RESERVE ANALYSIS

Reserve analysis is applied on estimations of time and cost in project planning.

1. RESERVE ANALYSIS (Time)

It is the review and study of :

- identified unknowns such as risks or assumptions

- unidentified unknowns such as risks

to determine its duration impact to the:

- project activities

- WBS package (work, planning or control)

- project as a whole

to determine, for the project, the needed amount of:

- Contingency Reserve (against identified unknowns such as risks or assumptions)

- Management Reserve (against unidentified unknowns such as risks)

1.1. CONTINGENCY RESERVE (time):

Also known as schedule reserves.

Duration estimates may include contingency reserves for schedule uncertainty.

Contingency reserves are the gross estimated durations within the schedule baseline which are practically added to the activity durations for identified:

- risks.

- implemented assumptions.

Contingency reserves are associated with the [known unknowns] which may be estimated for reworking all or part of the activity due to these unknowns.

The contingency reserve may be a (or):

- percentage of the estimated activity duration

- fixed amount of time

Contingency reserves can be provided (as required) to:

- any activity

- any package (work, planning or control)

- the project as a whole

then, it is aggregated (with the durations) from bottom to top.

As more precise information about the project becomes available, the contingency reserve may be (or):

- used

- reduced (via change order)

- eliminated (via change order)

Contingency reserve should be clearly identified in the schedule documentation.

1.2. MANAGEMENT RESERVES (Time):

Estimated durations are input to identify the amount of management reserve of the project schedule.

For schedule, management reserves are a specified amount of the project duration that is:

- withheld for management control purposes

- reserved for unforeseen work that is within scope of the project.

Management reserves are intended to address the [unknown unknowns] that can affect a project.

Management reserve is not included in the schedule baseline, but it is part of the overall project duration requirements.

When an amount of management reserves is needed to be used, this amount is added to the schedule baseline by an approved change request.

The management reserve serves the buyer favor and controlled by him as follows:

- the requester of this change request, mostly, is the project manager from the buyer organization or in consultation with him.

- the approver of this change request is an authority within the buyer organization.

Conclusion of time reserve analysis:

Work Package Duration Estimates = sum of all activity duration estimates

Schedule Baseline = Contingency Reserve + Work Package Duration Estimates

Overall Project Duration = Schedule Baseline + Management Reserve

2. RESERVE ANALYSIS (Cost)

It is the review and study of :

- identified unknowns such as risks or assumptions

- unidentified unknowns such as risks

to determine its duration impact to the:

- project activities

- WBS package (work, planning or control)

- project as a whole

to determine, for the project, the needed amount of:

- Contingency Reserve (against identified unknowns such as risks or assumptions)

- Management Reserve (against unidentified unknowns such as risks)

2.1. CONTINGENCY RESERVE (Cost):

Also known as contingency allowance.

Costs estimate may include contingency reserves for cost uncertainty.

Contingency reserves are the budget within the cost baseline that is allocated for identified:

- risks.

- implemented assumptions.

Contingency reserves are associated with the [known unknowns] which may be estimated for reworking all or part of the activity due to these unknowns.

The contingency reserve may be a (or):

- percentage of the estimated activity cost

- fixed amount of cost

Contingency reserves can be provided (as required) to:

- any activity

- any package (work, planning or control)

- the project as a whole

then, it is aggregated (with the durations) from bottom to top.

As more precise information about the project becomes available, the contingency reserve may be (or):

- used

- reduced (via change order)

- eliminated (via change order)

Contingency reserve should be clearly identified in the cost documentation.

2.2. MANAGEMENT RESERVES (Cost):

Estimated costs are input to identify the amount of management reserve of the project cost.

For cost, management reserves are a specified amount of the project cost that is:

- withheld for management control purposes

- reserved for unforeseen work that is within scope of the project.

Management reserves are intended to address the [unknown unknowns] that can affect a project.

Management reserve is not included in the cost baseline, but it is part of the project budget.

When an amount of management reserves is needed to be used, this amount is added to the cost baseline by an approved change request.

The management reserve serves the buyer favor and controlled by him as follows:

- the requester of this change request, mostly, is the project manager from the buyer organization or in consultation with him.

- the approver of this change request is an authority within the buyer organization.

Conclusion of cost reserve analysis:

Work Package Cost Estimates = sum of all activity cost estimates

Cost Baseline = Contingency Reserve + Work Package Cost Estimates

Project Budget = Cost Baseline + Management Reserve