What is a 20% contingency?

This contingency is usually calculated as a percentage. If the phase is 100 days of effort, the 20% contingency would be another 20 days. As the project progresses, the level of risk decreases as the requirements and problems are known, so the percentage will be reduced. The contingency budget, in the context of project management, is an amount of money that is included to cover potential events that are not specifically accounted for in a cost estimate.

The purpose is to compensate for the uncertainty inherent in cost and time estimates, as well as the unpredictable exposure to risk.