Looking back over the past 3 years, fewer than one-third of all respondents’ projects managed to come within 10 percent of the planned budget and just a quarter of construction projects came within 10 percent of their original deadlines.
These findings suggest that, while controls may bring many benefits, they have yet to be fully and effectively embedded. The results also raise questions on the skills of those working with the various controls, either within PMIS or otherwise.
Contingency planning typically involves downside risk estimates for budget and delivery times throughout the project life cycle. According to the senior executives participating in this year’s survey, a range of methods is used to calculate contingency levels. The two most popular approaches are: 1) a set percentage, and 2) quantitative risk analysis, with 30 percent respectively opting for these choices. The relative sophistication of the latter suggests that owners are trying to become more accurate in their forecasting.
Only half of the respondents state that their organizations use both a project level contingency and a management reserve. Management reserves recognize the potential for risks that are outside of the project team’s ability to control, which reflects a more realistic and pragmatic view.
In terms of managing contingencies, the single most common method (used by a third of respondents) is to allocate and, if necessary, reallocate contingency funds directly to control accounts based on ongoing project risk assessments. Thirty percent say that they choose to draw down from a single pool of contingency based upon project risks, which shows a more mature and sophisticated approach and a further 23 percent operate contingency as a single “balancing account” with transfers to and from other control accounts as needed.