Reserve Analysis

Posted on February 11, 2009 by

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Several processes found in the PMBOK® list Reserve Analysis as a technique. It is also referred to as a “contingency reserve” or “buffer.” The concept is quite simple—we know to expect the unexpected, so we plan for it. Applicable to both time and cost, it is the technique of adding some extra time to complete activities and extra funds to the budget.

This results from Risk Identification by determining the “known, unknown” risks.  Contingency reserves are different from management reserves – which address “unknown, unknowns” and are set aside in a general management budget.

Although we may know how long our project activities should take, we also know that it is likely that there will be at least some minor setbacks—a key person is sick, weather delays a shipment, etc. Similarly, although we may know how much things should cost, we can easily find ourselves dealing with unexpected costs. By planning upfront for a little extra time and/or funds, we have a safety net when things do not go as hoped. Adding these buffers is one of the principles of the Critical Chain Method.

There is not a set way to determine how much of a buffer to add—some may simply add a couple days to each activity or systematically add a certain percentage to the budget. The nature of the project relates to how large of a safety net to spread. A routine project should not need as much of a buffer as will a critical project in uncharted waters. Do you perform reserve analysis? If so, how do you choose how much time or funds to add?