Amacom - Modern Project Management (Ocr) - 2001 ! - (By Laxxuss)

What is called for in this case is the indirect

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Unformatted text preview: y be only a single contingency amount for the total project. On other projects there may be individual control packages that have contingency amounts calculated specifically for them. It often makes sense to have a work package directly under each control package for which a contingency budget is calculated specifically. We refer to such work packages as contingency packages because they contain the contingency budget for all the work packages under a particular control package. Figuring out a meaningful unit of measure for a contingency package is sometimes tricky. For example, suppose we have a large summary-level control package with a labor-hour budget of 100,000 man-hours and a 10% contingency budget. The unit of measure for this control package may be systems, and the quantity budget at this level of the WBS hierarchy may be 3. On average, it is going to take about 33,000 labor-hours per system, so the 10,000 man-hour contingency budget would account for only about 0.3 systems, which may make no sense. In fact, even with the contingency the plan is still to deliver only three systems. So in this case it does not make sense for the unit of measure for the contingency budget to be systems. Page 236 One possibility in this example would be to choose a unit of measure of man-hours for this contingency package. Then the quantity budget and the labor-hour budget would be the same. If this is done, however, it is probably a mistake to use the quantity method for statusing such a package, because, as the contingency man-hours are used up (drawn down), the quantity method would indicate that the percent complete was the number of contingency labor-hours used divided by the total number of contingency labor-hours for the package. What is called for in this case is the indirect statusing method. If the control package with which the contingency package is associated is 50% complete, even if the contingency labor-hours are 85% used up, the contingency package should only be reported as being 50% complete. We postpone further discussion of statusing contingency packages until the next section. By now the reader should have an intuitive understanding of measuring risk in terms of labor-hours or cost, and that we are referring to these risk amounts (labor- hours or dollars) as contingency. What remains to be explained is how these contingency budgets are to be allocated to the work packages associated with a control package. Since a particular contingency budget for a specific control package was generated at the control package level and not for the work packages associated with the control package, it is not immediately clear which work packages this contingency budget should be spent on. In fact, in the best of all situations, we would like to spend none of the contingency budget. The fact is that, since contingency was derived from our understanding of the probability associated with achieving a budget, there may be some (non-zero) probability that we will not use any of the contingency budget. There may also be some probability...
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