PMI CAPM (Certified Associate in Project Management) Examination Content OutlinePredictive, Plan-Based MethodologiesMedium
A project manager is developing the project management plan for a new product development project. The team has identified several high-priority risks that could significantly impact the project objectives. To address the uncertainty associated with these identified risks, the project manager should include a specific amount of budget and schedule in the cost and schedule baselines. What is this amount called?
- AContingency Reserve
- BCost Baseline
- CBudget at Completion (BAC)
- DManagement Reserve
Show answer & explanationAnswer & explanation
Correct answer: A. Contingency Reserve
Contingency reserves are budget and schedule amounts held to address identified risks (known-unknowns). They are part of the cost and schedule baselines. Management reserves, on the other hand, are for unknown-unknowns and are not part of the project's cost baseline.
Why the other options are wrong
- B. Cost Baseline is the approved budget for the project, which includes contingency reserves, but it's not the reserve itself.
- C. Budget at Completion (BAC) is the total planned budget for the project, not a specific reserve for risks.
- D. Management Reserve is for unknown-unknown risks and is not part of the project's cost baseline.
Contingency Reserve
Budget or schedule amounts added to the cost or schedule baseline to account for identified risks (known-unknowns).
- Part of the project's cost and schedule baselines.
- Used to mitigate the impact of specific, identified risks.
- Estimated using quantitative risk analysis methods.
Memory trick: Reserves: Contingency for Knowns, Management for Unknowns.