Contingency Reserve

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1.1. Project budget and types of reserves
This section will present the definition and the accuracy estimating the project budget, and will explain the content of the project budget which will describe in more details the role of the different types of reserves and how it is calculated or estimated to complete the full form of the project budget estimation.
1.1.1. Project budget
Project budget could be defined as the amount of funds the project owner is willing to pay for the total project activities cost, to complete a certain project in an economical way (Oberlender G. , 2000). While, the project manager is one of the most important participant to keep the project actual cost in line with the estimated project budget through managing and controlling the additional costs resulting from less accurate estimation and unforeseen events that may face the project during the total project life cycle (YANG & CHEN, …show more content…

Moreover, numerous tools to estimate this amount will be discussed in the following sections. However, by adding the amount of contingency reserve to the amount of project cost estimate, we get the control accounts.
On the other hand, management reserve is considered to be the amount of money allocated to cover the unknown-unknown risks that may face the project. Finally, the total project budget is the sum of the project activities cost estimate, contingency reserve estimate and management reserve estimate, which is illustrated in figure (2-1)
Moreover, (Touran, Ali; Zhang, Ye, 2011) agree that the risks that may face the project could be divided into two parts known-unknown risks, which are covered by contingency reserve amount, and unknown-unknown risks which are covered by management reserve

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