Contingencies and allowances are known as what?

Contingencies and allowances are known as what?

• A. Contingencies
• B. Allowances
• C. Buffers
• D. Risks

Answer: (D)

Contingencies and allowances are funds set aside in a project budget to absorb cost uncertainty and potential changes. They represent the financial response to risk in the estimate: contingencies cover unforeseen conditions or events that could raise costs, while allowances cover price uncertainty for defined items where the exact amount isn’t known yet. Because both are used to manage cost risk on a project, they’re collectively known as risks. Other terms like buffers describe similar ideas in a broader sense, but the DBIA context treats contingencies and allowances as elements of risk.

Contingencies and allowances are funds set aside in a project budget to absorb cost uncertainty and potential changes. They represent the financial response to risk in the estimate: contingencies cover unforeseen conditions or events that could raise costs, while allowances cover price uncertainty for defined items where the exact amount isn’t known yet. Because both are used to manage cost risk on a project, they’re collectively known as risks. Other terms like buffers describe similar ideas in a broader sense, but the DBIA context treats contingencies and allowances as elements of risk.