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1. Earned Value Formulas
PV (Planned Value) = BCWS (Budgeted Cost of Work Scheduled
EV (Earned Value) = BCWP (Budgeted Cost of Work Performed)
AC (Actual Cost) = ACWP (Actual Cost of Work Performed)
SV = EV – PV (minus is behind schedule)
CV = EV – AC (minus is over budget)
SPI = EV/PV (Less than 1 is behind schedule)
CPI = EV/AC (Less than 1 is over budget)
EAC = AC + (BAC-EV) Use when variances are atypical
EAC = BAC/CPI Use when variances are typical
(Note: This is the same as EAC = BAC/CPI)
VAC = BAC – EAC
ETC = BAC – EV Use when variances are atypical
ETC = (BAC – EV)/CPI Use when variances are typical
ETC = EAC – AC Use when original estimates were flawed
Project Selection Financials
NPV (Net Present Value) = FV/(1+r)n
FV= Future Value, r= interest rate, n= no. of time periods
Higher NPV is better
IRR (Internal Rate of Return) = Solve the NPV equation for “r”
Also called Hurdle Rate
Higher IRR percentage is better
BCR (Benefit/Cost Ratio)
Higher BCR is better.
Beware, exam can call it CBR, where lower is better
Payback Period = Time to recover cost of the project
Lower payback period is better
Cash Flow = Cash In – Cash Out
Network Diagrams
Precedence Diagramming Method (PDM)
Also called Activity on Node (AON): Activities are in boxes
Most commonly used today
Has 4 relationships: F-S, S-S, F-F, S-F
No “dummies” (zero duration dependencies) allowed
Can analyze using either Three-Point Estimates or CPM
Arrow Diagramming Method (ADM)
Also called Activity on Arrow (AOA)
Only 1 relationship: F-S
Can have “dummies”
Can analyze using either Three-Point Estimates or CPM
Graphical Evaluation and Review Technique (GERT)
Allows loops and repetitive activities
Three Point Estimates, or PERT
PERT = PROGRAM Evaluation and Review Technique
Holds schedule and lets cost float
3 estimates for each task: Optimistic, Pessimistic, and Most Likely
Mean Estimate = (O + 4*ML + P)/6
Standard Deviation (σ) = (P – O)/6
Critical Path Method, CPM Analysis
1 bestimate per activity: the Most Likely estimate
Holds cost and lets schedule float
Calculating Slack or Float
Total Float (also called Slack, Float, or Project Float) is the
total amount of time an activity can be delayed without
delaying the project finish date.
Free Float/Slack is the amount of time an activity can be
delayed without delaying its successor (following
activity).
LS – ES: Calculates slack with forward pass
LF – EF: Calculates slack with backwards pass
Lag Time: Inserted wait time between activities
Lead Time: Overlapping activities, also called paralleling or
fast tracking.
“Lead In; Lag Out”
Accuracy of Estimates
Order of Magnitude: -25% to +75%
Budget Estimate: -10% to +25%
Definitive Estimate: -5% to +10%
Standard Deviations from the Norm
± 1 σ = 68.26%
± 2 σ = 95.46%
± 3 σ = 99.73%
± 6 σ = 99.99%
Powers of a Project Manager
1. Expert: Best, earned on your own
2. Reward: Next best. Based on PM position
3. Formal: Power, based on PM position
4. Referent: Referring to positions of others
5. Penalty: Worst. Based on PM position
Conflict Resolution (Best to Worst)
1. Problem Solving: Also called Confronting
2. Compromising: Solutions satisfy both parties
3. Withdrawal: Postponing a decision
4. Smoothing: Emphasis on agreement
5. Forcing: One viewpoint at expense of another.
Channels of Communication
Between Team Members = N(N-1)/2
Sources of Conflict (Order of Priority)
1. Schedules
2. Project Priorities
3. Resources
4. Technical Opinions
5. Administrative Procedures
6. Cost
7. Personality
Herzberg’s Motivators
1. Achievement
2. Recognition
3. Challenge of the work itself
4. Responsibility
5. Advancement
6. Growth
Also, remember Maslow’s Hierarchy of Needs
Closing
Project is closed when administrative closure is complete.
Administrative closure is done at end of each Project Phase and
at the end of the Project.
Contract closure: verification that deliverables were acceptable; it
is done once at the end of the contract.
Contract Closure Procedure is produced under “Close Project”
PMP Test Preparation