HKSM
Contingency Reserve
Schedule time or budget built into the baseline to handle identified risks for which specific response plans already exist.
Key Points
- Used for known risks that have defined response strategies (known-unknowns).
- Included within the approved schedule and cost baselines.
- Estimated using risk analysis methods such as EMV, Monte Carlo simulation, and three-point estimating.
- Drawn down when risk triggers occur or to execute planned responses; tracked by the project manager and risk owners.
Example
A construction project budgets an extra 10 days and $150,000 in contingency to address identified risks like material delivery slippage and weather delays, each with mitigation plans. When a supplier shipment arrives late, the team uses 4 contingency days and $40,000 to activate the mitigation and keep critical path work moving.
PMP Example Question
An identified supplier-delay risk occurs, and the team executes its planned mitigation. Which funding source or time buffer should be used?
- Management reserve outside the baseline
- Contingency reserve in the approved baselines
- Operating expense budget
- Profit margin held by the contractor
Correct Answer: B — Contingency reserve in the approved baselines
Explanation: Contingency reserve is time or money allocated in the schedule or cost baseline for known risks with active response strategies, and it is used when those planned responses are carried out.
