These two are different and must be calculated separately and clearly stated.
Contingency Allowance
- Definition: Buffer for unforeseen circumstances and price changes
- Range: 5-10% of direct cost (varies by risk)
- NOT: Contractor’s profit
| Project Type | Risk Level | Contingency % |
|---|---|---|
| Simple residential | Low | 5-7% |
| Commercial/Industrial | Medium | 8-10% |
| Complex (Infrastructure) | High | 10-15% |
Profit Margin
- Definition: Contractor’s return on investment
- Range: 10-15% (market-dependent)
- Added after: Materials, labour, equipment, overhead, contingency
Complete Cost Build-up Example:
| Component | Amount (₹) | % |
|---|---|---|
| Materials | 30,00,000 | 50% |
| Labour | 12,00,000 | 20% |
| Equipment | 6,00,000 | 10% |
| Direct Cost | 48,00,000 | 80% |
| Overhead (8%) | 3,84,000 | 6.4% |
| Contingency (7%) | 3,62,880 | 6% |
| Profit (10%) | 5,54,688 | 9.2% |
| FINAL ESTIMATE | ₹61,01,568 | 100% |
Final Formula:
Final Estimate = (Material + Labour + Equipment) × (1 + Overhead%) × (1 + Contingency%) × (1 + Profit%)
