> No need for key() here, an XPath will be fine:

   val="{sum(//type[@value =
  current()/contact/@type]/@benchmark1)}"/>

actually the OP wants


 val="{sum(for $t in contact/@type return //type[@value = $t]/@benchmark1)}"/>

except that's XPath2, for XSLT1 there are several idioms that allow
the sum of a computed value, one suggested by the OP, using a recursive
template, other suggestions

http://www.google.co.uk/search?q=xslt+transform+and+sum


David