Nicholas Nesto PMPProject Manager| Kraft FoodsEast Hanover, Nj, United States
Hello all,
Looking for best practices regarding contingency planning:
1. Should contingency time and cost be built into each low-level task on your project plan? Or should contingency be its own task (i.e. be a separate line item in a project plan with days and dollars attached to it?)
2. In considering how much contingency should be built into schedule and cost estimates, what is the best practice regarding risk assessment? Is it based on the overall project risk? Or on the risk of the individual task?
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George JucanManaging Partner| Organizational Perfomance Enablers NetworkWoodbridge, Ontario, Canada
I personally like to schedule tasks very aggressively and have a contingency buffer at the end of the project. It is a given that any task will expand to fill all the time allocated (and some more), so including contingency at task level is not as effective as one would think. However, to apply this you have to make it clear to sponsors, clients, executives etc to not expect each and every task to be completed as scheduled as any encountered risk will delay the timelines – they have to look at the impact of delays in the big picture (project delivery) as you provisioned contingency time at the end. You also have to be able to resist pressures to cut out that consolidated buffer – I explain them that I cannot commit to the timeline without that contingency, but if no risks will occur we’ll deliver faster.
The size (time and budget) for the contingency buffer depends of multiple project and organizational factors. I usually use the total project complexity (see http://www.gantthead.com/content/articles/231775.cfm) to adjust the risk provisions of each identified risk, and a 5/10/15% of duration and total budget for unknown risks (based on complexity level). However, these are guidelines only and you have to decide on your own levels based on project’s and organization’s tolerance to risks: a project and/or organization with low risk tolerance needs firm delivery dates, so you would add more contingency.
Hope it helps.
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Nicholas Nesto PMPProject Manager| Kraft FoodsEast Hanover, Nj, United States
George - thanks for taking the time to reply, this certainly helps....follow up question - when doing Earned Value and Planned Value calculations, would the contingency dollars be included in the calculations? For example, would the contingency dollars be included in the "Budget at Completion" number? And, likewise, would the contingency time come into play when calculating percent complete?
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George JucanManaging Partner| Organizational Perfomance Enablers NetworkWoodbridge, Ontario, Canada
I represent the risk contingency as a task with cost and effort, through a “dummy” resource if using MS Project, so it gets included in all project numbers and EVA calculations. For minor use of contingency budget or time I increase percent complete on the task. However, if the project “eats up” a significant portion of the contingency provision I modify the "reserve" task to reflect remaining budget and time and re-baseline the plan to reflect current reality. If you don’t re-baseline the EVA calculations get skewed. For example, in reality you may use budget but not time (e.g. for an unplanned purchase), but increasing percent complete on contingency will also take away time. When the numbers are small the deviation is minor, but large numbers could produce false readings for your project “health”. Please let me know if I explained it in enough details or if anything else needs clarifications – far from me to say it’s the only / best way to do it, but it makes sense and it works (at least for me). Saving Changes...
