Management Reserve (MR) : Humphreys & Associates

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Management Reserve (MR)

Management Reserve (MR) is an amount of the contract budget set aside by the project manager at the beginning of a project. The sum of the Performance Measurement Baseline (PMB) and MR equals the Contract Budget Base (CBB). By definition, Management Reserve does not have a specific scope of work and therefore it is not part of the PMB. Management Reserve is established to provide budget for known-unknowns that are within the scope of the contract but out of scope to any control account.

The project manager has authority and control over the use of Management Reserve. The project manager will establish the MR based on examination of the contractual scope of work. Factors affecting MR establishment are high technical risk and opportunity areas, complex schedule problems, or an anticipated shortage in a critical resource area such as labor, material, or support services. Once anticipated problems and risks and opportunities have been identified, and management judgment included, the Management Reserve is established.

Management Reserve is decreased to provide budget to control accounts for unplanned tasks within the contract scope of work. Management Reserve is increased if work scope and its associated budget is removed from a control account. Management Reserve is not to be used to offset cost overruns, nor is it increased by transferring budgets from control accounts that are underrunning. Management Reserve cannot be a negative value.

Management Reserve transactions are typically documented in a Management Reserve Log (MRL) and summarized monthly to the Contract Budget Base Log (CBBL), or transactions may be documented directly in the CBB Log, in which case an MR Log will not be used. The amount of MR will be displayed each month on formats 1, 2, and 3 of the Contract Performance Report (CPR) or Integrated Program Management Report (IPMR). The Management Reserve transactions that have taken place each month are addressed in Format 5 of the CPR or IPRM to the customer.

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