Change Management Terms

Definition of Project Reserves and contingencies

The total budget of a project consists of the Cost Baseline, plus the Management Reserve.

The Cost Baseline is made up of the accumulated contract and/or work package cost estimates, plus the Contingency Reserve.

For each contract, or work package cost estimate, there are Activity Cost Estimates, and these may also have some contingency associated with them.

It is important to ensure that there is clarity regarding contingencies - to ensure that all necessary contingency is included, but only counted once.

This means that contingency for each work package should EITHER be counted at the Activity level OR included in the Contingency Reserve.

Meanings and understanding of reserves and contingency often get mixed up - especially by those that do not specialise in project control.

It is worth checking that you are clear on the meanings and differences between contingency reserve and the management reserve, and the difference between who controls the purse strings.