Definition of Management Reserve
Management reserve is the amount that management or project leader decided to take as reserve or backup in case of any unforeseen situation or unidentified risk. This amount is not part of the actual cost of the project and there is no formula to calculate this amount. will decide it according to the company’s policy. It could be as low as 3-5% and as high as 8-10% of the project. Apart from the monetary term, time is also included in the management reserve.
If the company is working on a project on which they have full expertise and an experienced workforce, it will keep less reserve time and amount. On the other hand, if the company is working on a project with an inexperienced or less skilled workforce, they will keep a high reserve amount as well as completion time.