HKSM

A method that examines key elements and dependencies in the project management plan to set aside contingency reserves for schedule time, budget, cost estimates, or overall project funding.

Key Points

• Determines time and cost reserves by analyzing risks, estimates, and plan components.
• Contingency reserves sit inside the schedule and cost baselines; management reserve is outside the performance measurement baseline and requires change control to use.
• Common inputs and techniques include the risk register, probability-impact data, three-point estimates, and Monte Carlo simulations.
• Reserves are monitored and adjusted as risks evolve; document the basis of reserves and update baselines when changes occur.

Example

A $1,000,000 construction project identifies risks that could add cost and delay critical activities. The team applies three-point estimates and a risk analysis and sets a 12% cost contingency ($120,000) within the cost baseline and a 10-day buffer on the critical path. As risks materialize or retire, the project manager draws from or returns contingency; access to any additional management reserve requires an approved change.

PMP Example Question

While developing the cost baseline, the project manager reviews the risk register and uses three-point estimates to set aside funds to address identified uncertainties. Which tool or technique is being used?

1. Cost aggregation
2. Funding limit reconciliation
3. Reserve analysis
4. Parametric estimating

Correct Answer: C - Reserve analysis

Explanation: The scenario describes analyzing risks and estimates to establish contingency funds, which is reserve analysis. The other options address different planning activities.