How the contingency runway calculator arrives at a month
A runway calculator is a small piece of arithmetic with a large effect on a board meeting. It takes what the owner already knows about a contingency fund and returns a month. This post walks through the inputs, the two rates it computes, the comparison it makes, and the places where the answer depends on a choice rather than a formula.
The five inputs
The first input is the fund's starting balance, taken from the frozen GMP baseline. The second is the current balance, taken from the latest pay application or the owner's ledger after reconciliation. The difference is total draws to date.
The third is the number of months elapsed since the GMP was set, and the fourth is the substantial completion month from the contract or the latest accepted schedule. The fifth is the draw history by month, which is needed for the trailing rate. Without monthly history the calculator can only compute an average.
Every one of these should be a stored value, not a recomputed one. If the completion date changes by change order, the calculator should use the new date from that month forward and keep the old date in prior snapshots. A calculator that reaches back and restates history will show a runway that never moved, which is never true.
The two rates
The average rate is total draws divided by months elapsed. The trailing rate is draws in the last N months divided by N, where N is fixed at the start, commonly three or four. Each rate divided into the current balance gives months of runway. Each runway added to the current month gives an exhaustion month.
The calculator should show both. When they agree, the owner has one date. When they disagree, the owner has a range and a reason to look at the cause mix of recent draws. A calculator that picks one rate silently is hiding the most useful thing it knows.
A fictional $55 million performing arts center in month fourteen of twenty six: starting contractor contingency $2.2 million, current balance $1.1 million, average rate about $79,000 a month, trailing four month rate $165,000 a month. Runway on the average is about fourteen months, exhaustion around month twenty eight, after completion. Runway on the trailing rate is under seven months, exhaustion around month twenty one, five months before completion. Two dates. One flag.
The comparison and the flag
Each exhaustion month is compared to substantial completion. If both are after completion, the fund is projected to last and the line is clear. If the trailing date is before completion and the average is after, the fund is under recent pressure and the line is a watch. If both are before completion, the fund is projected to run out and the line is a flag.
The flag is a statement about arithmetic, not about the project. It says: at this rate, this fund does not reach the end. It does not say the rate will hold. Deciding whether it will is the owner's reading of the remaining work.
Optional adjustments
Some owners add pending draws to the current balance as a second scenario, and some add a manual risk weighted estimate for the remaining work. Both are useful. Both should be labeled as scenarios and shown next to the base calculation, never folded into it. The base calculation is the one whose history is comparable month to month.
Where the judgment sits
The calculator makes no decisions. The owner decides the trailing window length, decides which completion date to use when the schedule is disputed, decides whether a pending draw is likely enough to include, and decides what the flag means given the cause mix. Each of those choices should be written down once so the calculation stays consistent.
Costwitness runs this calculation on each contingency fund from stored monthly snapshots, shows both rates and both dates against completion, and raises the flag when either lands early. The software is the arithmetic. The reading of the result belongs to the owner's team.
What to do this month
- Gather the five inputs for each contingency fund and confirm each one comes from a stored source, not a recalculation.
- Fix the trailing window at three or four months and write it into the report template.
- Run both rates, compare to completion, and add the result as one line with both dates to the owner report.
Questions on this
What if the project has no monthly draw history yet?
Then the calculator can compute only the average rate, and that with few data points. Show it, label it as early, and add the trailing rate once three or four months of draws exist. The value of the calculation grows with the history.
Should the runway use the contract completion date or the current schedule?
Use the date the owner considers most likely, and state which one it is. Many owners use the latest accepted schedule update. If the schedule is in dispute, show the runway against both dates, since a late completion also extends the period the contingency has to cover.
Can the calculator be run on owner contingency?
Yes, with the same inputs. Owner contingency draws are change orders, so the history comes from the change order register rather than the contingency narrative. The flag means the same thing: at this rate of owner directed change, the owner's fund does not reach the end.
In the product
Contingency ledger, Anticipated final cost, Monthly owner report. Free tool: Contingency Runway, Schedule Risk versus Float.
Keep reading
Earlier: Cause classification: owner scope, design gap, unforeseen, coordination. Later: Where contingency hides in the pay application. All articles on contingency.
See the two funds on a project like yours.
Thirty minutes on a call. The twin drawdown chart on a fictional project at your GMP size, and the month the fund runs out.