What are P50 and P80 contingency, and which should you use?
They are confidence levels. A P50 contingency is the number you have roughly a coin-flip chance of staying within. P80 is the number you would defend to a board. Most projects carry a contingency at neither — because nobody asked which one it was.
What the numbers mean
Model the project’s risks with ranges rather than single points, run the distribution, and you get a curve of possible outcomes. P50 is the point you have a 50% chance of coming in under. P80 is the point you have an 80% chance of coming in under — a bigger number, bought with more money held back.
Neither is “correct”. They answer different questions. P50 is a realistic expectation; P80 is a commitment you are willing to make in public.
The question nobody asks
Most projects carry a contingency of five, or ten, or fifteen per cent — a round number, arrived at by convention, defended by experience.
And the honest question is: what is the confidence level of that number? Usually nobody knows, because it was never derived from anything. It is not a P50 and it is not a P80. It is a percentage that felt about right, and it will turn out to have been either generous or catastrophic, and there was never any way to tell which in advance.
And sizing is not releasing
This answer is about how much contingency to HOLD. Deciding when it may be SPENT is a separate discipline with separate rules — drawdown against materialised, documented risk, never against scope creep, with the burn curve watched against progress.
The two are commonly conflated, and the conflation is expensive: a project can size its contingency beautifully at P80 and then hand it out for scope additions by month eight.
References
- AACE International — cost-contingency practice and confidence-level framing
Zepth is the construction project delivery platform — it runs construction, procurement and asset management on one record, and does the work: reading the drawings, reviewing the submittals, matching the invoices and flagging the risks, with a human sign-off on anything consequential.
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