Contingency Budget Calculator: AACE-Based Sizing
Contingency reserves cover "known unknowns": risks you can name but cannot eliminate. AACE International's class-based system is the most widely cited reference for sizing them.
AACE estimate classes and contingency ranges
| AACE class | Project definition | Typical use | Contingency range |
|---|---|---|---|
| Class 5 | 0% to 2% complete | Concept screening, order-of-magnitude | +30% to +50% (and higher) |
| Class 4 | 1% to 15% complete | Feasibility study | +20% to +30% |
| Class 3 | 10% to 40% complete | Budget authorisation | +10% to +20% |
| Class 2 | 30% to 70% complete | Control estimate, bid/tender | +5% to +15% |
| Class 1 | 50% to 100% complete | Definitive, contractor close-out | +1% to +10% |
Source: AACE International Recommended Practice 18R-97, Cost Estimate Classification System.
Type-A vs type-B contingency sizing
A useful Flyvbjerg distinction: a "type-A" project is one that has been done many times before in a very similar form (a suburban office building, a routine paving job, a familiar SaaS rollout). A "type-B" project is novel in technology, scale, or context (first-of-a-kind nuclear, first-of-a-kind transit line, custom enterprise software).
| Project type | Suggested contingency at AACE class 3 | Rationale |
|---|---|---|
| Type-A (well-known) | 10% to 15% | Reference class data is strong; known risks dominate. |
| Type-B (novel) | 25% to 50% | Unknown unknowns dominate; reference class is thin or non-existent. |
If you are negotiating contingency under 10% on a type-B project, you are essentially betting that nothing surprises you. The empirical record says you will lose that bet.
Sources
- AACE International Recommended Practices (40R-08, 18R-97, 57R-09)
- Project Management Institute (2017). PMBOK Guide 6th edition, section on reserves and contingency.
- UK Treasury Green Book supplementary guidance on optimism bias uplifts.