Reserve Training

Andy Jordan is President of Roffensian Consulting S.A., a Roatan, Honduras-based management consulting firm with a comprehensive project management practice. Andy always appreciates feedback and discussion on the issues raised in his articles and can be reached at [email protected]. Andy's new book Risk Management for Project Driven Organizations is now available.

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I’m going to enjoy gantthead’s theme this month--risk management. It’s a bit of a bugbear of mine, and so I have the perfect opportunity to get up on my soap box. This time I want to talk about reserves--the amount of time and money that needs to be put aside to cope with the risks on a project. In particular, I want to look at the mindset of the sponsor who refuses to acknowledge this contingency in the budget and schedule.

I guess the sponsor’s theory is that the provision of a separate pool is tantamount to providing an extra period of time and/or money that will inevitably be used up and delay the project--or cause it to spend more than necessary (the old “work expands to fill the time available” theory). Instead, the sponsor believes that by expecting the team to successfully manage through the hardships, they can deliver the project earlier and more cheaply than if a contingency fund had been created.

I don’t intend for this to be an attack on sponsors--like every other project role, there are good ones and bad ones. But I am sure that we can all relate to this situation at some point in our careers.

Defining reserves
Let’s start by defining what I mean by “reserves”. For the sake of this article, I’m going to focus on contingency reserves--those that arise from known risks. When we conduct…

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