your entire company will tackle a crisis.

That’s where monday.com comes in. Our flexible digital workspace gives you everything necessary to ensure everyone follows the contingency plan when they need to.

Use our pre-built contingency plan template to get you started 

Make sure that no employee is left clueless during a crisis. Our contingency plan template has everything you need to start the planning process.

With our pre-built template, you can feel confident you’re following best practice contingency planning, so your business will run smoothly even in the case of unexpected events.

Use integrations to notify someone of an event automatically 

use automation to keep stakeholders up to date on your contingency plan

With monday.com’s powerful integrations and automations, you can respond to unfavorable events more quickly.

For example, you can immediately create and assign a work item whenever a customer submits a bug report.

This approach helps avoid another potential problem: customer service failing to report bug reports to your development team.

Monitor project status at all times in dashboards to avoid bottlenecks and domino effects.

manage your contingency planning with monday.com dashboards

The best time to start acting is before a catastrophic event that puts your entire project or business at risk.

To do that, your management team needs a clear understanding of the project’s status at all times.

Use the 30,000-foot view every manager needs to avoid predictable project delays and failures and check that project controls are working properly.

Contingency plans are a must-have.

When starting a project or business, most people plan according to the status quo. Unfortunately, that’s a best-case scenario and not helpful in the real world.

A contingency plan helps you prepare for worst-case scenarios and keep your project afloat, should anything go wrong.

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Developing a Business Continuity Plan for Construction Companies

contingency plan for construction company

Would you know how to keep your construction business running if a major weather-related event destroyed your headquarters? What if there’s an extended power outage and you can’t conduct business for days or even weeks?

In addition to natural disasters, there are other incidents that can threaten your operations. Equipment, machines or technology that are critical to your operations can break down or be infected with malicious ransomware. Or, a key employee with highly specialized skills required to complete a job suddenly leaves your company, leaving you scrambling to find a replacement or find more workers .

You may not be able to prevent such incidents, but you can prepare by creating a business continuity plan to help you conduct business as usual when the unexpected happens.

What is a Business Continuity Plan?

A business continuity plan is a deliberate strategy for resuming and maintaining your normal business functions in the midst of a major disruption. The plan provides detailed instructions, procedures and tasks that your employees need to deploy in the event of a disaster or other interruption.

You may have also heard the term “disaster recovery plan” used synonymously with business continuity plan. However, a disaster recovery plan merely focuses on restoring your IT infrastructure. That said, it should be included in your overall business continuity plan as part of an all-encompassing strategy. A business continuity plan will guide the way you handle your assets, human resources, communications, processes, vendor relationships and more.

The Need for a Business Continuity Plan is Real

It’s easy to think, “It will never happen to me.” But record-breaking, weather-related disasters are on the rise . So-called “100-year floods,” for example, seem to happen every few years instead of once a century.

Not surprisingly, some organizations never recover from a catastrophic event. The Federal Emergency Management Agency (FEMA) estimates that 40 – 60% of small businesses never reopen following a disaster, and 90% of smaller companies fail within one year unless they can resume operations within five days.

Sadly, organizations that experience a data breach or cyberattack face a similar outcome. Studies indicate that 60% of small and medium-sized businesses that become victims of cyber attacks never recover and shut down within six months.

How to Develop a Business Continuity Plan

Gather resources.

While you may have a running list in your head of all your employees, contractors and other important contacts, compile them into a document along with their contact information. That way, you can immediately reference the information rather than spend time tracking down phone numbers and email addresses when you need them.

Likewise, take an inventory of all your equipment and include model numbers and contact information for those who service and sell the machines. This will allow you to get the ball rolling for repairs or replacements faster and will also smooth out the process of filing construction insurance claims.

Designate temporary work locations so employees can continue working in the office. It’s also important to know where to secure rental equipment to continue work on the jobsite if your machinery was damaged or destroyed. 

Ensure that your computers and networks are backed up regularly so you can get your systems up and running quickly. Because of the reliance on technology, quickly recovering business data and records is critical for sustaining operations.

Establish Processes

Your plan should outline the who, what, when, where and how for getting systems back up and running, making phone calls, working with vendors, and handling general business functions. Determine how you will continue working if major tools, equipment, technology or people are no longer available.

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Likewise, you’ll want to determine how to cover your employee payroll to ensure your workers are taken care of and that they can focus on getting your business back up and running. Many employees may end up working overtime during a crisis, so make sure you also have policies in place so they know what to expect and so you’re financially prepared.

Following through on various procedures can be difficult if much of your business technology isn’t available due to a power outage, so it’s a good idea to keep a hard copy of your business continuity plan on hand in addition to a digital version.

Assign Roles

Your team not only needs to know what should be done, but who should do it. Assign roles to individuals in your organization who will be responsible for essential business operations. Identify those with responsibilities by name to eliminate ambiguity, and make sure they are aware of their roles in the recovery process ahead of time.

Develop a Communication Plan 

Establish a clear plan for communicating next steps with your employees. This requires informing your workforce about your business continuity plan ahead of time. Conduct periodic meetings to talk through your plan and any updates so that everyone knows what to expect and how to proceed.

Some business disruptions come with unexpected consequences. For example, if an explosion occurs on your jobsite, various law enforcement and government agencies will likely get involved. Who will work with them? Such an event could also capture the attention of the media. Identify who will speak with news outlets and what steps need to be taken to protect your business reputation. Will you need a press release? Is someone monitoring social media? Make sure managing PR is part of your plan.

Consider that some communication lines may be down during a power outage, so establish a backup plan for communicating with employees, whether through a mass text, email, private social media group or even a designated meeting place. Outline every possible scenario and establish communication protocols to ensure no one is left in the dark.

Getting Started with a Business Continuity Plan

By following these tips, you’ll be able to get a great start on the basics of your business continuity plan. You’ll likely find that the unique risks surrounding the construction industry fall outside a typical company’s situation. It’s important to make sure you’ve covered all the bases and don’t overlook critical details.

You’ll also find benefit in working with an experienced risk advisor who specializes in providing services to construction companies. The team at McClone would be happy to guide you through this process and discuss options. Click the link below to get the conversation started.

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What is a contingency plan & how to develop one.

Vivian Tejeda

ClickUp Contributor

July 13, 2023

In business, the only constant is inconsistency. 

Whether it’s natural disasters, cybersecurity breaches, or supply chain disruptions, unexpected events can strike at any time. And this isn’t simply alarmist talk—obviously, business risks can pop up anywhere, but you can avoid so much with a general backup plan.  

It’s why developing a contingency plan is essential for every organization. However, it takes knowing what to include, how to create proactive measures, and how to have this plan ready at any time so you maintain normal operations.

And that’s where this guide comes in. 💪

Let’s walk through the process of contingency planning to help your team navigate unforeseen challenges with confidence. Here’s how to start safeguarding your business against the unpredictable.

What is a Contingency Plan?

Benefits of having a contingency plan, how to create a business contingency plan: a step-by-step guide, elements of a contingency plan, contingency plan examples, get your team prepared with a contingency plan.

A contingency plan is a proactive strategy designed to help businesses prepare for potential risks and disruptions. It outlines the necessary steps to lower potential damage, ensure your business operations continue, and that an organization can recover from its biggest risks or unexpected adverse situations.

Business contingency plans understand the key risks that could derail an entire project or business continuity. Typically, contingency planning relies on business impact analysis to determine the biggest risks and potential setbacks . This allows companies to proactively create a backup option from an original plan.

From weather-related disasters to data breaches, contingency planning makes all the difference when the unexpected occurs. There are plenty of reasons to create contingency plans—for obvious and not-so-obvious reasons.

Here are some of the benefits of contingency planning you might not realize:

1. It keeps damage and losses in check

Having a solid contingency plan means you’re ready to tackle whatever curveballs life throws at your business. And the best part? It minimizes the impact these surprises can have on your business. For example, it could be financial, operational, or reputational risk management to keep damage and losses to a minimum.

With detailed contingency plans in place, you set yourself up to stay strong, no matter what.

2. It allows companies to keep business as usual—even when it’s not

A lot of businesses operate on the model that everything runs perfectly—minus a few hiccups here and there. But how do organizations plan around unpredictable disasters from weather or other emergencies that could break your supply chain?

You could panic—or have some relief knowing the contingency plans you created have a detailed backup plan to maintain business continuity—so everything remains running smoothly. Contingency planning allows you to adapt to whatever comes your way and keep serving your customers with minimal interruption.

Now that’s what you call stability.

3. It helps businesses bounce back in no time

Let’s be real—the faster you recover from an unexpected event, the better. Your contingency planning process helps you identify what you need to do to get back on track ASAP.

The result? You save time and resources and avoid any extra headaches that might come from a prolonged disruption—including losing that customer base you’ve worked so hard to grow. 

4. It makes it easier to win over customers and keep them

Here’s the thing—your customers and key stakeholders want to know you’ve got their backs. When you’ve got a business contingency plan at the ready, you show customers you’re serious about maintaining top-notch service and reliability. 

It’s a rock-solid way to build trust, foster customer loyalty, and show that your business operates no matter the situation—so you can focus solely on what matters most.

Ready to build your own contingency plans? Follow these seven steps to ensure your business is prepared for the unexpected. 

1. Assemble a contingency planning team

Gather a diverse group of employees and stakeholders who understand your business and provide valuable insights into potential risks and solutions. 

This team should include representatives from different departments and levels of responsibility, ensuring a well-rounded perspective. Remember, a diverse team spots potential blind spots better and brings creative problem-solving ideas to the table.

2. Leave no stone unturned

Identify possible disruptions—natural disasters, cybersecurity breaches, personnel issues, or other hazards—and assess their potential impact on your business. Take a deep dive into your operations and consider both internal and external threats. 

Consult with your team and external experts if needed, and create a comprehensive list of risks that could affect your business continuity.

3. Tackle the biggest fish first

Rank the identified risks according to their potential consequences and the likelihood of them actually happening. Focus on high-impact, high-probability events for your contingency plan.

This prioritization process will help you allocate resources effectively and ensure you’re tackling the most critical threats first. Remember, it’s essential to strike a balance between addressing immediate threats and preparing for longer-term risks.

4. Plan for action—not a reaction

For each risk, create a detailed plan outlining the steps your business will take to mitigate the threat and minimize its impact. These response strategies should be clear, actionable, and tailored to the specific risk at hand . 

clickup contingency plan template

Better yet, don’t start from scratch. ClickUp provides a done-for-you contingency template that you can fill in and share with your whole team. As you continue to flesh out your contingency plan, consider both short-term and long-term solutions, and make sure your plan is flexible enough to adapt to changing circumstances. The more specific your action plans , the better prepared your team will be.

5. Establish communication and keep the lines open

Determine how the information will be shared and establish guidelines for coordinating response efforts among team members and stakeholders. This might involve setting up dedicated communication channels, designating points of contact, or implementing a centralized reporting system. 

It might even be worth adding it to your onboarding process for employees. The goal is to ensure that everyone involved in executing the contingency plan is on the same page.

6. Train employees and raise awareness

Educate your employees about the risks you’ve identified and make sure they’re familiar with the contingency plan. Conduct regular training sessions and drills to keep everyone prepared. 

Make sure your team understands their role in the plan and is equipped with the skills and knowledge necessary to execute their responsibilities. Who is doing what? What are the expectations?

An informed and well-trained team is your strongest asset in navigating unexpected challenges.

7. Regularly review and update the contingency plan: Stay ahead of the curve

Stay proactive by periodically reviewing your contingency plan and making necessary updates based on changes in your business environment, new risks, or lessons learned from past incidents . 

Schedule routine check-ins to reassess potential risks, evaluate the effectiveness of your response strategies, and make any necessary adjustments. A contingency plan is a living document—keep it fresh and relevant to stay prepared for whatever comes your way.

Creating comprehensive contingency plans takes several crucial elements—think of them as the building blocks for a solid foundation of preparedness. Let’s explore each of these components in detail:

Risk assessment and identification: Know your threats

First things first, you need to dive deep into your business processes and identify potential threats that could disrupt your operations. 

Consider everything from natural occurring disasters and cyberattacks to personnel changes and to issues with supply chains. Once you’ve compiled a list of risks, assess their potential impact on your business to determine the severity of each threat.

Risk management is all about knowing the likelihood of anything and everything that could pause your operations. Here are some common reasons for developing contingency plans :

  • Natural disaster recovery (e.g., floods, earthquakes, hurricanes, tornadoes)
  • Pandemics or widespread health crises
  • Supply chain disruptions or shortages
  • Cybersecurity breaches or data theft
  • Technological failures or system outages
  • Regulatory changes or legal issues
  • Economic downturns or market fluctuations
  • Competitor actions or industry shifts
  • Workplace accidents or safety incidents
  • Acts of terrorism or civil unrest
  • Damage to facilities or equipment (e.g., fires, vandalism)
  • Intellectual property disputes or theft
  • Loss of major clients or contracts
  • Reputation-damaging events (e.g., product recalls, public relations crises)
  • Environmental hazards or accidents (e.g., chemical spills, pollution incidents)

Risk Assessment Whiteboard Template by ClickUp

Try the ClickUp Risk Assessment Whiteboard Template to collaboratively plan around all of the potential issues that could harm your operations. A visual whiteboard allows everyone to participate and clearly see the risks and strategies to address them in one space. Now, your contingency plan will look better than ever.

Prioritization of risks: Focus on what matters most

Not all risks are created equal. To make the most of your contingency planning efforts, prioritize risks based on their likelihood as well as what their consequences could be. 

Focus on addressing high-impact, high-probability events first, then work your way down the list to make sure you’re tackling the most critical threats head-on to have a solid Plan B.

ClickUp Prioritization Matrix Template

The ClickUp Prioritization Matrix Template aids in prioritizing tasks and projects based on their impact on users and the effort required to implement them. It’s a useful tool for assessing operational workflows and improvements, with prioritization made easy using the 3×3 matrix.

Response strategies and action plans: Be proactive—not reactive

For each identified risk, develop a clear and actionable plan outlining the steps your business will take to minimize the threat and its impact. 

Remember, it’s essential to be proactive rather than reactive—having well-defined response strategies in place will help you act swiftly and decisively when faced with unexpected challenges.

Using the Cybersecurity Action Plan Template by ClickUp to create an organized and detailed cybersecurity implementation plan

For IT teams, contingency plans must include how you’ll address any cybersecurity threats. The ClickUp Cybersecurity Action Plan Template helps IT departments add crucial details to a contingency plan.

Communication and coordination: Keep everyone in the loop

Here’s an important note to keep in mind: A contingency plan is only effective if everyone involved knows about it and understands their role. 

Outline how information will be shared during an emergency, and establish protocols for coordinating efforts among team members and stakeholders. For example, HR software with clear communication and seamless coordination features can be vital for a successful response to any crisis.

ClickUp Communication Plan Template

If you need help setting up your internal or external communication process during a crisis, the ClickUp Communication Plan Template is a must. This template provides simple steps to build an effective communication plan with easily customizable sections throughout the Doc so your contingency plan is as thorough as possible.

Training and awareness: Empower your team

Educate your employees about potential risks and the contingency plan itself. 

Run regular training sessions and drills to make sure everyone is familiar with their responsibilities and prepared to act when the time comes. An informed and well-trained team is your strongest asset when navigating unexpected challenges.

ClickUp Process and Procedures Template

Get a head-start with the ClickUp Company Process and Procedures Template to easily document and organize your contingency planning guide for the organization. This template will give you the bones of a solid plan to get employee buy-in and knowledge of what to specifically do if circumstances change.

Plan maintenance and updates: Keep it fresh and relevant

Lastly, don’t let your contingency plan collect dust. Regularly review and revise it as needed to make sure it remains up-to-date and aligned with your current business environment. 

Schedule periodic check-ins to assess potential risks, evaluate the effectiveness of your response strategies, and make any necessary adjustments. A contingency plan is a living document—keep it fresh and relevant to stay prepared for whatever comes your way. 🚀

clickup business continuity plan template

Don’t make planning any more difficult than it has to—use the ClickUp Business Continuity Plan Template and rest assured you’ve included everything. Add reassessment plans to go back and edit contingency plans based on new threats or risk you could encounter and review each year.

Toyota’s Swift Response to the 2011 Tsunami

In 2011 a devastating earthquake and tsunami hit Japan, causing widespread destruction and significantly impacting businesses across the country. Toyota, a global leader in the automotive industry, was no exception. Supply chains suffered massive disruptions due to damaged infrastructure and affected suppliers.

However, Toyota’s business contingency plan played a crucial role in minimizing the impact of the disaster on the company. They already discovered the possible risks associated with natural disasters and put measures in place to address them with a solid backup plan.

The company’s business continuity planning played a huge role in quickly bouncing back. Here are some of the best examples of their plan: 

Shifting production to alternative locations

Toyota’s “plan B” included an emergency response process to shift production to other facilities. When the tsunami struck, Toyota quickly relocated some manufacturing operations to unaffected plants, both within Japan and overseas.

These types of proactive measures helped maintain production levels and ensured that the company could continue to meet customer demands during the crisis.

Tapping into alternative suppliers

The event also affected many suppliers that Toyota relied on for parts and materials. To minimize the impact on supply chains, the company leveraged its extensive network of global suppliers, turning to alternative sources to procure the necessary components. 

This diversification strategy allowed Toyota to maintain its production schedules and minimize late deliveries of customer vehicles. 

Implementing recovery efforts

In the aftermath of the crisis, Toyota swiftly mobilized its resources to support recovery efforts. They worked closely with affected suppliers to help them restore their operations, provided financial assistance, and shared their expertise in disaster recovery. 

By getting ahead of “what ifs”, Toyota demonstrated the power of effective contingency planning in the event of a major disaster.

Remember, a good offense is the best defense. That’s why contingency planning pushes you to be proactive in managing risks . By identifying potential threats and addressing them before they escalate—and keeping your plan updated—you’ll always be ready to respond effectively. It’s like having a secret weapon in your back pocket.

Whether you use one of ClickUp’s templates or create something from scratch, a contingency plan is about so much more than just preparing for the unexpected. It’s about minimizing damage, ensuring business continuity, bouncing back quickly, building trust, and being proactive.

Use ClickUp as your central space for communication, planning, and organizing essential documents. Additionally, you can rely on Whiteboards to collaboratively organize your response plans.

When you put it all together with ClickUp, you’ve got a recipe for a resilient, agile, and successful organization that takes on anything life throws its way. Give ClickUp a try today for free !

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The Importance of Contingency Planning: Preparing for Unexpected Costs and Delays

Home > Construction Contracts > The Importance of Contingency Planning: Preparing for Unexpected Costs and Delays

  • April 10, 2023

Construction projects often face unexpected costs and delays that can disrupt timelines and budgets. These issues can be caused by a variety of factors, from material price fluctuations and labour shortages to weather-related delays and design changes. Homeowners may feel overwhelmed by the uncertainty of the construction process, especially resulting from the COVID-19 pandemic. However, by implementing a contingency plan, homeowners can prepare for unexpected issues and minimise their impact on the project. In this article, we will focus on the importance of contingency planning in construction projects and provide practical tips for setting aside a contingency fund, anticipating potential issues, adjusting project timelines, and engaging construction professionals to develop and implement effective contingency plans.

Table of Contents

Setting aside a contingency fund, the purpose of a contingency fund.

One of the most crucial aspects of contingency planning is setting aside a contingency fund. A contingency fund serves as a financial cushion for unexpected costs that may arise during the construction process. This fund can help cover the costs of unforeseen issues such as material price increases, weather-related delays, or design changes. A contingency fund is essential for protecting a construction project’s budget and ensuring its success.

Tips for Determining the Size of the Contingency Fund

Determining the appropriate size of the contingency fund depends on various factors, such as project size, complexity, and risk factors. As a general rule of thumb, a contingency fund should be set aside for 10% to 20% of the total project cost. However, this amount can vary depending on the project’s specifics.

It would be beneficial for homeowners to seek advice from professionals, like a construction lawyer or financial advisor. Advisors can assist owners to work through and determine an appropriate contingency fund amount. These experts can provide insight into the specific risks and challenges associated with the construction project and help identify the appropriate contingency fund amount. By setting aside an appropriate contingency fund, homeowners can have peace of mind knowing that they are prepared for any unexpected costs that may arise during the construction process.

Anticipating Potential Issues

Identifying common sources of unexpected costs and delays.

The key to effective contingency planning is anticipating potential issues before they arise. Common sources of unexpected costs and delays include material price fluctuations, labour shortages , weather-related delays, and design changes or errors.

Material price fluctuations can be caused by changes in the market, global supply chain disruptions, or shortages of specific materials. Labour shortages can occur due to a lack of skilled workers or changes in immigration policies. Weather-related delays , such as hurricanes or heavy rain, can significantly impact construction timelines. Finally, design changes or errors can lead to unexpected costs and delays, particularly when changes are made after construction has already begun.

Strategies for Anticipating and Mitigating Potential Issues

To effectively anticipate and mitigate potential issues, it’s essential to conduct thorough research on market trends and potential risks. Homeowners can work closely with construction professionals to identify and address potential issues early in the process. This can involve developing alternative plans, identifying alternative suppliers or materials, and exploring alternative construction techniques.

By taking a proactive approach to contingency planning, homeowners can minimise the risk of unexpected costs and delays. Additionally, by staying informed and up-to-date on market trends and construction issues, homeowners can be better prepared to anticipate and respond to potential issues as they arise.

Adjusting Project Timelines

The importance of realistic project timelines.

Accurate project timelines are critical for managing expectations and minimising the impact of unexpected delays. Homeowners and construction professionals must work together to create realistic timelines that take into account potential delays and contingencies. This approach can help ensure that all parties involved in the project have a clear understanding of what is required to complete the project successfully.

Tips for Creating and Adjusting Project Timelines

To create and adjust project timelines effectively, homeowners should develop a detailed schedule that includes milestones, buffer time, and contingency plans. This schedule should be communicated regularly with the builder and other professionals to monitor progress and address potential delays. Homeowners should also be prepared to adjust timelines as needed to accommodate unforeseen issues or changes.

Finally, it’s essential to be realistic about the timeline and avoid setting unrealistic expectations that can lead to disappointment and frustration. Homeowners should work closely with their construction team to develop a timeline that takes into account the unique challenges of their specific construction project.

By adjusting project timelines as needed and communicating regularly with construction professionals, homeowners can minimise the risk of unexpected delays and ensure the success of their construction project.

contingency plan for construction company

The Role of Construction Professionals in Contingency Planning

How construction professionals can help with contingency planning.

Construction professionals play a critical role in contingency planning. They have the expertise and experience to identify potential issues early in the construction process and develop effective contingency plans. For example, a construction lawyer can provide advice on the legal implications of potential issues, while a contractor can provide insights into the practical challenges of the construction process.

Benefits of Engaging Professional Services for Contingency Planning

Engaging professional services for contingency planning can provide several advantages. For example, construction professionals have access to industry knowledge, risk management strategies, and dispute resolution skills that can help ensure the success of the construction project. Additionally, they can help homeowners navigate complex legal and financial issues and ensure that all parties involved in the project are held accountable for their responsibilities.

By working closely with construction professionals, homeowners can take a proactive approach to contingency planning and minimise the risk of unexpected costs and delays. This approach can help ensure that the construction project is completed on time, on budget, and to the desired quality and craftsmanship standards.

Related Articles

The NSW Court of Appeal case of The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2023] NSWCA 301 , marks a significant authority for Design and Building Practitioners Act 2020 (NSW) claims including potentially limiting the jurisdictional reach of the NSW Civil and Administrative Tribunal (NCAT) in similar matters, as established in the NCAT Appeal Panel decision of Deaves v Sigma Group NSW Pty Limited [2023] NSWCATAP 94 .

Central to the The Owners – Strata Plan No 84674 v Pafburn Pty Ltd dispute was the interpretation of the statutory duty of care as outlined in the Design and Building Practitioners Act , non-delegable duties, and vicarious liability, particularly concerning proportionate liability.

Central to homeowner rights under the Home Building Act are the section 18B statutory warranties. These warranties are automatically implied in all residential building contracts, offering homeowners a safety net against substandard building practices. They cover various aspects, from the quality of the work to ensuring that the construction is completed within a reasonable time. Essentially, these warranties are designed to protect homeowners from the financial and emotional stress of dealing with construction defects or delays, amongst others.

A significant concern for many homeowners is whether they can claim compensation for the emotional toll – stress and disappointment – resulting from a builder’s breach of these statutory warranties. While traditionally, claims in contract law focus on financial losses, recent legal developments have opened avenues for homeowners to seek redress for non-economic losses, like emotional distress. The evolving legal landscape, shaped by pivotal court decisions, has begun acknowledging the impact of such breaches on a homeowner’s mental well-being.

Understanding these rights is vital for anyone facing building disputes . It empowers you to not only seek compensation for financial losses but also for the emotional distress caused by breaches of the Home Building Act’s statutory warranties.

The case of Millen v Skyview Homes Pty Ltd [2021] NSWCATCD 137 is an interesting case about a renewal proceeding under Schedule 4 Clause 8 of the Civil and Administrative Tribunal Act 2013 (NSW), known as the NCAT Act. The Respondent is a licensed builder who also owned the property in question. 

The applicant purchased the property from the respondent builder. The property, a residential dwelling, is located in South Western Sydney, NSW. A final occupation certificate for the property was issued on 25 September 2019. 

The applicant purchased the property for $703,662.45 around 27 September 2019. A Certificate of Home Warranty Insurance was obtained by the builder, but the contract amount listed was $195,789, described as a “speculative project.”

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contingency plan for construction company

Mastering Contingency Planning: Expert Strategies, Proven Best Practices, and Testing Techniques for Optimal Results

By Joe Weller | May 9, 2023

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Successful organizations must understand potential risks and have contingency plans in place to address them. We’ve assembled expert tips on effective contingency planning and offer practical insights on how to test those contingency plans.

Included on this page, you’ll find the benefits of contingency planning , steps to take to create a contingency plan, examples of contingency plans , and information on a range of exercises your team can do to test its contingency plans.

What Is a Contingency Plan?

A contingency plan is a proactive strategy that outlines the actions a person or entity will take in response to a potential future event. Businesses often develop contingency plans to prepare for risks and mitigate their impact on the business.

What Is Business Contingency Planning?

Business contingency planning is work an organization does to determine how it responds to future events that might affect the business. The goal is to prepare an organization to respond to negative events and mitigate their impact on the business.

A business contingency plan is a written document that outlines an organization’s contingency planning efforts. It typically includes a comprehensive assessment of possible risks to the business and corresponding measures the organization has planned to mitigate these risks, such as legal and budget contingency.

Why Is a Business Contingency Plan Important?

A business contingency plan is crucial for any organization, as it helps them respond quickly and effectively to negative events. With a solid contingency plan in place, companies can minimize damages and continue to thrive even amid challenges.

While an organization might develop a contingency plan for risks to individual projects or general risks to the enterprise as a whole, business contingency plans refer specifically to general risks to the enterprise. This document details all of the most important risks that a business or organization faces.

In recent years, the importance of business contingency plans has increased significantly. With the rise of climate change, natural disasters have become more frequent and disruptive, underscoring the need for organizations to have effective contingency plans. In addition, the ever-growing threat of cybercrime has further highlighted the importance of contingency planning, as businesses increasingly rely on technology to operate.

Luis Contreras

“Before, you might have said, ‘What are the odds of a 100-year flood?’” says Luis Contreras, President and Principal Consultant for AzTech International , a California consultancy that helps organizations manage large, complex projects. “Well, they are happening more often now. ‘What are the odds of a cyber incident?’ Well, they're happening more often.”

Erika Andresen

Many organizations take steps in their risk management programs to try to completely eliminate certain risks. However, it’s almost impossible for any organization to completely eliminate the chance of a risk happening, says Erika Andresen,  a business continuity and resilience expert, author, and founder of EaaS Consulting . Business contingency planning is important, she says, “because your risk management will fail at a certain point.”

The Benefits of a Contingency Plan

Contingency plans offer several benefits to organizations. They enable organizations to respond promptly and effectively to unexpected events, minimize damages, and facilitate a quick recovery. With a contingency plan in place, organizations can take proactive measures to mitigate risks.

Here are some of the primary benefits of having a contingency plan in place:

  • Improves Event Responsiveness: By having a clear plan in place, there is no confusion and individuals know how to react without blindly searching for direction. This enables the organization to take swift and effective action, minimizing response times and ensuring continuity of operations.

Andrew Lokenauth

  • Facilitates Quick Recovery: Organizations with good contingency plans bounce back quickly from negative events. For example, a severe storm or power outage might have a huge effect on a state or metropolitan area, but businesses that have backup generators and other contingency plans can often resume operations quickly. “It's resilience — it's how your company stays a company,” Andresen says. “That's how the company is able to grow and thrive. You've figured out that you're going to have a risk that is going to impact your operations. And then you worked and took the extra step to put in policies and procedures to get yourself back up and running with minimal disruption.”
  • Decentralizes and Disseminates Important Information: Business contingency planning forces organization leaders to gather people to assess the organization’s potential response to various events. This work necessitates the sharing of important information about the company and its operations, resulting in more people knowing how to assist in the company’s response. Accessible, decentralized information is invaluable in a crisis event or when top leaders in a company suddenly leave.“If you have a company with one or two top leaders, then it makes it even more important,” says Lokenauth. “If one person has all the knowledge, when something happens to that one person, how does the company function?”
  • Gives the Company Confidence in Its Operations: When you create effective contingency plans, you boost the confidence of everyone in the company. You instill a sense of trust that the company will respond well in an emergency. Moreover, you enhance confidence in the company’s overall preparedness, foresight, and integrity.

What Does a Contingency Plan Cover?

A contingency plan covers the important risks the organization is monitoring and any possible triggers to those risks. It also outlines the specific actions organization staff will take to respond to them.

A contingency plan often includes the following components:

  • Triggering Events: Identify the events that can make a risk event more likely to happen, such as weather patterns or market conditions.
  • Response Details: Outline specific actions the organization will take in response to a risk event, including preventive measures and mitigation strategies.
  • Organizational Responsibilities: Detail the roles and responsibilities of key personnel within the organization, such as the crisis management team and first responders. This might include a RACI chart that outlines who is responsible, accountable, consulted, or informed about specific response actions.
  • Key Contacts: Include contact information for key people or organizations that will be involved in the response efforts, such as emergency services, suppliers, and customers.
  • Outside Experts: Identify outside experts or consultants the organization might need to engage for help when responding to the risk event, such as legal advisors, public relations firms, or technical specialists.
  • Response Timeline: Include a timeline that details when certain responses need to happen, such as when to activate the crisis management team, notify stakeholders, or implement recovery measures.

Learn more about important components and how to write an effective contingency plan in this all-inclusive guide to writing contingency plans.

How to Develop a Contingency Plan

Developing a contingency plan begins with identifying and assessing potential risks. Next, teams outline an appropriate response to each risk, including specific actions that need to be taken and who will be responsible for executing those actions.

Steps in Business Contingency Planning

To develop an effective contingency plan, businesses need to follow some critical steps. The process starts with identifying and assessing potential risks and creating a response plan. Teams should then be trained on the plan and continually monitor potential risks.

These are the important steps to creating an effective contingency plan:

  • Identify and Assess Risks: Identify potential risks that could have the most significant impact on your organization. This assessment might involve conducting a business risk analysis to evaluate potential threats, vulnerabilities, and consequences. Learn more about this step in the contingency planning process in this comprehensive guide to risk mitigation .
  • Identify Resources: Identify what resources your organization already has that can help with contingency responses. This might include people, tools, or services that can be used to respond quickly to an unexpected event. Gather and coordinate those resources.
  • Create Contingency Plans: Create a contingency plan for each risk that your organization has identified as critical. This plan should outline specific actions that need to be taken, who will be responsible for those actions, and a timeline for executing the plan.
  • Seek Input and Secure Approvals: Get input from stakeholders and people within your organization on your draft contingency plans. Once you’ve gathered feedback, finalize plans and get approval from the organization’s leaders.
  • Share Your Plans: Communicate your contingency plans to all relevant stakeholders within your organization. This includes making sure that everyone understands what the plans are, what their role is in executing the plans, and any necessary training or resources required to implement them.
  • Perform Training Exercises: Train all relevant staff members on the contingency plans, and make sure they understand their roles in executing them. To test the effectiveness of the plans, perform exercises or drills that simulate potential risk events.
  • Monitor Risks and Contingency Plans: ​​Regularly review and assess business risks to ensure that your contingency plans remain effective and relevant. Evaluate whether the current plan provides the best response to potential risks and consider making updates or modifications as necessary.
  • Create New or Adjusted Contingency Plans as Needed: If your monitoring indicates that your contingency plans require adjustments, take action and promptly update them.

Business Contingency Planning Grid Template

Sample Business Contingency Planning Grid Template

Download a Sample Business Contingency Planning Grid Template for  Excel | Microsoft Word

Download a Business Contingency Planning Grid Template for  Excel | Microsoft Word

Download this business contingency planning grid template to assist your team in identifying potential risks to consider in your organization’s business contingency planning. This template provides a comprehensive list of broad risk categories and specific risks within those categories. By using this tool, you can evaluate which risks are relevant to your organization and develop appropriate contingency plans.

Contingency Planning for IT

Contingency planning in IT follows the same basic steps as other organizations. However, it often begins with a contingency planning policy statement , which outlines an organization’s broad approach to contingency planning.

What to Include in a Contingency Planning Policy Statement

A contingency planning policy statement is a document that outlines how an organization will perform contingency planning. It includes details on objectives, roles and responsibilities, resource and training requirements, testing schedules, and data backup and storage plans.

A contingency planning policy statement should include the following components:

  • Objectives: Describe the organization's overall contingency planning objectives — for example, what types of risks the organization is preparing to address and how the organization's contingency planning efforts align with its overall business goals.
  • Roles and Responsibilities: Outline the specific roles and responsibilities for performing contingency planning within the organization. This should include both high-level positions and specific individuals who will be responsible for carrying out different components of the plan.
  • Organizational Functions and Departments: Identify which organizational functions and departments will be responsible for performing contingency planning. This helps ensure that all relevant areas of the organization are involved in the planning process.
  • Resource Requirements: Determine the resources needed to support contingency planning efforts, including funding, personnel, equipment, and other necessary resources.
  • Employee Training Requirements: Develop a plan for training employees on their roles and responsibilities in the event of a contingency situation. This might include both general training on contingency planning concepts and specific training on the organization's specific plan.
  • Schedules of Exercises and Tests: Establish a schedule for conducting exercises and tests of contingency plans to ensure that they are effective.
  • Procedures for Maintaining and Updating: Develop procedures for maintaining and updating contingency plans over time, including regular reviews and updates to reflect changes in the organization's risk landscape or other relevant factors.
  • Data Backup and Storage: Determine how the organization will back up and store all electronic data to ensure that critical information is not lost in the event of a contingency situation.

A Contingency Plan Model for IT

The National Institute of Standards and Technology (NIST) has created SP 800-34, a popular contingency plan guide for IT. The guide outlines the steps and considerations that organizations should take when developing, implementing, and maintaining an effective contingency plan.

The SP 800-34 guide covers the entire contingency planning process, from risk assessment to plan testing and maintenance. It is widely used as a reference by government agencies, private organizations, and security professionals.

IT Preventive Controls

Any organization’s IT contingency plan should include preventive controls. These are measures an organization can take to prevent interruptions to information services or technology.

 Here are some basic IT preventive controls recommended by the NIST for federal information systems:

  • Uninterruptible power supplies (UPS): To provide short-term backup power to all components, appropriate for the size of your system.
  • Fuel-powered generators: To provide power over the longer term.
  • Air-conditioning systems: Establish adequate capacity to prevent failure of components that malfunction when overheated.
  • Fire and smoke detectors: Install in appropriate locations.
  • Fire suppression systems: Install to minimize potential damages.
  • Water sensors: Place in the ceiling and floor of rooms where computer equipment is located.
  • Containers for backup media and vital non-digital records: Ensure they are heat resistant and waterproof.
  • Master system shutdown switch: Make available for emergencies.
  • Off-site storage areas: Use them for backup media, system documentation, and important non-digital records.
  • Technical security controls: This includes management of cryptographic keys.
  • Frequent scheduled backups of data: This includes information on where the backups are stored, onsite and offsite.

Examples of Contingency Plans

Contingency plan examples can help your team understand what to consider in creating a plan and the important components to include.

You can learn more about contingency planning and download blank and example contingency plans.

Business Contingency Planning Best Practices

To improve your organization’s business contingency planning, experts recommend following a number of best practices, such as performing an effective risk assessment, training employees on the plan, and conducting exercises to test the plan.

These are some best practices to follow for effective business contingency planning:

  • Perform Good Risk Assessment and Analysis: Your team should identify the most critical risks through a thorough risk assessment. This includes analyzing the potential impact of each risk and determining which risks require a comprehensive contingency response.
  • Ensure All Team Members Are Aware of Contingency Plans: Contingency plans will not be effective if the employees in your organization are not aware or have only a vague understanding of them. Incorporate contingency planning into employee training and orientation programs, and communicate regular reminders and updates on the plans through team meetings, newsletters, and other internal communication channels.
  • Train Staff and Conduct Regular Drills: Your organization should train all employees responsible for specific tasks in the plan. Conducting exercises or drills where employees simulate a risk event scenario can help teams identify potential gaps or issues in the plan and improve its effectiveness. Many organizations will complete a business continuity or contingency plan, then “put it on a shelf and say, ‘OK, I did it.’ No, you didn’t,” says Andresen. “You haven't done it. You don’t know what’s in it. You don’t have the muscle memory for what the procedures are. When the disaster happens, you don’t want to be saying, ‘Hold on, let me flip through the pages.’ That's another integral part to business continuity planning or contingency planning: to train the plan and exercise the plan. That’s how you figure out if the plan works.”
  • Continually Review Plans and Make Necessary Adjustments: Drills and exercises are crucial to contingency planning, as they allow organizations to identify which contingency are ineffective and need to be revised. It is essential to modify plans when necessary, whether due to changing risks or other factors. After conducting a drill on a contingency plan, Andresen advises, “Go back and relook at the plan and say, ‘OK, we did this well. This didn't work. This needs to be improved.’” By doing so, teams can ensure that their contingency plans actually work. “This is why this needs to be revisited continuously so that the plan is not just a heavy paperweight,” says Andresen. “Don't break your arm patting yourself on the back that you've accomplished making the plan — actually do something with it.”

Types of Exercises to Test Your Contingency Plan

Conducting a variety of drills and exercises for contingency plans is essential for organizations that want to be prepared for any potential risks. The following chart outlines different types of exercises that can test and improve your contingency plans.

Common Contingency Planning Pitfalls to Avoid

To achieve effective contingency planning, it is important to be aware of common challenges and pitfalls. One such challenge: organizations not allocating sufficient resources to planning and executing responses that are part of the plans.

These are some of the most common challenges and pitfalls to avoid:

  • Lack of Resources Devoted to Contingency Planning and Actions: To create effective contingency plans, organizations must allocate staff time and resources for both planning and response. This includes significant resources to execute the actions required in response to a risk event. Neglecting these necessary resources can result in ineffective contingency plans and costly responses to risks.
  • Lack of Buy-in From Organizational Leaders: Lack of buy-in from organizational leaders often results in a lack of resources. Leaders who don’t value contingency planning might not provide the necessary funding, time, or attention to ensure the plans are effective. This can result in plans that are incomplete, inadequate, or not tested or updated regularly. “Every level of employee is going to look at leadership and see if they take this seriously,” Andresen says. “Is this some simple extra duty? If leadership is saying, ‘No, this is really important, and this is why this is important,’ they get the employees behind that. Then the employees are going to take it seriously.”
  • Bias Against Plan B Thinking: Contingency planning assumes that at some point, an organization’s mission is going to fail. Unfortunately, some organizational leaders have a bias against this, as they perceive it as thinking about a Plan B. However, these leaders must work to understand that having contingency plans is vital for the organization’s future and doesn’t reflect a lack of confidence in Plan A.
  • One-and-Done Contingency Plans: According to Andresen, organizations often develop contingency plans because they are deemed useful or someone within the organization encourages their development. However, these contingency plans are often completed, then disregarded. In order for contingency plans to be effective, organizations must share them widely, train their employees on them, and continuously adapt them to changing circumstances.

Effective vs. Ineffective Contingency Planning Example

The table below demonstrates the varying outcomes between a well-considered contingency plan and one that is less so. The consequences of these differing results can be significant for both the organization and the community.

Resource and Environment at Risk: An oil production facility has above-ground oil flowlines that run for 7,000 feet. The facility is located half a mile west of a major creek and six miles north of a river. The creek flows into the river, which flows into a town of 150,000 people located 12 miles away.

Contingency Plan Purpose: Detect and mitigate any significant oil leak from the facility's flowlines, with the goal of minimizing environmental damage. The plan places a special emphasis on preventing oil from reaching the nearby creek or river.

Business Contingency Plan vs. Business Continuity Plan

A business continuity plan and a business contingency plan share some similarities, but a business continuity plan primarily focuses on how an organization can continue operations during an emergency, whereas a contingency plan addresses a broader range of risks.

  • Business Continuity Plan: A business continuity plan outlines the steps an organization will take to maintain normal operations following a major and disruptive event, such as an earthquake, fire, or major data breach.
  • Business Contingency Plan: A business contingency plan covers a broader range of risks that an organization might face and outlines how the organization plans to respond. These risks can include potential major disruptions or events that might not directly affect operations but still require an effective response.

Business Contingency Plan vs. Project Risk Management Plan

Business contingency plans and project risk management plans both identify potential risks and determine ways to respond to them. The former focuses on risks to the entire organization, while the latter focuses on risks to a particular project.

In a project risk management plan , teams identify and assess possible risks to a specific project. It then determines how project leaders can respond to, eliminate, or mitigate those risks.

A business contingency plan identifies potential threats to an organization's ability to continue operating. It assesses risks that could temporarily or permanently halt operations, and then outlines plans to mitigate or eliminate those risks.

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  • What is a contingency plan? A guide to ...

What is a contingency plan? A guide to contingency planning

Julia Martins contributor headshot

A business contingency plan is a backup strategy for your team or organization. It lays out how you’ll respond if unforeseen events knock your plans off track—like how you’ll pivot if you lose a key client, or what you’ll do if your software service goes down for more than three hours. Get step-by-step instructions to create an effective contingency plan, so if the unexpected happens, your team can spring into action and get things back on track.

No one wants Plan A to fail—but having a strong plan B in place is the best way to be prepared for any situation. With a solid backup plan, you can effectively respond to unforeseen events effectively and get back on track as quickly as possible. 

A contingency plan is a proactive strategy to help you address negative developments and ensure business continuity. In this article, learn how to create a contingency plan for unexpected events and build recovery strategies to ensure your business remains healthy.

What is contingency planning?

What is a contingency plan .

A contingency plan is a strategy for how your organization will respond to important or business-critical events that knock your original plans off track. Executed correctly, a business contingency plan can mitigate risk and help you get back to business as usual—as quickly as possible. 

You might be familiar with contingency plans to respond to natural disasters—businesses and governments typically create contingency plans for disaster recovery after floods, earthquakes, or tornadoes. 

But contingency plans are just as important for business risks. For example, you might create a contingency plan outlining what you will do if your primary competitors merge or how you’ll pivot if you lose a key client. You could even create a contingency plan for smaller occurrences that would have a big impact—like your software service going down for more than three hours.

Contingency planning vs risk management

Project risk management is the process of identifying, monitoring, and addressing project-level risks. Apply project risk management at the beginning of the project planning process to prepare for any risks that might come up. To do so, create a risk register to identify and monitor potential project risks. If a risk does happen, you can use your risk register to proactively target that risk and resolve it as quickly as possible. 

A contingency plan is similar to a project risk management plan or a crisis management plan because it also helps you identify and resolve risks. However, a business contingency plan should cover risks that span multiple projects or even risks that could affect multiple departments. To create a contingency plan, identify and prepare for large, business-level risks.

Contingency planning vs crisis management

Contingency planning is a proactive approach that prepares organizations for potential emergencies by implementing pre-planned risk mitigation strategies. It involves identifying threats and crafting strategies in advance. 

Crisis management , on the other hand, is reactive, focusing on immediate response and damage control when a crisis occurs. While contingency planning sets the stage for effective handling of emergencies, crisis management involves real-time decision-making and project management during an actual crisis. Both are important for organizations and businesses to maintain their stability and resilience.

Contingency plan examples

There are a variety of reasons you’d want to set up a contingency plan. Rather than building one contingency plan, you should build one plan for each type of large-scale risk or disaster that might strike. 

Business contingency plan

A business contingency plan is a specialized strategy that organizations develop to respond to particular, unforeseen events that threaten to disrupt regular operations. It's kind of like a business continuity plan, but there's one key difference. 

While business continuity plans aim to ensure the uninterrupted operation of the entire business during a crisis, a business contingency plan zeroes in on procedures and solutions for specific critical incidents, such as data breaches, supply chain interruptions, or key staff unavailability. 

A business contingency plan could include:

Strategies to ensure minimal operational disruption during crises, such as unexpected market shifts, regulatory compliance changes, or severe staff shortages.

Partnerships with external agencies that can provide support in scenarios like environmental hazards or public health emergencies.

A comprehensive communication strategy with internal and external stakeholders to provide clear, timely information flow during crises like brand reputation threats or legal challenges.

Environmental contingency plan

While severe earthquakes aren’t particularly common, being unprepared when “the big one” strikes could prove to be catastrophic. This is why governments and businesses in regions prone to earthquakes create preparedness initiatives and contingency plans.

A government contingency plan for an earthquake could include things like: 

The names and information of the people designated to handle certain tasks in advance to ensure the emergency response is quick and concise

Ways to educate the public on how to respond when an earthquake hits

A timeline for emergency responders.

Technology contingency plan

If your business is particularly data-heavy, for example, ensuring the safety and cybersecurity of your information systems is critical. Whether a power surge damages your servers or a hacker attempts to infiltrate your network, you’ll want to have an emergency response in place.

A business’s contingency plan for a data breach could involve: 

Steps to take and key team members to notify in order to get data adequately secured once more

The names and information of stakeholders to contact to discuss the impact of the data breach and the plan to protect their investment

A timeline to document what is being done to address the breach and what will need to be done to prevent data breaches in the future

Supply chain contingency plan

Businesses that are integral parts of the supply chain, such as manufacturing entities, retail companies, and logistics providers, need an effective supply chain contingency plan to continue functioning smoothly under unforeseen circumstances.

These plans hedge against supply chain disruptions caused by events like natural disasters or technological outages and help organizations reduce downtime and ensure real-time operational capabilities. 

A supply chain contingency plan could include:

Secure critical data and systems while promptly notifying key team members, such as IT staff and management, for immediate action.

A predetermined list of essential stakeholders, including suppliers, customers, investors, and authorities, should be contacted to inform them about the disruption and steps being taken.

A detailed timeline is essential for documenting the immediate response and outlining long-term strategies to prevent future disruptions in the supply chain.

Pandemic contingency plan

In the face of a global health crisis, a pandemic contingency plan is vital for organizations in healthcare, retail, and manufacturing. This plan focuses on mitigation strategies to minimize operational disruptions and ensure the safety of employees while maintaining business continuity. 

A pandemic response plan could include:

A comprehensive health and safety protocol for employees, which integrates regular health screenings, detailed risk analysis, and emergency medical support as key components.

Flexible work arrangements and protocols for remote operations and digital communication.

A list of key personnel and communication channels for immediate response and coordination.

Regularly reviewing and adapting the pandemic contingency plan as part of an ongoing disaster recovery plan to address evolving challenges and lessons learned.

How to create a contingency plan

You can create a contingency plan at various levels of your organization. For example, if you're a team lead, you could create a contingency plan for your team or department. Alternatively, company executives should create business contingency plans for situations that could impact the entire organization. 

As you create your contingency plan, make sure you evaluate the likelihood and severity of each risk. Then, once you’ve created your plan—or plans—get it approved by your manager or department head. That way, if a negative event does occur, your team can leap to action and quickly resolve the risk without having to wait for approvals.

1. Make a list of risks

Before you can resolve risks, you first need to identify them. Start by making a list of any and all risks that might impact your company. Remember: there are different levels of contingency planning—you could be planning at the business, department, or program level. Make sure your contingency plans are aligned with the scope and magnitude of the risks you’re responsible for addressing. 

A contingency plan is a large-scale effort, so hold a brainstorming session with relevant stakeholders to identify and discuss potential risks. If you aren’t sure who should be included in your brainstorming session, create a stakeholder analysis map to identify who should be involved.

2. Weigh risks based on severity and likelihood

You don’t need to create a contingency plan for every risk you lay out. Once you outline risks and potential threats, work with your stakeholders to identify the potential impact of each risk. 

Evaluate each risk based on two metrics: the severity of the impact if the risk were to happen and the likelihood of the risk occurring. During the risk assessment phase, assign each risk a severity and likelihood—we recommend using high, medium, and low. 

3. Identify important risks

Once you’ve assigned severity and likelihood to each risk, it’s up to you and your stakeholders to decide which risks are most important to address. For example, you should definitely create a contingency plan for a risk that’s high likelihood and high severity, whereas you probably don’t need to create a contingency plan for a risk that’s low likelihood and low severity. 

You and your stakeholders should decide where to draw the line.

4. Conduct a business impact analysis

A business impact analysis (BIA) is a deep dive into your operations to identify exactly which systems keep your operations ticking. A BIA will help you predict what impact a specific risk could have on your business and, in turn, the response you and your team should take if that risk were to occur. 

Understanding the severity and likelihood of each risk will help you determine exactly how you will need to proceed to minimize the impact of the threat to your business. 

For example, what are you going to do about risks that have low severity but high likelihood? What about risks that are high in severity, but relatively low in likelihood? 

Determining exactly what makes your business tick will help you create a contingency plan for every risk, no matter the likelihood or severity.  

[inline illustration] Business impact analysis for a contingency plan (example)

5. Create contingency plans for the biggest risks

Create a contingency plan for each risk you’ve identified as important. As part of that contingency plan, describe the risk and brainstorm what your team will do if the risk comes to pass. Each plan should include all of the steps you need to take to return to business as usual.

Your contingency plan should include information about:

The triggers that will set this plan into motion

The immediate response

Who should be involved and informed?

Key responsibilities, including a RACI chart if necessary

The timeline of your response (i.e. immediate things to do vs. longer-term things to do)

[inline illustration] 5 steps to include in your contingency plan (infographic)

For example, let’s say you’ve identified a potential staff shortage as a likely and severe risk. This would significantly impact normal operations, so you want to create a contingency plan to prepare for it. Each person on your team has a very particular skill set, and it would be difficult to manage team responsibilities if more than one person left at the same time. Your contingency plan might include who can cover certain projects or processes while you hire a backfill, or how to improve team documentation to prevent siloed skillsets. 

6. Get approval for contingency plans

Make sure relevant company leaders know about the plan and agree with your course of action. This is especially relevant if you’re creating team- or department-level plans. By creating a contingency plan, you’re empowering your team to respond quickly to a risk, but you want to make sure that course of action is the right one. Plus, pre-approval will allow you to set the plan in motion with confidence—knowing you’re on the right track—and without having to ask for approvals beforehand.

7. Share your contingency plans

Once you’ve created your contingency plans, share them with the right people. Make sure everyone knows what you’ll do, so if and when the time comes, you can act as quickly and seamlessly as possible. Keep your contingency plans in a central source of truth so everyone can easily access them if necessary.

Creating a project in a work management platform is a great way of distributing the plan and ensuring everyone has a step-by-step guide for how to enact it.

8. Monitor contingency plans

Review your contingency plan frequently to make sure it’s still accurate. Take into account new risks or new opportunities, like new hires or a changing business landscape. If a new executive leader joins the team, make sure to surface the contingency plan for their review as well. 

9. Create new contingency plans (if necessary)

It’s great if you’ve created contingency plans for all the risks you found, but make sure you’re constantly monitoring for new risks. If you discover a new risk, and it has a high enough severity or likelihood, create a new contingency plan for that risk. Likewise, you may look back on your plans and realize that some of the scenarios you once worried about aren’t likely to happen or, if they do, they won’t impact your team as much.

Common contingency planning pitfalls—and how to avoid them

A contingency plan is a powerful tool to help you get back to normal business functions quickly. To ensure your contingency planning process is as smooth as possible, watch out for common pitfalls, like: 

Lack of buy-in

It takes a lot of work to create a contingency plan, so before you get started, ensure you have support from executive stakeholders. As you create your plan, continuously check in with your sponsors to ensure you’ve addressed key risks and that your action plan is solid. By doing so, you can ensure your stakeholders see your contingency plan as something they can get behind.

Bias against “Plan B” thinking

Some company cultures don’t like to think of Plan B—they like to throw everything they have at Plan A and hope it works. But thinking this way can actually expose your team to more risks than if you proactively create a Plan B.

Think of it like checking the weather before going sailing so you don’t accidentally get caught in a storm. Nine times out of ten, a clear sunny day won’t suddenly turn stormy, but it’s always better to be prepared. Creating a contingency plan can help you ensure that, if a negative event does occur, your company will be ready to face it and bounce back as quickly as possible. 

One-and-done contingency plans

It takes a lot of work to put a contingency plan together. Sometimes when you’ve finished, it can be tempting to consider it a job well done and forget about it. But make sure you schedule regular reminders (maybe once or twice a year) to review and update your contingency plan if necessary. If new risks pop up, or if your business operations change, updating your contingency plan can ensure you have the best response to negative events.  

[inline illustration] The easiest ways to prevent contingency plan pitfalls (infographic)

You’ve created a contingency plan—now what?

A contingency plan can be a lot of work to create, but if you ever need to use it, you’ll be glad you made one. In addition to creating a strong contingency plan, make sure you keep your plan up-to-date.

Being proactive can help you mitigate risks before they happen—so make sure to communicate your contingency plan to the team members who will be responsible for carrying them out if a risk does happen. Don’t leave your contingency plan in a document to collect dust—after creating it, you should use it if need be!

Once you’ve created the plan, make sure you store it in a central location that everyone can access, like a work management platform . If it does come time to use one of your contingency plans, storing them in a centrally accessible location can help your team quickly turn plans into action.

Cargo ship sailing

Businesses need to have a plan in place to get back on track when a disaster interrupts daily operations. Contingency plans, also known as “business continuity plans,” "emergency response plans” and “disaster recovery plans” help organizations recover after a disruption. Whether they’re preparing for a global outbreak of a deadly virus, crisis management around a data breach or simply the loss of an important client, contingency plans help organizations get back on their feet after a negative event.

Companies create many kinds of recovery strategies for everything from the merger of key competitors to the insolvency of the bank used to process its employee payroll. In India, the government was busy designing a contingency plan as a drier-than-expected monsoon season approached.¹ Meanwhile, in Hong Kong, a large bank was preparing a plan b in case a host of new sanctions were levied as the result of a recent geopolitical development.²

Here are five steps companies use to create effective business contingency plans.

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The contingency planning process begins with a risk assessment to gauge the potential impact of each risk. Typically, risk analysis is conducted by business leaders and employees. Team members begin with a brainstorming session where they discuss potential risks, courses of action and the company’s overall preparedness. During this stage it’s important to be clear about the scope of the project and invite all relevant stakeholders to give input. Companies don’t need to create a risk management plan for every threat they face, just the ones deemed highly likely and with the potential to interrupt business operations.

Effective business impact analysis (BIA) is critical to understanding different business functions and how they will react to unexpected events. For example, while a shortage in micro-processors might be devastating to a part of a business that deals with the manufacture of gaming consoles, it likely will have little to no impact on the same company’s HR department.

To assess the urgency of creating an action plan for this specific threat, the company would need to know how much of its revenue was being generated from the part of the business threatened by the microprocessor shortage. If gaming consoles are a high percentage of their revenue, they’ll want to make sure they have a strong plan in place soon. A well-developed BIA helps stakeholders assess risk and better understand which parts of their business are most critical to daily operations.

After identifying the risks their company faces, determining the likelihood and severity of each risk and conducting a BIA, business leaders can follow a simple, three-step process to build their backup plan.

Identify the triggers that will set their plan into action: For example, if a hurricane is approaching, at what point does the approaching storm trigger the contingency plan? When it’s 50 miles away—100? They’ll need to make clear decisions so the teams they put in charge of execution will know when to start their work.

Design an appropriate response: The threat the business prepared for has arrived. Teams will need to know exactly what’s expected of them so the company can recover quickly. They’ll need clear, accessible instructions, protocols that are easy to follow and a way for everyone to communicate with each other.

Delegate responsibility clearly and fairly: Like any other initiative, contingency planning requires effective project management to succeed. In the case of an existential threat such as a natural disaster, everyone involved in helping the company recover needs to know their role and have received the proper training necessary to perform it. For example, in the case of a fire, it wouldn’t be fair to expect employees untrained in firefighting to pick up a hose. However, with the right training, they could conduct headcounts or go floor-to-floor to ensure other employees have evacuated.

One way to improve workflow among teams when designing a plan is to create a RACI chart. RACI stands for responsible, accountable, consulted and informed and is a widely used process to help teams and individuals delegate responsibility and react to crises in real time.

While it can be hard to justify the importance of putting financial resources into something that might never happen, these past few years have taught us the value of good contingency planning. Think of all the supply chain problems, critical shortages of personal protective equipment and financial havoc wreaked by the pandemic. What would have been different if organizations had had effective contingency plans in place for the kinds of threats they faced?

Cost and uncertainty are big barriers when it comes to convincing business leaders of the importance of making an investment in contingency planning. Since all costs for contingency plans are estimated—there’s no way of knowing precisely how events will disrupt a business—decision makers are understandably hesitant.

Different industries have different ways of approaching this problem. In the construction industry it’s common to set aside 10 percent of the overall budget of a project for contingencies. Other industries use different methods. One popular method estimates risks according to a percentage of how likely they are to occur. By this method, if there’s a 25 percent risk of an event occurring that will result in USD 200,000 in recovery costs, the company must set aside 25 percent—or USD 50,000—to be in compliance with their contingency plan.

Markets and industries are constantly shifting, so the reality that a contingency plan faces when it is triggered might be very different than the one it was created for. For example, after the 9/11 terror attacks, many of the contingency plans that the U.S. government had in place were suddenly irrelevant, because they had been prepared decades before.

To avoid a similar disconnect between plans and threats, businesses need to constantly test and reassess the plans they’ve made. For example, IBM’s guidelines mandate that plans should be tested at least once annually and improved upon as necessary.³ If new risks are discovered and their severity and likelihood is deemed high enough, the old plans might be scrapped altogether.

When businesses are hit with an unexpected disruption, a strong contingency plan gives much-needed structure to the recovery process. Disruptive events cause chaos and decision makers and employees are often left scrambling to understand what is happening and how best to respond to it. Having a strong plan to turn to can help restore confidence and show the way forward.

Here are a few benefits business leaders who create strong contingency plans can expect:

Businesses that create strong plans recover faster from a disruptive event than businesses that don’t. When a negative event occurs, the faster the business recovers and gets back to business-as-usual, the lower the risk to the company, its customers and its employees.

A good contingency plan minimizes the damage to a company—both reputational and financial. For example, while a data breach will undoubtedly damage a bank’s reputation, as well as its bottom line, how the bank responds will play a critical role in whether its customers decide to continue doing business with it.

Many organizations use a strong contingency plan to show employees and customers that they take preparation seriously. By planning for a wide range of potentially damaging events, business leaders can show investors, customers and workers that they’ve taken the necessary steps to minimize risk.

Many plans focus on natural disasters such as floods, earthquakes or fires. Others deal with data breaches, unexpected network downtime or the loss of a key employee such as a CEO or founder. Here are a few examples of contingency plan templates that deal with broadly different scenarios across a range of industries.

Severity and likelihood of risk: The manufacturers have been following the news in a region where they source specific airplane parts and have deemed the likelihood of disruption there “high.” They initially conduct a search for another supplier but quickly learn that it will take months—even years—to find one. Since the part is necessary for the construction of all their airplanes, they label the severity of this disruption “high” as well.

Trigger: Suppliers make the manufacturer aware that they will soon run out of the needed part due to a disruptive geo-political event in its country of origin.

Response: The manufacturer begins the search for a new supplier of the much-needed part in a more stable country.

Severity and likelihood of risk: The managers of a bank know of a vulnerability in their app that they are working to fix. If the app is hacked, and their information systems are compromised, they are likely to lose vital customer data. They rate the likelihood of this event as “high” since, as a financial institution, they are a desirable target. They also know from watching their competitors face similar situations that the potential for disruption to their business in an event like this is great. They rate the severity of this risk as “high” as well.

Trigger: IT makes the bank’s managers aware that the bank’s app has been hacked and their customers’ data is no longer secure.

Response: The app is immediately shut down and customers are notified that their data has been compromised. They are made aware of the steps the bank is taking to ensure that they have access to their money and that their personal information is not available to anyone on the dark web. An on-call team of security experts that has been specially trained for this scenario is brought in to restore the banks systems and secure customer information.

Severity and likelihood of risk: The plant’s managers know that severe flooding could spread un-treated water into the city’s streets and public waterways. Both the severity of this risk and its likelihood given the impending storm are deemed “high. ”

Trigger: The hurricane’s path turns towards the city and approaches to less than 100 miles away with wind speeds higher than the threshold rated “safe.” The plant’s contingency plan is put into action.

Response: All necessary workers are recalled to the plant 24/7 and measures are taken to treat as much of the water as possible before the hurricane arrives. According to their plan, whatever is left over will be pumped into holding tanks that are designed to withstand a hurricane. When windspeeds rise to a certain velocity, the plant itself is shut down and all workers evacuated.

Help your business respond quickly to changing conditions with IBM Maximo, an integrated cloud-based solution that harnesses the power of artificial intelligence (AI), Internet of Things (IoT) and advanced analytics to maximize performance and minimize costs and downtime.

Learn more about the process of disaster recovery planning and Disaster-Recovery-as-a-Service.

Discover how global supply chains responded to the COVID-19 pandemic and are developing better ways to balance efficiency and resilience.

See how businesses are leveraging AI and other emerging technologies to maintain business continuity amid disruption and uncertainty.

Explore the business continuity measures IBM takes to help prevent or reduce the impact of potential threats.

Unlock the full potential of your enterprise assets by using IBM Maximo Application Suite to unify maintenance, inspection and reliability systems into one platform. It’s an integrated cloud-based solution that harnesses the power of AI, IoT, and advanced analytics to maximize asset performance, extend asset lifecycles, minimize operational costs and reduce downtime.

1  “ El Nino contingency plan being readied for farmers & output ” (link resides outside ibm.com) Elara Securities Pvt Ltd. April 27th, 2023

2  “ HKMA has prepared contingency plans in case of severe sanctions ” (link resides outside ibm.com) UBS Global Research and Evidence Lab, May 5th, 2022

3  “ IBM business continuity management position paper ” IBM Global Technology Services thought leadership white paper, September, 2019

Mastering Contingency Planning In The UK Construction Industry

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Introduction

In an industry as complex as construction, disciplined financial planning and risk management are of paramount importance. This article provides an insightful guide for architects, project managers, and clients on contingency planning, realistic budget setting, and budget monitoring in UK construction projects. Drawing from the Royal Institution of Chartered Surveyors’ (RICS) Risk Management guidance note, we delve into the intricacies of effective contingency planning and the benefits it affords in terms of improved budget accuracy and risk management. We will also explore the crucial role of continuous budget monitoring, from the initial design stages right through to the construction phase. Let’s start this deep dive into mastering contingency planning in the UK construction industry.

contingency plan for construction company

Contingency Planning in the UK Construction Industry

Contingency planning holds a vital position in the UK construction industry, serving as a protective measure against unexpected challenges and risks. Its core objective is to foresee possible issues and design an adaptable alternative plan ready for immediate implementation. This forward-thinking process aims to minimise the impact of unexpected events, thus safeguarding the project against delays, budget excesses, and quality compromises.

The Significance of Contingency Planning

The role of contingency planning is highly significant within the UK construction industry. It is primarily designed to anticipate and respond to potential issues or uncertainties that may crop up during the project’s lifetime. Preparing for potential disruptions in advance, it facilitates quick decision-making processes for project managers, architects, and clients, thereby reducing downtime and related costs. Ultimately, contingency planning is a safety net, ensuring project delivery within the stipulated time and budget, while maintaining quality standards.

Key elements of an effective contingency plan

A comprehensive contingency plan for construction projects should include a number of integral components, such as:

  • Risk Identification: Recognize potential risks that may pose a threat to the project, such as unexpected weather conditions, unanticipated ground circumstances, or supply chain delays.
  • Response Strategy: The plan should contain detailed responses for each risk identified, showcasing the steps to mitigate and respond in order to reduce the impact on the project.
  • Resource Allocation: The plan should specify who will manage each risk and the resources needed to carry out the mitigation strategies.
  • Continuous Monitoring and Adjustment: The contingency plan should be open to regular monitoring and modifications, enabling alterations based on new risks and situations.
  • Flexibility: An effective contingency plan needs to be a living document that is flexible and can adapt to the individual challenges of each construction project.

The plan should also provide for constant monitoring and adjustment, allowing for changes to be made in response to evolving risks and circumstances. Ultimately, an effective contingency plan should be a dynamic document, flexible to changes and adaptable to the unique challenges of each construction project.

Key Risks to Address in Contingency Planning

While contingency planning needs to cover a variety of risks, which are often specific to the project, here are some general examples applicable to most projects:

  • Financial Risks: Price fluctuations for critical materials, labour, equipment, and services. Potential risks also include inflation, changes in exchange rates, and contractor insolvency.
  • Operational Risks: Potential project timeline delays due to supplier delays, adverse weather, or on-site accidents. Low productivity from labour shortages, strikes, or inadequate skill levels are also to be considered. Technical complexities, such as unexpected site conditions, design errors or equipment malfunctions, are additional risks.
  • Legal and Regulatory Risks: Legislative changes, contract breaches, property rights disputes, or failure to comply with building regulations or health and safety guidelines.
  • Strategic Risks: Changes in market conditions, client requirements, or loss of key staff members, all of which could significantly alter the project’s direction or feasibility.
  • Environmental Risks: Potential environmental impacts like soil contamination, noise pollution, or damage to local wildlife habitats. Compliance with environmental regulations is crucial to avoid legal repercussions and damage to the company’s reputation.

Effective contingency plans acknowledge a wide spectrum of potential risks, ranging from financial and operational to legal, strategic and environmental. By predicting these risks and crafting strategies to address them, construction companies can significantly reduce project disruptions, ensuring timely completion within budget.

Strategies for Contingency Coverage in the UK Construction Industry

In the UK construction industry, it’s crucial to strategically address contingencies to reduce project risks and secure optimal results. Various methods can be used, including:

  • Contingency Reserve: This involves setting aside a specific amount within the project budget to cover unforeseen costs. The size of the reserve depends on project specifics, estimation confidence, and associated risk levels.
  • Risk Transfer: This method shares or transfers project risks to another party, typically through insurance or contracts. Examples include fixed-price contracts with suppliers or insurance policies covering specific risks like damage, injury, or delay.
  • Risk Avoidance: Not always feasible or economical, this approach alters the project plan to eliminate or reduce exposure to certain risks.
  • Early Warning Systems: These systems provide advance notice of potential risks by tracking project progress and highlighting deviations from the plan, facilitating proactive management and early corrective action.
  • Professional Development: Investing in staff training enhances skills and knowledge, equipping the team to effectively identify, manage, and mitigate risks.

Each method has its own pros and cons, and the optimal approach depends on the project’s specific circumstances. Successful contingency planning requires a diverse strategy that combines these methods based on the project’s unique needs and risk profile.

RICS Management of Risk Guidance Note

The Royal Institution of Chartered Surveyors (RICS) Management of Risk Guidance Note is a vital reference document offering insights and advice on risk management in construction and project management. It serves as a best practice benchmark in risk and contingency management.

The guidance emphasises a systematic approach to risk management, which includes risk identification, analysis, contingency planning, risk mitigation strategy implementation, and continuous monitoring and review. It offers a structured method for managing risk throughout a construction project’s lifecycle. Here at Multirpoject we strongly believe in following this and other RICS guidances to ensure successful project delivery.

Setting a Realistic Budget

Setting a realistic budget is a crucial step that should never be underestimated. It serves as a roadmap, guiding all financial decisions throughout the project’s lifecycle. It is a common refrain by many architects, project managers, and clients that many projects exceed their budgets. This is often due to a lack of foresight in the budget planning stage, hence the importance of allocating resources accurately and realistically from the get-go.

Creating a contingency budget is a key part of this process. A contingency budget is an amount of money set aside to cover unexpected costs during the construction process. It is in essence, a safety net, preventing the overall project from going over budget due to unforeseen expenses. The size of the contingency budget can vary depending on the project but generally falls between 10% to 15% of the total project cost. It is important to factor in this contingency budget when setting the overall project budget.

While setting a realistic budget requires a significant time investment and a solid understanding of the project, the payoff is worth it. A well-planned budget that accounts for contingencies can be the difference between a successful project that is delivered on time and within budget, and one that, unfortunately, is not. This not only saves money but also maintains the reputation of those involved in the project.

In conclusion, setting a realistic budget, including a contingency plan, is an essential step in any construction project. It ensures that the project can continue to run smoothly, even when unexpected costs arise. By following these guidelines, architects, project managers, and clients can reduce financial risk and ensure the successful completion of their projects.

Budget Monitoring in Construction Projects

Establishing a budget is merely the first step in financial management for construction projects. It’s crucial to continuously monitor budgets throughout both the design and construction phases. As projects progress and risks become better understood or eliminated, initial contingencies may be reduced or dismissed.

However, new risks may emerge that need to be incorporated into the contingency plan and budget. This highlights the dynamic nature of construction project budgets and contingency plans

Benefits of Contingency Planning

Implementing contingency planning within the construction industry provides several invaluable benefits. Primarily, it greatly improves the accuracy of budget estimates. By forecasting potential risks and accounting for them in the budget, projects are less likely to experience financial overruns, ensuring a more accurate alignment of the final project costs with the initial estimates.

Furthermore, contingency planning significantly enhances risk management. It provides a structured approach to identify, assess and prepare for risks, ensuring an effective response strategy is in place for any unexpected circumstances. Thus, the probability of project delays, additional costs or compromised quality is reduced. Therefore, the practice of contingency planning is highly advantageous for successful construction management in the UK.

In summary, contingency planning plays a pivotal role in the UK construction industry. It offers a proactive approach to risk management, ensuring resources are allocated to handle unexpected developments. By fostering more accurate budget estimates, it not only keeps a project within financial bounds but also aids in maintaining project timelines.

Moreover, the RICS Management of Risk guidance note provides invaluable insights that can be incorporated into contingency planning, emphasising the importance of realistic budgeting and diligent budget monitoring. With contingency planning, project managers, architects, and clients can better navigate the unpredictable nature of construction projects, leading to improved efficiency and effectiveness. Ultimately, contingency planning is not merely an option, but a necessity in the UK construction industry.

For further guidance on contingency planning within the UK construction industry, a wealth of information is available online. The RICS website offers a comprehensive suite of resources, including detailed guides on risk management and budgeting. It is also worth exploring the Chartered Institute of Building (CIOB) ‘s repository of articles and insights into the latest methodologies and best practices in the field.

For those seeking personalised advice, professional organisations such as the Association for Project Management (APM) offer a platform to connect with experienced industry professionals. They can provide project-specific advice and mentorship. In addition, you may find the Construction Industry Council (CIC)’s resources helpful, which provide a holistic view on contingency planning, budgeting and risk management within the construction sector.

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