Contingency Plan vs Fallback Plan

July 26, 2020
Fahad Usmani
contingency plan vs fallback plan

This is one of those concepts that makes professionals scratch their heads. I was a victim of it myself. During my initial days of PMP exam preparation, I had difficulty understanding the difference between the contingency plan and the fallback plan.

I used to think that the contingency plan was used to manage identified risks and the fallback plan was for unidentified risks. This was wrong. Contingency and fallback plans help manage identified risks.

However, since both plans are used to manage risks, you may wonder which you should follow if any identified risk occurs as both deal with identified risks?

Since I have passed the PMP and PMI-RMP exams and understand these concepts well, I am writing this blog post and hope after reading it you will be able to differentiate the contingency and fallback plan.

Contingency Plan

Merriam-Webster defines the term “contingency” as “an event that may but is not certain to occur.”

A contingency is an event that may or may not occur. Therefore, we can say that the contingency plan deals with events that may or may not occur.

A contingency plan is a part of the project management plan; it describes every action that you will take if any identified risk is occurs.

Let us look at a real-world example of a contingency plan.

A Real-World Example

You are working on a construction project, and there is a risk that rain may fall during execution, which will damage any consumables lying out in the open.

Therefore, you make a plan that says, “If there is an indication of rainfall, all consumables will be covered with a plastic sheet.” You further add that after the rain stops, you will bring a fan/vacuum pump to clean and dry the wet consumables.

This is a contingency plan for this risk event.

You can find many definitions of a contingency plan on the internet which may appear different to you, but they may be individually correct.

Below are two such different explanations of the contingency plan.

  • Contingency plans are the plans that describe the specific actions that will be taken if an opportunity or a threat occurs.
  • A contingency response strategy will be executed if there is a sufficient warning sign (risk trigger).

If you examine these definitions, you will find that they are not different, just phrased differently.

Fallback Plan

The fallback plan is a part of the project management plan and defines under which circumstances action has to be taken.

A fallback plan is implemented when the contingency plan fails or is not fully effective. It is a backup for the contingency plan. You can say that the fallback plan is generally made for residual risks.

A Real-World Example

Let’s reconsider the example given above.

Suppose the rain continued to fall for a very long time, longer than expected, which causes damage to the consumables.

In this case, you will implement your fallback plan. It says that if the rain continues to fall for a very long time, causing consumables to be damaged and the contingency plan fails, you will reorder consumables from a pre-identified supplier.

This is an example of a fallback plan.

Before I go any further, let me share another example from my own experience.

I am using a third-party backup service to save data for my blog. I can use this backup in case my site crashes and my hosting provider does not have any backup.

This is my contingency plan.

Now, what would happen if my site got hacked, and at the same time my third party backup service also went out of business? How would I restore my blog?

This is where my fallback plan comes into play. To save myself from such disaster, I always keep an updated copy of my blog on my computer and Google Drive.

Now, if my blog is hacked and even the third party service fails, I can restore my blog from my backup stored on my computer or online storage.

The Difference Between the Contingency Plan and Fallback Plan

There is no difference between the contingency plan and fallback plan; they complement each other. The fallback plan only comes into use when the contingency plan fails.

Similarities Between the Contingency Plan and Fallback Plan

The similarities between these two plans are as follows:

  • Both plans are known as risk responses.
  • Both plans are used to manage the identified risks.
  • Both plans utilize the contingency reserve for implementation.

Summary

The contingency and fallback plans are the backbone of your risk management plan that helps you manage identified risks. You will implement the contingency plan if any identified risk occurs, and when the contingency plan fails or seem ineffective, you will implement the fallback plan.

You will use the contingency reserve to apply the contingency or fallback plan, not the management reserve, because the contingency reserve is used for identified risks. The management reserve is used to manage unidentified risks.

I hope that now you understand these terms. However, if you still have some trouble, leave a comment below. I am ready to discuss.

The contingency plan and fallback plan are very important from a PMP and PMI-RMP exam point of view, so be sure to understand this topic well.

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Speak Your Mind

  • Hi Fahad,
    Many thanks for the article. I came to it by trying to figure out, where an issue response plan fits in or is it related to the contingency plan or the fall-back plan. Any thoughts on that?

  • i love you man. your explanation was crystal clear and so useful .
    i appreciate you because you know what we need to know.
    thanks a lot

  • Thanks for the clear explanation. So the contingency reserve for both plans add up ? Now let’s say, management imposes to crash the schedule and I am over budget. Suggested is to reestimate risk and decrease cost associated to it to make some budget available. So I change the contingency plans or both (and get back the amount associatd with it / them) ?

    • Hello Daniel,

      1) Yes.

      2) I did not understand what you meant here. If you are over budget, crashing will increase the cost.

  • do need to issue a change request for the implementation of a contingency plan and the use of contingency reserves? The contingency plan (as a reactive response) is not in the project schedule, the schedule reserve will be used from the project buffer…but again, do I need to issue a change request to show that an unplanned activity is represented in the schedule and justify the reduction of the buffer?

    thanks

  • I am preparing for PMI-RMP and I have a doubt, hope someone can help.

    For an actively accepted risk, I can plan a contingency response, set aside contingency reserves or both.

    My question is, the contingency plan (in case it is a set of activities, such as…if it rains, spend 2 days drying the floor) is originally included in the network diagram?…

    if the answer is yes, if it doesn’t rain, do I need to make a change request to adjust the plan and remove the activities?

    and vice versa, if the answer is no, and it does indeed rain…after the plan is implemented (money reserves are there and the risk was identified and assigned to a risk owner), do I need to issue a formal change request to reflect the event in the plan and adjust the dates accordingly?

    Thank you for the help.

    • A risk may or may not happen. It does not change any baseline as it is identified and factored in the planning. Of course unless the impact is too high and you ran out of your reserves.

      • PMBOK 5th Edition page 353, at epigraph 11.6.3.2 it is indicated that implementing contingency plans sometimes result in a change request. What is “sometimes” referring to here?

        thanks a lot

  • thank you this post, I real did not understood the topics discussed above the contingency and fall back plan. I have been assigned to come up with one, your assistance is greatly appreciated. how can I draw for presentation to management of this type

  • wow very interesting place to learn, I have learnt a lot here.
    Please throw more light on;

    ACCEPT, CHANGE REQUEST, WORKAROUND, RESIDUAL RISK and also how to response to RESIDUAL AND SYSTEMATIC RISK.

  • Thanks for your explanation, according to your definition of fallback plan, could you please answer this question?
    —–
    While completing your risk management plan you also decide to
    create a fallback plan. What is the main reason for creating a fallback plan?
    A: To deal with known risks with a large uncertainty about the probability of occurrence.
    B: Unknown risks that cannot be managed proactively.
    C: Unknown risks that have been identified in the risk management plan.
    D: Known risks that if they occur can have a larger-than anticipated impact on your project.

      • Correct, I agree with you. Based on the above explanation the correct answer should be “D”.
        But it is said in the answers that:
        The correct answer is B.
        A: Risk fallback, or contingency, plans deal with all unknown
        risks, no matter if they are large or small.
        B: Unknown risks are risks that cannot be managed proactively,
        and fallback, or contingency, plans are for unknown risks.
        C: Risk fallback, or contingency, plans deal with risks that
        haven’t been identified in the risk management plan.
        D: Risk fallback, or contingency, plans deal with unknown risks,
        not known risks.

  • Useful piece . I loved the points – Does someone know where my company would be able to grab a sample PH RKS Form 5 document to type on ?

  • Hello Fahad

    I have a question. Is there such a thing as schedule reserve? Rita book describes it in the process ‘Activity Duration Estimate’. But I haven’t seen any references to that term in pmbok or elsewhere. Please help.

  • a project manager discover that a project problem has occurred.the problem was never discussed during risk planning activities or added to the risk register and it will now cost the project money .what will be an appropriate response for this situation?

  • I really enjoy reading many valuable articles on this blog and want to express many thanks to Mr. Fahad Usmani and many visitors who left their opinions. Today I read many comments made here regarding contingency plans and risk responses and they are likely regarded to be same according to my understanding upon reading.

    But in my experience and understanding of concepts in PMBOK, these two concepts might be different for their uses. A simple example might be introduced as follow:

    A project manager decides subcontracting for a portion of his construction project as a strategy of risk transfer (risk response) at his late planning session due to lack of skillful labors or expertise in his organizations. The subcontracting work can be allotted to the WBS and the budget and duration of those works can be incorporated into original plan accordingly without adding contingency reserve at this point.
    He might prepare contingency plan for secondary risk such as bankruptcy of sub-contractor etc. and fallback plan for ineffectiveness of contingency plan for the secondary risk for subcontracting work. In this case of contingency plan or fallback plan for secondary risk might result in updating contingency reserve or other related plans after pre defined secondary risk occur.

    Conclusion : In my opinion, risk responses might encompass contingency plan and fallback plan and not necessarily the same because budgets and durations of risk responses can be inclusive in the cost and duration estimates rather than in contingency reserve.

    The other thing I want to post my opinion is regarding workarounds, ad hoc responses, for unidentified or passively accepted risks. Even though PMBOK guide clearly states that contingency reserves are used for identified or actively accepted risks, in my opinion, if any unidentified or passively accepted risk occurs during execution of the project work, project manager should decide whether or not he uses contingency reserve upon consultation of clauses of the contract, sponsoring entity (client) and his senior managers. In case of use of contingency reserve for the workarounds, contingency reserve might be updated to accommodate the event later. It is practically not recommendable to use management reserve if the contract allows the change order or variation order by client, if the senior management agrees to use contingency reserve for workarounds and allows to update reserve and plans accordingly. In some cases management reserves might be used though, upon obtaining the approval from management in case that contract, insurance or other relevant mitigations cannot be practically, contractually and legally applied. So it is my conclusion that it is hard to consider workarounds should use management reserve due to various reasons, not only example introduced above. Management reserve can’t be used for emergency case but remaining contingency reserve can practically used in any emergency cases followed by proper procedures dealing with the situation because all identified risks might not occur together at the same time. Thank you for reading my post.

    • Hello Park,

      Regarding the reserve used for workarounds, practically you may be right however for the PMP exam you must follow the PMBOK Guide.

  • Hi Fahad

    Thanks for the explanation. However one question I want to ask. If contingency reserves fund the contingency plans then what funds the fallback plans? Do we have to keep additional reserves under the title of ” fallback reserves”. Kindly explain

  • in PMP exam
    they asked many questions made me crazy
    for example said one situation and asked me use contingency reserve if available or use management reserve or change request!!
    itis confuse for me how come ??
    how can i knew they already identified in risk register or not and also how can i choose between change request or management reserve

    please help me

    • Hello Mohammed,

      It would be difficult for me to comment on any question without seeing it.

      Also I suggest you not posting PMP exam questions on any forum or blog as it is illegal.

  • I’m not sure about the PMBOK terminology, but this is my take on risk response planning, from a logical perspective.

    Once you have identified all of the risks you (and your team) can think of:

    1. If you can reconfigure the project tasks in such a way to eliminate the risk by achieving the task objective in a different way, without negatively impacting schedule, budget, scope, or quality, you can make that change and AVOID the risk.

    2. If you can outsource the risky task to another organization, shifting responsibility for the risk to them, you can TRANSFER the risk.

    3. If you can augment your project plan in such a way to lessen either the probability or impact of the risk to a more acceptable level, then you can MITIGATE the risk. In this case, you are developing and implementing a MITIGATION PLAN, which becomes part of the baseline project, and for which you are proactively accepting the associated costs and budget impacts into the project. You are committing to paying for this.

    4. If the proactive changes are not feasible (cost or schedule impact is too high to accept as is), you can develop a CONTINGENCY PLAN which will be implemented only if the trigger event occurs. This contingency plan becomes part of the approved project baseline, and associated budget is placed in the CONTINGENCY RESERVE. You ACCEPT the risk, but you may not have to pay for it if the trigger event never occurs. You might also create contingency plans for secondary or residual risks which could occur in the event of failure of the primary contingency plans, and allocate additional budget to the contingency reserve in case their trigger events also occur. These secondary contingency plans could be thought of as FALLBACK PLANS.

    Your approved project baseline allows for all of the above, and anything you do up to here generally would not require a scope change or additional approval. This covers all of the KNOWN-KNOWNS and the KNOWN-UNKNOWNS.

    Now if something else occurs that you didn’t anticipate, it can be placed in one of the remaining two categories:

    1. An UNKNOWN-KNOWN is something that you should have been able to identify WOULD occur in your project, but somehow you did not include this in your plan. This would generally be considered a planning error, since a skilled project manager would have realized that it must be included in the project plan.

    2. An UNKNOWN-UNKNOWN is something that could occur during the project execution, but that you had no reasonable expectation to identify as a risk. If it occurs, it would be difficult to place blame on the project plan, and instead most would consider this an unfortunate unforeseen circumstance.

    To limit the impact on the project, you have to be REACTIVE and implement a WORKAROUND, requesting approval for a scope change that would then be drawn from the MANAGEMENT RESERVE. You might also use the management reserve to react to low-risk events that had been previously identified but intentionally kept on the watch list.

    As I said, I’m not sure how well this matches up with PMBOK-speak, but I find it to be a very logical framework for dealing with real project management situations.

    • Known-Unknown are identified risk for which you have to develop the contingency plan.

      The Unknown- Known, and Unknown-Unknown shall be managed through the workaround.

  • Hi Fahad,
    You mentioed above that :

    In project management, a contingency plan is a part of the project management plan and it describes every action that you will take if the risk is about to happen or has happened.

    My question please : is a contingency plan is a part of the project management plan ????
    Thanks,
    Imad

  • Hello,

    PMBOK says contingency plan and fallback plan are same

    11.5.2.3 contingent response Strategies
    Some responses are designed for use only if certain events occur. For some risks, it is appropriate for the project team to make a response plan that will only be executed under certain predefined conditions, if it is believed that there will be sufficient warning to implement the plan. Events that trigger the contingency response, such as missing intermediate milestones or gaining higher priority with a supplier, should be defined and tracked. Risk responses identified using this technique are often called contingency plans or fallback plans and include identified triggering events that set the plans in effect.

    • Fallback plan is developed for residual risks.

      The PMBOK Guide, fifth edition: 11.5.2

      A fallback can developed for implementation if the selected strategy turns out not to be fully effective or if an accepted risk occurs.

  • Do i need to issue a change request to utilise Contingency reseres?

    Do i need to issue a change request after utilising the contingency reserves to reflect the update to the cost baseline?

    Do i need to issue a change request to implement contingency plan?

  • Hi Fahad,
    You do the 3 point estimate (for Time and Cost) based on risk available in project charter and doing so you may uncover some additional risks.
    These risk along with the ones identified during project initiation are dealt with risk management.
    During risk management you prepare risk response but, some residual risk remains even after risk response planning.
    Now my question is, we keep contingency reserve to “cover cost for risk response that we created” or for the “residual risk remaining that remains after risk response planning” or for both.

    Regards,
    Shoeb.

    • You will analyse the residual risk. If it requires further planning, you will go for it, other wise just keep in watch list for future monitoring.

  • There are some low priority risks which are pushed into risk register as watchlist. when these risks occur what reserve will be used ? contingency or management reserve?

    • As per the PMBOK 5th edition page: 332,

      “Threats found in low-risk zone may not require proactive management action beyond being placed in the risk register as a part of watch list or adding a contingency reserve”.

      In your risk management/response plan, you have to decide that how you are going to manage the low priority risks. If you don’t keep contingency reserve, you will have to use the management reserve.

  • But I dont agree with you. We are reading in the PMBOK about Accept strategy: “This strategy can be either passive or active. Passive acceptance requires no action except to document the strategy, leaving the project team to deal with the risks as they occur. The most common active acceptance strategy is to establish a contingency reserve, including amounts of time, money, or resources to handle the risks.”

    So, Please put “chemical” in the situation of question in the place of “resource” in the above paragraph. The project manager buys 15% extra resource to handle the risk. He wants to have it as a reserve and IF some chemical were lost this 15? will be used. It is a proactive acceptance.
    In this meaning that you said all strategies except passive accept will be “mitigate” because they are decreasing potential negative impact or probability of risk.
    do you agree?

    • In accept strategy (active) you don’t do anything to reduce the probability of risks. You don’t take any action unless the risk occurs, though you assign a contingency resource for it.

      You deal with it if it occurs.

      While in mitigation, you try to reduce the probability of happening of risks.

  • I think so, so when we use two terms of “known” or “Unknown” together, the second one means “risk”. So unknown-unknown= unknown risk and known-unknown=known risk.

    I am in doubt about dept meaning of accept strategy. I feel some books don’t agree with me!
    For example what do you think about this?

    ” Your team has identified a risk with some of the chemicals you are using on your highway construction project. It is really difficult to mix them just right and, based on past projects, you’ve figured out that there’s a high probability that about 14% of the chemical supply will be lost in mixing problems. You decide to buy an extra 15% of the chemicals up front so that you will be prepared for those losses and your project won’t be delayed. Which response strategy are you using?
    1-Avoid
    2-Accept
    3-Mitigate
    4-Transfer
    “( Head-First_PMP.2009)

    • You are right that second terms mean the risk.

      Now come to your question:

      In your plan since you are acknowledging the risk, and making the plan to buy an extra 15% of chemical to mitigate the risk, hence it is neither a Avoid strategy or a Transfer Strategy.

      It can not be an Accept strategy because you have made a plan to deal it.

      So as per me the best answer would be ‘Mitigate’.

  • 1- “The most common active acceptance strategy is to establish a contingency reserve, including amounts of time, money, or resources to handle the risks.”PMBOK
    So can we say when PM is setting aside some money , time or resources as contingency reserve he/she is using Accept strategy?

    2-I saw in the “Deep Dive into Project Risk Management” _ an e-book on PMI webpage_ : “There can be two kinds of reserves for time and costs: contingency reserves and management reserves. Contingency reserves are kept for the unknown and are a perfect fit for risks.”
    Is the second sentence wrong?

    • Both statements are correct.

      Contingency reserve is used of known risks (known-unknown), and management reserve is used for unknown risks (unknown-unknown).

      Accept is a risk response strategy which you used for known risks.

  • Please refer to PMBOK 4 page 275 and 305,
    Known risks are those risks which have been identified and analysed and making it possible to plan response for those risks (Question what is that response called?)
    Specific unknown risks can not be managed proactively and hence the project team should create a “contingency plan”.
    11.5.2.3 Gives some what more information but still rferes to “some risks”. (PMBOK 5 is little more clear but still).
    My understanding is contingency reserves (cost/time) are provided to meet known unknown risks. Contingency Plans are executed using those contingency reserves to tackle known unknown risks They become known when they occur. Question> does it refer to the “Specific Unknown risks” mentioned at item 11.5.2
    Fallback is back up plan for Contingency plan but it is a well planned activity not a an adhoc plan
    Workaround is an ad hoc response when unknown unknown occurs and I suppose Management reserves should be used to cater to them.
    Is my understanding correct?

    • As per my understanding, answers to your questions are as follows:

      “Question what is that response called?”

      You may call them contingency response.

      “does it refer to the “Specific Unknown risks” mentioned at item 11.5.2”

      Specific unknown, it mean you are talking about known unknown.

      For the rest, you are right and management reserve should be used for workaround.

  • 1.Project risk has its origins in the uncertainty present in all projects.

    2.Known risks are those that have been identified and analyzed, making it possible to plan responses for those risks.

    3.Specific unknown risks cannot be managed proactively, which suggests that the project team should create a contingency plan.

    4. A project risk that has occurred can also be considered an issue

    Dear Fahad,

    The above given are the four sentences of the last paragraph of page 275 PMBOK. I have a great confusion on the sentence #3. Does it state that coningency plan for unknown risk?

    Please clarify

    • As per my understanding, these are the risks for which it is difficult to draw a contingency plan. In other words you can say that there is very little or no information available about them.

    • If I may add my two cents to the discussion, contingency reserve is ‘money’ while contingency plan is, well, a plan. Contingency reserve is the amount calculated, typically using a Decision Tree or EMV calculations. As a part of estimating costs, we estimate all the activities and add up their individual costs. In parallel, we also calculate the amount we will need to cover all the identified risks, in case they occur. This amount is the contingency amount, which is at the PM’s discretion. The activities’ total cost and the contingency amount is added up and forms the project’s cost baseline.

      The contingency plan is simply the plan that will be followed if and when an identified risk occurs. It is the series of steps that need to be taken and is documented in the Risk Management Plan. To sum up, if and when an identified risk occurs:-

      #1 We need to follow the steps as defined in the risk’s contingency plan
      #2 We need to use the contingency reserve to tackle this risk monetarily

      • Contigency Reserve can be any resources that are kept aside for responding to Identified Risks and when the risk response is triggered. It can be utilized in the form of Time, Money, Human and non human resources as well as Scope.

        We tend to imagine that Money is the only element of the reserves, and most times that is logical but not the entire element of the list.

        Scope reduction is not a viable solutions in many cases, but when everything is tight (Time, Money, Resources are down to 0 and management reserves cant be touched), I have seen situations where compromising on Scope reduction of course via change request is the only possibility left because compromising on quality is most times un acceptable. This is why I have included scope in the list. Thanks.

        Prashant-

        • You are right Prashant, a reserve is reserve, it might be time, cost, material or anything else.

          Regarding Scope Reserve, can you explain it a bit more?

          • First of all my apologies for late response.

            There is no such thing that I am aware of as “Scope reserve”, although Scope is a dimension (much like Cost, Schedule, Quality etc) that can undergo compromise while utilizing Contingency Reserve and Management Reserve. This is very rare though.

            When we say in real world that we are invoking set aside Contingency Reserve (for known risks/unknowns) usually we have set aside either Time (crashing/fast tracking etc options), or we have set aside $$ (without padding). Most times Quality is not compromised;

            So in broader sense saying something like “we will provide the product on time, without budget but it will not be a quality product, so expect issues” is not an acceptable approach for several reasons. Clients dont want to hear that they are getting something below grade. Also, the cost of support may go un acceptably high if the quality is compromised.

            Now, what if you do not have time, and money and quality cannot be compromised and still the delivery is required? That is when de-scoping comes into rescue. Fortunately, most projects come up with few “must haves”, few “should haves”, few “could haves” and few “good to haves”. The initial budget is calculated considering all of the above. However, when you approach the above scenario, the de-scoping starts from reducing to eliminating “good to haves” and move back wards. Obviously this requires:
            1. Change Request
            2. Client Consensus
            3. Viability

            Viability plays important role in this. What if a good to have feature does not fall under critical path, does not cost much and yet is to be done by a resource that would not be utilized in either crashing or fast tracking project? In that event, though you might have Client Consensus for removing that good to have feature and Change Request can be approved, it offers negligible benefit at the end making the de-scoping effort less productive.

            Having said this, de-scoping is not a widely favored approach – but it does exist and this offers some times valuable leeway for making your time, cost, quality and Risk intact.

            Hope this helps. Good discussion here!

            • So in broader sense saying something like “we will provide the product on time, ***within*** budget but it will not be a quality product, so expect issues” is not an acceptable approach for several reasons. Clients dont want to hear that they are getting something below grade. Also, the cost of support may go un acceptably high if the quality is compromised.

              • You are welcome Fahad. I have a quick question. Do we need to open a Change Request if we want to invoke the Contigency Reserve? (I know we need it for Management Reserve).

                Also, If we need to implement the work around because something unforeseen occurred and we did not have any response strategy against it – OR – our plan B failed as well – do we need to invoke the CR? I think answer to this is “yes”, but need to confirm. What are your thoughts in these 2 scenarios? Thanks.

                • In first case, you will not raise the change request. You are going to use the contingency reserve, and no change request is required for it as there is no change in any baselines, scope or project plan.

                  In second case, ideally if any unforeseen incident occurs, you should use the management reserve.

                  • I disagree on the first point. CR should be initiated because there will be a change in the cost baseline once the contingency reserve will get used. We might have to add more contingency fund for further risks / keep it as it is. nevertheless CR analysis has to be performed.

                    • With due respect.. contingency reserve is already calculated and part of cost/ schedule baseline.. so it won’t change

  • After reading this article bit confused between Risk response and Contingency plan. Both look same to me now, but is it really same or any difference? Please let me know if contingency plan is more or less same as RIsk response.

    Kindly clarify.

    • Contingency Plan is a Risk Response Plan. When a Risk occurs, you'll implement the contingencyplan.And if the contingency plan fails, you'll implement the Fallback Plan. Fallback Plan is also a risk response plan but it is implemented when contingency plan fails.Contingency and Fallback Plans – both are the risk response plan.Hope it clears your doubt.Sent from my iPhone

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