Contingency Budget to Performance Budget

Turn your contingency budget into your performance budget

You can get your commercial construction team on board for saving time,  reducing rework, diminishing safety issues, and integrating increased productivity on each project. One way to do it is by giving your team the opportunity to reap the reward through moving the money from the contingency fund to the performance fund.

Contingency budgets are real

Before you get too excited about the possibilities. Or, before you get mad at me for suggesting the prospect of fund shifting, let me explain. I know a contingency budget is called a contingency budget for a reason. A very good reason. Contingencies lurk around the corner.

Therefore, knowing there are contingencies over which neither you nor your crew have control, a contingency fund is still an excellent practice.  Some of the uncontrollable aspects include:

  • premature equipment failure
  • owner bankruptcies
  • regulatory changes
  • strikes
  • unanticipated price or interest rate increases
  • unusual or calamitous weather

Then understand, there are other things which come up which are more in your control, yet sometimes missed. They can include:

  • incomplete designs
  • scope errors
  • equipment breakdowns due to faulty maintenance schedule
  • estimating inaccuracies
  • technological upgrades you haven’t incorporated (yet)

Too many dastardly contingencies can, at times, eat up the  entire contingency budget. Yet, that isn’t always the case.

Reprioritize your contingency budget 

You have the opportunity to reprioritize the “insurance” of your contingency fund when you find it has not been needed in the usual way. Well of course, you could stick those funds in your pocket or in the bank. Yet, think of the opportunity you have. You can garner much more than the five to fifteen percent of a given project’s budget. (You know, the contingency fund.) When you get team buy-in as well as fewer problems, you’re on a golden path.

It begins with communication. Giving your team the “rules” before the game starts, gives them the opportunity to mitigate the risk associated with each portion of the contingency.

Consider what you want from your team: 

  • Fewer safety problems
  • Reduced rework issues
  • Increased productivity

Ways you can work with them to reach those goals: 

  • Improve safety training and provide more of it
  • Create better processes removing inefficiencies (These two articles, found here and here are gold when it comes to helping you and your team increase productivity.)
  • Provide specialized training for supervisors
  • And, (this is important) let them know how they will benefit by helping you turn the job contingency budget into their performance budget.

Risk management tool

Think of the time and effort you put into working with your team on moving your contingency fund to the performance fund as a risk management tool.

Here are a few more tips to help you in this effort.

  • Get the crew involved in doing regular inventories. That way, they and you know what you need and what you already have.
  • Set aside a certain amount of time at the end of each day to cleanup. As a result, your team understands it is part of their job. You aren’t asking them to do “extra stuff” after the day is complete.
  • Avoid inefficient layout of the shop, work vehicles, and work site. Let the team know they’re part of the effort to be organized. Here is an article you can check to get more information concerning organizing your vehicles.
  • Communicate often. Remember, communication is a two-way street.

It is our desire this article (among our growing library of construction-centric informational articles) is helpful in assisting commercial construction contractors build better building businesses. 

Providing Accounting, Contract Document Management, and Advisory Board Level counsel for small to medium commercial construction subcontractors.

So you can Run With the Big Dogs. 866-629-7735  

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