E118. How much contingency should you allocate for new homes and renovations/extensions?

Kicking off 2026 with a bang, hosts Amelia and Frank Geskus return to the Building Design, Prime Time Podcast to tackle one of the most overlooked, yet most critical parts of any construction project: budgeting for the unexpected.

Whether you’re dreaming of a brand-new home or planning an extension, surprises lurk beneath every slab and behind every wall. From hidden rocks and rogue plumbing to surprise council demands and unpredictable weather, Frank shares decades of real-world experience showing how a well-planned construction contingency can save your sanity and your wallet.

You’ll discover why new builds and renovations require different contingency amounts, how to spot risk factors before you break ground, and why a “fixed-price contract” doesn’t always mean what you think it does. Frank also reveals insider tips for reducing costly surprises, like getting quality engineering, setting clear expectations, and understanding the difference between a variation and a contingency.

Packed with stories, practical insights, and a touch of humor, this episode is essential listening for anyone planning a build in 2026. Think of it as insurance against stress, delays, and budget blowouts, and your roadmap to building smarter, not harder.

Tune in now to learn how a little planning today can keep your project on track and your dream home within reach. Subscribe so you don't miss an episode! 

About us
Prime Design is a building design company locally owned and operated in Tasmania since 2004.  Our goal is to share as much valuable information as possible about the process of building design, extensions, and more. We will talk about a different topic each week. To suggest a topic you would like us to talk about contact us at info@primedesigntas.com.au

Disclaimer
The information provided on this podcast is for educational and informational purposes only and is not intended to be a substitute for professional advice, individual circumstances, or remedy. We strongly suggest you consult a qualified professional before taking any action based on the information provided in this podcast. The views, opinions, and information provided in this podcast are those of the hosts do not necessarily reflect the official policy or position of any other agency, organisation, employer, or company. All content provided on this podcast is provided “as is” without warranty of any kind. We make no representations as to the accuracy, completeness, currentness, suitability, or validity of any information on this podcast and will not be liable for any errors, omissions, or delays in this information or any losses, or damages arising from its use. We reserve the right to change content or delete any information provided on this podcast at any time without prior notice.

Transcript

E118. How much contingency should you allocate for new homes and renovations and extensions?

[INTRO] (0:08 - 0:24)

Hello and welcome to the Building Design, Prime Time Podcast, focused on providing valuable information for anyone looking to undertake a new build or extension project. We'll share our tips, tricks and stories from a building designers perspective.

[Amelia] (0:26 - 0:42)

Hello and welcome to the Building Design, Prime Time Podcast. I'm your host, Amelia. And once again, we're joined by Frank Geskus.

[Frank] (0:42 - 0:44)

Happy 2026, Amelia.

[Amelia] (0:44 - 0:48)

I know, it's our very first podcast episode for the new year.

[Frank] (0:49 - 0:54)

Again, this is exciting. Another new year, all refreshed. Could have done for another couple of weeks, would have been nice.

[Amelia] (0:56 - 0:57)

That's all right though.

[Frank] (0:58 - 1:15)

Yes, we jumped straight back into it. 

[Amelia]

We did. 

[Frank]

And we're going to start on something because it came up with one of my early first meetings, as soon as I came back into the office and talking with the customer. And we're going to talk about in residential building, budget and construction contingency.

[Amelia] (1:15 - 1:23)

Now, you might actually have to explain what a contingency actually is, because I know when I first started in this job, I didn't know what it was.

[Frank] (1:23 - 2:06)

It's interesting where it's one of the most important things you need to do when building a new house or construction, extensions and the like. So some people often think hidden costs, the builders have added padding to the job or they've estimated poorly because it's an estimate and this is going to make it up. The reality is it's about risk management.

It's reducing the potential stress when you're going through a new build or an extension. And once you go through it, you'll be so thankful you did it when there's a surprise within the design, the council, the project, supply, something goes wrong.

[Amelia] (2:06 - 2:19)

And especially if you've already organised with your bank, X amount of funds to be, you know, allocated to a build, you know, if something unexpected comes up, you want to make sure that, you know, you can accommodate for that.

[Frank] (2:19 - 3:34)

Well, the bank wants that as well. 

[Amelia]

That's right. 

[Frank]

You try and predict the future without knowing what's going to happen.

And also, please be aware that the contingency for a new build compared to a reno or extension to your house is different. Okay, so we've got to try and give you some realistic numbers that I've worked with in many, many years and also working with builders and other professionals in the industry that having contingency in place, it is preparing you for the unknown, it’s leaving enough in the tank. So the main thing is, you don't know what's going to go on on the build side.

No one does. Builder can't predict it, engineer can't predict it, soil test can't predict it, bushfire guy can't predict it. None of us can.

And it's not about sloppy estimating, but we're going to do another podcast on sloppy estimating because that's a whole different thing. It's not about builder's profit and it's not about a licence to go berserk with your money. You've got to remember, construction isn't just a buy this, I've purchased this and it's all done and dusted.

When you're building something from scratch, it's closer, prototype isn’t the right word, but you're building something custom on that piece of land.

[Amelia] (3:34 - 3:37)

Well, every site is a custom site.

[Frank] (3:37 - 4:07)

It is. The challenge you'll find is it's usually within the ground or the site is where the contingency comes in from my experiences. So decisions are made on site when things are found.

And we'll talk about some of the crazy stuff we've found. Think of it this way, if you're going on a trip and you're using your Google Maps, do you fill your car, if you've got a petrol car or diesel, do you only fill it if it's a 420 kilometre drive? Do you only fill it so it's 420 kilometres?

[Amelia] (4:07 - 4:09)

No, most people just fill it up.

[Frank] (4:09 - 4:47)

Fill it up. You've got enough to well and truly get back, plus any other bits and pieces you want to do there as driving around, okay? 

[Amelia]

Yes.

[Frank]

No different with a house. You've got your budget, you've got your price, your contract price, but you've got money up your sleeve because, oh, we didn't expect this or we had to divert here or change this. And we'll go through some of those kinds of things.

It's a buffer for reality. So it's preparing for the unknown. So reducing your risk. So here are the classics, soil and ground conditions. The ones I've come across in my 30 years is the favourites of finding a dirty great rock where it shouldn't be.

[Amelia] (4:47 - 4:48)

Yes.

[Frank] (4:49 - 5:19)

Someone's pulled out a huge tree stump and you've got a dirty great hole there full of roots and stuff and we've got to rip it all out because you can't build on top of it. The soil conditions weren't exactly as per the soil report and now you've got to put in bored piers, strengthen up the slab. Weather can mess it up as well.

[Amelia]

Yes. 

[Frank]

Because the timing delays and this one really gets up my goat. Councils and other regulatory authorities asking for extra items on your site after you've got approval.

[Amelia] (5:20 - 5:21)

You're kidding.

[Frank] (5:22 - 5:36)

Nah It happens. My favourite is one of my favourite councils in their plumbing departments where they give you a permit and then they want you to change everything and ask for performance solutions and all this. Yet they never told you when they gave you the permit.

[Amelia] (5:37 - 5:38)

Then why did they give the permit?

[Frank] (5:38 - 5:52)

Hello. And if you listen to my previous podcast, you know which council it is. Funny enough, they were on ABC News down in Hobart just recently and they were copping a fair pasting of their poor performance and attitude.

[Amelia] (5:52 - 5:53)

Bit of a reputation there.

[Frank] (5:54 - 6:07)

Oh, terrible reputation. Supply chains is another good one. Oh, actually not a good one, but from the point of you may have specified everything in your house and then all of a sudden, oh, we can't get that anymore.

You've got to choose something else. But what you want is actually more expensive.

[Amelia] (6:07 - 6:08)

Yes.

[Frank] (6:08 - 6:32)

To get the equivalent. Their thinking oh, no. Hello, I've got the money to do that.

Trades that can potentially let people down too. And I've seen that with builders where they've engaged trades and let them down or they haven't priced it properly. And I know you say, well, the builder should have known this and builders should carry that.

Most builders will actually carry any expenses because they've got a quote off the trades.

[Amelia] (6:32 - 6:32)

Yes.

[Frank] (6:33 - 6:56)

We'll have to switch trades, but then there's a delay. That's just on new builds. One that's not in there that I wasn't thinking before and this is something that I've worked really hard on in our business is where designers and architects don't document well, i.e. they haven't got the levels right. They haven't got the driveway right and a bunch of things like that. And it costs you extra money during the build.

[Amelia] (6:56 - 6:56)

Yes.

[Frank] (6:57 - 7:05)

Yet it should be correct on the drawings. So the builder has to put another two courses of brickworks in. Well, he hasn't allowed for that.

[Amelia] (7:05 - 7:05)

Yes.

[Frank] (7:06 - 7:14)

Because they want to try and get as accurate as possible. The driveway, the amount of concrete, you change your mind. I want more turning space for my driveway.

[Amelia] (7:14 - 7:15)

Of course, that's going to cost more.

[Frank] (7:16 - 7:44)

That's a variation. 

[Amelia]

Yes. 

[Frank]

And a variation is different in contingency.

Be aware of that. A variation is when something changes and you have to sign off on that variation that the builder is going to change something due to unforeseen circumstances. So with all these, you will receive from the builder a variation and you have to sign that and give it back if you agree with it.

If you don't agree with it, you need to talk to the builder a bit more about it. But sometimes there's no way around it.

[Amelia] (7:44 - 7:44)

Yes.

[Frank] (7:44 - 7:54)

That's why you have a contingency. Remember, these are not mistakes. These are conditions that only reveal themselves over time and keeps your build on track.

That's really important.

[Amelia] (7:54 - 7:55)

Yeah it is. 

[Frank] (7:55 - 7:59)

Keep it on track. Get the timing. Time is just as important as money.

[Amelia] (7:59 - 8:00)

That's exactly right.

[Frank] (8:02 - 8:03)

So how much to allow?

[Amelia] (8:04 - 8:12)

That's a really good question. You mentioned, I think earlier, that it's different for new builds than renovations, extensions.

[Frank] (8:12 - 9:01)

Yeah. Due to the risks and of when things go wrong. So from my experience, and this could vary all over the country and for different builders and everyone, and this will also depend on your site and the type of house you're building too.

So I normally allow for a new build 10% and as subject to if it's a known rocky site, if it's a really steep site, if it's a really bad soil site, as I keep pointing back to the dirt, that's where it bites you. And in Tasmania particularly, we've got every rotten type of piece of ground around and every state's got a level of this. So you want to be able to lower the risk.

That's why sometimes we get permission from the council to actually get a machine on the site first, strip it out to see if there's any problems.

[Amelia] (9:02 - 9:02)

Yes.

[Frank] (9:03 - 9:20)

So getting that done. Clear the site. And also getting your soil test done early.

Soil test will only tell you a small part of it. I've seen where soil tests are clear, shown where the soil test in, where the test hole was done. Yep, that's right.

Move 15 metres this way, it's completely different.

[Amelia] (9:21 - 9:21)

Really?

[Frank] (9:21 - 9:21)

Yep.

[Amelia] (9:22 - 9:22)

Wow.

[Frank] (9:22 - 9:26)

It's crazy. So it's natural. No, it's not predictive.

[Amelia] (9:26 - 9:35)

It's off topic a little bit. So how much of the site do they actually have to map out? Because do they only do exactly where the house will go or do they do a bit extra?

[Frank] (9:35 - 9:52)

They have to know where the house goes. And a lot of the time they drill a hole, okay? And quite a few of the geotech guys do.

I think you're only required to do one test hole, but most of the geotechs here in Tassie do two, unless instructed to do more because it's a known problem area.

[Amelia] (9:52 - 9:53)

Okay.

[Frank] (9:54 - 10:24)

But it still doesn't tell you that there's a dirty gate rock under there because you might have drilled in these spots and it's missed the rock. It'd open it up, there's a rock. That's right.

Or fill. There's lots of rubbish been put in there or fill to build up the site. That could be a problem because the geotech might pick up, hey, this is all natural, great.

And you get to another point, someone's excavated. I've had it where there was an old infrastructure, stormwater line pulled out and all the fill was put back in, but it was just fill. So we had this straight line through the block of fill.

[Amelia] (10:24 - 10:25)

Yeah, right.

[Frank] (10:25 - 10:29)

Where the trench was back filled. So we had to then redo the engineering over this component.

[Amelia] (10:30 - 10:30)

Yes.

[Frank] (10:30 - 10:45)

So it's just weird. Oh, another one I found was I got a call from the builder, come out to site now. Why?

It's all collapsing. Turn out there, they hit a disused pipe I can’t remember if it was sewer or stormwater and all this water came in.

[Amelia] (10:45 - 10:45)

Oh no.

[Frank] (10:45 - 10:51)

The ground was saturated and you know when you go to the beach and you dig in the sand near the water and it all collapses in.

[Amelia] (10:51 - 10:52)

Caves in, yeah.

[Frank] (10:52 - 10:53)

It was doing that.

[Amelia] (10:53 - 10:54)

Oh no.

[Frank] (10:55 - 11:07)

And you can imagine a few metres, you know, it was about two, two and a half metres down. And I said, throw all the dirt back in. Just throw it back in there.

Hold it up. So we found out what the problem was. But that was a lot of extra work.

We had to redesign the whole engineering.

[Amelia] (11:08 - 11:09)

Yeah, that's not going to be cheap.

[Frank] (11:09 - 11:12)

No, but you didn't have a choice. Again, how did anyone know?

[Amelia] (11:12 - 11:13)

No one would have known.

[Frank] (11:13 - 11:41)

Didn't come up with infrastructure searches. And that is a classic case where you need a contingency. Don't ever think you just borrow the cost of the contract.

You need to have it up your sleeve. Don't think a new build is just a blank sheet. There is always a risk.

It increases with complex architectural design. Or building design. Whoever's doing your job for you.

The more complex it is, the higher risk of finding problems on site or how it doesn't work on site.

[Amelia] (11:42 - 11:47)

So what sort of complex things? So like, do you mean the soil or the design itself?

[Frank] (11:47 - 11:50)

The design itself in relation to the site.

[Amelia] (11:50 - 11:50)

Okay.

[Frank] (11:50 - 12:17)

It may be the difficulty of the access. It may be the complexity of the design and how it integrates with the site. If you just put a simple box on, it's generally easy.

But if you've got bits hanging out everywhere and whatnot. And look, this should be reduced. You shouldn't have that problem with the way we 3D model now and how we get our surveys done in a 3D model.

We should be able to do that really, really well. But it's not perfect. It should just be minor.

The other thing is flood overlay.

[Amelia] (12:17 - 12:18)

Yes.

[Frank] (12:18 - 12:52)

Now, if it's not mapped in your area, you might find during the build, there's big rain and you'll find water tearing through your site. Again, been there. And it made an absolute mess.

I had my own house where big storm and pushed clay because it was all clay around the site, had a retaining wall, pushed the clay over the blue stone, which was behind the retaining wall. So the water didn't go down into the blue stone into the ag drains, pushed clay clean over and bridged over to the top of the retaining wall in the bottom side of my house, which was all in construction timber frame. It wasn't plastered yet, filled up with water.

[Amelia] (12:53 - 12:53)

Oh no.

[Frank] (12:54 - 12:57)

So that was a classic example. Hello, I've got to deal with this.

[Amelia] (12:58 - 12:59)

Yeah, you can't leave that.

[Frank] (12:59 - 13:04)

No. So then we got excavators in and we dealt with them. How do you plan that?

[Amelia] (13:05 - 13:05)

You can't.

[Frank] (13:06 - 13:29)

No, exactly. So the money I had to spend on that was part of that contingency. So it's different risk profiles and sometimes you can't pick it.

So the next one is renos and extensions. 

[Amelia]

Yes. 

[Frank]

So I think I said for new homes, allow about 10% subject to site. Renovation and extensions, 15 to 20.

[Amelia] (13:29 - 13:31)

That's a lot more. That's double.

[Frank] (13:32 - 13:33)

There's a lot more unknowns.

[Amelia] (13:34 - 13:35)

That's true.

[Frank] (13:36 - 13:41)

How do you know how well the house has been built? Is the electrical any good? Is the plumbing any good?

[Amelia] (13:41 - 13:47)

It's all those things that I guess that you can't see that's behind the wall or in the roof or...

[Frank] (13:47 - 14:21)

The existing bathroom, which you thought was fine, you weren't going to touch it. You find out that part of the floor is rotted out. And nowadays, 30 grand for a new bathroom. Thanks for coming. You don't know that until you open it, as we call opening up the building and getting inside it to look in behind. You might find there's just mould through all the framing and stuff and go, oh no, got to fix that as well.

So they are a higher risk because you don't know what's behind the wall, under the floor, in the roof, in all these spaces. And the buildings were older standards. How do you know someone hasn't done a shortcut?

[Amelia] (14:22 - 14:31)

And I mean, depending on the age of the house too, like I know with our house, the previous owner, they built the house themselves. You don't know the quality of...

[Frank] (14:33 - 14:35)

It's either going to be overdone or underdone.

[Amelia] (14:35 - 14:39)

That's right. You don't know. They didn't have the regulations back then.

[Frank] (14:39 - 14:46)

If it’s good Italian people, It's built out of concrete. It's built like a bomb shelter.

There's plenty of those in Launceston.

[Amelia] (14:47 - 14:47)

Oh yeah.

[Frank] (14:47 - 14:50)

They're insane. They must have their own concrete batching plants.

[Amelia] (14:50 - 14:52)

Yes, yes. Lots of concrete.

[Frank] (14:52 - 15:04)

They were just massively strong. So finding rotten components, undersized framing, my favourite, and everyone's favourite, asbestos.

[Amelia] (15:04 - 15:05)

Yes.

[Frank] (15:05 - 15:24)

Floors are out of level. 

[Amelia]

Yeah, that's a common one. 

[Frank]

Yeah, and the building doesn't join up and it's not straight.

So you've got to get it all straightened up again. Or someone's dug out the underside of the house and the footings have been undermined. Seen that.

Old wiring, old plumbing, and the services aren't where they said they were on the plans.

[Amelia] (15:24 - 15:31)

Or maybe you've got to upgrade your services because you're adding extra power and that sort of stuff.

[Frank] (15:31 - 15:48)

Yeah, like in Launceston. Yeah, your power, that's one. In Launceston, we've got some of the oldest infrastructure in Australia where a lot of the sewer and stormwater all goes into one pipe.

[Amelia]

Oh, you're kidding. 

[Frank]

Yeah, you know that, Launie. Stormwater and sewer all goes into the same pipes.

[Amelia] (15:48 - 15:49)

Yeah, okay.

[Frank] (15:49 - 15:50)

Yeah, not great.

[Amelia] (15:50 - 15:50)

No.

[Frank] (15:51 - 16:10)

So there's a lot more of that to treat. But if we do an extension on a property that's within those older areas, we now have to separate the sewer and stormwater to the boundary, then join them. So if it ever gets changed, they can connect it.

Which I find a bit crazy because they're not going to chuck in a new sewer line.

[Amelia] (16:10 - 16:10)

No.

[Frank] (16:10 - 16:40)

So renovating is a bit like surgery. Scans help, but certainly the real work comes in when you open it all up. And we do a lot of advice with customers that we allow for ourselves and the engineers to go to site when we open the building up.

have a really good look. So then what we design, is it going to work? If not, we figure an alternative.

Hopefully there's no extra cost in there. So it's about controlling the risk. The risk is new versus old because they're two very different ones, aren't they?

[Amelia] (16:41 - 16:41)

They are, yeah.

[Frank] (16:42 - 17:22)

Site constraints, design complexity, finish levels. They're your big, they're your higher risks. To lower the risks, simpler layouts, standard materials, repetitive construction.

Which can be boring at some times, not real pleasant. But it's bang for your buck. Complex, more expensive, simple, cheaper.

It's not rocket science. 

[Amelia]

No. 

[Frank]

High risk example with a lot of this stuff is your split levels, high-end finishes, structural changes that you don't see on site and tight sites.

I've had a number of jobs in the middle of the city and they're super tight. We have to spend extra money to underpin or build something because you're so close to the boundary.

[Amelia] (17:23 - 17:25)

Even access can be a problem too.

[Frank] (17:25 - 18:19)

Yeah, access becomes very expensive. It's hard to price. So nothing wrong with complexity as long as you're aware of it.

Please be aware though that fixed price by a builder is wonderful. But they have clauses in them now since the pandemic and a lot of builders went bust purely because they had fixed price contracts and all the price of the materials went up and they were held contractually to the agreement. They now have clauses in there that won't happen again.

To say you'll never get a variation, I'm sorry, that's a load of BS. The only thing you do is not having provisional sums and all latent conditions. It's purely getting a really good detailed quote from your builder rather than a sloppy estimate because then you will use your contingency.

A good quality one, there's a good chance they've built in all the risk into the build as best they can.

[Amelia] (18:19 - 18:32)

Yes, I guess the important thing to note though is that the builder cannot control everything. I guess that's kind of one of the takeaways out of this is that you can't have a fixed dollar amount. It just doesn't work.

[Frank] (18:32 - 18:40)

So if you can't get a product or there's a supply problem or whatever, there's going to be cost increase. The builder's not going to carry that now.

[Amelia] (18:40 - 18:41)

No.

[Frank] (18:42 - 19:03)

All these builders, they did their... I was going to say did their ass, but they lost a lot of money. So not quite fair when all these prices increase.

They have to be passed on to the customer. It's as simple as that. So they have to be transparent, sharing that with you, but it's also built into the contracts.

What happens if the contingency is too low though?

[Amelia] (19:03 - 19:05)

Well, there are a lot of consequences of that.

[Frank] (19:05 - 19:09)

That tells me that it wasn't estimated properly in the first place.

[Amelia] (19:09 - 19:11)

Well, actually you're 100% right.

[Frank] (19:12 - 19:24)

That's why quality builder, quality estimates. You don't want sloppy estimates, provisional sums where they've estimated a $30,000 for your kitchen, but you actually wanted a $50,000 kitchen.

[Amelia] (19:25 - 19:25)

Yes.

[Frank] (19:25 - 19:51)

The deck you wanted outside, you didn't want to trade a pine, you want to put Mabu or you want to put Modwood or something like that on there, which is considerably more expensive. This is where getting all your expectations of fit out, priced properly, and you've specified it. So having this all clear, and this is why it's so much work in getting these underway and getting them right.

The less decisions you need to make through the build, the less chance you're going to have to do contingency.

[Amelia] (19:52 - 19:52)

It makes sense.

[Frank] (19:53 - 19:54)

Or a blowout, you know?

[Amelia] (19:54 - 19:55)

Yeah.

[Frank] (19:55 - 20:00)

Good quality structural engineering. That's another one to reduce contingency.

[Amelia] (20:01 - 20:01)

Yes.

[Frank] (20:02 - 20:17)

Poor engineering, it might be cheap, but it may cost you thousands more in your footings, your framing, your bracing, and all the rest of it. Good quality engineer will always give you the best value to ensure that even if there are adjustments need to be done on site, it's not going to cost you a fortune.

[Amelia] (20:17 - 20:18)

Yes.

[Frank] (20:18 - 20:35)

The project doesn't get cheaper, but it does get harder when you're doing this. So I suppose we want to change everyone's mindset on contingency. You've got to have peace of mind that you've got money up your sleeve.

This goes a lot of things, isn't it? You go on holidays, you don't have to have a budget, but you've got a bit up your sleeve.

[Amelia] (20:35 - 20:36)

That's right.

[Frank] (20:36 - 21:09)

I mentioned about the car, you know? It's insurance against stress and problems and getting into your house on time. You don't want to spend it.

I get it. So then don't make changes and quality build a quality quote, as I said before. So with all this, remember new homes allow 10% renovation extensions, 15 to 20.

And then obviously subject to conditions and what you're doing. So remember, this is planning, good quality planning for the future. 

[Amelia]

At the beginning.

[Frank]

At the beginning. And then hopefully you don't have to spend much of it.

[Amelia] (21:09 - 21:09)

That's right.

[Frank] (21:10 - 21:11)

Everyone's happy then.

[Amelia] (21:12 - 21:19)

That's exactly right. And I mean, if you factor that in at the beginning, then you don't feel like you're losing out at the end if you do have to spend a bit of it.

[Frank] (21:19 - 21:22)

You will lose out if you don't allow for it.

[Amelia] (21:22 - 21:23)

That's exactly right.

[Frank] (21:23 - 21:24)

That's the take home.

[Amelia] (21:24 - 21:28)

What a great way to wrap up. Thanks for listening to the Building Design, Prime Time Podcast.

[Frank] (21:29 - 21:29)

Have a good one. Bye.

[OUTRO] (21:39 - 21:42)

You're listening to the Building Design, Prime Time Podcast.