Bala S DuvvuriProject Manager| ShellBangalore, Karnataka, India
Hello All,
Has anybody come across a team member trying to justify padding as contingency reserve or as a project manager you are trying to justify padding as a contingency reserve with the client
I am basically trying to understand the pointers to differentiate between padding and contingency reserves
Senior Projects Manager | Field & Marten AssociatesNew Westminster, British Columbia, Canada
Jan 27, 2016 4:21 PM
Replying to John Herman
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In my mind, padding is another word for buffer or contingency. Of those 3 words, "padding" has the worst connotation, then "buffer", then "contingency". Padding may have a bad connotation due to its use sometimes in the past to boost company reputation (or profits) by finishing early and under budget.
If possible, for transparency, associate a cost amount and schedule timeframe with each assumption and (known) risk. That makes it very clear to all involved that the estimating is done with diligence. Obviously, the amount to associate with "unknown unknowns" is probably not quantifiable, but maybe should be some percentage of the budget adjusted for complexity, and the preponderance or sparsity of other risks.
Hi John,
IMHO, Padding - Buffer - Contingency are totally three different concepts.
Padding is just assuming without justification based on best guess.
Buffers are used in CCM to avoid target date slippage and are non-schedule work activities.
Contingency: The cost of Known-Unknowns and is part of the cost baseline.
Of all the above, Padding should not be used at all. Saving Changes...
Tiago MateusSenior PM | Author of the book "Project Your Life"| Volkswagen Financial ServicesPortugal
1- Have you tried to ask the team member for the details of his padding? 2- Do you agree with all the risks that you identified in his justification? 3- Now, how in collaboration with him can you turn it more transparent in the project? 4- Why not in a weekly meeting? in a risk management workshop? in a expert meeting (perahps together with his linemanager)? 5- Can you know quantify it as a contingency reserve for the project?
What do you think about this process? Saving Changes...
In my mind, padding is another word for buffer or contingency. Of those 3 words, "padding" has the worst connotation, then "buffer", then "contingency". Padding may have a bad connotation due to its use sometimes in the past to boost company reputation (or profits) by finishing early and under budget.
If possible, for transparency, associate a cost amount and schedule timeframe with each assumption and (known) risk. That makes it very clear to all involved that the estimating is done with diligence. Obviously, the amount to associate with "unknown unknowns" is probably not quantifiable, but maybe should be some percentage of the budget adjusted for complexity, and the preponderance or sparsity of other risks.
Hi Rami, While I understand that you recognize that the 3 words have 3 different meanings, it's the rest of the world that needs clarification. So, we need to be careful about our choice of words and to properly explain them when used.
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1 reply by Rami Kaibni
Feb 03, 2016 10:45 AM
Rami Kaibni
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You are absolutely right about this John.
Saving Changes...
Aejaz ShaikhPM I| Alyx Technologies India Pvt LtdPune, Maharshatra, India
Padding is not contingency reserve. As we are aware the Contingency Reserve (CR) is for Known-Unknowns, whereas my take on padding is just scaling up the estimates based on expert judgement or an input from the SME. Also one needs to justify or put a proper reason for the padding, it cannot be used just like that arbitrarily whereas CR gives us the legitimacy to use estimates and is considered valid. Saving Changes...
Senior Projects Manager | Field & Marten AssociatesNew Westminster, British Columbia, Canada
Feb 02, 2016 9:13 AM
Replying to John Herman
...
Hi Rami, While I understand that you recognize that the 3 words have 3 different meanings, it's the rest of the world that needs clarification. So, we need to be careful about our choice of words and to properly explain them when used.
You are absolutely right about this John. Saving Changes...
Robert DeVassieSenior Project Manager| ConsorPortland, Or, United States
My understanding of padding or contingency is using the higher end of the estimate range, which a lot of people do unknowingly. The downfall is that one discipline pads and then another and we loose value in the overall estimate.
Rough Order of Magnitude (ROM) Estimate: within the range of -25% to +75%
Preliminary estimate: within the range of -15% to +50%
Budget estimate: within the range of -10% to +25%
Definitive Estimate: within the range of -5% to +10%
Final estimate: 100% accurate
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2 replies by Robert DeVassie and Sergio Luis Conte
Apr 15, 2020 11:51 AM
Sergio Luis Conte
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What you state is inside Barry Bohem´s Cone of Uncertainty, just to put the reference that is taking by most of the people including the PMI and for products beyond software products. Just to comment, what Bohem said is not put this as padding. What he said is when project manager publish an estimation those percentages have to be taking into account and an range must be published instead of one point number. The justification about that is because the amount of information people have into each phase of the solution creation has a direct impact on the estimations.
Apr 16, 2020 12:36 PM
Robert DeVassie
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I completely agree Sergio.
Saving Changes...
Sergio Luis ConteHelping to create solutions for everyone| Worldwide based OrganizationsBuenos Aires, Argentina
Apr 15, 2020 10:55 AM
Replying to Robert DeVassie
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My understanding of padding or contingency is using the higher end of the estimate range, which a lot of people do unknowingly. The downfall is that one discipline pads and then another and we loose value in the overall estimate.
Rough Order of Magnitude (ROM) Estimate: within the range of -25% to +75%
Preliminary estimate: within the range of -15% to +50%
Budget estimate: within the range of -10% to +25%
Definitive Estimate: within the range of -5% to +10%
Final estimate: 100% accurate
What you state is inside Barry Bohem´s Cone of Uncertainty, just to put the reference that is taking by most of the people including the PMI and for products beyond software products. Just to comment, what Bohem said is not put this as padding. What he said is when project manager publish an estimation those percentages have to be taking into account and an range must be published instead of one point number. The justification about that is because the amount of information people have into each phase of the solution creation has a direct impact on the estimations. Saving Changes...
Thomas WalentaGlobal Project Economy ExpertHackenheim, Germany
Isn't management reserves padding? It is put on top the project for unknown unknowns and residual risks, based on heuristics, experience and not on justification. The only technique available might by analogous estimating.
Given our human optimism bias and sales objectives diverting from feasibility considerations, such padding is highly professional and ethical.
Given historic data, any Olympic games estimate should be padded by a factor of 10.
Well yes, it is a hard sell if you did not prepare arguments and facts. Faking these is a common practice - but certainly less ethical than padding.
Some times fixed price contracts can avoid this, if the risk is strictly with the contractor and they are sustainable. Saving Changes...
Robert DeVassieSenior Project Manager| ConsorPortland, Or, United States
Apr 15, 2020 10:55 AM
Replying to Robert DeVassie
...
My understanding of padding or contingency is using the higher end of the estimate range, which a lot of people do unknowingly. The downfall is that one discipline pads and then another and we loose value in the overall estimate.
Rough Order of Magnitude (ROM) Estimate: within the range of -25% to +75%
Preliminary estimate: within the range of -15% to +50%
Budget estimate: within the range of -10% to +25%
Definitive Estimate: within the range of -5% to +10%
Final estimate: 100% accurate
How I would differentiate between padding and contingency reserves is that padding would be fixed figure and would only appear on initial scoping for costs during the project planning phase when some of the information has not been submitted.
Padding would consist of known cost (Information could be part of previous project implemented) with a plus or minus margin of error.
Padding would only happen before a project has begun. It could be seen as a place holder figure or working figure to give the project team and stakeholders and understanding of the cost and how this would relate to the overall project budget.
Contingency reserve would be initially scoped before a project begun, it would still be a educated guess or guesstimate based on all the know costings being submitted and verified and the figure for contingency reserve would be constantly updated during the progression of the project and theoretically should decrease as risk of project issues decreases and work done increases and deliverables and milestones are reached.
Contingency reserve could be realised based on a mathematical formula unique to a organisations PMO.
Padding could be a plus/minus percentage number that would be an known industry standard.
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