cost management - management reserve

Submitted by vijayavadrevu on Sat, 03/23/2013 - 11:46

 management reserves are normally defined asa percentage of estimated budget. As a project goes through its life cycle phases on a cost reimbursable contract, the project manager wants the dollar value of the management reserve to ------------------, whereas the customer wants the management reserve to ......................

 

Ans is

Remain the same; be returned to the customer

 

can some one explain the concept?

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sandeepdel

Sat, 03/23/2013 - 12:28

 The mgt reserve is for unknown unknowns means those risk which no body have thought of and manger most of time want to keep it intact I.e they want their reserve as last resort to save the project. Now based on the said philosophy when project will in the end PM will be left with mgt reserve and as a customer because he gave money for unknown unknowns and they did not occur so want that money back. So Pm philosophy to keep mgt remain unchanged and customer thinks when no one used the money so want back. Hope it helps.

vijayavadrevu

Sat, 03/23/2013 - 13:32

 Thank You so much !!!

bpatel

Sat, 03/23/2013 - 12:45

Where is this question from?

vijayavadrevu

Sat, 03/23/2013 - 13:34

From one of the question banks which my friend has shared, (very old one I suppose) and not from any of the simulators or mock tests

Regards

Vijaya

sspawar

Sat, 03/23/2013 - 16:50

 In addition of Mr Sandeep , I want to add few points:

Cost base line is the value of project (project cost), a project will be a successfull project if it will finish within this project cost, and CPI will not be less than 1, thus project will be under budget or on budget. Thus PM will gain the credit and will prove the right estimation too.

Management ( Customer/client/sponsor) , knows this fact that management reserve is not a part of project cost , it should be unaffected for an ideal project. 

vijayavadrevu

Sat, 03/23/2013 - 17:03

 Thank You Sir