Protecting software development projects against underestimation

When competing for projects, project teams will often create aggressive schedules and budgets that leave no room for mistakes or setbacks. These plans are often so tight that the project teams significantly underestimate the effort they will need to perform to deliver the project as the client requires. This article examines an approach to developing project contingencies administered at the portfolio level, an approach that suggests a contingency should reflect the effort needed to recover a project from underestimation. In doing so, it defines the purpose of contingency funds and the problems teams face--and the solutions they typically select--when their projects slip behind schedule. It identifies the three behaviors affecting how teams use contingency funds; it lists a formula for understanding why project contingencies must equal the expected cost of recovering a project.
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