HKSM

An amount planned in the project management plan to address potential impacts on cost or schedule from risk. It is often specified with a modifier (such as contingency reserve or management reserve) to clarify which types of uncertainty it is intended to cover.

Key Points

• Provides a buffer to handle risk-driven cost or time impacts.
• Contingency reserve covers known-unknowns; management reserve covers unknown-unknowns.
• Size is typically based on risk analysis and reviewed as risks change.
• Use is controlled by governance; it is not unrestricted padding.

Example

A construction project sets a 10% contingency reserve for weather delays and rework identified in risk analysis, and a separate management reserve held by executives for unforeseen regulatory changes that could add scope or time.

PMP Example Question

Which statement best describes a reserve in project management?

1. A planned allowance in the project management plan to address cost and/or schedule risks, often labeled as contingency or management reserve.
2. Extra scope added to satisfy late stakeholder requests without formal approval.
3. A penalty fee paid to a vendor for early delivery.
4. Hidden padding inserted by the team to mask inefficiency.

Correct Answer: A — A planned allowance to address cost or schedule risks

Explanation: Reserves are formal risk responses documented in the plan; modifiers like contingency and management reserve indicate the type of uncertainty they cover.