International Project Management Association (IPMA) Practice Exam

How should contingency allowances be managed?

1. Only for cost

2. Only for schedule

3. Made for both cost and schedule

4. Large enough to guarantee all project objectives are met

The correct answer is: Made for both cost and schedule

Contingency allowances should be made for both cost and schedule because projects often face uncertainties and risks that can impact both aspects. By allocating contingency measures for costs, project managers can address unexpected expenses that may arise due to various factors such as price increases or unforeseen challenges. Similarly, having contingency plans for the schedule allows for flexibility in managing time-related risks, such as delays caused by resource unavailability or changes in project scope. Effective project management requires a balanced approach where risks are anticipated and resources are set aside to address potential issues. This dual focus helps ensure that the project remains on track both financially and temporally, enhancing the likelihood of successfully meeting project objectives. In contrast, options that suggest contingency allowances should be made solely for either cost or schedule overlook the interconnected nature of these factors. Additionally, the notion of having a contingency large enough to guarantee all project objectives are met could lead to overestimation and inefficient resource allocation, as it does not account for intelligent risk management strategies that optimize both time and budget without excess cushioning. This makes the approach of providing for both cost and schedule the most effective strategy in project management.