The 5% Variance Rule: zero tolerance starts at contract
Every estimate carries uncertainty. The question is not whether variance exists, it is whether the builder controls it or absorbs it. Up to 5% per line item is acceptable at estimate stage. At contract execution, the tolerance is zero.
Nathan Holloway
Founder · BuildHawk and Hawktress
Every estimate carries uncertainty. The question is not whether variance exists, it is whether the builder controls it or absorbs it.
The 5% Variance Rule is a commercial discipline applied at the estimation stage. It acknowledges that during cost planning, a tolerance of up to 5% on any individual line item is acceptable. Once the contract is signed, the tolerance is zero. The number is the number.
The gate that removes the tolerance
The 5% tolerance has a hard expiry: contract execution. At the point of signing, every line item must be confirmed.
BuildHawk's estimating framework is built around this principle. Every cost plan is produced with flagged tolerances, stage-gate review, and a pre-contract sign-off checklist designed to close every open item before execution.
— BuildHawk
Written by
Nathan Holloway
Founder · BuildHawk and Hawktress
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