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Float v Contingency

16 replies [Last post]
Tue, 2008-09-23 16:26
Uri Shachar
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Guys,
I think people are confusing between the terms ’Float’ and ’Contingency’ (what we call delay allowance).

To me, these are two different things. Float is what each activity has following the caclulation of the network (I agree it is owned by the ’Project’) whereas contingency is the difference between the net completion and the gross completion dates. Contingency is considered a critical activity (i.e. zero float) and it is clearly owned by the Contractor (C). The contingency will be longer if the C is ahead of program or shorter if the C is behind following re-calculation of the program.

Do you agree?
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Replies

Sun, 2008-10-05 06:18
#1
Mike Testro
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Hi Charlie

Projects that fall apart on letters of intent are the richest source of commissions for lawyers and delay analysts. Long may it continue.

Best regards

Mike Testro
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Sun, 2008-10-05 06:17
#2
Mike Testro
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Hi Anoon

Nearly right - as always this thread has drifted off target. My concept was that if the two parties have trust in each other then a formal contract is not needed.

In current times however such trust is a rare phenomonon.

Best regards

Mike Testro
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Sun, 2008-10-05 00:31
#3
Anoon Iimos
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Gentlemen,

It’s incredible! what you said (the way I understand it) is that: Floats and Contingencies can be summarized in the word "TRUST"?

i’ve also learned that Project Management can be summarized to the word "Decisiveness".
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Sat, 2008-10-04 10:26
#4
Charleston-Joseph...
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Hi MIke,

Thanks a lot. I do understand what you mean.

I did encounter situation wherein people says there is contract because a letter of intent was issued, acknowledge and signed by both parties.

On the other hand, when the project is not progressing well, and people start to look at the letter of intent as a contract that bind both parties.

Base on the three element of Letter of Intent as you mentioned above, what will be the recourse of the parties to the letter of intent in the event that the work was not done 100"%, there was no money paid to work done, and the time to complete is not attainable due to procrastination and delays in the effective start date, says five months

A very simple answer to a very simple question:

Can both parties agree that they have a contract based on the signed, acknowledge LETTER OF INTENT.

I do appreciate your idea on the above scenario.

Cheers,
Charlie
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Sat, 2008-10-04 10:15
#5
Mike Testro
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Hi Charlie

The contract is the document that sets out the terms of the bargain that has been agreed between the contractor and the employer - it sets down who takes what risk in completiing the project.

A letter of intent should at least set down the:

1. Work to be done
2 Money to be paid
3. Time to complete

It should also state the form of contract that will be signed.

When work starts without any of these terms being stated then the common law of the land applies.

If there is trust between the parties then a contract would not be necessary - there is a story about the Head of Cunard lines sitting next to the head of the shipyard at the launch of the latest liner. The Cunard man took his commeroative photgraph of the ship being launched and wrote on the back "One more of the same please".

The ship was duly delivered launched and paid for.

Best regards

Mike Testro
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Sat, 2008-10-04 09:53
#6
Charleston-Joseph...
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The moral here is that always focus on the contract.

What the contract says?????

By the way, what if there was no contract, only letter of intentl.

I’m asking this because in most intances, letter of intent was issued to the contractor considering that it will take time to finalize the contractl.

Cheers,
Charlie
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Sat, 2008-10-04 01:44
#7
Mike Testro
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Hi Anoon

What happens is whatever it says in the contract.

If the contractor caused the delay then LAD’s are deducted.

If the employer caused the delay then an EOT is claimed.

Best regards

Mike Testro
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Sat, 2008-10-04 00:17
#8
Anoon Iimos
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what will happen if your actual time have eaten all the floats and contigencies that you had placed? (which ALWAYS happen I believe!)

1. change the Contractor?
2. Stop the Project?
3. or just go on with it?
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Fri, 2008-09-26 11:22
#9
Mike Testro
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Hi All

To my mind there are two types of contingency time risk buffers.
1. The Contractors own contingency which is represented by a fixed bar - reduced for his own delays.
2. The Projects Contingeny risk which has a sliding duration and reduces and / or increases as the project evolves.

In poweproject software this sliding buffer is created as a task type.

In other software it has to be created by a summary bar over two milestones - ome fixed at completion date and the other linked to the end of the Contractors Risk Buffer.

Best regards

Mike Testro
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Thu, 2008-09-25 09:31
#10
Oliver Melling
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IMO Contingency is many things.

It can be the buffer that the shop-floor guy puts into his estimate (to allow for brews, fag breaks etc).

It can be the un-needed task the planner puts in the programme to give the PM more space to breath.

It can be the percentage added to the base estimates to allow for uncertainty.

It can be an amount added to the base-contract value to allow for the unknown unknowns.
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Thu, 2008-09-25 02:15
#11
Anoon Iimos
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Thanks Chris,

I found it too general, do you have something specific tailored to what Uri is trying to explain?

If Contingency and Float are two different things, and Float has a standard formula for calculations, what is it for Contigency?

regards
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Thu, 2008-09-25 01:37
#12
Chris Oggham
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Hi Anoon,

One of the best definitions for contingencies is in the Wideman Comparative Glossary of Common Project Management Terms. When I first started in planning I was told that contingency is "the little bit extra you put on your duration to cover the b*ggerance factor"

I think Wideman is better as it shows that contingency needn’t be just time-related, but can apply to other resources as well.

Chris Oggham
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Wed, 2008-09-24 22:56
#13
Anoon Iimos
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Uri,

Still not clear to me, "target date" in the program is the Planned (right?), this maybe using early finish or late finish, depending on what has been agreed, but this does not necessarily mean the same as the Project Completion Date (assuming Project Completion is specified in the Contract).

Target Date, may or may not have float (0); and maybe late or earlier than the specified Project Completion Date (is that right?).

Float is a figure that you can calculate using your program or manually.

Contingency is what? is it imposed or how do you calculate it? Or you need to put your target date to be always earlier than your Project Completion? so that you got allowance?

regards

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Wed, 2008-09-24 02:29
#14
Uri Shachar
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Annon,

No, it is not early and late (as in ES/EF/LS/LF) or Planned v Actual. This is the difference between the ’target’ date in the program, which is net of any delays and the Date for PC, which should include some allowance for delays (assuming prudent C).

The purpose of the Contingency is to cover the C for issues not covered by the qualifying causes of delays in the Contract. For example, it would make sense to have larger contingency if the Contract does not allow the C entitlement for inclement weather.
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Wed, 2008-09-24 00:49
#15
Anoon Iimos
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Uri,

I don’t understand, net completion and gross completion? Is it early and late? or Planned vs. Actual?

would you mind explaining further before we can doubtly agree?
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Tue, 2008-09-23 23:23
#16
A D
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Float is derived from the network calculation and normally it is always owned on the basis of "FIRST COME FIRST SERVE".

Contingency is better explained in PMBOK. I believe, its split into two parts:

Project Contingency: for "Known unknowns", which will be a integral part of project scope and baselines.

Manamenet Contingency: For "UNKNOWN UNKNOWNS", for unplanned activities or events and which are potentially required to counterattack the changes in project scope and cost.
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