Reginald SmithFire Support Trainer| Capstone CorporationClarksville, Tn, United States
I am dialing in on my knowledge base for my upcoming PMP Exam which I take in six weeks. Can someone help me with the definition of activity contingency reserve. Based on PMBOK, 5th Edition, Activity Contingency Reserve + Activity Cost Estimates = Work Package estimates. See Figure 7-8 Project Budget Components.
Senior Projects Manager | Field & Marten AssociatesNew Westminster, British Columbia, Canada
In a sense this is true.
There are two reserve in a project: Contingency Reserve and Management Reserve.
Management reserve is not part of the cost baseline, however, it is part of the overall project budget and in simpel words: It is the cost estimate for the unknown-unknowns. This is not under the control of the project manager.
Contingency Reserve is part of the cost baseline and it is the cost estimate for the Known-Unknowns so the total cost estimate is the Activity Cost Estimate + Contingency Reserve.
Hope this helps.
...
1 reply by Reginald Smith
Apr 27, 2017 4:26 PM
Reginald Smith
...
Rami,
I just want to thank you for taking the time in answering questions that I posed. I passed the test on 26 April 2017. Your efforts helped and I am grateful.
As Rami commented above, activity contingency reserve might include in level of the activity cost estimates when risks of those activities are analyzed and cost for any responses to those risks might be determined.
However, you can add the contingency reserve in a project level too as general contingencies which means the costs of work packages or any level of components of WBS plus contingency reserves. Cost baseline should include the contingency reserve as PMBOK indicates.
In short, contingency reserve might be in the work package level as you commented but contingency reserve might be incorporated into higher level of WBS before finalizing the cost baseline. Saving Changes...
Reginald SmithFire Support Trainer| Capstone CorporationClarksville, Tn, United States
Rami, I know the difference between Contingency Reserve and Management Reserve. There is no argument there. I am a very literate person and sometimes it takes an explanation of a chart before I can appreciate the usage of that chart, hence why I started the discussion. PMI did a poor job explaining Figure 7-8. I can appreciate Sungjoon's further comment on the matter but I still don't know what PMI means by Activity Contingency Reserve. If the work package cost estimate equals the activity cost estimate + activity contingency reserve than what is the difference bewteen this activity contingency reserve and the contingency reserve + work package cost estimate that equals Control accounts. Saving Changes...
Senior Projects Manager | Field & Marten AssociatesNew Westminster, British Columbia, Canada
Reginald, Share the figure you are referring to please and then I am pretty sure we will be able to ellaborate better ! I am not sure even if there is a difference between the above mentioned in your last paragraph. Saving Changes...
Reginald SmithFire Support Trainer| Capstone CorporationClarksville, Tn, United States
Rami, it will not allow me to paste it here. Page 213 of the PMBOK, 5th Edition is the chart, "Project Budget Components. Thank you for asking. Saving Changes...
Senior Projects Manager | Field & Marten AssociatesNew Westminster, British Columbia, Canada
Reginald,
The figure on page 213 is 7-9 so I assume you are referring to Figure 7-8 on page 212 - Here is how understand it:
1- Each Activity in the WBS has a cost estimate and there is a risk component associated with each activity and that's why coingency is allocated: Activity Cost + Contingency = Work Package Estimate.
2- Each WP which is basically a group of activities also have Risk associated with it as a work package which is different than the risk for the single activity and thats why they allocate more contingency: WP's Estimate + Contingency = Summation of Control Account = Cost Baseline.
3- The control account is the level of granularity to track measurement. For example: WP1 + CR1 = CA1
Reginald SmithFire Support Trainer| Capstone CorporationClarksville, Tn, United States
Rami, I am thankful for your time and effort in this matter. I appreciate the breakdown and have no issues with it. I guess what I don't know is under what conditions will an activity contingency reserve be needed outside the contingency reserve needed for the work package. Saving Changes...
Senior Projects Manager | Field & Marten AssociatesNew Westminster, British Columbia, Canada
Reginald,
You're welcome - This is a totally different question than the one orginally addressed. There is no specific condition for allocating contingency reserve to single activities. This all depends on many factors that are related to that specific project and the risk analysis you will do for that project. This risk analysis and risk apetite, toelrance and threshold for the project will tell you where and how much you need to allocate.
The figure gives you the process as a whole but you will eventually tailor it to suit your project needs (i.e. In many cases you won't need contingency for each activity and the contingency allocated for WP's will suffice).
Good Luck with your Exam ! Saving Changes...
Reginald SmithFire Support Trainer| Capstone CorporationClarksville, Tn, United States
Feb 13, 2017 3:58 PM
Replying to Rami Kaibni
...
In a sense this is true.
There are two reserve in a project: Contingency Reserve and Management Reserve.
Management reserve is not part of the cost baseline, however, it is part of the overall project budget and in simpel words: It is the cost estimate for the unknown-unknowns. This is not under the control of the project manager.
Contingency Reserve is part of the cost baseline and it is the cost estimate for the Known-Unknowns so the total cost estimate is the Activity Cost Estimate + Contingency Reserve.
Hope this helps.
Rami,
I just want to thank you for taking the time in answering questions that I posed. I passed the test on 26 April 2017. Your efforts helped and I am grateful.
r/
Reggie
...
1 reply by Rami Kaibni
Apr 27, 2017 7:33 PM
Rami Kaibni
...
Reggie,
You're welcome - I am glad to hear that you've passed the exam. Welcome On Board. Cheers !
Senior Projects Manager | Field & Marten AssociatesNew Westminster, British Columbia, Canada
Apr 27, 2017 4:26 PM
Replying to Reginald Smith
...
Rami,
I just want to thank you for taking the time in answering questions that I posed. I passed the test on 26 April 2017. Your efforts helped and I am grateful.
r/
Reggie
Reggie,
You're welcome - I am glad to hear that you've passed the exam. Welcome On Board. Cheers ! Saving Changes...
Community Champion
