Good morning everyone, today I have 2 questions I'm a little unclear on as I'm getting 2 different view points.
From my understanding the contingent reserve is at the PM level of discretion and is used to mitigate known risk and is primarily cost related.
Management reserve is where I get two different views, view number 1 states management reserve is used during time related events when falling behind schedule such as "crashing" or "fast tracking" and requires approval from the board.
View number 2 states that management reserve is used during unknown risks, example during a natural disaster, any clarity would be greatly appreciated.
My second question is in regard to analogy estimating vs parametric estimating?
I understand that with analogy estimating you compare two similar projects where as parametric estimating you use some form of measurement unit such as square footage
I can see how parametric estimating would be useful with a commercial database but am not very clear on the use of analogy estimating in the sense that you could in theory have 2 compared projects but what if the resources differed?
Example if I’m building 2 cars and had 20 people available on project A and project B I only have 5 people wouldn’t that throw off my estimating?
Thank you for taking the time to answer my questions and providing assurance. Saving Changes...
Contingency vs. management is a matter of semantics and who has the authority to alter the plan. Management reserve is in fact used to account for contingencies. Often, the PM or performing teams build reserve into their plan dates (float or slack) or their budget to account for unknowns. This is part of the committed plan and no approval is required to use the full time and/or budget. The goal is to outperform the plan, but typically groups use up all their contingency. Management may also require milestones planned to account for contingencies in the underlying activities and hold additional budget in reserve in case the costs go beyond those in the approved plan. If the goal is to have all deliverables closed 2 weeks before the milestone, the groups sliding their dates closer to the milestone require management approval, as does moving the milestone.
Analogous estimating is not usually done at the project level, expect perhaps in the case of very early rough estimating or very similar work. In many cases at the task level, they are similar enough to prior work that the actual costs and flow from the prior work may be used. If I know that from prior planning, the flow time of a certain deliverable is typically 100 days, I can use that for my new estimate without planning at the detail level. Saving Changes...
1. The word "management" in "management reserve" really sums it up. It is at management's discretion (i.e. not the PM or the team). What they choose to budget for and utilize is up to them. I have seen it used in the field for everything from unknown-unknowns to known-unknowns to even funding scope increases and approving variances which were in the control of the team to avoid.
2. Both parametric and analogous estimating are based on historical information and can be applied at any level of a WBS, but usually the former applies once there is so much predictability and data available that a formula or model can be built whereas the latter still implies a fair bit of uncertainty as analogous estimates are often provided with ranged information.
* Contingency reserves are destined to know unknown risks, and can be added to each activity in the development of the schedule, while management reserves are amounts prepared for unknown - unknown risks, and are added to the total cost baseline. The project manager is typically authorized to spend management reserves, but it's generally necessary an upper management authorization to access management reserves.
*Analogous estimating can be used at a project-level taking into account very similar previous projects, but, as in general there are a number of differences, this type of estimation can be applicated at a phase-level or task level, where we can found exact coincidences in the type of work and resources. Saving Changes...
Thank you again to all of you, it's much clearer to me now and I truly appreciate you taking the time to answer. Saving Changes...
Peter RapinSubject Matter Expect; Project Delivery| Independent ConsultantOntario, Canada
I see the 'management reserve' as the gap between the estimated cost, or approved budget of the deliverable and the value the deliverable has to the company.
Contingency has two components
1) estimating contencency which reflects the expected accuracy of the cost estimate, and
2) a risk contencency commonly refered to as a risk allowance
Contingencies and risk allowance is typically within the project's authorization whereas management reserves are at the perogative of upper management. Saving Changes...
