ASTM E2168-10(2023)
(Classification)Standard Classification for Allowance, Contingency, and Reserve Sums in Building Construction Estimating
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
Relations
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 service@astm.org. 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 rolls up into the other,
with program being the top level. In Table 1, it is assumed that
X1.6 Program Level—A prudent client may also make
responsibility for maintaining these levels within budget is
provision for changes in overall program direction, changes in
delegated down from management/client (program), to project
requirement, and other discretionary or unavoidable changes. A
manager (project), to consultant (construction), although each
management reserve is the usual approach. For purposes of this
level has an oversight responsibility for their subordinate’s
discussion, a program may include several projects but only
actions. Table 1 uses this hierarchy.
one reserve. Such reserves are controlled by the client and the
X1.4 Construction Level—When summarizing estimates, amount may be based on company policy, calculation, or the
specific allowances are usually included within the section to recommendation of others. Again it is a measure of possible
which they apply, that is, an allowance for rock excavation exposure and is for use in the eve
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