Contingency is additional budget or resources reserved for unexpected production expenses.
Technical Details
Studio productions typically budget 10% contingency, while independent films allocate 15-20% due to higher uncertainties. The contingency is divided into three categories: Production Contingency (5-7% for shooting), Post-Production Contingency (3-5% for post-production), and Completion Bond Reserve (2-3% for completion guarantees). Initial contingency funds are released when the budget exceeds 102% of the original budget, with every use requiring documentation and approval from the Line Producer.
History & Development
Irving Thalberg introduced the systematic contingency system at MGM in 1924 after Erich von Stroheim's "Greed" exceeded its estimated budget by 400%. In 1935, the Motion Picture Producers Association standardized the 10% rule for A-Pictures. With the advent of Completion Bonds in the 1960s, contingency became a contractual obligation for bank-financed productions. Modern streaming platforms utilize dynamic contingency systems that vary between 8-25% depending on the project phase.
Practical Application in Film
"Apocalypse Now" used its entire 15% contingency after only 60% of the shooting time, leading to the infamous budget explosion. Christopher Nolan routinely reserves 12% contingency exclusively for complex Practical Effects, as documented in "Inception." Marvel Studios has calculated tiered contingencies since 2008: 8% for Pre-Production, 12% for Principal Photography, and 6% for Post-Production/VFX. If individual departments exceed their allocation, there is no automatic redistribution between contingency categories.
Comparison & Alternatives
Contingency differs from calculating with risk premiums in that it is only activated when actual additional costs are incurred. Pay-or-play deals function as a personal contingency, while equipment insurance acts as a technical contingency. Modern split-rights deals partially replace traditional contingencies with revenue-sharing models, where additional costs are offset against future revenue.