Contingency planning in projects has been historically done poorly in terms of either the amount of contingency (whether that be time or money or both) needed for a project and/or managing the use (or draw down) of that contingency.

Working in projects across a broad spectrum of industries and varying levels of complexity, there are many different approaches to contingency build up; from a flat rate of 10% approach to a professionally facilitated quantitative risk assessment (QRA) workshop with cost and schedule ranging completed. Obviously, the latter is the way to go.  But why is it so important?

The answer to that question is both simple and complex.  Meaning the reason is simple but the data behind it can be lengthy and complex, yet completely necessary.  The reason risk-based contingency is so important is the result gives greater predictability and transparency for the project.  Let’s be honest, any data in relation to time and cost given to a project owner is going to be taken as gospel, so the more science behind that data the more accurate that data will be.

The benefit of risk-based approach, conducted in an open and honest way, is it involves the entire project team and stakeholders.  Often a QRA workshop fleshes out gaps in scope development that either adds time and cost risk and/or highlights the need to focus or accelerate effort towards that development.  This is particularly evident when a workshop has a good facilitator with that industry experience that can ascertain the difference between allowing the tangential conversation to continue or pull the group back into line and park the conversation for another time.

The inputs for a good QRA are a detailed deterministic schedule and bottom up cost estimate (aligned to the schedule) so the workshop can be armed with critical and near critical activities.  This will enable the team to assess both overarching project risks (i.e. delay in sanction funding) and any specific risks that apply to the activities or moments in the schedule (i.e. weather effects during civil scope).

Regardless of the approach, any form of risk assessment applied to contingency will yield a more logical and predicable outcome and with the right stakeholders involved the greater chance of achieving the desired result.

Author:

Chad Trethowan