Using Contingency and Schedule Reserve in Your Projects
Nearly every project comes with surprises that can delay or disrupt the work. Project Management Professional (PMP)® credential holders know this and spend time considering possible risks as they work through the project’s planning phase. Other surprises are unknown because they may exist outside the realm of risks identified by the project management team.
This distinction is what separates management reserves, including a schedule reserve, from contingency reserves. Management reserves cover risks that were unplanned and not anticipated — like a key vendor backing out mid-project or a significant delivery delay due to material shortages. Contingency reserves cover the risks already identified by the project manager, such as the cost of materials increasing.
Two of the most common challenges project managers face are time and money. Even when project managers can anticipate some disruptions, they may not know when or how they will crop up. That’s when they turn to the reserves they have in place to keep the project on track and within budget.
Understanding how schedules and contingency reserves work is an important skill for a project manager. Questions about management reserves may appear on the Project Management Professional® exam, so it’s helpful to review what schedule and contingency reserves are and how project managers use them.
On this page:
- Schedule Reserve
- Contingency Reserve
- Schedule Reserve vs. Contingency Reserve
- Schedule Reserve PMP: Why This Matters
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Schedule reserve refers to the amount of time built into the schedule to accommodate unforeseen delays in the project schedule. Building in this extra time is an essential component of project planning because it allows for unexpected delays that can happen throughout the project.
For example, inclement weather may make it impossible to work at an outdoor site or disrupts the communication system between remote workers. When this happens, they won’t be able to complete scheduled tasks until the issue is resolved. Sometimes a key worker with specialized knowledge or skill quits the project before completing their assigned tasks. In this case, the project manager needs time to hire a new person and onboard and potentially train them.
Schedule reserves give the project manager some breathing room and help them avoid changing the project schedule. Making adjustments to the schedule and deliverables is not always possible if workers and equipment will not be available during the extension period. This creates a new risk, also known as a secondary risk, of disrupting the project’s progress.
Not only does a schedule reserve account for these delays, but it also helps maintain the overall, planned quality of the project. It forces the project manager to spend more time on planning and preparation. This reduces the stress levels for themselves and the team when complications arise.
A contingency reserve is the amount of money set aside in the budget to cover unexpected costs during the project. Including this reserve is important for a project because it creates a cushion for costs that could otherwise send the project over budget.
Say, for example, a piece of equipment breaks during the project and must be repaired to keep the project on schedule. The project manager can use the contingency reserve to pay for the repair without adjusting the budget.
Like the schedule reserve, the contingency reserve is included in the overall budget and normally expressed as a percentage. You can use one of several methods to calculate the reserve. For small projects, taking a percentage of the overall project baseline (i.e. 3% or 10%) and adding that amount as a reserve may be sufficient. Other options require calculating individual project risks and assigning values to them that can then be incorporated into the overall schedule and budget. These more advanced methods are generally reserved for large or complex projects.
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Contingency Reserve vs. Schedule Reserve
Both schedule and contingency reserves share some similarities. They’re both included in the project’s overall budget. They are also generally listed as a percentage of the time or money expected to complete the project.
Where they differ is in their usage. Schedule reserve specifically refers to potential schedule delays in the project, while contingency reserves are a component of the overall project budget. This also affects when they are used. Since schedule reserve deals with time, it’s used while the project is still active. Contingency reserves are planned, potentially adjusted, and drawn upon throughout the project.
Schedule Reserve PMP: Why This Matters
An adequate reserve is a necessity for any project. Failing to complete reserve planning can contribute to project failure or significant schedule and budget overruns. It’s not possible to predict every complication that can arise during a project. However, it is possible to anticipate delays and disruptions and account for them in the overall schedule and budget.
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