Definition of Project Reserve
Any project has risks that may affect the cost, schedule or quality of the completed work.
The likelihood of some of these risks – often called ‘known unknowns’ – can be assessed and their typical cost can be calculated. The result is the contingency reserve. This amount is part of the project cost and can be called on as the expected risks materialise. The project manager may be able to control access to the contingency reserve, depending on the authority matrix.
There are other risks to a project that cannot be foreseen or planned for, but depending on the size and complexity of the project, the likelihood of one of these ‘unknown unknowns’ occurring increases. The project reserve is intended to cover this risk, and it is often controlled by a management committee of the owner(s) rather than by the project team. Again, this depends upon the authority matrix.