PSI NASCLA Practice Exam 2025 – The All-in-One Guide to Master State Contractors Licensing!

Contingency mark-ups are primarily determined by the risk level of the project. This is because a higher risk level often necessitates a larger contingency to cover potential unforeseen costs that may arise during the project's execution. For example, projects that involve innovative construction techniques or face unpredictable environmental challenges will typically require more substantial contingency funding compared to more straightforward, lower-risk projects. Thus, the assessment of risks plays a pivotal role in deciding the amount of contingency that should be included in the overall budget.

While other factors like the total project budget, duration, and subcontracting might influence project planning and cost estimation, they are not the primary drivers for determining contingency mark-ups. The core purpose of such a mark-up is to mitigate the uncertainties associated with the unique risks that a specific project may encounter.