Do you include contingency reserves for risks in the PMB (Performance Measurement Baseline)?
If these reserves are not included, the baseline will probably not be met, because in all projects at least some identified risks will occur.
But, including the reserves lead to two issues:
1) The EVM and specially the forecasts calculated from the EVM will not deliver correct results.
2) According to Parkinson’s law (“work expands so as to fill the time available for its completion”) the reserves will be used if risks will occur or not. This will result in an exceedance of the baseline, especially if risks occur at the end of the project.
Does it make sense to use the baseline without the reserves as a basis and increase the baseline with the reserves as soon as risks occur (similar to the handling of management reserves)? Saving Changes...
Drew CraigSr. Agile & Product Coach| VanguardPhiladelphia, Pa, United States
I include the contingency into the plan baseline. I'm tracking all 'assets' to the original planned work, efforts, etc. The reserves are for identified known unknowns prior to the cost baseline. The PM is responsible for using and tracking accordingly.
Anish AbrahamPrivacy Program Manager| University of WashingtonAuburn, Wa, United States
I agree with Sante, Kiron and others on this.
In my projects, contingency reserves are added to the baseline. This is the performance baseline against which the actual performance of the project will be measured. Saving Changes...
Thanks to all for the comments. Very helpful.
Calculating the EMV and add it to the work package estimates to get the baseline - but still managing the contingency / the EMV and the work package estimates separately - seems to be the best approach for me. Saving Changes...
Sergio Luis ConteHelping to create solutions for everyone| Worldwide based OrganizationsBuenos Aires, Argentina
People, while I sustain my comments about baselines is an obsolete concept to use please I do not want to deviate the discussion. That is because I made my second comment about to include contingency into baseline if you use it.
...
1 reply by Anish Abraham
Dec 27, 2017 4:45 PM
Anish Abraham
...
Thanks Sergio, for the clarification.
Saving Changes...
Anish AbrahamPrivacy Program Manager| University of WashingtonAuburn, Wa, United States
Dec 27, 2017 4:25 PM
Replying to Sergio Luis Conte
...
People, while I sustain my comments about baselines is an obsolete concept to use please I do not want to deviate the discussion. That is because I made my second comment about to include contingency into baseline if you use it.
Thanks Sergio, for the clarification. Saving Changes...
Wilko, I am agreed with Andrew, you can use contingency reserve in known-unknown risk and in Agile approach with rolling wave planning enable you to update your baseline also with EVM is giving you the special tools for forecasting your baseline although it will not give you always correct picture but at least give you ideas and figures that you can manage the risk unknown-unknown with management reserve.
you should manage different kind of risk with these techniques during your project timeline not at the end of project. Saving Changes...
Wilko - Please note that by definition, Contingency Reserves are for unknown risks which can happen anytime during the project. For known/documented risks, you would have a mitigation plan. If the documented risks materialize, then you should follow the mitigation plan
What we should do when an unknown/undocumented risk occurs is wide open to discussion/debate. The options are
1. You could change the project plan/staffing/timeline etc and present an updated cost/timeline to project sponsor and seek the approval
2. When you do an impact analysis of the undocumented risk and you find that this can be mitigated with some budget from the Contingency reserve, then you can choose to implement that. But in practice you should not consume entire contingency for a single occurrence. Further down the line of project, if a new risk occurs, then you would be left with no reserve
Contingency is a like a small purse given to PM to use in case of an emergency. Ideally PM should have authority to use only a %(say 25%) of the amnt in any given situation. If the situation demands more money, then you should seek approval from the sponsor.
It is a usual practice to exclude Contingency Reserve from the EVM calculations
Hope this clarifies your question
The Con
Contingency Reserve (CR) covers known-unknown, that means risks that can be define and are described inside a Risk Register.
Unknown-unknows, such as risks that you cannot define are covered inside the Management Reserve(MR) Saving Changes...
Contingency Reserve (CR) and Management Reserve (MR) are not actually part of the "baseline", but they are in the PMB in a "separate folder".
With the Contingency Reserve, that covers known-unknowns we can also define a schedule profile because these risks are detailed inside the Risk Register.
Usually unknown-unknows don't have such information, so the MR is located near the end of the project, unless some information are available.
When a risk occurs and we need to use coverage of the CR, we write a so called "BCR" (baseline change request) and we move the amount from the CR into the baseline, with no effect in terms of PMB. In this way, we avoid different use of the CR value and variation of the PMB. Saving Changes...
Thomas WalentaGlobal Project Economy ExpertHackenheim, Germany
Francesca, like your explanation. That's the way I see it too. EV is to measure the team performance in their work, actuals vs plan. If you include CR or even MR, the results would be skewed.
There is a difference between 'distributed budget' (=aggregated work from package or control account estimates) and cost baseline (add CR), or project budget base (add MR). Most PMs have control of the cost baseline, but not the budget base. Saving Changes...
