During the planning phase of a software-upgrade project, the project team completes a qualitative risk analysis and decides to add a contingency reserve to the budget. According to PMI-aligned project management practices, what is the primary purpose of including a contingency reserve in the cost baseline?
To compensate for inaccurate project estimates
To account for known risks that may impact the project
To cover the costs of unexpected scope changes
To fund opportunities that could benefit the project
A contingency reserve is an amount of time or money built into the project's cost or schedule baseline to address identified, accepted risks-often called "known unknowns." It is calculated during risk planning and controlled by the project manager. Management reserves, in contrast, are held outside the baseline for unforeseen work (unknown-unknowns) within the approved scope and are usually released by senior management.
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