What term refers to costs added to an estimate to cover unknown variables?

The term that refers to costs added to an estimate to cover unknown variables is contingency costs. These costs are included to account for unforeseen circumstances that could arise during a construction project, such as delays, design changes, or unexpected site conditions. Since these variables can significantly impact the overall budget, including contingency costs allows builders and project managers to plan for potential financial shortfalls and manage risks effectively.

In contrast, fixed costs refer to expenses that do not change with the level of goods or services produced, such as rent or salaries. Direct costs are those that can be directly attributed to a specific project or activity, like materials and labor. Overhead costs encompass indirect expenses required to run a business, like utilities and administrative salaries, but do not specifically address the uncertainties encountered during a project. Therefore, the inclusion of contingency costs is essential for comprehensive financial planning in construction projects.