Project Management

Management Reserve (MR)  [Suggest Change] |   22,326 page views |

Primary Functional Area : Business

Definition   [Suggest Change]

Management Reserve (MR) is the amount of the total budget withheld for management control purposes, rather than designated for the accomplishment of a specific task or set of tasks. It is held and applied through a disciplined process to any additional work that is to be accomplished within the authorized work scope of the contract or applied to accommodate rate changes for future work. It may not be used to offset or minimize existing cost variances. (Source: Earned Value Management Implementation Guide - October 2006)

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General Information/Narrative   [Suggest Change]

Management reserve is held for growth within the currently authorized work scope, for rate changes, and for other program unknowns. MR is not used to offset accumulated overruns or underruns and it is not a contingency budget than can be used for new work or eliminated from the contract price during subsequent negotiations. The management reserve budget is not included as part of the performance measurement baseline.

Management reserve is best explained by understanding its relationship with the total allocated budget. The total allocated budget, or TAB, is one of the most confusing concepts of earned value because its definition changes, as the contract evolves. In all cases, the TAB includes the budgets for all contractually authorized work. The TAB does not include profit or fee. Simply put the TAB represents the estimated budget for all work associated with a contract.

The contract price has two elements (see Figure 1). The first...