Contingency Reserve

The term contingency reserve refers primarily to the amount of quantity of funds or other financial resources that is required to be allocated at and above the previously designated estimate amount to reduce the risk of overruns to an acceptable level for the financially responsible organization. However, contingency reserve need not refer exclusively to monetary terms. It can also refer to a specific quantity of time in man hours that must be allocated above and beyond the previously determined quantity of hours required to assure that any overtime or other unexpected hours of work required can be properly compensated for. Typically the contingency reserves, in terms of both finance and time, are determined at the outset of a project. However, as a project is ongoing, if it appears that the project will require additional funds or time allocation to complete, contingency reserves can be instituted or modified at any time to better prepare the organization for the possibility of their usage at some point in a projects life.