Proper contingency management is essential during project execution and contingency should not be released too early. In our new White Paper ‘Why Contingency Reserves Need to Be Owned by Senior Management’ we elaborate on the ownership of Project Contingency, and the fundamental reasons why it needs to be owned by an authority above the Project Manager.

The word ‘contingency’ can be used in different ways depending on the industry or the cost management standard that is followed. In this paper, contingency is a single amount of money that is designed to cover the entire project risk, at least the Known Unknowns. It is sometimes called ‘Management Reserve’.
It is different from other cost elements that are managed by the Project Manager, including risk elements sometimes also called “contingency” that are sometimes allocated to the project cost on a line-by-line basis by some organizations (we believe that reserves to cover risk should be a single amount at the project level and should not be distributed among the different project cost elements to ensure effectiveness and reasonableness of the protection afforded).

Contingency needs to be owned by Senior Management simply because:

• contingency when it is used needs to be used massively,
• contingency engagement needs to be a significant management decision as it may well decide on the outcome of the project.

The engagement of contingency is a key decision that needs to reside above the Project Manager, because it is similar to engaging the reserves in the battle. Engagement of contingency when it happens must be massive, focused and coordinated to ensure the maximum effectiveness. We recommend setting up a task force at the Project Management Team level to manage this engagement, drawing on the reserves that will have been made available through a proper start-up process (which will have created space to lead) and sufficient available reserves in the Project Management Team itself.
Proper contingency usage can make or break your project. Use contingency properly! Find out how in our new White Paper ‘Why Contingency Reserves Need to Be Owned by Senior Management’.

This new White Paper complements White Paper 2014-09 ‘How to Manage Properly Your Project Contingency Throughout Project Execution’.