Management reserve and the performance measurement baseline

Try 3 questions on this

Pick an answer to see why each option is right or wrong.

1. On a predictive project tracked with earned value, a site accident forces unplanned rework on in-scope deliverables. The control account has no budget for it. Which of the following should the project manager do?

   Right. In the game that’s Renown for your Business Environment building.

   Not that one: C is right. In the game your Business Environment building would lose a little Renown, and this question would come back later.

   Your answerA.Submit a scope change requestThe deliverables are already in scope. A scope change request is for new or reduced scope, not rework on agreed work.Your answerB.Record the overrun as cost varianceAn accident's in-scope rework is what management reserve is for. Allocating it brings the work into the baseline; reserve is only barred from offsetting variances that already exist.The answerC.Allocate management reserve to itGAO's Cost Estimating and Assessment Guide says management reserve covers uncertainties such as unanticipated effort from accidents, errors or technical redirection.Your answerD.Draw on the sponsor's contingency fundIn GAO's usage, contingency is held at or above the program office for problems outside the contractor's control, while management reserve covers in-scope effort such as accident rework.

   Show the full explanation and doc quotes

   When a portion is allocated to such an issue it becomes part of the performance measurement baseline, and it applies only to in-scope work.

   Written from www.gao.gov/assets/d20195G.pdf

2. Monthly cost reports on a predictive project show that most of the management reserve has already been allocated, although less than half of the work is complete. Which of the following should the project manager do?

   Right. In the game that’s Renown for your Business Environment building.

   Not that one: D is right. In the game your Business Environment building would lose a little Renown, and this question would come back later.

   Your answerA.Rebaseline the remaining workA new baseline neither explains the burn rate nor saves reserve for later; GAO's step is to tie reserve use back to the risks.Your answerB.Ask to raise the contract valueRaising the contract value to cover depleted reserve hides variances. GAO warns analysts to watch for exactly that request.Your answerC.Keep allocating reserve to problemsAllocating reserve to every problem is the pattern GAO's analysis is meant to prevent; at this rate nothing will be left for the harder work later.The answerD.Compare reserve use with identified risksGAO's Cost Estimating and Assessment Guide calls it alarming when management reserve is used faster than the program progresses, because reserve is needed later, especially for problems in testing and evaluation.

   Show the full explanation and doc quotes

   Comparing the risks from the cost uncertainty analysis with reserve allocation shows where risks are turning into issues and prevents allocating budget whenever a problem appears.

   Written from www.gao.gov/assets/d20195G.pdf

3. On a predictive project that uses earned value management, the change board has just approved adding a new work package. The next scheduled baseline replan is two months away. Which of the following should the project manager do?

   Right. In the game that’s Renown for your Business Environment building.

   Not that one: A is right. In the game your Business Environment building would lose a little Renown, and this question would come back later.

   The answerA.Add it to the baseline nowGAO's Cost Estimating and Assessment Guide says approved changes must be incorporated into the earned value system as soon as possible.Your answerB.Fund it from management reserveGAO says management reserve can be applied only to in-scope work. New approved scope belongs in the baseline itself.Your answerC.Add it at the scheduled replanBatching changes into a later replan sounds orderly, but GAO says delayed incorporation leaves the baseline outdated and variances unreal.Your answerD.Track it outside the baselineWork tracked outside the baseline means the baseline no longer reflects the program, and the earned value data loses its meaning.

   Show the full explanation and doc quotes

   If they are not incorporated quickly, the performance measurement baseline becomes outdated and the variances it produces no longer reflect reality.

   Written from www.gao.gov/assets/d20195G.pdf