Reserve analysis
“Reserve Analysis” is a tool/technique for the process “Estimate Activity Durations”.
Duration estimates may include contingency reserves, sometimes referred to as time reserves or buffers, into the project schedule to account for schedule uncertainty. Contingency reserves are the estimated duration within the schedule baseline, which is allocated for identified risks that are accepted and for which contingent or mitigation responses are developed. Contingency reserves are associated with the ?known-unknowns,? which may be estimated to account for this unknown amount of rework. The contingency reserve may be a percentage of the estimated activity duration, a fixed number of work periods, or may be developed by using quantitative analysis methods such as Monte Carlo simulation. Contingency reserves may be separated from the individual activities and aggregated into buffers as shown in Figure 6-19.
As more precise information about the project becomes available, the contingency reserve may be used, reduced, or eliminated. Contingency should be clearly identified in schedule documentation.
Estimates may also be produced for the amount of management reserve of time for the project. Management reserves are a specified amount of the project duration withheld for management control purposes and are reserved for unforeseen work that is within scope of the project. Management reserves are intended to address the ?unknown-unknowns? that can affect a project. Management reserve is not included in the schedule baseline, but it is part of the overall project duration requirements. Depending on contract terms, use of management reserves may require a change to the schedule baseline.
“Reserve Analysis” is a tool/technique for the process “Estimate costs”.
Cost estimates may include contingency reserves (sometimes called contingency allowances) to account for cost uncertainty. Contingency reserves are the budget within the cost baseline that is allocated for identified risks, which are accepted and for which contingent or mitigating responses are developed. Contingency reserves are often viewed as the part of the budget intended to address the ?known-unknowns? that can affect a project. For example, rework for some project deliverables could be anticipated, while the amount of this rework is unknown.
Contingency reserves may be estimated to account for this unknown amount of rework. Contingency reserves can provide for a specific activity, for the whole project, or both. The contingency reserve may be a percentage of the estimated cost, a fixed number, or may be developed by using quantitative analysis methods.
As more precise information about the project becomes available, the contingency reserve may be used, reduced, or eliminated. Contingency should be clearly identified in cost documentation. Contingency reserves are part of the cost baseline and the overall funding requirements for the project.
Estimates may also be produced for the amount of management reserve to be funded for the project.
Management reserves are an amount of the project budget withheld for management control purposes and are reserved for unforeseen work that is within scope of the project. Management reserves are intended to address the ?unknown unknowns? that can affect a project. The management reserve is not included in the cost baseline but is part of the overall project budget and funding requirements. When an amount of management reserves is used to fund unforeseen work, the amount of management reserve used is added to the cost baseline, thus requiring an approved change to the cost baseline.
“Reserve Analysis” is a tool/technique for the process “Determine budget”.
Budget reserve analysis can establish both the contingency reserves and the management reserves for the project.
“Reserve Analysis” is a tool/technique for the process “Control costs”.
During cost control, reserve analysis is used to monitor the status of contingency and management reserves for the project to determine if these reserves are still needed or if additional reserves need to be requested.
As work on the project progresses, these reserves may be used as planned to cover the cost of risk mitigation events or other contingencies. Or, if the probable risk events do not occur, the unused contingency reserves may be removed from the project budget to free up resources for other projects or operations. Additional risk analysis during the project may reveal a need to request that additional reserves be added to the project budget.
“Reserve Analysis” is a tool/technique for the process “Control Risks”.
Throughout execution of the project, some risks may occur with positive or negative impacts on budget or schedule contingency reserves. Reserve analysis compares the amount of the contingency reserves remaining to the amount of risk remaining at any time in the project in order to determine if the remaining reserve is adequate.
This definition was found in the PMBOK V5
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