how much contingency should you add to a quote?
Ask ten tradies and you will get ten different answers. "I always add 10%." "15% on renos, 10% on new builds." "Depends on the customer." The truth is that a flat percentage contingency is a guess — and it is usually wrong. Sometimes it is too much, pricing you out of the job. Sometimes it is nowhere near enough, and you end up working for free.
This guide explains why flat contingency fails and how to calculate a contingency that actually reflects the risk on your specific job.
why flat contingency does not work
Consider two jobs, both with a base estimate of $20,000:
| Job | Description | Risk Profile | Needs |
|---|---|---|---|
| Job A | Bathroom reno — standard fixtures from Bunnings, your usual plumber and sparky, no structural work | Mostly Low | ~5-8% buffer |
| Job B | Bathroom reno — bespoke imported tiles, new fabricator for the shower screen, suspected asbestos, no site survey | Mostly High | ~18-25% buffer |
If you add a flat 10% to both, you are overpricing Job A (and might lose it to a cheaper quote) while underpricing Job B (and will almost certainly lose money). The right contingency depends on the specific risks in the specific job.
what the numbers actually look like
When you run a Monte Carlo simulation on jobs with different risk profiles, the contingency needed varies dramatically:
| Risk Profile | Base Estimate | P80 Quote | Effective Contingency |
|---|---|---|---|
| All Certain/Low items | $20,000 | $21,200 | 6% |
| Mix of Low/Medium items | $20,000 | $22,400 | 12% |
| Mix of Medium/High items | $20,000 | $24,000 | 20% |
| Mostly High/Wild Guess | $20,000 | $26,800 | 34% |
The difference between 6% and 34% on a $20,000 job is $5,600. That is the difference between a healthy profit and a significant loss. A flat 10% would have been wrong in every single one of these scenarios.
real-world AUD examples
Merbau deck, 25 sqm, standard design. Materials from your regular timber yard. Your usual chippy doing the labour. Council-approved plans already in hand.
Base estimate: $12,000
Risk profile: Mostly Low with one Medium item (timber prices)
Recommended quote (P80): $13,100 — about 9% contingency
Full strip-out and refit. Imported tiles, custom frameless shower screen from a new supplier, suspected asbestos in old adhesive. Customer has not finalised fixtures.
Base estimate: $18,000
Risk profile: Mix of Medium and High items
Recommended quote (P80): $21,800 — about 21% contingency
60 sqm granny flat. Council DA not yet approved. Soil test not done. First time working with this drafter. Sewer connection location unknown.
Base estimate: $95,000
Risk profile: Multiple High and Wild Guess items
Recommended quote (P80): $121,600 — about 28% contingency
how to calculate your contingency
- List every line item in your quote.
- For each one, honestly assess how confident you are in that number. Have you got a written quote? That is Certain. Are you guessing? That is High or Wild Guess.
- Run the numbers through a Monte Carlo simulation.
- The difference between your base estimate and the P80 result is your risk-weighted contingency. It is different for every job because every job has different risks.
This takes about five minutes. It could save you thousands of dollars on every job.