Blessing Fadumila MNIQS CEC’s Post

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Cost Consultant | Estimator | Quantity surveyor | Project Coordinator

MANAGEMENT RESERVE AND CONTINGENCY RESERVE Management reserve and contingency reserve are both elements of project management that serve as buffers for unforeseen events or risks, but they are used for different purposes and are managed differently. Let take a look at: Management Reserve Management Reserve: Management reserve refers to a portion of the project budget or schedule that is set aside by senior management or project sponsors to address unknown unknowns or major changes in project scope. Management reserve is intended to cover risks that are beyond the scope of the project team's control or anticipation. It provides a safeguard against significant uncertainties that could impact project objectives, such as changes in regulatory requirements, market conditions, or strategic priorities. Management reserve is typically under the direct control of senior management or project sponsors, and its allocation requires formal approval. Project managers may have limited discretion over its use and may need to seek approval for releasing funds from the management reserve. Contingency Reserve: Contingency reserve, also known as contingency or buffer, refers to a portion of the project budget or schedule that is allocated to address known unknowns or identified risks. A contingency reserve is used to mitigate specific risks that have been identified and assessed during project planning. It provides flexibility for the project manager to respond to unforeseen events or deviations from the project plan without jeopardizing project objectives. A contingency reserve is typically managed by the project manager as part of the overall project budget or schedule. The allocation and utilization of contingency reserve are based on the project manager's discretion within defined limits and guidelines. DIFFERENCES BETWEEN CONTINGENCY AND MANAGEMENT RESERVE 1. Management reserve addresses unknown unknowns and major changes in project scope, while contingency reserve addresses known unknowns or identified risks. 2. Management reserve is controlled by senior management or project sponsors and requires formal approval for allocation, whereas contingency reserve is managed by the project manager within defined limits and guidelines. 3. Management reserve is broader in scope and may cover a wide range of potential risks or uncertainties, while contingency reserve is more specific and targeted towards mitigating identified risks. #constructionindustry #constructionmanagement #reserves

Dumisani Sibeko

Electrician Infrastructure Assessment

8mo

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