The application of contingency buffer, more commonly known as “padding” or “management reserve” is the final step in any project estimation process. The most common practice is for the estimator to use an intuitive multiplier which is added to base estimate. Unfortunately, everyone has a different multiplier which is shaped by their own personal bias about risk and it is hidden in their head. This creates a fundamental problem with transparency and consistency within most organizations.
Fortunately, there's a better way. One solution is to define and configure agreed upon standards that are matched to specific business risk situations. These should be collaboratively agreed to by all the stake holders in the organization. Then they can be codified into a configuration that can be selected at the time when contingencies are typically applied to an estimate. This helps solve the consistency issue.
To attack the transparency issue, you can use a technique of overlays to visualize the contingency in comparison to the base estimate.