Janet

14% Contingencies 900,000

Just another view about contingencies.

Many of the more enlightened corporations (that may leave out OPA) no longer allow contingencies to be included in project cost estimates because they are a totally meaningless line item which does absolutely nothing to control the costs of a project. In fact, contingencies often result in unapproved expenditures being made to cover up sloppy original construction estimates.

OPA is NOT going to contract for and acquire $900,000 of contingencies. Contingencies are NOT tangible or intangible goods or services. Contingencies are NOT permits, taxes, insurance or "spot o pots". They are no more than a costly but convenient "out" for project managers to avoid having to come back to an approval authority for more funding if circumstances prove that their original estimates were wrong.

BTW, when the corporation I worked for finally did away with contingencies in project cost estimates, we got much better controls on project costs. Our managing engineers were not happy, but our stock did better as we got very good at controlling costs and getting the most for each dollar spent.

Again, just another view about contingencies.

Gene