Quote Contingency: Cost the Uncertainty and Explain the Scope

This worksheet suits a service owner quoting a job where quantities, site access or supplier availability are uncertain. It helps explain the estimate. It does not provide contract clauses or decide whether a later charge can be recovered.

Start with a base estimate that can be explained

List the ordinary quantities, internal cost rates and supplier prices. Remove any hidden general buffer before adding a separate contingency. If labour already includes two hours for difficult access, don't add the same access risk again.

Write the assumptions you could resolve before quoting. A site visit, measurement or current supplier quote may remove uncertainty more cheaply than a large contingency. Keep the evidence date so an old quote isn't mistaken for a current commitment.

Build a small risk register

Assumptions: Fictional Australian-dollar management-costing example. Amounts exclude GST that is assumed recoverable; any non-recoverable tax is already included in costs. These assumptions do not establish your GST entitlement. Contribution is before unallocated overheads and income tax.

Uncertainty	Illustrative extra cost range	Assumed chance	Weighted allowance	Evidence and treatment
Difficult access	$0–$400	25%	$100	Access photos incomplete; inspect first
Supplier substitution	$0–$120	50%	$60	Availability unconfirmed; obtain a valid quote
Extra material quantity	$0–$250	20%	$50	Measurement incomplete; verify dimensions
Total allowance	All three high costs: $770	Judgement inputs	$210	Review after the missing evidence arrives

Original ASBG worked example. All businesses, amounts and scenarios are fictional. The table contains the same figures as the visual.

Here each risk is simplified to two outcomes: no extra cost, or the full listed extra cost. Multiplying cost by the assumed probability gives $100, $60 and $50. The resulting $210 is an expected-cost allowance across those assumptions, not a maximum loss and not a guarantee that $210 will be enough for this job.

If all three high outcomes occurred, extra cost would be $770 within this limited model. Other risks could exist outside it. For this particular job, check whether you could also fund the larger scenario.

Keep cost, contingency and price separate

Assumptions: Fictional Australian-dollar management-costing example. Amounts exclude GST that is assumed recoverable; any non-recoverable tax is already included in costs. These assumptions do not establish your GST entitlement. Contribution is before unallocated overheads and income tax.

Line	Without contingency	With modelled contingency
Base delivery cost	$3,000	$3,000
Identified uncertainty allowance	$0	$210
Planning cost	$3,000	$3,210
Price at a chosen 25% margin	$4,000	$4,280

Original ASBG worked example. All businesses, amounts and scenarios are fictional. The table contains the same figures as the visual.

The second price is $3,210 ÷ 0.75 = $4,280, before the model's assumed GST. The 25% is a chosen margin for the example, not an industry target. Adding 25% to cost would be a markup and would produce a different margin.

The $210 cost allowance and the margin solve different problems. One addresses estimated delivery uncertainty; the other is the gap between revenue and modelled cost. Keep the margin separate when checking how much uncertainty the estimate allows for.

Choose a treatment for each risk

You might inspect the site and remove the uncertainty, obtain a supplier commitment, narrow the scope, include an allowance in a fixed price, or propose a clearly documented variation process. The right choice depends on the work and the agreement.

If access remains unknown, write what access the estimate assumes and how a change would be handled. Don't leave the scope vague and expect the customer to fund the difference. Have the actual quote and variation terms reviewed where enforceability or consumer obligations are in question. Business.gov.au's quote guide is a useful starting checklist for that discussion.

Update the register after the job

Record which risks occurred, the actual extra cost and whether the estimate missed something else. A contingency that is never used may reflect cautious estimates; one that is exceeded repeatedly may reflect poor scope information. Compare like jobs before changing the assumptions.

The budget-versus-actual method helps keep that review connected to evidence. Keep the original estimate as well as the updated version, so you can see what was known at the time of the quote.

Where to get help

Use the completed-job review for actual results and rush-job costing for a deadline that disrupts capacity. Revisit pricing strategy and the pricing and profit hub for the wider decision.