Management Reserve

In project management, contingency reserve is often interchanged with management reserve. While the former is defined as the planned amount of money that is needed to address a particular risk, the latter is defined as the planned amount of money (or time) that is added to an estimate to address any unforeseeable risks.

The management reserve is often withheld for management control purposes. The amount of money that is put under the management reserve is up to the project manager. Unfortunately, calculating the amount is purely guesswork depending on how risky the project is.

It is important to have an emergency buffer in project management and the management reserve provides that. Without it, project managers go back to the sponsor of the project, explain the situation and ask for more money and this will take a longer time before you can get the much-needed resources to fix the problem. However, if you do have the management reserve, you need to ask permission from the project management team before you dip into the reserves but the delivery takes lesser time than asking directly from the sponsor.

This term is defined in the 5th edition of the PMBOK.