JUNE 2016 PM NE T WORK 53
Make the Case
Setting a responsible contingency budget starts with an honest
conversation about how much the sponsor is prepared to hold in
reserve—and what will happen if the project encounters a major
risk with no safety net in place.
“You need to understand from the sponsor what amount
of contingency fund might even be available for the project,”
says Travis Scruggs, PMP, senior technical project manager,
Helix Education, Chicago, Illinois, USA.
Having an engaging, data-driven dialogue with the project
sponsor does more than just build the case for contingencies.
It can also help make the project team’s response to risks during
project execution faster and more effective. But getting sponsor
buy-in can be as much about persuasion and education as logistics.
“Break it down as a story, so it connects with the sponsor. Make sure
Assess the Situation
your presentation includes more graphs and pictures than blocks of text
or data,” Mr. Scruggs says. “And you need to be prepared with alternatives
regarding your contingencies and risk management strategies.”
For instance, maybe the project sponsor can’t green-light
a sizable contingency but is willing to approve scope reduc-
tion if certain risks are realized, Mr. Scruggs says.
Contingency budgets are built on a detailed understanding of the project’s risks—including the likelihood they will be realized and the cost of a
“Contingency planning and risk management go hand in hand,” says
Jihan Al-Sherif, PMP, transformation project manager, David Jones, Sydney,
To ensure that the contingency budget is built on a solid foundation,
calculate the cost of a risk response plan for high-impact risks or those that
are more likely to happen. At London, England-based Network Rail,
for instance, projects have a contingency budget that ranges from 20
percent to 80 percent above cost, depending on the scope and complexity of the project and the risks associated with it, says Matthew
Hannaway, PMI-RMP, PMP, head of project risk and value management, Network Rail,
When Ms. Al-Sherif recently calculated a contingency budget for a business process
management program she oversaw, she realized the organization didn’t typically do this
type of work—yet the program’s successful execution was an integral part of its strategy.
When the program began to suffer during the execution phase because of resource and
training issues, “the contingency budget saved the day,” she says. Those allocated funds
were used to cover the cost of additional resources and much-needed training. As a result,
the program finished on time, on budget and delivered its intended scope.
“Without the right contingency budget assigned and approved, the organization would
go hand in
—Jihan Al-Sherif, PMP,
David Jones, Sydney,
“Break it down as a
story, so it connects
with the sponsor.
Make sure your
more graphs and
pictures than blocks of
text or data.”
—Travis Scruggs, PMP,
Helix Education, Chicago,