Keeping money aside for the hard times is, in everyday life, quite a usual and recommended behaviour. In a project environment, if done poorly, it can make your project noncompetitive and produce unexpected surprises for your stakeholders down the road. You need to implement some basic principles for allowance and contingency management to keep your project healthy and fit. These principles are fundamental to the correct reporting and understanding of the project performance. That’s exactly the topics developed in our new White Paper 2012-17 “The Right Way to Keep Money for the Hard Times“.
Do you keep some reserves?
It is very important to understand the difference between allowance and contingency, and when it is allowable to store money in these buckets.
We believe that allowances should be banned at pricing / tendering stage to avoid excessive padding and protection; and that allowances should be allowed during project execution to dampen the surprises that the project will uncover, in the positive and negative way.
Contingencies should be calculated on unpadded cost estimates of the project items and it is important to workout regularly the allowances and contingencies to check that the money kept in store is really needed, or if it should be increased.
Discover more on this hot subject of allowances and contingencies in our new White Paper 2012-17 “The Right Way to Keep Money for the Hard Times: Allowances and Contingency Management“
