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 you will be able to differentiate the contingency and fallback plan after reading it.
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 occurs.
Let us look at a real-world example of a contingency plan.
A Real-World Example of Contingency Plan
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 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 that may appear different to you but may be individually correct.
Below are two different explanations of the contingency plan.
- Contingency plans 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 of Fallback Plan
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 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.
What would happen if my site got hacked and my third-party backup service went out of business simultaneously? How would I restore my blog?
This is where my fallback plan comes into play. I keep an updated copy of my blog on my computer and Google Drive to save myself from such a disaster.
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 the 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 seems 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.
I am Mohammad Fahad Usmani, B.E. PMP, PMI-RMP. I have been blogging on project management topics since 2011. To date, thousands of professionals have passed the PMP exam using my resources.
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?
Since this risk was not identified, the project manager will manage it through a workaround.
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.
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.
Thanks.
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
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?
1) No
2) No
3) No
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.
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