Managing Contingency in Mastt

Contingency acts as a safety net to cover risks that have yet to be defined in a scope. The way you set it up in Mastt should make it easy to see two things:

1. How much contingency is remaining
2. How much has been drawn down

There isn't one right method, and Mastt supports a few different approaches. We've identified two that work well in practice. The right one depends on how much detail your stakeholders need and whether contingency needs to be reflected in your Estimate at Completion (EAC).

Compare the two options

Start with a dedicated contingency budget

Whichever approach you take, keep contingency in its own budget item rather than building it into your contract budgets. This lets you track it as one item.

Contingency is a project-level reserve, so keeping it separate makes it easier to see how much is available and to direct it to the contract items that may eventually need it.

One contingency line is usually enough. If needed, you can split it to distinguish between different reserves or who has authority to draw them down. For example, you might keep separate Client Contingency and Project Contingency budgets.

Decide what works for your project and stay consistent with it.

Tip: New to budgets? Start with How to Create Budgets and Sub Budgets.

Option 1: contingency with a forecast

Choose this option if you want to reflect contingency in the Estimate at Completion, keep a record of each draw-down, or have Budget Variance sit at zero.

With this approach, you create a contingency forecast with the same reserves as the initial starting amount. As contingency is drawn down, the current contingency reduces, and you can transfer the amount where applicable.

This gives you two outcomes:

• The forecast accurately shows how much contingency remains.
• Budget transfers show where the money has been reallocated.

Example

If the initial contingency budget is $200,000 and a Change Order is approved for $30,000, the remaining contingency becomes $170,000. The $30,000 is then transferred to the relevant contract.

Things to know

• The downside: There are a couple of extra steps, and they need manual intervention every time contingency is drawn down. If you reduce the forecast but don't transfer the funds, the contract can appear overspent while the contingency still appears untouched.
• Worth knowing: The initial starting amount remains unchanged while Current Contingency moves, so you retain a record of the original reserve throughout the project.

Option 2: contingency without a forecast

Choose this option if your main goal is to understand how much contingency remains, and you don't need it reflected in the EAC or a detailed draw-down history within Mastt.

Utilizing the project-level variance gives you a view of the remaining contingency without the EAC. The contingency budget holds a positive variance, while approved Change Orders increase the spend against the relevant contract budgets and reduce the overall project variance.

For many, this is the simpler option. It works well when stakeholders mainly want a high-level snapshot of the remaining contingency rather than a detailed history of each draw-down.

Things to know

• The downside: It's high level. It only shows how much contingency remains, not necessarily what was drawn down or when. If you need a history of contingency usage, you'll need to keep that record separately.
• Allocate your other budgets: Your other project budgets may also need to be fully allocated. If they aren't, the project variance won't represent remaining contingency on its own.

Tip: Brief your audience: a large positive Variance at project level can look like an underspend to someone who doesn't know the setup. A simple note in your reporting, "Variance on the project line represents remaining contingency", can avoid confusion.

One approach we'd steer you away from

You can also post Change Orders directly against the contingency budget and adjust the forecast to match. This can work mathematically and avoids the budget transfer, but we generally don't recommend it.

It means the same contract can end up being represented across multiple budget lines, which makes reporting harder to understand. The question that usually follows is: "So what is this contract actually worth?"

Keeping contingency separate and transferring the funds when they're drawn down takes a little longer. It keeps the contract value clear and makes the project easier to understand.

Pick one and stay with it

Both approaches can work. The important thing is not to mix them within the same project.

A project using one method for some draw-downs and another for others can quickly become difficult to track, particularly when stakeholders are looking at variance or EAC.

If you're unsure, we'd generally lean towards Option 2 for its simplicity. If you later find that stakeholders need a proper draw-down history, that's a good indication that Option 1 would be a better fit for future projects. That's why it's important to work out at the start of the project who this information will be presented to and what requirements they may have.

Whichever approach you choose, keep it consistent. A straightforward setup that everyone understands is more useful than a detailed one that nobody can explain.

Need help?

Contact Mastt Support for additional assistance.