What does it mean?
Contingency is a stated allowance for uncertainty within a cost estimate. It should be tied to identified risks and the maturity of the information, not used to disguise missing scope. Design development, quantity uncertainty and other risks may require different treatment. A contingency allowance is distinct from a contractor’s profit and from a material wastage factor.
In practice
A deliberately chosen 5% allowance on a 200,000 base estimate is 10,000. Record what risks that amount covers, so later changes are not counted again in both the base estimate and contingency.
Keep in mind
For a project record, note the document reference, revision and agreed measurement or contractual basis beside the quantity. Keep assumed information visibly separate from confirmed information. If two parties use different definitions or inclusions, resolve that difference before comparing amounts. These explanations are general estimating context; the wording of the applicable contract and its administration process must be checked for the particular job.