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BUILDING IN A TIME CONTINGENCY 181

Quantifying Contingency

As part of the risk analysis process, we identify risks, the probability of the risk,
and the impact of the risk. As part of the risk mitigation plan, we identify actions
that can be taken to avoid or minimize risks (or the deleterious effects of risks).
We also identify alternatives and decision points (when to consider implementing
the alternatives).

In many cases, rather than allowing for each individual risk, we gather risks
into natural groups, for which we then provide for a collective contingency. These
contingencies may involve time, resources, money, and even the scope of work.
The amount of contingency will depend on the degree of risk and the penalties
for missing targets.

Here are a few examples.

Building In a Reasonable Time Contingency

Those of us who use critical path scheduling to calculate a project end date
may be lulled into thinking that the date that was generated by the computer
is a valid project end date. But you must realize that a CPM schedule would
normally represent the most likely duration of the project. That means, in
essence, that the calculated end date is at the mid-point of the range of dates
that could be realized. In this case, zero float (or zero slack) means a 50 per-
cent chance of meeting the schedule. Is that good enough? Well, that depends
on a couple of things.

The first one is: What is the penalty for missing that date? I can relate this to
my philosophy for driving my car to various appointments. For a person who
preaches the use of contingency, I am notorious for not allowing any contingency
in my planning to get places. My subconscious reasoning, I guess, is that there
usually are no deleterious consequences from my being a few minutes late to a
doctor’s appointment or a dinner engagement. In other words, there is an accept-
able risk. On the other hand, if I am driving to the train station or airport, I do in-
ject some contingency into my driving schedule. It is worth the time contingency
to avoid the risk of missing a flight.

The message, therefore, is to evaluate the potential consequences of a
schedule delay, and to factor in a contingency that is consistent with the degree
of risk. Certainly, we would take greater schedule precautions in the case of
a $10,000 per day penalty contract than we would in a contract without a
delay clause.

But getting back to the 50 percent issue. The project completion date, that is
supposedly a most likely calculation, is based on the workscope that has been