*Marking this as urgent because my exam is Friday morning. Really hoping I can get an answer before then!!

In the 4.1 video, Cost Estimates During Design, at the 3:30ish mark, the presenter does some calculations adding in 5%, 3%, and 2% contingencies to the base estimate. However, it looks like their calculations build on their previous answer:

$5,160,000 x 1.05 = $5,148,000

$5,148,000 x 1.03 = $5,580,540

$5,580,540 x 1.02 = $5,692,150

Is this incorrect? Or is the way they show the right way to do it? I would think that contingencies are all added onto the base estimate like:

$5,160,000 x .05 = $258,000

$5,160,000 x .03 = $154,800

$5,160,000 x .02 = $103,200

Total: $5,160,000 + 258,000 +154,800 + 103,200 = $5,676,000

Check: $5,160,000 x (1.05+1.03+1.02) = $5,160,000 x 1.1 = $5,676,000

At least, this is how I see contingencies added on construction bids / GMPs.

Thank you!!

Ami

Hi @amim ! Thank you for your question.

Calculating contingencies could be done either way, depending on the situation. If an ARE question is specific on rounding, it should provide instructions on which route to take.

This specific example references a design contingency, then a bidding contingency, then an escalation contingency for inflation. These differing/separate contingencies (in this order) makes sense to build on each other.

If the contingencies were similar in nature (i.e. design contingency for interiors, design interiors for structure, etc.), it would make sense to calculate them on the base estimate.

I hope this helps. Best of luck on your exam - the entire Black Spectacles Team is rooting for you!

Kiara Galicinao, AIA, NCARB

**Black Spectacles**

@kiaragalicinao that makes sense and is super helpful. Thank you!!