Category: Project Management Professional (PMP)® Exam using A Guide to the Project Management Body of Knowledge (PMBOK® Guide)

What are Contingency Reserve and Contingency Plan?

Question sign Depositphotos 23022738 xsIf you are preparing for the Project Management Professional (PMP)® Exam then you need to know what a “Contingency Reserve” and a “Contingency Plan” is. You may even come across PMP® Exam sample questions that focus on these two terms:

Contingency Reserve is the budgeted dollars or scheduled time that are set aside for risks that have been identified and accepted or identified and have mitigating responses developed. It will cover the costs and necessary time to handle any accepted risks should they occur and the costs or time of mitigating any risks as needed. Contingency reserves in the budget may be a percentage of the overall budget, a fixed amount, or an amount determined based on quantitative analysis. Contingency reserves in the schedule may be a percentage of the schedule, a fixed number of work periods, or a determined length of time based on quantitative analysis. It should be clearly defined and included as part of the budget and schedule of the project and only cover risks that have been identified as part of the project. As a project progresses or as more information is learned the contingency reserves may be used, reduced, or even eliminated based on if identified risks do or do not occur.

A Contingency Plan is an alternate plan that is developed for those risks that would have a high impact on a project if they were to occur. A contingency plan should include an objective, the circumstances in which the plan will be enacted,the people and resources needed to carry out the plan, and any additional details needed to fully implement the plan. For example a company that purchases a specific widget from a company that is located in hurricane prone area has determined that there is a risk that the widget producing company may be offline for a period of time during hurricane season.  A contingency plan would be needed to identify where to obtain this widget and the associated costs if the producing company is offline and cannot supply the widget for a specific amount of time.

A Guide to the Project Management Body of Knowledge (PMBOK® Guide) discusses both Contingency Reserves and Contingency Plans in sections,, &

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