Q1

You have been appointed as the project manager for a complex construction project to build a new state-of-the-art research facility. The project is expected to last for two years and has a total budget of $75 million. The project sponsor is well aware of the uncertainties involved in such a large-scale project and wants you to establish appropriate reserves to handle any unforeseen events or risks that may arise during the project's execution.

During the initial planning phase, you identify several potential risks, including weather-related delays, material shortages, and design changes requested by stakeholders. Based on historical data and expert judgment, you estimate that the overall risk exposure for the project is approximately $8 million.

1. i, Differentiate between contingency reserve and management reserve in the context of this project.
2. ii, Will the $8Million be considered a contingency or management reserve? Give reasons

Q2.

i, How would you develop a cost baseline for the project in Q1? Identify the steps you would take and explain them.

ii, If at the end of the project, you spent an additional 40% of the reserve, what was the cost efficiency of the project?