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Topics: Cost Management, Risk Management
Is EMV same as Contingency Reserve?
In one of my previous organizations we would calculate EMV while budgeting for project. This was over 10 years back when I wasn't aware of Reserves. We were part of performing organization. We would include EMV for coming up with Project Cost. Would put our margin over this and propose it as Project Budget. Can you please let me if the EMV we calculated can be called Contingency Reserve?
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Well, it is not the same, EMV is a statistical tool used for many purposes, one being to estimate a contingency reserve, which is a tool for responding to risk.
Ashwin -

as Thomas has indicated, the scope of what EMV can be used for goes well beyond contingency reserve calculations. For example, decision tree analysis (e.g. build vs. buy) often uses EMV.

In the same vein, contingency reserves do not have to be based on EMV. For example, some organizations will put a flat percentage of the estimated total costs as the contingency reserves. While I find this to be "lazy" and they might get challenged for doing so, it happens quite a bit in the "real world".

Kiron

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