Project Contingency: What Is It? When and How to Create One?

In 2023, the HS2 (UK's High-Speed Rail) project was partially cancelled. In 2024, The Times cited massive cost overruns, poor integration with existing transport networks, and environmental concerns as key contributors to the cancellation. A project contingency plan could have abated the impact of those risks, saving the initiative.

In this article, we'll guide you to avoid failures encountered in cases like HS2. You'll learn how to use a tool to create a contingency plan, identify potential risks, and create a plan-B, complete with cost and time buffers.

What is a project contingency?

A project contingency is a fallback strategy for high-impact risks for preventing risks upfront. Built through structured risk analysis, it complements your main project plan, covering cost, time, scope, and technical contingencies.

What you'll get:

• A clear definition and comparison with project plans and mitigation plans
• A breakdown of different contingency types and when to use each
• A simple 4-step method to build your contingency plan with Meegle

What is contingency in project management?

Contingency in project management is a predefined backup plan designed to handle unexpected risks.

Note that it doesn't prevent issues, like, say, regulating spending windows in the case of HS2:

Preventing risks isn't a contingency; that is risk mitigation

In contrast, contingencies help you respond when things go off track despite your best efforts. Take a look at these examples.

• Example 1:

Problem: A supplier failure delayed your product launch.

What a project contingency might look like: Switching to an approved secondary vendor already scoped into the plan.

• Example 2:

Problem: Your software rollout failed UAT testing.

What a project contingency might look like: The team might fall back to a previous stable release while patching the bugs.

Contingency plans often include extra budget (cost contingency), schedule buffers (time contingency), or backup resources (resource contingency). They're particularly vital for high-stakes projects where failure would be costly—think healthcare rollouts, government infrastructure, or critical SaaS migrations.

Without contingency, your only option is to scramble mid-crisis. With it, you already have Plan B on standby.

How is it different from a project plan?

A project plan outlines the intended path to reach your goals. This path includes project tasks, timelines, budget, and scope.

A contingency plan is created in advance, but it's only activated if the intended path gets derailed by unexpected issues like budget cuts.

Another key difference is the use case for both plans.

Use your project plan to execute against known variables: milestones, resource allocations, and deliverables. In contrast, use a contingency plan when you're uncertain. An example of this is when you're working with new technology, volatile supply chains, or strict compliance requirements.

While project and contingency plans are different, they complement each other. For instance:

• Your project plan might allocate four weeks to build a feature. Your contingency adds a one-week buffer in case integration issues arise.
• Your project plan might use a single contractor, while the contingency names a backup provider—if the initial contractor falls through.

You need both to deliver projects reliably. The project plan keeps you on track, while the contingency plan helps you adapt when things don't go as planned.

Is it the same as a mitigation plan?

No, and mixing them up can cost you time and money.

Mitigation plans reduce the likelihood or impact of risks before they happen. Contingency plans kick in after risks have materialized and you're in response mode.

For example:

Say you're worried about system downtime during deployment.

• A mitigation plan might include load testing or upgrading infrastructure.
• A contingency plan outlines actions for downtime (if it happens), regardless of your mitigation plan. For instance, rolling back to the previous build or rerouting traffic to a backup server.

In short, use mitigation when the risk is preventable. Use contingency when the risk is possible despite best efforts or too costly to mitigate fully. Think of mitigation as defensive driving. Contingency is your seatbelt and airbag.

Do you need contingency planning in project management?

Or better put, is your project at risk?

Before you answer, check these out:

Project: Titan Submersible (OceanGate)

• What happened: A submersible designed for deep-sea tourism, including visits to the Titanic wreck, experienced a catastrophic implosion.
• Why it failed: Ignoring safety warnings, the Titan suffered a catastrophic implosion due to structural failures, resulting in the loss of five lives (New York Times).

• What the contingency would have looked like: A formal contingency plan might have enforced third-party engineering audits, mandated sub-design peer reviews, and required a halt to operations if certain safety thresholds were unmet. A risk-based go/no-go checklist might have flagged critical concerns earlier, potentially prompting a delay or cancellation of the dive.

Product: Tally

• What happened: A fintech startup that acted as a personal financial coach failed.
• Why it failed: A pivot to a business-focused model didn't gain traction. Customer complaints about missed payments and rising interest rates damaged its reputation and eroded trust (Banking Dive).
• What the contingency would have looked like: A contingency plan could have included phased pilot testing for the new B2B model, reputation-monitoring triggers to pause expansion, and a fallback plan to double down on its original consumer segment if KPIs dipped below set benchmarks.

To answer the question:

Yes, all projects are at risk.

The successful ones—like SpaceX Falcon 9, which builds in multiple abort and fallback procedures—prepare for failure long before it happens. Having a contingency mindset is what makes the difference.

So, you need a contingency plan. Below is what you stand to gain.

Benefits of a contingency plan in project management

Types of contingency in project management and when you need each

Different project risks call for a distinct type of contingency. Below are the main types and when to apply each to curb potential risks—using real-world examples.

Cost contingency

A cost contingency reserve is a project budget buffer set aside to cover unexpected expenses, like material price hikes, vendor delays, or last-minute scope changes. You'll use this most often in complex or long-running projects where cost overruns are common.

Schedule contingency

Schedule contingency is buffer time added to your project schedule to absorb delays such as missed deadlines, resource conflicts, or external approvals. It's essential for sales teams working on product launches or campaign-driven quotas.

Resource contingency

Resource contingency is setting aside people, tools, or equipment to handle unexpected workload spikes or resource gaps. It's critical when project success depends on specialized roles.

Note: While related, a resource contingency isn't the same as a cost contingency. The former covers the availability of people or tools. The latter accounts for unexpected expenses that may arise from those or other project variables.

Scope contingency

This contingency is a built-in allowance to handle changes in project scope, such as new feature requests or shifting client expectations. It is especially useful for a project that involves external stakeholders prone to change requests or unclear initial requirements.

Technical contingency

This contingency addresses unforeseen technical challenges, such as compatibility issues, system failures, or software bugs, that may arise during the project. It's crucial when dealing with complex systems or integrating new technology.

How to calculate contingency in project management

While contingency planning involves foresight, calculating it requires a structured approach. Below is a quick guide on how you can estimate the different types of contingency:

How to create a project contingency plan using Meegle

Project contingency planning can be straightforward with the right PM tool. Meegle helps you map risks, build adaptive workflows, and keep your team aligned through every what-if scenario. Here's how to use it to create your contingency plan, step by step:

Step 1: Identify high-impact risks

Pinpoint the biggest threats to your project—missed deadlines, tech failures, resource gaps—and document them at the "Identify Risks" node. With shared dashboards and real-time updates, your team can collaboratively assess these risks across other project phases and departments.

Step 2: Estimate required reserves

For each risk, calculate what backup resources, time, or budget you'd need. Then, use Meegle's drag-and-drop (Gantt bar) in Member Schedule to adjust schedules, adding buffers and alternate paths directly to your project timeline.

Step 3: Assign contingency triggers

Establish clear conditions under which each contingency plan should activate—missed milestones, budget overruns, supplier delays. Then, create custom automation rules on Meegle. You can do this by creating new automation rules like the one shown below:

Afterwards, do these:

• Tie the triggers to specific tasks
• Assign them to owners
• Connect them to automated workflows for immediate response

Step 4: Communicate and review

A contingency plan is only effective if your team members are aware of it. Meegle's centralized workflow ensures the entire team gets automatic updates on timelines, tasks, and responsibilities when contingency is triggered. In other words, team members will receive real-time notifications. This way, everyone knows what's changed, why it changed, and what to do next.

FAQ

1. What's the ideal contingency reserve?

It depends, but the typical range is 5–15% of the overall cost estimate or schedule.

2. Who approves contingency use?

Usually, approval is down to the project manager and sponsor. Define this in your risk management plan.

3. Can I use contingency for known issues?

No. Contingency is for unknowns or unplanned impacts. Known issues should be in the base plan.