In project management, a contingency plan is a specified, executable strategy that should be used if a potential risk materializes. It essentially serves as a “Plan B” to be implemented when things don’t turn out as planned. Contingency planning is described by the Project Management Institute as “involv[ing] defining action steps to be taken if an identified risk event should occur.” “In project management, contingency plans are a part of risk management and should be included in the risk management plan.
Project Contingency Gameplay – Halo Fan Game
Types of project contingency
The project managers typically oversee three different kinds of project contingencies:
What is project contingency?
A project’s contingency plan is a backup strategy for events that do not turn out as expected. These plans are helpful to everyone when a previously identified risk materializes because they are made to include actionable solutions. Contingency plans, however, do not take into account unidentified or unknown risks because it is impossible to quantify them.
Plans for contingencies don’t work to lower a risk’s likelihood of happening or its severity. Instead, their primary responsibility is to identify as many potential risks as they can and to specify solutions to the issues in order to lessen the impact on the project or organization.
Why is it important to understand project contingency?
Most projects run into problems when they are put into practice because it is impossible to accurately predict all misfortunes, miscalculations, bad decisions, hidden costs, collaboration issues, and other types of unforeseen events in advance. Even though creating project contingency plans can be expensive, it is likely to turn out to be advantageous if things do not go as expected. Understanding project contingency is crucial for the following main reasons:
How to prepare a contingency plan
Consider these steps when preparing a contingency plan:
What is a project contingency?
In project management, a contingency plan is a specified, executable strategy that should be used if a potential risk materializes. It essentially serves as a “Plan B” to be implemented when things don’t turn out as planned.
How do you determine project contingency?
Providing a risk contingency for each line item and multiplying the probability percentage by your estimated cost impact is the simplest way to accomplish this. For instance, a risk contingency of $8,000 is produced by multiplying a risk probability of 20% by a cost impact of $40,000.
What is project contingency costs?
Most construction projects use a rate of 5%–10% from the total budget to determine the amount of contingency needed. Usually, that will cover any additional expenses that might arise. Nevertheless, depending on the size of the project, using a rate lower than that is frequently a bad idea.