EdStainless and Artisi are absolutely correct that over-sizing pumps results in efficiency and maintenance burdens (stars to both!). I fully agree and have made similar statements many times.
In my view, the apparently simple 10% margin requirement is not bad on its own because that is a reasonable expression of normally tolerated production pump performance uncertainty. For relatively small pumps, getting closer performance guarantees from the manufacturer is unlikely to be practical. If it is a relatively expensive, high power pump, then the manufacturer may be able to assure a somewhat tighter performance uncertainty (for an additional price that may be justifiable for the overall economics of the installation). I've seen cases where the overall design margin proves to be far greater by the time the actual system comes into reality (30%, 40%, even 50% due to compounding margins provided on pumps, piping, and other system components are no great surprises).
In a realistic defense of including significant, but realistic, design margins by engineers, consider the career killing problem of a nice, dandy, big, EXPENSIVE, new process system that, when installed and running, can't be made to satisfy its required performance by anything short of "Divine Intervention" because one or more critical components have been hopelessly undersized as the result of an overly aggressive "right-sizing" design philosophy. I've seen some of these, and they can be a serious nightmare! The engineer(s), and often others, involved are never in a happy place in their career(s) when that reality materializes. When this happens, Engineer X (in charge of creating these problems by design) will become eternally famous within the facility. Whenever anything goes wrong, or is even just a bit of nuisance, the troublesome pump, pipe, valve, motor, or whatever else, will be very unkindly described or discussed as an "Engineer X" pump, or "Engineer X" pipe, ... regardless of whether or not the current problem is really in any way the fault of the now defenseless "Engineer X." You can be certain that nobody wants to be that "Engineer X."
Alternatively, "marginally" greater operating costs due to modestly excessive design margins are just a problem, and to some extent, the resultant costs may actually be somewhat compensated by somewhat greater than required system production capabilities (read greater net revenues).
Valuable advice from a professor many years ago: First, design for graceful failure. Everything we build will eventually fail, so we must strive to avoid injuries or secondary damage when that failure occurs. Only then can practicality and economics be properly considered.