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BETTESWORTHConstruction

School Project Budgets: What Districts Need to Know About Contingency, Change Orders and Audits

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A school construction project budget should show contingency as a visible, controlled amount—not as a substitute for a complete estimate—and should connect every change order and contingency draw to documented authority, funding and final costs. There is no universal contingency percentage or approval path: requirements depend on the state, grant or other funding program, project type, contract and district policy. The examples below illustrate why those details matter; they are not national rules.

How much contingency should a school construction budget include?

There is no single percentage that fits every school project. Start with the applicable state and funding-program requirements, owner policy and contract; then assess project-specific risks, the maturity of the design and the cost base to which any percentage applies. Do not average percentages from different authorities or present one jurisdiction’s figure as a national standard.

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Source and context Published figure How to interpret it
California Department of General Services (DGS), 2025 procedure 5% for new facilities; 7% for renovations Applied to estimated construction cost or bid under the procedure. This is California-specific guidance.
New Hampshire Department of Education, 2024 school-building manual 5% for new construction; 10% for renovation A recommendation in the state’s planning manual, not a national requirement.
California School Boards Association (CSBA) policy brief 1%–5% for potential change orders, depending on project size and complexity Illustrative governance guidance from a policy brief; do not treat it as current binding law or as interchangeable with the other figures.

The underlying contexts differ: one source discusses estimated cost or bid, another a planning recommendation, and the CSBA brief discusses potential change orders. Before comparing figures, check the jurisdiction and funding program, whether the project is new construction or renovation, the denominator (estimate, bid or contract amount), the covered risks, who can authorize draws, and whether scope changes or depletion require additional approval. See the California DGS procedure, the New Hampshire 2024 manual and the CSBA policy brief for their respective contexts. Confirm that guidance remains applicable before using it for a current project.

What is contingency for—and what is it not?

Contingency is a separately identified risk-management amount for uncertainty or unforeseen costs, used only under the rules that govern the project. It should not hide an unfinished estimate, blur who controls project funds or become a general-purpose pool for unapproved additions.

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The federal General Services Administration (GSA) draws a useful distinction among three budget concepts. An allowance is for a planned item that is not yet fully defined; contingency addresses unintended occurrences that are not directly controllable; and a reserve is held by management for unforeseen changes in requirements. Those terms may be used differently in a particular contract or local policy, so the project’s governing documents control. The distinctions are set out in the GSA project cost and schedule management directive.

GSA cautions that contingency is not a substitute for accurately assessing expected cost and calls for quantitative assumptions. In practice, the estimate should make clear what the amount covers, what it excludes, the risks and assumptions behind it, and the authority required to spend it. The American Institute of Architects’ 2023 guidance likewise frames contingency as a project-specific risk-management tool: possible uses can include errors or omissions in construction documents, scope changes and unknown conditions, but an appropriate amount depends on the project. Neither source establishes a universal school-project percentage.

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What counts as a change order?

A change order is a formal amendment to the construction contract during the project. It documents an agreed change to the work or other contract terms; the contract and applicable law determine its required form, content and approval route.

Examples identified in California DGS procedures include unforeseen site conditions, errors or omissions in drawings and specifications, and department requests. These examples do not mean every such event automatically qualifies for contingency funding or can be approved by the same person. The change still needs a contractual basis, an established funding source and any required public approvals. Read the project’s contract and the applicable procurement and funding rules alongside the California DGS change-order guidance.

What should a change-order record include?

Keep a record that lets someone who was not part of the decision reconstruct what changed, why it changed, what it cost, how it affected the schedule and who authorized it. A clear record helps district staff manage the work and gives reviewers a traceable basis for evaluating the final cost.

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  • Description and reason: identify the affected work, the cause and whether the change addresses an unforeseen condition, a document issue or a requested scope change.
  • Scope and supporting material: retain the request, relevant drawings or specifications, supporting estimate and other documents that explain the proposed work.
  • Financial effect: state the cost increase or decrease, identify the funding source and show any contingency draw separately in the project’s cost records.
  • Schedule effect: record whether the change affects timing and, if so, the documented effect under the contract.
  • Review and approval: preserve the required technical and administrative reviews, signatures and approvals, with dates, before proceeding as required by the contract and local rules.

The Texas Legislative Budget Board’s school review audit protocol offers useful control questions: are the reasons for cost changes fully specified, have the appropriate administrators and project professionals reviewed and signed off, and does the change comply with the original contract? It is an audit protocol, not a substitute for a district’s current legal or contractual requirements. Use it as a practical prompt alongside local rules, not as proof that a particular approval route applies everywhere. Read the Texas school review audit protocol.

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Who approves a change order or contingency draw?

The answer depends on the contract, owner policy, governing law and funding conditions. A project manager’s authority to administer work should not be assumed to include authority to change scope, reallocate restricted funds or commit the district to additional cost.

Before approval, check which individual or body has authority for the specific type and value of change, what technical and financial reviews are required, and whether the grant agreement or public-procurement rules impose separate conditions. Keep those approvals with the change record. If a proposed change may alter scope or exhaust contingency, California DGS directs project staff to discuss it with Finance before execution to determine whether further project approval is needed. That is a California-specific procedure, not a nationwide approval rule. The applicable DGS guidance is a reminder to check for additional approvals before the project commits to the change.

Can contingency pay for a scope change?

Sometimes, but a budget line labeled “contingency” does not by itself authorize spending it on any purpose. Check the source of funds, grant agreement, owner policy, contract and approval requirements before using contingency for changed scope.

Separate two questions: does the contract permit the proposed work as a change, and does the project’s funding and approval structure allow that work to be paid from contingency? A change can have a valid contract basis while still requiring a funding transfer, project augmentation or additional approval. Under California DGS procedures, a proposal that may alter project scope or exhaust contingency should be discussed with Finance before execution to determine whether further approval is required. Elsewhere, use the local process; do not treat the California procedure as a general rule.

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What will a school construction audit review?

Audit timing and scope vary by jurisdiction and funding program. There is no single nationwide deadline or universal checklist in the cited sources, so districts should identify the applicable audit terms early and retain records that support both individual changes and total project costs.

Connecticut provides one specific statutory example: if the Department of Administrative Services has not completed a full audit within two years of final payment, the statute provides for a limited-scope audit. The listed review subjects include total reported expenditures, off-site improvements, adherence to authorized space specifications, and interest costs on temporary notes and bonds. This is a Connecticut rule, not a deadline for other states. Consult the current Connecticut school building project statute for its scope and conditions.

For routine project controls, the Texas audit protocol also suggests asking whether the project stayed within budget, whether change controls and approvals were followed, and whether each change is fully explained. These questions can inform local oversight, but the protocol is historical illustrative material, not a nationwide legal standard. An audit-ready file should let a reviewer follow the decisions from initial authorization through closeout without relying on undocumented explanations.

What records should a district preserve?

Build a continuous record from the original approved budget through final actual cost reporting. The point is not simply to keep a stack of forms; it is to preserve the connection between estimates, approvals, changes, funding and what the project ultimately cost.

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A practical project file should include the approved budget and estimate assumptions; dated estimate revisions; the construction contract and amendments; change requests, supporting estimates, reviews and approvals; contingency authorization and draw records; periodic cost reports; and closeout documentation. Also retain the relevant grant and owner requirements that establish who may approve spending and what costs are eligible. Required forms and retention periods depend on jurisdiction, contract and funding conditions.

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California’s Division of the State Architect (DSA) provides an example of the link between estimates and closeout: the district or client estimates construction cost during its application process, and DSA uses form DSA 168, the Statement of Final Actual Project Cost, as final verified cost documentation for fee reconciliation. DSA also describes fee consequences that should not be confused with contingency rules: a construction-cost increase of 30% or more before project approval triggers fee recalculation, and actual cost more than 5% above the estimate is described as a “further fee” condition. These are DSA fee rules, not project contingency percentages or general budget thresholds. Review the current California DSA plan review guidance for the applicable process.

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Why can the estimate differ from final cost?

The estimate and final cost can differ when project scope develops, an unforeseen site condition arises, drawings or specifications have errors or omissions, or another change occurs during construction. The size of a difference alone does not explain it: a sound closeout reconciles each material change to its reason, approval, funding source and cost effect.

Keep the project’s cost categories clear. California DGS separately identifies contract costs, contingency and construction support in its cost guidance. That separation helps readers distinguish the original contract from authorized amendments and contingency draws rather than treating all spending as one unexplained total. When reporting final cost, show how the approved baseline changed over time and explain whether each adjustment changed the original scope or addressed an unforeseen condition. The cited sources do not establish a national statistic for school-project overruns attributable to change orders, so a district should not infer one from an individual project’s records.

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How should districts apply guidance from another state?

Use another state’s figure or procedure as a comparison point, not as authority for your own project. First identify the applicable jurisdiction and funding program, then compare the project type, percentage base, covered risks and approval conditions. A 5% figure tied to a new-facility estimate is not automatically comparable with a renovation recommendation or a percentage for potential change orders.

Before adopting a benchmark, confirm the source’s current status and whether it governs the district, project and funding source in question. Then document the chosen contingency assumptions in the estimate and establish who may authorize a draw, what records are required, and which conditions trigger higher-level review. That discipline is more useful than copying a percentage without its context.

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Frequently Asked Questions

Can a district publish the remaining contingency balance in a project update?

It can report the balance as part of a transparent project cost update, provided the figure is clearly labeled and reconciles to approved draws and current commitments. Whether a particular report or disclosure is legally required depends on local law, board policy and funding conditions.

Does the Connecticut two-year audit threshold apply to school projects in other states?

No. It is a Connecticut statutory example tied to that state’s school building project process and final payment. Other districts need to check their own statutes, grant terms and contracts for audit deadlines.

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Does DSA’s 30% cost increase threshold set a school construction contingency amount?

No. The cited California DSA material describes a fee recalculation condition before project approval, not a contingency requirement or general budget limit. Do not use that fee threshold to calculate or authorize contingency.

Should an unspent contingency automatically be treated as savings available for another project?

Not automatically. The final treatment depends on the contract, funding restrictions, owner policy and closeout approvals; reconcile the project’s actual costs and commitments before identifying any balance as available.

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