How to Apply Contingency Reserve in Project 2016

By Cynthia Snyder

Contingency reserve is either time or money that is factored into the schedule or the budget to mitigate identified risks. A risk is an uncertain event or condition that, if it occurs, affects the schedule (or another project objective, such as cost, resources, or performance). The proper way to deal with uncertainty on a project is to conduct a thorough risk analysis.

For those risks you accept, because you either choose not to develop a response or can’t further mitigate their probability or impact, you can set aside contingency reserve to address the event when and if it occurs. No prescribed equation can determine the appropriate amount of reserve to set aside; every project is different. Here’s a list of factors that generally indicate you should set aside more reserve:

  • New or unproven technology
  • Complex projects with numerous interfaces
  • Projects that are unfamiliar to your organization
  • Resources unfamiliar with the type of work to be done
  • A constrained budget
  • Business-critical or high-profile project

To provide contingency reserve in the schedule, an unresourced task is commonly added at the end of every project phase or before a major deliverable is due. This strategy increases the likelihood that you’ll meet the due date of a milestone or phase.

The figure shows how a task called Registration Contingency was added to reduce the probability that a slip on any task in the Registration work packages would delay the Registration Available milestone. If everything goes as planned, then the contingency won’t be used. However, if there are tasks that need to be reworked, or if there are problems with a resource, or if a stakeholder isn’t available for feedback, there is some reserve built in.

Contingency in the schedule of a project in Microsoft Project.
Adding contingency in the schedule.

Set aside contingency reserve for both the schedule and the budget.