ASTM E2168-10(2023)

Standard Classification for Allowance, Contingency, and Reserve Sums in Building Construction Estimating

SIGNIFICANCE AND USE
4.1 When preparing construction, project, and program cost estimates, it is often necessary to make monetary provision for change or risk, or both, or other exigencies where information is incomplete.  
4.2 Such allowance, contingency or reserve sums are employed by many persons engaged in the planning, delivery, and financing of construction work.  
4.3 These users include owners, developers, facilities programmers, cost planners, estimators, schedules, architects and engineers, specification writers, operating and maintenance staff, manufacturers, educators, financial managers, and comptrollers.  
4.4 Usage:  
4.4.1 These sums are especially appropriate when performing the following activities:    
Cost budgeting;  
Conceptual, design, and construction cost estimating;  
Preparing complete forecast cost for economic evaluation,
investment analysis, and approval; and    
Controlling cost during planning, design, and construction.  
4.4.2 In any of these activities a needed requirement, or component, of the planned construction can be known while the defined solution, design or specification, for providing this may not. The usual, and appropriate, response in these situations, is the inclusion of a monetary sum, within an estimate, to provide for this (these) requirement(s).  
4.4.3 Such sums may be general or specific in scope, may be planned to be spent or may only be included as possible mitigation for unplanned events and requirements.  
4.4.4 To distinguish between these sums, and in recognition of their differing purpose, they are described, and classified here, using the terms allowance, contingency, or reserve.
Note 1: Section 5 includes a generic statement of purpose for each of the three terms and provides a sub-classification that distinguishes between sums included for specific purposes and for non-specific, that is, general purposes. In cost budgeting, conceptual and design estimating especially, an estimator may intuitively recognize...
SCOPE
1.1 This classification establishes a classification for allowance, contingency, and reserve sums used in construction, project, and program estimating.  
1.2 This classification applies to all construction work.  
1.3 This classification is not based on permanent physical elements of construction (as defined and classified in Classification E1557). Rather, the classification items are cost components common to construction, project, and program estimates.  
1.4 This international standard was developed in accordance with internationally recognized principles on standardization established in the Decision on Principles for the Development of International Standards, Guides and Recommendations issued by the World Trade Organization Technical Barriers to Trade (TBT) Committee.

General Information

• Status: Published
• Publication Date: 30-Apr-2023
• ICS: 91.010.20 - Contractual aspects
• Technical Committee: E06 - Performance of Buildings
• Drafting Committee: E06.81 - Building Economics

Relations

• Refers: ASTM E1557-09(2020)e1 - Standard Classification for Building Elements and Related Sitework—UNIFORMAT II
• Effective Date: 01-Apr-2020
• Refers: ASTM E1557-09(2015) - Standard Classification for Building Elements and Related Sitework—UNIFORMAT II
• Effective Date: 01-Oct-2015
• Refers: ASTM E631-15 - Standard Terminology of Building Constructions
• Effective Date: 01-Mar-2015
• Refers: ASTM E631-14 - Standard Terminology of Building Constructions
• Effective Date: 01-Nov-2014
• Refers: ASTM E833-13b - Standard Terminology of Building Economics
• Effective Date: 01-Nov-2013
• Refers: ASTM E833-13a - Standard Terminology of Building Economics
• Effective Date: 15-Oct-2013
• Refers: ASTM E833-13 - Standard Terminology of Building Economics
• Effective Date: 01-Oct-2013
• Refers: ASTM E833-12 - Standard Terminology of Building Economics
• Effective Date: 01-May-2012
• Refers: ASTM E1804-12 - Standard Practice for Performing and Reporting Cost Analysis During the Design Phase of a Project
• Effective Date: 01-Apr-2012
• Refers: ASTM E1946-12 - Standard Practice for Measuring Cost Risk of Buildings and Building Systems and Other Constructed Projects
• Effective Date: 01-Apr-2012
• Refers: ASTM E833-09a - Standard Terminology of Building Economics
• Effective Date: 01-Nov-2009
• Refers: ASTM E1557-09 - Standard Classification for Building Elements and Related Sitework-UNIFORMAT II
• Effective Date: 01-Jun-2009
• Refers: ASTM E833-09 - Standard Terminology of Building Economics
• Effective Date: 01-May-2009
• Refers: ASTM E833-08 - Standard Terminology of Building Economics
• Effective Date: 01-Nov-2008
• Refers: ASTM E1946-07 - Standard Practice for Measuring Cost Risk of Buildings and Building Systems
• Effective Date: 01-Apr-2007

Overview

ASTM E2168-10(2023), Standard Classification for Allowance, Contingency, and Reserve Sums in Building Construction Estimating, provides a clear, internationally recognized framework for categorizing monetary provisions used in construction cost estimates. The standard addresses the ambiguity often found in the terms “allowance,” “contingency,” and “reserve,” ensuring that each has a distinct, consistent meaning for all stakeholders in the construction process. It applies to all types of construction work and is widely used by owners, developers, project managers, architects, engineers, cost estimators, and financial stakeholders.

By establishing a systematic classification, ASTM E2168-10(2023) enhances the precision and reliability of budgeting, cost control, risk management, and financial planning across building construction projects.

Key Topics

Classification Criteria:

• Allowance: A sum intended to be spent on known scope of work but with incomplete information.
• Contingency: A provision for unintended departures from the planned scope, used to buffer against risks and unforeseen events.
• Reserve: Funds typically held by management to address changes in project requirements or external factors, ensuring the project or program can adjust to significant changes or risks.

Primary and Secondary Classifications:

• Each sum type can be further categorized:
  • Specific: Uniquely identified, calculated for a distinct, known purpose.
  • Non-Specific: Broadly identified, covering general uncertainties.
• These provisions can be included at:
  • Construction estimate level
  • Project estimate level
  • Program estimate level

Purpose and Significance:

• Provides a common language for construction cost estimating terms.
• Promotes consistent documentation and reporting practices.
• Supports informed decision-making throughout project planning, design, execution, and completion.

Applications

ASTM E2168-10(2023) is instrumental in a variety of building construction management and estimating activities:

• Cost Budgeting: Embedding allowance, contingency, and reserve sums into budgets to address uncertainty, design evolution, and project changes.
• Conceptual and Design Estimating: Incorporating specific and non-specific sums in early-stage cost forecasts to anticipate detail refinement and risk.
• Economic Evaluation and Investment Analysis: Ensuring full project cost consideration for feasibility studies and approval processes.
• Cost Control: Enabling transparent identification and tracking of monetary provisions throughout project delivery.
• Stakeholder Communication: Defining financial exposure and allocation, especially when coordinating with diverse groups such as owners, maintenance staff, financial controllers, and designers.

Illustrative Use Case: For example, during a major transportation infrastructure project, the effective allocation and classification of allowance, contingency, and reserve sums helped project teams manage unknowns, stakeholder desires, and potential changes efficiently, with clear traceability for decision-makers.

Related Standards

ASTM E2168-10(2023) is designed for compatibility with a range of related standards that support construction cost estimating and project management:

• ASTM E631: Terminology of Building Constructions
• ASTM E833: Terminology of Building Economics
• ASTM E1557: Classification for Building Elements and Related Sitework (UNIFORMAT II)
• ASTM E1946: Practice for Measuring Cost Risk of Buildings and Building Systems
• ASTM E1804: Practice for Performing and Reporting Cost Analysis During the Design Phase of a Project
• ASTM E2013: Practice for Developing Functions, Constructing FAST Diagrams, and Performing Function Analysis During Value Analysis Studies

Practical Value

Utilizing ASTM E2168-10(2023) enables organizations to mitigate financial risk, maintain clearer project cost records, and promote confidence in construction project estimates. The standard’s methodical approach to monetary provisions ensures that all parties involved in construction estimating-owners, developers, cost engineers, and financial managers-operate with consistent definitions and processes, supporting better outcomes in budgeting, planning, and cost control within the built environment.

Keywords: construction estimating, cost control, allowance, contingency, reserve, building economics, cost planning, risk management, ASTM E2168, project budgeting, construction cost classification, UNIFORMAT II.

Standards Content (Sample)

This international standard was developed in accordance with internationally recognized principles on standardization established in the Decision on Principles for the
Development of International Standards, Guides and Recommendations issued by the World Trade Organization Technical Barriers to Trade (TBT) Committee.
Designation: E2168 − 10 (Reapproved 2023)
Standard Classification for
Allowance, Contingency, and Reserve Sums in Building
Construction Estimating
This standard is issued under the fixed designation E2168; the number immediately following the designation indicates the year of
original adoption or, in the case of revision, the year of last revision. A number in parentheses indicates the year of last reapproval. A
superscript epsilon (´) indicates an editorial change since the last revision or reapproval.
INTRODUCTION
In building construction estimating the terms allowance, contingency, and reserve are often used
almost interchangeably and are assumed to be universally understood, yet they often mean different
things to different people. Consequently they can be ambiguous in meaning and intent.
Applying these terms, as classified herein, adds a needed precision and rigor in their use as each
term is held to be specific in its meaning, intent, and use.
1. Scope E1946 Practice for Measuring Cost Risk of Buildings and
Building Systems and Other Constructed Projects
1.1 This classification establishes a classification for
E2013 Practice for Developing Functions, Constructing
allowance, contingency, and reserve sums used in construction,
FAST Diagrams, and Performing Function Analysis Dur-
project, and program estimating.
ing Value Engineering (VE)/Value Analysis (VA) Study
1.2 This classification applies to all construction work.
3. Terminology
1.3 This classification is not based on permanent physical
elements of construction (as defined and classified in Classifi-
3.1 Definitions—For definitions of terms used in this
cation E1557). Rather, the classification items are cost compo-
classification, refer to Terminologies E631 and E833.
nents common to construction, project, and program estimates.
1.4 This international standard was developed in accor- 4. Significance and Use
dance with internationally recognized principles on standard-
4.1 When preparing construction, project, and program cost
ization established in the Decision on Principles for the
estimates, it is often necessary to make monetary provision for
Development of International Standards, Guides and Recom-
change or risk, or both, or other exigencies where information
mendations issued by the World Trade Organization Technical
is incomplete.
Barriers to Trade (TBT) Committee.
4.2 Such allowance, contingency or reserve sums are em-
ployed by many persons engaged in the planning, delivery, and
2. Referenced Documents
financing of construction work.
2.1 ASTM Standards:
4.3 These users include owners, developers, facilities
E631 Terminology of Building Constructions
programmers, cost planners, estimators, schedules, architects
E833 Terminology of Building Economics
and engineers, specification writers, operating and maintenance
E1557 Classification for Building Elements and Related
staff, manufacturers, educators, financial managers, and comp-
Sitework—UNIFORMAT II
trollers.
E1804 Practice for Performing and Reporting Cost Analysis
During the Design Phase of a Project
4.4 Usage:
4.4.1 These sums are especially appropriate when perform-
ing the following activities:
This classification is under the jurisdiction of ASTM Committee E06 on
Performance of Buildings and is the direct responsibility of Subcommittee E06.81
Cost budgeting;
on Building Economics.
Conceptual, design, and construction cost estimating;
Current edition approved May 1, 2023. Published May 2023. Originally Preparing complete forecast cost for economic evaluation,
approved in 2001. Last previous edition approved in 2016 as E2168 – 10 (2016). investment analysis, and approval; and
Controlling cost during planning, design, and construction.
DOI: 10.1520/E2168-10R23.
For referenced ASTM standards, visit the ASTM website, www.astm.org, or
4.4.2 In any of these activities a needed requirement, or
contact ASTM Customer Service at [e-mail]. For Annual Book of ASTM
component, of the planned construction can be known while
Standards volume information, refer to the standard’s Document Summary page on
the ASTM website. the defined solution, design or specification, for providing this
Copyright © ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959. United States
E2168 − 10 (2023)
may not. The usual, and appropriate, response in these 5.2.2 Contingency—A sum of money that is provided to
situations, is the inclusion of a monetary sum, within an cover the occurrence of unintended departures from the
estimate, to provide for this (these) requirement(s). planned scope of work. Used in the absence of precise
4.4.3 Such sums may be general or specific in scope, may be knowledge, and estimated to the best of one’s knowledge to
planned to be spent or may only be included as possible ensure that a financial buffer is available within a budget.
mitigation for unplanned events and requirements. Contingencies assist in mitigating the effects of unplanned
4.4.4 To distinguish between these sums, and in recognition events and other risks that are external to, and are not directly
of their differing purpose, they are described, and classified controllable within, a project plan.
here, using the terms allowance, contingency, or reserve. 5.2.3 Reserve—A sum, usually held by management (client)
to be disbursed only when project requirements are changed.
NOTE 1—Section 5 includes a generic statement of purpose for each of
Used to provide insurance against a project or program failing
the three terms and provides a sub-classification that distinguishes
to complete on budget or for the revision of a budget in the case
between sums included for specific purposes and for non-specific, that is,
general purposes. In cost budgeting, conceptual and design estimating
of changed management or program direction and requirement.
especially, an estimator may intuitively recognize the need for a general
NOTE 2—For the purposes of the classification an internal environment
purpose sum. This recognition comes in the absence of any known specific
requirement other than the need to ensure the estimate total is a reasoned is that which exists within an organization. An internal environment may
readily allow cost control through revision of design or specification, or
forecast of a reasonable bid result.
both. External environment changes impact the project cost and may be
4.5 This classification defines allowance, contingency, and
the result of contractual obligation, uncovered site conditions or changed
reserve sums as items common to construction, project, and
legislation, for example. External environment changes may allow little or
program estimates through planning, design, construction, and no opportunity for mitigation.
completion. The terms are sufficiently generic to be applied in
5.3 Secondary Classification:
all forms of construction work.
5.3.1 Each of the Primary Classifications may be further
sub-classified as:
5. Basis of Classification
5.3.2 Specific—Where the content of a sum is uniquely
5.1 Classification Criteria: identified and the sum is calculated solely for that distinct
5.1.1 The selected classification of terms is based on the purpose, and
following criteria. The terms shall: 5.3.3 Non-Specific—Where the content of a sum is only
broadly identified and the sum is calculated for application to
Be readily distinguishable one from the other,
Be simple and must identify their properties and usage directly,
that general purpose.
Be appropriate in all forms of construction financial activities, and
Allow a distinction between the environments (internal or external)
NOTE 3—Reference should also be made to Practice E1946, which
within which they are applied.
describes a formal methodology for estimating the amount of each sum.
NOTE 4—For examples of specific allowance items refer to Practice
5.2 Primary Classification:
E1804.
5.2.1 Allowance—A sum of money that is intended to be
5.4 Classifications in Context:
spent on the planned scope of work. Used in the absence of
precise knowledge, and estimated, to the best of one’s abilities, 5.4.1 Placing these classifications in the context of typical/
generic usage provides an additional understanding of the
to ensure a full and complete estimate. Allowances cover
events and activities that are normally internal and so are distinctions between the classified terms.
directly controllable within the project plan. 5.4.2 Table 1 is a tabulation of the basic properties, events
TABLE 1 Classification of Allowance, Contingency, and Reserve—Typical Application
Allowance Contingency Reserve
1. Intend to spend? Yes No No
2. Applied to work actions that are: Intended Unintended At Client Discretion
3. Expenditure is effected by:
Internal Change Yes No No
External Change No Yes No
Management (Client) Change No No Yes
4. Is an integral part of:
Construction Estimate Yes No No
Project Estimate Yes Yes No
Program Estimate Yes Yes Yes
5. Commitment Sanctioned by:
Consultants Yes No No
Project Manager Yes Yes No
Management (Client) Yes Yes Yes
6. Calculated on the basis of:
Past Personal/Corporate Experience Yes Yes Yes
Statistical Analysis of Past Projects Yes Yes Yes
Probabilistic Assessment of Change Yes No No
Probabilistic Assessment of Risk No Yes No
Management Policy No No Yes
E2168 − 10 (2023)
and methods defined for allowances, contingencies, and re- includes acquisition costs, construction work, fees (profes-
serves as typically applied in the building construction indus- sional and legal), expenses, and any other disbursements. A
try. This table identifies the key differences and some project estimate may include both specific and non-specific
similarities, makes for easy identification of the generic prin- contingency(s).
ciples driving the classifications, and so allows consistent 5.5.3 Program Estimate—An estimated cost that includes
application. It also draws attention to the need for a subsidiary all Client Costs in addition to the Project Estimate(s) that are
cost classification that is typically part of a generic Work collectively part of the main Program of Work, that is, an
Breakdown Structure. overall management estimate including project estimate(s), and
other program delivery, operation and maintenance, estimates.
5.5 Subsidiary Classification:
A program estimate may include both specific and non-specific
5.5.1 Construction Estimate—An estimated cost for the
reserve(s).
construction work including all trade costs and the prime
contractors’ Field Requirements and Office Overhead & Profit;
NOTE 5—These subsidiary classifications, while not obviously needed
to classify allowances, contingences, and reserves, are important to
that is, an estimate of construction work intended to forecast
understanding the context in which they are used.
the amount of a reasonable bid figure. A construction estimate
may include both specific and non-specific allowance(s).
6. Keywords
5.5.2 Project Estimate—An estimated cost that includes
Design and Project Management Fees & Disbursements, and 6.1 allowance; budgeting; building economics; classifica-
other costs, in addition to the Construction Estimate, that are tion; construction estimating; contingency; cost control; cost
discretely packaged as a total project; that is, a total estimate estimating; cost planning; cost risk; reserve; UNIFORMAT II
APPENDIXES
(Nonmandatory Information)
X1. GUIDANCE NOTES
X1.1 These guidance notes are included to aid in under- category. Non-specific allowances, by their very nature, cannot
standing the application of the classification terms. A simple be treated that way and so must be included in a unique section
and relatively common arrangement used in building construc- or category of their own. In architectural building parlance, an
tion has been used, within the mandatory information as Table allowance is sometimes described as provision for a deferred or
1, describing a common usage. Appendix X2 provides an evolving design decision.
example of its application within the transportation construc- NOTE X1.1—This summary methodology and its distinction between
the specific and the non-specific also applies to contingencies and
tion sector.
reserves.
X1.2 Most especially with design construction estimates
X1.5 Project Level—A project manager, whose responsibil-
there is a need to make provision for the, as yet, undefined
ity is to deliver a project “on time and within budget,” will
detail. It is necessary to make allowance for this if an estimate
make provision within the project estimate for risk items when
total is to be a reasoned forecast of construction cost. An
advising management of their financial exposure. This may be
estimate based on complete drawings and specifications will
done by including a contingency sum within the total forecast
include only those allowances specifically prescribed in that
project cost. Although estimated in several possible ways
documentation. Both specific allowances and non-specific
contingency sums should reflect both the upside and down side
allowances may be required, particularly during the early
of identified project risks. Contingencies are reasoned sums
design stages.
that take into account the probability of occurrence of such
identified risks. Such sums may likely be included for funds
X1.3 Table 1 considers just three levels of a typical Work
appropriation purposes and are only to be expended, as needed,
Breakdown Structure—program, project, and construction—
against those risks.
and the cost estimates within them. Each ro
...