Comments on: Project Contingency http://www.pmhut.com/project-contingency Sat, 11 Feb 2012 03:23:28 +0000 http://wordpress.org/?v=abc hourly 1 By: John Tailby http://www.pmhut.com/project-contingency/comment-page-1#comment-13902 John Tailby Wed, 16 Dec 2009 01:09:52 +0000 http://www.pmhut.com/?p=4409#comment-13902 What group of management executives will let project teams have large visible line items called "contingency, management reserve or budget buffer" or similar? Most executives will take items like that and financial risk reserves and take them out of the project budget and think they have added value to the project, rather than what they have done which is to ensure that the project will go over budget. Project teams then respond by icnluding contingency within their estimates, thus distributing the contingency throughout the project, effecctively padding each estimate. Thus going against PM text book practices. As I understand it, if you apply PERT estimating to a project and add up the variances to work out the total variance and total standard deviation of the project, you can't ever get to a value of "can't go above" because there is always some probability that the project will go above the budget estimate. What group of management executives will let project teams have large visible line items called “contingency, management reserve or budget buffer” or similar?

Most executives will take items like that and financial risk reserves and take them out of the project budget and think they have added value to the project, rather than what they have done which is to ensure that the project will go over budget.

Project teams then respond by icnluding contingency within their estimates, thus distributing the contingency throughout the project, effecctively padding each estimate. Thus going against PM text book practices.

As I understand it, if you apply PERT estimating to a project and add up the variances to work out the total variance and total standard deviation of the project, you can’t ever get to a value of “can’t go above” because there is always some probability that the project will go above the budget estimate.

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