Today, I thought I’d write about contingency as this came up in a project that I was reviewing.
Everyone knows that projects can be risky, and usually we add varying degrees of contingency, from 5-25% depending upon the projects complexity.
This contingency can either be in the shape of budget or it could be in the time, i.e. we plan to finish 2 weeks ahead of the due date to give us some contingency.
Whilst nearly every project manager adds contingency, I am not convinced that everyone knows how to use contingency, or how best to manage it.
Having contingency available, doesn’t always mean we have options available when we need them.
For example, on a $10m project if we have 10% budget contingency, i.e. $1m, but no time contingency and we find ourselves 3 weeks behind schedule with only 1 week remaining, its unlikely that we will be able to buy three weeks worth of time.
We may be able to by 3 weeks worth of effort, but it might not be possible to consume within the one week remaining. Which means that we are actually out of contingency.
Also, with ‘time contingency’ this too can be a problem. I once had a project manager who included weekend working in his 12 month project as his contingency. Nothing wrong with this.
However, when his project hit problems during the last month, his contingency which had been 104 days, i.e. 2 days per weekend throughout the project, this was now only the 8 remaining weekend days in his final month.
His contingency had been eaten up at a rate of 8 days per month, and having not been utilized, had provided no added benefit.
So we need to understand what contingency we have at the start, what we have utilized or lost during the course of the project, and what the remaining contingency can actually buy us, during the latter states of the project.
Often if my contingency is weekend working, I will work the project at least one day per weekend during the first month in order for us to get ahead of the game. If we can do 5 extra days during the first 5 weeks, then we may be able to get 5 days ahead of schedule, which we can use as contingency later on. As each week we lose 2 days of contingency throughout the project.
People often state that projects get late one day at a time, but this is not always true.
In most projects which I have seen become late, it wasn’t due to poor execution, it was due to poor planning or underestimation of what was fully needed to get the job done.
In these circumstances, projects can go from being believed to be on schedule to over a month late in the course of a day, just because we now know that one of the tasks on the critical path is going to take 5 weeks and not the 5 days we planned.
Now within the space of a day we have a 4 week delay to contend with.
This is why planning is so important, and in my experience it’s a skill that is often over looked, or under valued. A great plan is a great tool and will increase the probability of success of the project. A great plan also includes contingency, both budget and time, which is clearly understandable in order that it can be utilized.
We also need to understand where we are at any time during the project, so that we know whether or not we need to use our contingency.
When leading projects I like to use Earned Value Analysis, in order to have a clear picture of where we are on a project at any given stage.
It’s a simple tool, which is not used as often as it should be. Earned Value Analysis allows us to measure our project in terms of deliverables delivered, versus the budget and time planned to deliver those items. Which then acts as an early indicator for whether we are behind schedule in terms of budget and time, compared to what has been achieved.
Another good tip is to get ahead of schedule as early as possible and try and stay ahead of schedule.
There has never been a project without any issues and we need to be able to give ourselves time and budget to be able to deal with the issues when they arise, which is often the last days before go-live.
It’s like a boxing match, get ahead on points early, don’t rely on a knockout in the last round to win. A final round knockout is possible, but it’s also unlikely to happen.
My top tips for running projects:
- Create a solid plan including contingency;
- Understand your contingency;
- Use earned value analysis to understand where you are;
- Get ahead of schedule early, and stay ahead;
- Cruise over the finishing line.
As the saying goes, “Hope for the best, plan for the worst”.