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Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
Calculating contingency for management reserve
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Calculating contingency for management reserve

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  • 1. Understanding riskcontingency and MR- how risk tools can helpVal JonasRisk Decisions Group11th April 2013
  • 2. © Risk Decisions, 2013Agenda How tools can help calculate: Cost contingency (MS Excel, @Risk & Predict!) Schedule contingency (MS Project, Primavera, Predict!) PPP rollup of contingency & Management Reserve The Contract Budget Baseline (Deltek Cobra) How tools can help manage contingency Cost benefit analysis Managing action draw down of MR budget Summary
  • 3. © Risk Decisions, 2013Distributed +Undistributed BudgetNegotiated Cost 610kEmergent risk budgetBaseline budgetProgramme MR (held for the project)Project MRProgramme budgetProject budgetKnown risk budgetThe total project budgetMR = Management Reserve
  • 4. © Risk Decisions, 2013Baseline budget – spreadsheet estimatesRange of results generally bell shapedwith some right hand skewMS Excel with @Risk add-in
  • 5. © Risk Decisions, 2013Baseline budget Generally calculated during bidding process Only re-calculated if project is re-baselined Contract established Responsibility lies with budget holder (Control AccountManager) Managed via variance analysis (Earned Value process)
  • 6. © Risk Decisions, 2013Distributed +Undistributed BudgetNegotiated Cost 610kEmergent risk budgetBaseline budgetProgramme MR (for the project)Project MRProgramme budgetProject budgetKnown risk budgetKnown risk budget
  • 7. © Risk Decisions, 2013Known risk budget – based on risk registerRisk register probability & impact(Predict! Risk Controller)Predict!RiskAnalyser Range of results generally skewed(long right hand tail).
  • 8. © Risk Decisions, 2013Known risk budget Project MR is residual risk Mitigation actions are included in baseline budget MR held at project level Authority to drawdown against known risks only Used for (additional) mitigation and recovery actions Re-assessed at regular intervals throughout project Tools manage permissions at PPP levels Audit trail in risk register, cost & schedule toolsets
  • 9. © Risk Decisions, 2013Schedule Reserve – uncertainty + risksCompletion dateBudget(£k)Known risksBaselineX012,00024,00036,00048,00060,00072,00084,000Emergent risksJun 2013 Jul 2013 Aug 2013 Sep 2013 Oct 2013 Nov 2013 Dec 2013 Jan 2014 Feb 2014 Mar 2014Scheduleuncertainty1Schedulereserve2Contractmilestonebuffer3
  • 10. © Risk Decisions, 2013Schedule MR – Schedule & risk registerClean logic linked schedule (MS Project / Primavera)1+ risks (from Predict! risk register)2
  • 11. © Risk Decisions, 2013Gantt and Tornado chartsDeterministic schedule Tornado chartRisked Gantt chart
  • 12. © Risk Decisions, 2013Schedule reserve (sMR) Review individual milestones as well as whole project Baseline (working) milestones should not include sMR Contractual milestones should include sMR buffer Schedule buffers should be managed by project Drawdown (schedule and budget) against known risks only Used for (additional) mitigation and recovery actions Managed via Risk Management process Audit trail in risk register
  • 13. © Risk Decisions, 2013Agenda How tools can help calculate: Cost contingency (MS Excel, @Risk & Predict!) Schedule contingency (MS Project, Primavera, Predict!) PPP rollup of contingency & Management Reserve The Contract Budget Baseline (Deltek Cobra) How tools can help manage contingency Cost benefit analysis Managing action draw down of MR budget Summary
  • 14. © Risk Decisions, 2013Programme MR 10kProgramme CBB 10kNegotiated Cost 610kEmergent risk budgetProject budgetNegotiated Cost 610kKnown risk budgetThe Contract Budget Baseline(including emergent risk)10kProject CBB 600kDistributed +Undistributed Budget572kProject MR 28kDeltekCobra600k
  • 15. © Risk Decisions, 2013Agenda How tools can help calculate: Cost contingency (MS Excel, @Risk & Predict!) Schedule contingency (MS Project, Primavera, Predict!) PPP rollup of contingency & Management Reserve The Contract Budget Baseline (Deltek Cobra) How tools can help manage contingency Cost benefit analysis Managing action draw down of MR budget Summary
  • 16. © Risk Decisions, 2013The benefit of response actions
  • 17. © Risk Decisions, 2013Action Transfer – into PMBApprove an action tomitigate a threat,exploit an opportunityor recover from realisedriskProbability% Weeks Cost (k) % Weeks Cost (k)Redesign required to meet building regs 10% 10 4 No 10% 10 4Planning permission delays 20% 16 15 Yes 20% 16 2Contractor goes bankrupt 35% 4 10 No 5% 4 3EU competitive tender required 0% 12 2 No 0% 12 2Groundworks problems 20% 6 20 No 20% 6 2Shared services require re-routing 40% 4 5 No 40% 4 5Retaining wall needs rebuilding 5% 6 15 No 5% 6 15Steel shortage 50% 20 5 No 50% 20 5Impact MitigationApprovedPost mitigationAction: PR campaign – 2kTransfer workand budgetinto the PMB
  • 18. © Risk Decisions, 2013Project 1MR 28kBudget 600kDB 572kCost MR for known risksAction draw down (for known risk)Mitigation actiontransferred fromPredict! Risk Controllerto CobraProject 1MR 26kBudget 600kDB 574kCost MR for known risks
  • 19. © Risk Decisions, 2013Audit trail for MRMR baseline setin CobraMitigation action drawdown from MR todistributed budget
  • 20. © Risk Decisions, 2013Dashboards at programme level
  • 21. © Risk Decisions, 2013Agenda How tools can help calculate: Cost contingency (MS Excel, @Risk & Predict!) Schedule contingency (MS Project, Primavera, Predict!) PPP rollup of contingency & Management Reserve The Contract Budget Baseline (Deltek Cobra) How tools can help manage contingency Cost benefit analysis Managing action draw down of MR budget Summary
  • 22. © Risk Decisions, 2013@Risk (for MS Excel) Spreadsheet addin Apply uncertainty to existing spreadsheets Use on risk register data exported to MS Excel Mostly used for cost risk analysis Familiarity of MS Excel is an advantage
  • 23. © Risk Decisions, 2013Predict! (Risk Controller and Analyser) Enterprise risk management Multi project, programme, portfolio (PPP) Integrated toolset Risk, issue, opportunity and uncertainty management Cost & Schedule risk analysis for uncertainty & risk MS Project & Primavera interface Audit trail Mitigation/recovery action ownership, approval & drawdown
  • 24. © Risk Decisions, 2013Deltek Cobra Cost management tool Earned Value presents schedule and cost progress as ameasure of cost WBS (imported) from scheduling tool basis for cost control Analyse budgets, actuals and forecasts Time phased, resourced Report against baseline, forecast final project costs Multi project view
  • 25. © Risk Decisions, 2013QuestionsPredict! Risk Controller/Analyser: www.riskdecisions.com@Risk: www.palisade.comCobra: www.deltek.comPrimavera: www.oracle.comval.jonas@riskdecisions.com +44(0)7831 881297Contact details:
  • 26. © Risk Decisions, 2013Interfacing Risk & Earned Value ManagementISBN- 10: 1-903494-24-9ISBN- 13: 978-1-903494-24-0www.apm.org.uk/interfacingRiskandEarnedValueManagement.asp

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