Project contingency planning is among the least understood topics related to project management. This is probably due to the fact that contingency deals with the unknown. How do we plan for something that might happen but we don’t even know what that might be? And how much will it cost us if it does happen?
While risk management is a related area that deals with the unknown, at least in risk management we start by making a list of all the possible scenarios that can go wrong that we can think of. And if we can imagine a negative scenario, then we can estimate what it would cost if it manifested. On the other hand, contingency planning is to cover everything else that we haven’t thought of as a risk but that still might happen.
The June 2016 issue of PM Network magazine has an article about contingency planning and once again they reached out to project management practitioners for their input. I was quoted as saying “Unfortunately, project budget planning is too often tied to the financial constraints of the organization. Stakeholders, including project sponsors, want to cut corners by eliminating contingencies, especially because contingencies are not well-defined at the start of the project.” My quote is based on my own consulting experience, having learned that project budgets are almost always reduced to the bare essentials. No one wants to allocate budget for something unplanned that might happen, even if we know from historical experience that something unexpected almost always does happen.
Not understanding project contingencies is especially prevalent with less experienced project managers. This observation comes from my experience in mentoring junior project managers who often don’t think about what could potentially go wrong. They are not experienced enough to understand that the world is not perfect and they can’t control every possible aspect of the project, regardless of how determined they are to succeed. Or they may be just too insecure to admit that they are not in control and they fear that they will appear less competent if they mention unknowns.
In the real world, a project manager cannot control everything so that there is no risk and no uncertainty. In other words, it is not a project manager’s job to ensure that there is no need for a contingency. Rather, it is the project manager’s job to fully understand what is going on in their project and to anticipate trouble before it happens. When anything bad does happen, the project manager must react promptly with risk responses and contingency planning that is at their disposal to ensure that the project stays on track within the planned limits.