April Says
By April Bettinger | Nip Tuck Remodeling
The standard advice given to homeowners regarding contingency fees is that they will be 10-15% of the total project investment and should be budgeted for accordingly. For older homes or complex structural work, some sources push that to 20-25%. If you’ve done any remodeling research at all, you’ve seen this number in some form.
I’m going to intrigue you with a different number, not because the standard advice is wrong for every firm, but because it depends almost entirely on how the firm you’re considering actually plans a project. Can I interest you in a 2% contingency?
Most homeowners I meet have already internalized the contingency assumption. They’re not asking whether to set this money aside; they’ve decided they will. It’s a number sitting quietly in the back of their minds, and they’re wondering whether to broach the subject. But most homeowners don’t know to openly ask how much contingency should be held for a remodel.
My advice is to have a direct conversation with every firm you’re considering. Ask them specifically how their planning process addresses the unexpected. Ask about their track record. Ask whether their contingency experience is the exception or the norm. Their answer, and their confidence behind it, will tell you more than any percentage ever could.
I can look any client in the eye and tell them this: I’ve spent more than two decades in this industry, and in 16 years of running Nip Tuck Remodeling — over $50 million in completed projects — our 2% investment variance is the norm and not the exception. There are still surprises. Projects still occasionally exceed that. But these instances are a rarity, and that distinction is what the planning is designed to produce.
What the 2% Contingency Actually Means
A 15% contingency on a $300,000 project is $45,000 sitting in reserve against the unknown. That’s a significant amount of money held against surprises that thorough pre-construction planning is specifically designed to prevent.
When our pre-construction process is working as it should — when we’ve done a thorough trade walk, investigated the actual conditions of the home before finalizing scope, and documented every detail before a single wall comes down — the unknown dwindles considerably. Not to zero. But close enough that the contingency conversation looks very different.
Our projects historically complete within 2% of the original estimated investment. Not because we pad the numbers to make ourselves look good. But because the planning is thorough enough that by the time construction begins, very little is left to chance.
Why Contingency – and Preconstruction – Matters
We were working with a family on a main floor remodel, a project that was a meaningful investment for them. They were approaching the top of their budget, and they asked us, understandably, what they should hold in reserve. As part of the remodel, the clients wanted a very large island added to the kitchen. But the house was roughly 30 years old, and we knew going in that there was a floor deflection issue in the kitchen and that the island would put real demands on the structural support beneath the floor. As well, the homeowner wanted to address a sound transfer problem between floors.
During pre-construction, we cut access holes in the floor so we could actually see what was in there. We inspected the framing and the existing structure, and we determined what it would take to address the deflection and the sound transfer to the standard required for an island of that scale.
What we found gave us enough information to provide the homeowners with a grounded range for the floor work — not a guarantee, but a specific, informed estimate based on what we’d actually seen rather than what we assumed might be there. We were clear that we’d confirm the final number once demolition opened the floor fully. As it turned out, the number of inspection holes we’d cut during pre-construction made our assessment very accurate. The range we’d given held.
When the project finished, we came in within 2% of the original estimated investment. The floor work was accounted for, the island landed where it was supposed to, and the sound transfer was addressed. The homeowners, who were already at the top of their budget, didn’t face a surprise that would have required a difficult conversation mid-project.
Had we not looked before we started, that floor deflection could easily have become the kind of discovery that derails a project — and a homeowner — who has no room left in the budget to absorb the additional cost.
When a Contingency Line Item Belongs in the Contract
The previous story illustrates the more common outcome, where thorough pre-construction investigation eliminates enough uncertainty that an informal contingency reserve is sufficient. But there are projects where the approach must be a little different and a formal contingency must be considered.
A few years ago, we were working on a 1960s home in Medina, a project just over $1.5 million dollars. We were constructing a small addition, bringing the interior down to studs and reconfiguring walls throughout the home. We had completed a significant pre-construction investigation: attic access, crawl space – as much visual assessment as the structure allowed. But there were beams and framing in the ceiling cavity that simply weren’t visible until the insulation came out.
On a project of that scope and complexity, we took the step of including a 2% contingency as an explicit line item in the contract. Documented and accounted for as part of the total investment, this contingency was visible, budgeted, and agreed upon before construction began.
We used every dollar. (We may have used slightly more.) The structural discoveries that emerged as the ceiling opened up were real, and having that reserve in place meant we navigated them without a difficult mid-project conversation about money the homeowner hadn’t planned for.
This approach isn’t common in our work; most projects don’t require a formal contingency line item. But for a significant whole-house renovation with genuine unknowns, building it in explicitly is the right thing to do. The homeowner knows it’s there. They know what it’s for, and they’re not caught off guard if it’s needed.
The Question Worth Asking
How much should I hold in reserve? This standard contingency question is a reasonable response to an industry that routinely delivers surprises. But it’s the wrong question if you’re evaluating the right firm.
The right question is: How does your planning process reduce the likelihood of surprises in the first place?
There’s a reason the standard industry advice is 10-20% and it’s worth understanding what’s actually driving that number. When a remodeling firm doesn’t bring its trades to the site during pre-construction, those trades are estimating blind. They haven’t seen the conditions. They don’t know what’s behind the walls. So, they do what any professional does when asked to commit to a number without enough information: They give their worst-case estimate. They build a large buffer into their bid, to protect themselves from surprises they haven’t been given the chance to anticipate.
The firm then adds its own contingency on top of those inflated bids, and that’s how a project reaches a 20% reserve.
At Nip Tuck, our trade partners see the actual conditions before they give us a number. Their estimates are based on what they’ve walked through, discussed, and assessed firsthand. They also know that if a genuine surprise surfaces during construction, something that no amount of pre-construction investigation could have revealed, a change order is the appropriate mechanism, and we’ll use it. That transparency means they don’t need to pad their bids for self-protection. And it means the contingency conversation starts from a fundamentally different place.
When interviewing remodeling firms, ask about pre-construction. Ask how they investigate existing conditions before finalizing scope. Ask whether they’ve ever cut access panels or inspection holes during planning, specifically to answer a structural question before writing a budget line for it. Ask whether their trade partners see the actual project before giving a number. The answers will tell you whether you’re considering a firm that manages surprises after they occur — or one that prevents most of them from occurring at all.
At Nip Tuck, the homeowner’s budget isn’t a secret we’re trying to expose. The budget is a tool we use to design the best project, one they can help develop, finish, and live in without regret. And the 2% contingency is part of the transparency that makes the outcome possible.
The contingency fund isn’t a number we ask you to hold against us. It’s a number that shrinks when the planning is done right.
Want to understand what our pre-construction process looks like in practice? Book a Discovery Call at calendly.com/15ntr or read more at NipTuckRemodel.com.
