Contingency Reserves

Anonymous

There is a bit of confusion around Contingecy reserves being included in the cost baseline or not. The figure 2-18 in pmbok 7th addition, page 63 shows as outside of cost baseline, but I have seen many times as it is included in the cost baseline.

What the most up to date info about contingency reserves, management reserves vs cost baseline and total project budget?

Thank you for guidance.

Posted: Jun 2, 2026 1:21 AM

Sort By:

Verónica Elizabeth Pozo Ruiz RYLAI Access Control Quito, Pichincha, Ecuador

*Contingency Reserves are destined to "know-unknowns", which are identified risks, with response strategies established. These Contingency Reserves form part of the Cost Baseline along with the Activity Cost Estimates.

Cost Baseline is equal to: Activity Cost Estimates + Contingency Reserves

*Management Reserves are part of the budget destined to "unknown-unknowns", that are unidentified risks, without response strategies established.
These reserves are outside the Cost Baseline.

Total Project Budget is equal to: Cost Baseline + Management Reserves

Posted: Jun 2, 2026 10:48 AM

Rami Kaibni

Community Champion

Senior Projects Manager | Field & Marten Associates New Westminster, British Columbia, Canada

I agree with Veronica.. While PMBOK 7 can appear to place contingency reserves outside the baseline, I don’t believe PMI has changed the underlying definitions, and PMI's earned value management guidance continues to treat contingency reserves as part of the cost baseline.

In real life, we always have the contingency reserve as part of the cost baseline and it is under the PM’s control.

Posted: Jun 2, 2026 10:59 AM (Updated by author: Jun 2, 2026 10:59 AM)

Luis Branco CEO| Business Insight, Consultores de Gestão, Ldª Carcavelos, Lisboa, Portugal

One reason this topic creates confusion is that discussions about reserves often mix uncertainty, budgeting, and governance.

At their core, contingency reserves and management reserves exist to address different categories of uncertainty.

Contingency reserves are typically associated with identified risks and known uncertainty.
Management reserves are intended to address uncertainty that falls outside what has been explicitly identified and planned.

Both reserves exist for the same fundamental reason: no project plan can eliminate uncertainty.
The question is not whether uncertainty will materialize, but whether the project has an explicit mechanism to absorb it without losing control, transparency, or accountability.

From a governance perspective, the most important distinction is not the reserve itself, but the decision rights associated with it.

Who approves the reserve?

Who is authorized to consume it?

Under what conditions can it be used?

In many organizations, contingency reserves are estimated by the project team, approved as part of the project's authorized budget, and then managed by the project manager when agreed risk responses need to be implemented.
Management reserves typically remain under higher-level governance authority because they address uncertainty beyond the approved baseline.

That is why I find it useful to view reserve management not only as a budgeting practice, but also as a governance mechanism for managing uncertainty.

Ultimately, reserves are not created to protect budgets.

They are created to protect decision quality when reality inevitably diverges from the plan.

Reserve structures may vary.

Accountability for uncertainty cannot.

Posted: Jun 2, 2026 2:03 PM

Please login or join to reply

Contingency Reserves

Sponsors

Vendor Events

Guessing is not a strategy: How to build decision velocity with AI and real-time data

Newsletters