TOPIC: Free PMP® Exam Sample Question

During project execution, several unexpected issues have developed and are now threatening the project schedule and budget.

What is the best course of action for the project manager to address the issues?

A. Use contingency reserves
B. Review project funding requirements
C. Use management reserves
D. Review organizational process assets

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HINT: Which type of reserve is not included in the cost baseline?

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Answer and Explanation:
The correct answer is C.

The total project budget includes the cost baseline plus the management reserves. The cost baseline is comprised of the work package estimates and contingency reserves. The contingency reserves are allocated for identified risks. Management reserves are withheld for unforeseen risks that affect the project. According to the scenario, the issues developed during the project were unexpected. Therefore, of the choices provided, using the management reserves is the best course of action for the project manager.

Note, the scenario describes issues, while the explanation refers to risks. Prospective PMP aspirants should keep in mind that the questions on the real PMP exam may have such discrepancy in their wording.

Details for each option:

A. Incorrect. Contingency reserves are allocated for identified risk and are included in the cost baseline. Given that the question describes issues that have arisen from unforeseen and previously unidentified risks this is an incorrect answer.

B. Incorrect. A project is often funded in incremental amounts and may not be evenly distributed. The funding requirements specify when project funding will be required. The total funds required, or project budget, is the amount included in the cost baseline plus any management reserves. This question is not asking about funding.

C. Correct. The total project budget is determined by adding the cost baseline and the management reserves. The management reserves are used for unforeseen risks that may occur on the project and can only be used at management's discretion. Since the scenario describes issues that have not been identified during project planning, use of management reserves is the best answer to the question asked.

D. Incorrect. Organizational process assets are plans, processes, policies, procedures, and knowledge bases that are specific to and used by the performing organization. It is unlikely that reviewing the organizational process assets would help the project manager in addressing the issues described in the question.

Reference: A Guide to the Project Management Body of Knowledge (PMBOK^® Guide) – Sixth Edition, Project Management Institute Inc., 2017, Page(s) 254-255, 246