by Humphreys & Associates | April 3, 2018 5:00 am
Management Reserve (MR) is developed and managed by the Program Manager / Project Manager. This discussion will provide guidance for establishing and using Management Reserve to effectively manage a project.
H&A description– The standard definition of management reserve is an amount of contract budget set aside for management control purposes (known unknowns) rather than designated for the accomplishment of one or more tasks. It is not part of the performance measurement baseline (PMB) but is included in the contract budget base.
DOE guidance – The ability to establish MR allows project management to react to unforeseen in‐scope situations that arise during the life of a project. It is budget for handling project risk and in‐scope unanticipated events. Management Reserve is not a source of funding for additional work scope or for the elimination of performance variances. It is an amount of the project budget set aside for management control purposes by the contractor. Management Reserve is the contractor’s budget and provides the project manager with a budget for unplanned activities within the current project scope. Because MR is budget that is not yet associated to work scope, it is not part of the PMB.
The contractor must include a clear definition of MR in the EVM SD. For clarity and consistency, the EVM SD must describe the process and list allowable conditions under which it may be approved and allocated to the control accounts managers. Management Reserve cannot be used to offset accumulated overruns or under runs. Authorized uses of it include:
The first step in the process the PM must accomplish is establishing the Management Reserve at the initiation of the Performance Measurement Baseline development. The project manager has authority and control of the development and use of the MR budget.
The next step for the PM is to track the MR budget. This is done by creating a Management Reserve Log. This can be a separate log or part of the Contract Budget Base log.
During the actual execution of the project the PM may experience various scenarios that will require the use of Management Reserve. The process to identify, evaluate and authorize MR transactions should include the following steps:
Management Reserve is a critical part of the PM’s toolkit. It allows the PM some flexibility in planning for Risks and Opportunities, and for required changes that are in scope to the contract but were not identified in the original baseline planning. The company’s EVM SD is the primary guide the PM should use in determining which MR requests are allowable and those that are not valid.
Some Data contained in this paper came from Humphreys & Associates and from DOE EVMS websites.
Source URL: https://blog.humphreys-assoc.com/program-manager-project-manager-use-of-management-reserve/
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