Pmi dec 13

PMP Notes
• PMP Notes
• Vijay Raj
• vijayr1@hotmail.com
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0-Project Management Framework
“I Saw Two Crows Quietly Having Coffee & Reading
Poetic Stories,”
Integration, Scope, Time, Cost, Quality, HR, Communication, Risk, Procurement, Stakeholder
• CDC DSEED ED IPPR
• CDC Collect Requirement, Define Scope, Create WBS
• DSEED Define Activities, Sequence Activities, Est Activity Resource,
Est Act Duration, Define Schedule
• ED Estimate Cost., Develop Budget
• IQQR Identify Risk, Perform Qualitative Risk, Perform Quantitative
Risk, Plan Risk Response
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• The Exam included -
•
• 1. No ethics question
• 2. 10-12 EVM questions - very simple with little calculations but
requires that you know what the terms are
• 3. 5-6 network diagram questions which again were simple to crack.
Read the question clearly since they will try to confuse you.
• 4. There were few questions on contract types for procurement
• 5. Some topics which generated many questions were conflict
resolution techniques and risk response techniques
•
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Project Management Framework
Project Integration Management
Project Scope Management
Project Time Management
Project Cost Management
Project Quality Management
Project HR Management
Project Communications Management
Project Risk Management
Project Procurement Management
Project Stakeholder Management
Knowledge Area
Project Management Framework
IPECaC,
Initiating, Planning, Executing, Controlling & Closing.
“I Saw Two Crows Quietly Having
Coffee and Reading Poetic Stories,”
Integration, Scope, Time, Cost, Quality, Human
Resources, Communications,
Risk, Procurement, and Stakeholder management.
Project Integration Management
Project Scope Management
Project Time Management
Project Cost Management
Project Quality Management
Project HR Management
Project Communications Management
Project Risk Management
Project Procurement Management
Project Stakeholder Management
Ethics
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Project
Program
Portfolio
Functions of a PMO
Six competing project constraints
Triple constraints of project management
Iron triangle of project management
Diagram showing portfolio, program, project
Operations
Key points about Functional Organizations
Key points about Projectized Organizations
Key points about Matrix Organizations
Key points about Weak Matrix Organizations
Key points about Balanced Matrix Organizations
Key points about Strong Matrix Organizations
Role of a project coordinator
Role of a project expediter
Organizational Process Assets
Enterprise Environmental Factors
Project Life Cycle
Project Phases
Product oriented processes
Project management processes
Work Performance Data examples
Work Performance Information examples
Work Performance Report examples
Process Table (47 processes)
Phase exit, Phase end, Phase gate, Kill point
Product life cycle
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What is a Project?
A project is a temporary endeavor undertaken to create a unique product, service, or
result. The temporary nature of projects indicates that a project has a definite
beginning and end. The end is reached when the project’s objectives have been
achieved or when the project is terminated because its objectives will not or cannot be
met, or when the need for the project no longer exists. A project may also be
terminated if the client (customer, sponsor, or champion) wishes to terminate the
project.
Every project creates a unique product, service, or result. The outcome of the project
may be tangible or intangible
A project can create:
• A product that can be either a component of another item, an enhancement of an
item, or an end item in itself;
• A service or a capability to perform a service (e.g., a business function that supports
production or distribution);
• An improvement in the existing product or service lines (e.g., A Six Sigma project
undertaken to reduce defects); or
• A result, such as an outcome or document (e.g., a research project that develops
knowledge that can be used to determine whether a trend exists or a new process will
benefit society).
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Portfolio refers to a collection of projects,programs, sub portfolios, and
operations managed as a group to achieve strategic objectives.
Managing a project typically includes, but is not limited to:
• Identifying requirements;
• Addressing the various needs, concerns, and expectations of the
stakeholders in planning and executing the project;
• Setting up, maintaining, and carrying out communications among
stakeholders that are active, effective, and collaborative in nature;
• Managing stakeholders towards meeting project requirements and
creating project deliverables;
• Balancing the competing project constraints, which include, but are not
limited to:
• Scope,
• Quality,
• Schedule,
• Budget,
• Resources, and
• Risks.
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1.4.2 Portfolio Management
A portfolio refers to projects, programs, sub portfolios, and operations managed as
a group to achieve strategic objectives. The projects or programs of the portfolio
may not necessarily be interdependent or directly related. For example, an
infrastructure firm that has the strategic objective of “maximizing the return on its
investments” may put together a portfolio that includes a mix of projects in oil and
gas, power, water, roads, rail, and airports. From this mix, the firm may choose to
manage related projects as one program. All of the power projects may be grouped
together as a power program. Similarly, all of the water projects may be grouped
together as a water program. Thus, the power program and the water program
become integral components of the enterprise portfolio of the
infrastructure firm.
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Project Management Office; A project management office (PMO) is a management structure that
standardizes the project-related governance processes and facilitates the sharing of resources,
methodologies, tools, and techniques
Supportive. Supportive PMOs provide a consultative role to projects by supplying templates, best practices,
training, access to information and lessons learned from other projects. This type of PMO serves as a project
repository. The degree of control provided by the PMO is low.
• Controlling. Controlling PMOs provide support and require compliance through various means.
Compliance may involve adopting project management frameworks or methodologies, using specific
templates, forms and tools, or conformance to governance. The degree of control provided by the PMO is
moderate.
• Directive. Directive PMOs take control of the projects by directly managing the projects. The degree of
control provided by the PMO is high. The PMO integrates data and information from
A primary function of a PMO is to support project managers in a variety of ways which may include, but are
not limited to:
• Managing shared resources across all projects administered by the PMO;
• Identifying and developing project management methodology, best practices, and standards;
• Coaching, mentoring, training, and oversight;
• Monitoring compliance with project management standards, policies, procedures, and templates by means
of project audits;
• Developing and managing project policies, procedures, templates, and other shared documentation
(organizational process assets); and
• Coordinating communication across Projects.
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Differences between the role of project managers and a PMO may include the
following:
• The project manager focuses on the specified project objectives, while the PMO
manages major program scope changes, which may be seen as potential
opportunities to better achieve business objectives.
• The project manager controls the assigned project resources to best meet project
objectives, while the PMO optimizes the use of shared organizational resources
across all projects.
• The project manager manages the constraints (scope, schedule, cost, quality, etc.)
of the individual projects, while the PMO manages the methodologies, standards,
overall risks/opportunities, metrics, and interdependencies among projects at the
enterprise level.
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Stakeholder identification is a continuous process throughout the entire project life
cycle. Identifying stakeholders, understanding their relative degree of influence on a
project, and balancing their demands, needs, and expectations are critical to the
success of the project. Failure to do so can lead to delays, cost increases, unexpected
issues, and other negative consequences including project cancellation.
Sponsor. A sponsor is the person or group who provides resources and support for
the project and is accountable for enabling success. The sponsor may be external or
internal to the project manager’s organization. From initial conception through
project closure, the sponsor promotes the project
Project Life Cycle;A project life cycle is the series of phases that a project passes
through from its initiation to its closure.
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Contract Project Charter
A Contract is a formal document signed between
Buyer and Seller.
A buyer may be called the client or the customer
while a seller may be addressed as supplier,
vendor or the performing organization.
A Project Charter is usually prepared internally and
is issued by Sponsor to the Project Manager.
Sponsor is a person or a group or a department
who is authorized to provide financial resources for
the project.
A Project Manager is a person who is assigned by
performing organization to achieve project
objectives.
Contract is a legally binding to both buyer and
the seller.
A project charter may not be legally binding
especially when it is issued by a Sponsor who is
internal to performing organization.
A Project Charter formally authorizes the start of
the project and gives authority to Project Manager
to utilize organizational resources for completion of
project objectives.
A Contract may be signed for a Project or for
Operational Work.
A Project Charter is prepared for a Project.
A contract may or may not be available for a
Project.
Projects that are done internally without any third
party direction, support or governance will be
without contracts.
As a good practice a Project Charter should be
prepared for every project.
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At project or phase closure, the following may occur:
• Obtain acceptance by the customer or sponsor to formally close the project or phase,
• Conduct post-project or phase-end review,
• Record impacts of tailoring to any process,
• Document lessons learned,
• Apply appropriate updates to organizational process assets,
• Archive all relevant project documents in the project management information system
(PMIS) to be used as historical data,
• Close out all procurement activities ensuring termination of all relevant agreements,
and Perform team members’ assessments and release project resources.
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1-Project Integration Management
Project Selection Methods
Benefit Measurement Models/Methods
Constrained Optimization Methods
Present Value/ NPV
Project statement of work - who?
Agreements
Business case
Key elements of a project charter
Purpose of project charter, who signs/approves
Facilitation techniques
Key elements of a project management plan
Scope baseline
Schedule baseline
Cost baseline
Project performance baseline
Subsidiary plans/component plans
PMIS examples
Change control steps (six)
Definition of a deliverable
Analytical techniques
Regression analysis
Trend analysis
Murder boards
Work Authorization System
Who all can give expert judgement?
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2-Project Scope Management
Interviews
Focus groups
Facilitated workshops
Group creativity techniques
Brainstorming
Affinity diagram
Nominal group technique
Idea mind mapping
Multicriteria decision analysis
Group decision making techniques
Unanimity
Majority
Plurality
Questionnaires and surveys
Observations
Benchmarking
Prototype
Context diagrams
Requirements Traceability Matrix (RTM)
Product analysis
Lateral thinking
Pairwise comparisons
Project scope statement (consists of, details)
Product scope
Project scope
Decomposition
Scope baseline (consists of)
WBS
WBS dictionary (contents)
Difference in Control Quality and Validate Scope
Variance analysis
8/80 rule
Template
Validate scope
Opportunity cost
Direct costs (Examples)
Indirect costs (Examples)
Variable costs (Examples)
Fixed costs (Examples)
Work package
Planning package
Control account
Code of account
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Develop Project Charter
Develop Project Charter is the process of developing a document that formally
authorizes the existence of a project and provides the project manager with the
authority to apply organizational resources to project activities. The key benefit of
this process is a well-defined project start and project boundaries, creation of a
formal record of the project, and a direct way for senior management to formally
accept and commit to the project
. The approved project charter formally initiates the project. A project manager is
identified and assigned as early in the project as is feasible, preferably while the
project charter is being developed and always prior to the start of planning. The
project charter should be authored by the sponsoring entity. The project charter
provides the project manager with the authority to plan and execute the project. It
is recommended that the project manager participate in the development of the
project charter to obtain a foundational understanding of the project
requirements.
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Project Statement of Work
The project statement of work (SOW) is a narrative description of products, services, or
results to be delivered by a project. For internal projects, the project initiator or sponsor
provides the statement of work based on business needs, product, or service requirements.
For external projects, the statement of work can be received from the customer as part of a
bid document, (e.g., a request for proposal, request for information, or request for bid) or as
part of a contract. The SOW references the following:
• Business need. An organization’s business need may be based on a market demand,
technological advance, legal requirement, government regulation, or environmental
consideration. Typically, the business need and the cost-benefit analysis are contained in the
business case to justify the project.
• Product scope description. The product scope description documents the characteristics of
the product, service, or results that the project will be undertaken to create. The description
should also document the relationship between the products, services, or results being
created and the business need that the project will address.
• Strategic plan. The strategic plan documents the organization’s strategic vision, goals, and
objectives and may contain a high-level mission statement. All projects should be aligned
with their organization’s strategic plan. Strategic plan alignment ensures that each project
contributes to the overall objections of the organization.
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Business Case ; document describes the necessary information from a
business standpoint to determine whether or not the project is worth the
required investment. The cost-benefit analysis are contained in the
business case to justify and establish boundaries for the project.
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Project Charter; The project charter is the document issued by the project initiator or sponsor that
formally authorizes then existence of a project and provides the project manager with the
authority to apply organizational resources to project activities. It documents the business needs,
assumptions, constraints, the understanding of the customer’s needs and high-level requirements,
and the new product, service, or result that it is intended to satisfy, such as:
• Project purpose or justification,
• Measurable project objectives and related success criteria,
• High-level requirements,
• Assumptions and constraints,
• High-level project description and boundaries,
• High-level risks,
• Summary milestone schedule,
• Summary budget,
• Stakeholder list,
• Project approval requirements (i.e., what constitutes project success, who decides the project is
successful, and who signs off on the project),
• Assigned project manager, responsibility, and authority level, and
• Name and authority of the sponsor or other person(s) authorizing the project charter.
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Project Management Plan
The project management plan is the document that describes how the project will
be executed, monitored, and controlled. It integrates and consolidates all of the
subsidiary plans and baselines from the planning processes. Project baselines
include, but are not limited to:
• Scope baseline
• Schedule baseline
• Cost baseline
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• Corrective action—An intentional activity that realigns the performance
of the project work with the project management plan;
• Preventive action—An intentional activity that ensures the future
performance of the project work is aligned with the project management
plan; and/or
• Defect repair—An intentional activity to modify a nonconforming
product or product component.
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Approved Change Requests
Approved change requests are an output of the Perform Integrated Change Control
process, and include those requests reviewed and approved for implementation by
the change control board (CCB). The approved change request may be a corrective
action, a preventative action, or a defect repair. Approved change requests are
scheduled and implemented by the project team, and can impact any area of the
project or project management plan. The approved change requests can also
modify the policies, project management plan, procedures, costs, or budgets or
revise the schedules. Approved change requests may require implementation of
preventive or corrective actions.
Deliverables
A deliverable is any unique and verifiable product, result or capability to perform
a service that is required to be produced to complete a process, phase, or project.
Deliverables are typically tangible components completed to meet the project
objectives and can include elements of the project management plan.
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Analytical Techniques-Analytical techniques are applied in project management to
forecast potential outcomes based on possible variations of project or
environmental variables and their relationships with other variables. Examples of
analytical techniques used in projects are:
• Regression analysis,
• Grouping methods,
• Causal analysis,
• Root cause analysis,
• Forecasting methods (e.g., time series, scenario building, simulation, etc.),
• Failure mode and effect analysis (FMEA),
• Fault tree analysis (FTA),
• Reserve analysis,
• Trend analysis,
• Earned value management, and
• Variance analysis.
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3-Project Time Management
Progressive elaboration/rolling wave
planning
Decomposition
Activity list
Activity attributes (contents)
Milestone, Milestone list, examples
Mandatory dependency
Discretionary dependency
External dependency
Lead
Lag
Subnetwork/fragment network
Resource calendar
Bottom up estimating
Analogous estimating
Parametric estimating
Top down estimating
Three point estimates, PERT formulas
Delphi technique
Resource breakdown structure
Reserve analysis
Feeding buffers
Project buffer
CPM
CCM
Resource optimization techniques
Resource levelling
Resource smoothing
Scheduling tool
Modelling techniques
What-if scenario analysis
Simulation using Monte Carlo Analysis
Schedule compression
Crashing
Fast tracking
Project calendars
Schedule forecasts
Float/Slack/Total float/Total slack
Free float
AON, AOA diagram
Parkinson's law
Dummy activity
4 types of relationships (most common, least common)
Hard logic, Soft logic
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PROJECT INTEGRATION MANAGEMENT
either by rejecting changes or by approving changes, thereby
assuring that only approved changes are incorporated into a revised
baseline.
Changes may be requested by any stakeholder involved with the
project. Although changes may be initiated verbally, they should be
recorded in written form and entered into the change management
and/or configuration management system. Change requests are
subject to the process specified in the change control and
configuration control systems. Those change request processes may
require information on estimated time impacts and estimated cost
impacts.
Every documented change request needs to be either approved or
rejected by a responsible individual, usually
the project sponsor or project manager. The responsible individual
will be identified in the project management plan
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Interviews --in interview is a formal or informal approach to elicit information
from stakeholders by talking to them directly
Focus Groups-Focus groups bring together prequalified stakeholders and subject
matter experts to learn about their expectations and attitudes about a proposed
product, service, or result. A trained moderator guides the group through an
interactive discussion, designed to be more conversational than a one-on-one
interview.
Facilitated Workshops-Facilitated workshops are focused sessions that bring key
stakeholders together to define product requirements. Workshops are considered
a primary technique for quickly defining cross-functional requirements
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Group Creativity Techniques-Several group activities can be organized to identify
project and product requirements. Some of the group creativity techniques that can
be used are:
• Brainstorming. A technique used to generate and collect multiple ideas related to
project and product requirements. Although brainstorming by itself does not include
voting or prioritization, it is often used with other group creativity techniques that do.
• Nominal group technique. A technique that enhances brainstorming with a voting
process used to rank the most useful ideas for further brainstorming or for
prioritization.
• Idea/mind mapping. A technique in which ideas created through individual
brainstorming sessions are consolidated into a single map to reflect commonality
and differences in understanding, and generate new ideas.
• Affinity diagram. A technique that allows large numbers of ideas to be classified
into groups for review and analysis.
• Multicriteria decision analysis. A technique that utilizes a decision matrix to
provide a systematic analytical approach for establishing criteria, such as risk levels,
uncertainty, and valuation, to evaluate and rank many ideas.
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Group Decision-Making Techniques- A group decision-making technique is an
assessment process having multiple alternatives with an expected outcome in the form
of future actions. These techniques can be used to generate, classify, and prioritize
product requirements. There are various methods of reaching a group decision, such as:
• Unanimity. A decision that is reached whereby everyone agrees on a single course of
action. One way to reach unanimity is the Delphi technique, in which a selected group
of experts answers questionnaires and provides feedback regarding the responses from
each round of requirements gathering. The responses are only available to the facilitator
to maintain anonymity.
• Majority. A decision that is reached with support obtained from more than 50 % of
the members of the group. Having a group size with an uneven number of participants
can ensure that a decision will be reached, rather than resulting in a tie.
• Plurality. A decision that is reached whereby the largest block in a group decides,
even if a majority is not achieved. This method is generally used when the number of
options nominated is more than two.
• Dictatorship. In this method, one individual makes the decision for the group.
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Requirements Traceability Matrix
The requirements traceability matrix is a grid that links product
requirements from their origin to the deliverables that satisfy them.
Constraints. A limiting factor
Assumptions. A factor in the planning process that is considered to be
true, real, or certain, without proof or demonstration.
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Create WBS- Create WBS is the process of subdividing project deliverables and
project work into smaller, more manageable components. The key benefit of
this process is that it provides a structured vision of what has to be delivered.
WBS Data Flow Diagram- The WBS is a hierarchical decomposition of the total
scope of work to be carried out by the project team to accomplish the project
objectives and create the required deliverables.
Decomposition-Decomposition is a technique used for dividing and
subdividing the project scope and project deliverables into smaller, more
manageable parts. Decomposition of the total project work into work packages
generally involves the following activities:
• Identifying and analyzing the deliverables and related work;
• Structuring and organizing the WBS;
• Decomposing the upper WBS levels into lower-level detailed components;
• Developing and assigning identification codes to the WBS components; and
• Verifying that the degree of decomposition of the deliverables is appropriate.
Decomposition may not be possible for a deliverable or subcomponent that
will be accomplished far into the future. The project management team usually
waits until the deliverable or subcomponent is agreed on, so the details of the
WBS can be developed. This technique is sometimes referred to as rolling
wave planning.
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Scope Baseline-The scope baseline is the approved version of a scope statement, work breakdown
structure (WBS), and its associated WBS dictionary, that can be changed only through formal change
control procedures and is used as a basis for comparison. It is a component of the project management
plan. Components of the scope baseline include:
• Project scope statement. The project scope statement includes the description of the project scope,
major deliverables, assumptions, and constraints.
• WBS. The WBS is a hierarchical decomposition of the total scope of work to be carried out by the project
team to accomplish the project objectives and create the required deliverables. Each descending level of
the WBS represents an increasingly detailed definition of the project work. The WBS is finalized by
assigning each work package to a control account and establishing a unique identifier for that work
package from a code of accounts. These identifiers provide a structure for hierarchical summation of costs,
schedule, and resource information. A control account is a management control point where scope,
budget, actual cost, and schedule are integrated
• WBS dictionary. The WBS dictionary is a document that provides detailed deliverable, activity, and
scheduling information about each component in the WBS. The WBS dictionary is a document that
supports the WBS. Information in the WBS dictionary may include, but is not limited to:
○○ Code of account identifier,
○○ Description of work,
○○ Assumptions and constraints,
○○ Responsible organization,
○○ Schedule milestones,
○○ Associated schedule activities,
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○○ Resources required,
○○ Cost estimates,
○○ Quality requirements,
○○ Acceptance criteria,
○○ Technical references, and
○○ Agreement information.

Validate Scope
Validate Scope is the process of formalizing acceptance of the completed
project deliverables. The key benefit of this process is that it brings
objectivity to the acceptance process and increases the chance of final
product, service, or result acceptance by validating each deliverable.
The verified deliverables obtained from the Control Quality process are
reviewed with the customer or sponsor to ensure that they are completed
satisfactorily and have received formal acceptance of the deliverables by
the customer or sponsor.
Accepted Deliverables-Deliverables that meet the acceptance criteria are
formally signed off and approved by the customer or sponsor.
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Plan Schedule Management is the process of establishing the policies,
procedures, and documentation for planning, developing, managing,
executing, and controlling the project schedule.
6.2.2.1 Decomposition
Decomposition is a technique used for dividing and subdividing the project
scope and project deliverables into smaller, more manageable parts.
6.2.2.2 Rolling Wave Planning
Rolling wave planning is an iterative planning technique in which the work to
be accomplished in the near term is planned in detail, while the work in the
future is planned at a higher level. It is a form of progressive elaboration.
6.2.2.3 Expert Judgment
Project team members or other experts, who are experienced and skilled in
developing detailed project scope statements, the WBS, and project
schedules, can provide expertise in defining activities
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6.6.2.5 Modeling Techniques Examples of modeling techniques include,
but are not limited to:
• What-If Scenario Analysis. What-if scenario analysis is the process of
evaluating scenarios in order to predict their effect, positively or
negatively, on project objectives. This is an analysis of the question,“What
if the situation represented by scenario ‘X’ happens?” A schedule network
analysis is performed using the schedule to compute the different
scenarios, such as delaying a major component delivery, extending specific
engineering durations, or introducing external factors, such as a strike or a
change in the permitting process. The outcome of the what-if scenario
analysis can be used to assess the feasibility of the project schedule under
adverse conditions, and in preparing contingency and response plans to
overcome or mitigate the impact of unexpected situations.
• Simulation. Simulation involves calculating multiple project durations
with different sets of activity assumptions, usually using probability
distributions constructed from the three-point estimates (described in
Section 6.5.2.4) to account for uncertainty. The most common simulation
technique is Monte Carlo analysis (Section 11.4.2.2), in which a
distribution of possible activity durations is defined for each activity and
used to calculate a distribution of possible outcomes for the total project.
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6.3.2.3 Leads and Lags
A lead is the amount of time whereby a successor activity can be advanced
with respect to a predecessor activity. For example, on a project to
construct a new office building, the landscaping could be scheduled to
start two weeks prior to the scheduled punch list completion
A lag is the amount of time whereby a successor activity will be delayed
with respect to a predecessor activity. For example, a technical writing
team may begin editing the draft of a large document 15 days after they
begin writing it.
6.4.1.4 Resource Calendars
Described in Sections 9.2.3.2 and 12.2.3.3. A resource calendar is a
calendar that identifies the working days and shifts on which each
specific resource is available.
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• Resource Smoothing. A technique that adjusts the activities of a schedule
model such that the requirements for resources on the project do not
exceed certain predefined resource limits. In resource smoothing, as
opposed to resource leveling, the project’s critical path is not changed and
the completion date may not be delayed. In other words, activities may
only be delayed within their free and total float. Thus resource smoothing
may not be able to optimize all resources.
• Resource leveling. A technique in which start and finish dates are
adjusted based on resource constraints with the goal of balancing demand
for resources with the available supply. Resource leveling can be used
when shared or critically required resources are only available at certain
times, or in limited quantities, or over-allocated, such as when a resource
has been assigned to two or more activities during the same time period, as
shown in Figure 6-20, or to keep resource usage at a constant
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6.6.2.7 Schedule Compression
Schedule compression techniques are used to shorten the schedule
duration without reducing the project scope, in order to meet schedule
constraints, imposed dates, or other schedule objectives. Schedule
compression techniques include, but are not limited to:
• Crashing. A technique used to shorten the schedule duration for the
least incremental cost by adding resources. Examples of crashing include
approving overtime, bringing in additional resources, or paying to expedite
delivery to activities on the critical path. Crashing works only for activities
on the critical path where additional resources will shorten the activity’s
duration. Crashing does not always produce a viable alternative and may
result in increased risk and/or cost.
• Fast tracking. A schedule compression technique in which activities or
phases normally done in sequence are performed in parallel for at least a
portion of their duration. An example is constructing the foundation for a
building before completing all of the architectural drawings. Fast tracking
may result in rework and increased risk. Fast tracking only works if
activities can be overlapped to shorten the project duration.
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4-Project Cost Management
Cost control thresholds
Cost (level of precision)
Cost (level of accuracy)
Cost baseline
Contingency reserve
Management reserve
Vendor bid analysis
Cost aggregation
Funding limit reconciliation
Project funding requirements
EVM basic formulas
EVM Forecasting formulas
EVM TCPI formulas
Budget estimate
Definitive estimate
Order of magnitude estimate
Life cycle costing
Learning curve
Law of diminishing returns
Value analysis
S curve
Padding
Parkinson's Law
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Analogous estimating
(Top Down Estimating, Form of Expert Judgement
Least accurate form of estimating, Quick, easy & cheap, Give a Ball Park
Number)
Parametric estimating ( Formula Based )
(e.g., square footage in construction) to calculate a cost estimate for
project work.
Bottom-up estimating .
Time consuming, Complex,Most Accurate
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Three-Point Estimating-The accuracy of single-point activity cost estimates
may be improved by considering estimation uncertainty and risk and using
three estimates to define an approximate range for an activity’s cost:
• Most likely (cM).realistic effort assessment for the required work and
any predicted expenses.
• Optimistic (cO). best-case scenario for the activity.
• Pessimistic (cP). worst-case scenario for the activity.
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Determine Budget- is the process of aggregating the
estimated costs of individual activities or work packages to
establish an authorized cost baseline. The key benefit of this
process is that it determines the cost baseline against
which project performance can be monitored and controlled.
Funding Limit Reconciliation-To reconcile my activities as per
the funding limit imposed by the management.
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• Level of precision. The degree to which activity cost estimates will be
rounded up or down (e.g.,US$100.49 to US$100, or US$995.59 to US$1,000)
, based on the scope of the activities and magnitude of the project.
• Level of accuracy. The acceptable range (e.g., ―10%) used in determining
realistic activity cost estimates is specified, and may include an amount for
contingencies;
• Control thresholds. Variance thresholds for monitoring cost performance
may be specified to indicate an agreed-upon amount of variation to be
allowed before some action needs to be taken. Thresholds are typically
expressed as percentage deviations from the baseline plan.
The accuracy of a project estimate will increase as the project progresses
through the project life cycle. For example, a project in the initiation phase
may have a rough order of magnitude (ROM) estimate in the range of −25%
to +75%. Later in the project, as more information is known, definitive
estimates could narrow the range of accuracy to -5% to +10%.
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Scope Baseline
• Project scope statement.
• Work breakdown structure.
• WBS dictionary.
Control Costs
Control Costs is the process of monitoring the status of the project to
update the project costs and managing changes to the cost baseline. The
key benefit of this process is that it provides the means to recognize
variance from the plan in order to take corrective action and minimize risk.
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Earned Value Management
S Curve
66

Vendor Bid Analysis Cost estimating methods may include analysis of what
the project should cost, based on the responsive bids from qualified
vendors. When projects are awarded to a vendor under competitive
processes, additional cost estimating work may be required of the project
team to examine the price of individual deliverables and to derive a cost
that supports the final total project cost.
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Planned value. (PV) is the authorized budget planned for the work to be accomplished for an activity or work breakdown
structure component, not including management reserve. The total of the PV is sometimes referred to as the performance
measurement baseline (PMB). The total planned value for the project is also known as budget at completion (BAC).
• Earned value. EV is a measure of work performed expressed in terms of the budget authorized for that work. It is the
budget associated with the authorized work that has been completed. The EV being measured needs to be related to the
PMB, and the EV measured cannot be greater than the authorized PV budget for a component. The EV is often used to
calculate the percent complete of a project. Progress measurement criteria should be established for each WBS component
to measure work in progress. Project managers monitor EV, both incrementally to determine current status and cumulatively
to determine the long-term performance trends.
• Actual cost. Actual cost (AC) is the realized cost incurred for the work performed on an activity during a specific time
period. It is the total cost incurred in accomplishing the work that the EV measured. The AC needs to correspond in definition
to what was budgeted in the PV and measured in the EV (e.g., direct hours only, direct costs only, or all costs including
indirect costs). The AC will have no upper limit; whatever is spent to achieve the EV will be measured. Variances from the
approved baseline will also be monitored:
• Schedule variance. Schedule variance (SV) is a measure of schedule performance expressed as the difference between
the earned value and the planned value. It is the amount by which the project is ahead or behind the planned delivery date,
at a given point in time. It is a measure of schedule performance on a project. It is equal to the earned value (EV) minus the
planned value (PV). The EVM schedule variance is a useful metric in that it can indicate when a project is falling behind or is
ahead of its baseline schedule. The EVM schedule variance will ultimately equal zero when the project is completed because
all of the planned values will have been earned. Schedule variance is best used in conjunction with critical path methodology
(CPM) scheduling and risk management. Equation: SV = EV – PV
• Cost variance. Cost variance (CV) is the amount of budget deficit or surplus at a given point in time, expressed as the
difference between earned value and the actual cost. It is a measure of cost performance on a project. It is equal to the
earned value (EV) minus the actual cost (AC). The cost variance at the end of the project will be the difference between the
budget at completion (BAC) and the actual amount spent. The CV is particularly critical because it indicates the relationship
of physical performance to the costs spent. Negative CV is often difficult for the project to recover. Equation: CV= EV − AC.
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• Schedule performance index. The schedule performance index (SPI) is a measure of
schedule efficiency expressed as the ratio of earned value to planned value. It measures how
efficiently the project team is using its time. It is sometimes used in conjunction with the cost
performance index (CPI) to forecast the final project completion estimates. An SPI value less
than 1.0 indicates less work was completed than was planned. An SPI greater than 1.0
indicates that more work was completed than was planned. Since the SPI measures all project
work, the performance on the critical path also needs to be analyzed to determine whether
the project will finish ahead of or behind its planned finish date. The SPI is equal to the ratio
of the EV to the PV. Equation: SPI = EV/PV
• Cost performance index. The cost performance index (CPI) is a measure of the cost
efficiency of budgeted resources, expressed as a ratio of earned value to actual cost. It is
considered the most critical EVM metric and measures the cost efficiency for the work
completed. A CPI value of less than 1.0 indicates a cost overrun for work completed. A CPI
value greater than 1.0 indicates a cost underrun of performance to date. The CPI is equal to
the ratio of the EV to the AC. The indices are useful for determining project status and
providing a basis for estimating project cost and schedule outcome. Equation: CPI = EV/AC
• Total Cost Performance Index .A measure of the cost performance that must be achieved
with the remaining resources in order to meet a specified management goal, expressed as
the ratio of the cost to finish the outstanding work to the budget available.
69

BAC- Budget at completion
PV- As of how much work was planned to be done in $
AC- As of today how much does the work cost in $
EV – As of today how much work is actually done
PV= BAC * Planned % complete
AC= BAC * Actual % complete
SV = Scheduled Variance=Earned Value- Planned value= EV-PV
CV=Earned Variance –Actual Cost =EV-AC
SPI =Earned Value/Planned Value = EV/PV
CPI= Cost Performance Index=Earned Value/Actual Cost = EV/AC
EAC= Revised BAC=BAC/CPI= Budget cost completion/Cost Performance Index
TCPI= To Complete performance Index=
TCPI= (VAC-EV) / (BAC-AC) – BAC Base
TCPI= (VAC-EV) / (EAC-AC) – EAC Base
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Accuracy of Estimates
• Order of Magnitude Estimate: -25% - 75%; usually made
during Initiation Phase
• Budget Estimate: -10% - 25%; usually made during the
Planning phase
• Definitive Estimate: -5% - 10%; usually made during the
Planning phase
71

Accounting Standards
Present Value (value today of future cash flows):
PV = FV
(1 + r) N
FV = Future Value
R = Interest Rate
N = Number of time periods
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Reserve Analysis-Budget reserve analysis
• Contingency reserves (Know unknown)
• Project manager is authorized to have it and no management approval is
required.
• Management reserves (unknown unknown)
• Project Manager is not authorized to have it, needs to take prior
approval. These are not part of project base line.
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• Life Cycle Costing (Cradle to Grave)
Cost of whole life of the product and not just the cost of the
project.
• Cost Risk
Risk that may cause cost of the project go higher than planned.
• Law of Diminishing Returns
Overtime, adding more resources may increase overall output,
but eventually will decrease individual productivity.
• Value Analysis
Reducing the cost with out changing scope and possible
improving quality and performance.
• Learning Curve
Overtime the total cost will rise, but cost per unit will drop
because of repetition increases efficiency
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Analogous Esitmation Parametric Estimation
Analogous Estimation is based on historical
data
Parametric Estimation is also based on historical
data.
How could this be difference?
It uses historical data to determine duration
and/or cost estimates for similar activities or
WBS components or for a whole project
It uses historical data to prepare a mathematical
or statistical model to calculate duration and/or
cost estimates for activities or WBS components
or for a whole project
It is usually done in early phases of project
when detailed information is not available
It can only be done when detailed information is
available
The estimation so produced is usually not very
accurate. The accuracy of estimation is
dependent on expertise of person doing it.
The estimation so produced is usually more
accurate. The accuracy of estimation is
dependent on the sophistication of model used
and details available in historical data
It is usually less costly and time consuming It is usually more costly and time consuming
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Work Package is the smallest level of deliverable in WBS.
A Work Package cannot be broken down further (decomposed) into
another smaller deliverable. A deliverable (and hence a Work Package)
provides some tangible value. A Work Package is recognized, required and
valued by a stakeholder(s). A Work Package gives some sense of
achievement to project team and satisfies a stakeholder(s).Once a
deliverable (and hence a Work Package) is created, it is handed over to the
stakeholder(s).
The stakeholder(s) derive some benefit from the deliverable (and hence
Work Package). They use it for the purpose it was produced.
Succinctly, a Work Package is a result of an endeavor.
So what is an Activity?
A series of activities produces/creates a result or a deliverable (and hence
a Work Package). An activity, in itself, will not produce any result but a
series of activities will RESULT into a work package.
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79
Concept Formula Result Interpretation
To-Complete Performance
Index (TCPI)
Based on BAC: The TCPI is compared to the
cumulative CPI to determine if a
target EAC is reasonable.
The calculated project of cost
performance that must be achieved on
the remaining work to meet a specific
management goal (e.g. BAC or EAC).
TCPI = (BAC - EV) / (BAC - AC) A target EAC is assumed to be
reasonable if the TCPI is within
plus or minus 0.05 of the
cumulative CPI EVMmetric.
It is the work remaining divided by the
funds remaining.
Based on EAC:
TCPI = (BAC - EV) / (EAC - AC)

80
Variance at Completion (VAC) Result is a monetary value that
estimates how much over or under
budget (the variance) we will be at
the end of the project.
Anticipates the difference between the
originally estimated BAC and a newly
calculated EAC.
<0 = over budget
In other words, the cost we originally
planned minus the cost that we now
expect.
0 = on budget
>0 under budget
VAC = BAC - EAC

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Estimate at Completion (EAC) EAC = BAC / CPI
Original budget modified by the cost
performance. The result is a monetary value.
Expected final and total cost of an activity or
project based on project performance.
Assumption: use formula if current variances are thought
to be typical in the future.
Helps determine an estimate of the total costs
of a project based on actual costs to date.
This is the formula most often required on the exam.
There are several ways to calculate EAC
depending on the current project situation
and how the actual work is progressing as
compared to the budget.
EAC = AC + ETC
Actual Cost plus a new estimate for the
remaining work. Result is a monetary value.
Look for certain keywords to determine what
assumptions were made.
Assumption: use formula if original estimate was
fundamentally flawed or conditions have changed and
invalidated original estimating assumptions.
EAC = AC + BAC - EV Actual cost to date (AC) plus remaining
budget (BAC - EV).
Assumption: use formula if current variances are thought
to be atypical in the future and the original budget is
more reliable.
Result is a monetary value.
EAC = AC + ((BAC - EV) /(CPI * SPI))
Actual cost to date (AC) plus remaining
budget (BAC - EV)modified by both cost
performance and schedule performance.
Assumption: use formula if project is over budget but still
needs to meet a schedule deadline.
Result is a monetary value.

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Estimate to Complete (ETC) ETC = EAC - AC
Expected total cost minus actual cost
to date.
Expected cost needed to
complete all the remaining
work for a schedule activity, a
group of activities or the
project.
Inversion of the same formula from
the EAC calculations.
Result is a monetary value that will
tell us how much more the project
will cost.
Helps predict what the final
cost of the project will be upon
completion.
ETC = BAC - EV
The planned budget minus the earned
value.
There are many ways to
calculate ETC depending on the
assumptions made.
Assumption: use formula if current
variances are thought to be atypical
in the future.
will cost.
ETC = (BAC - EV) / CPI
The planned budget minus the earned
value modified by project
performance.
Assumption: use formula if current
variances are thought to be typical
in the future.
will cost.
ETC = We create a new estimate
when it is thought that the original
estimate was flawed.
This is not the result of a calculation
or formula, but simply a new estimate
of the remaining cost.

5-Project Quality Management
Quality vs Grade
Precision vs Accuracy
PDCA cycle - who?
Conformance to requirements - who?
Quality is free - who?
Cost-benefit analysis
Cost of quality
Cost of conformance
Cost of non-conformance
Cost of prevention
Cost of inspection
Cost of internal failures
Cost of external failures
Seven basic QC tools
Cause and effect diagram
Flowcharts
Checksheets
Pareto diagrams
Histograms
Control charts
Scatter diagrams
Benchmarking
Design of experiments
Statistical sampling
Force field analysis
Quality metrics (examples)
Quality checklists
Difference in QA and QC
Quality Audits
Process analysis
Tree diagrams (examples)
Prioritization matrices
Cost of poor quality
Run chart
Rule of seven
Prevention vs Inspection
Standards vs Regulations
Gold plating
Quality is free
Doing it right the first time
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3 or 6 sigma – represents level of quality
+/- 1 sigma equal to 68.26%
+/- 6 sigma equal to 99.99
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Perform Quality Assurnace Control Quality
It is part of Executing Process Group It is part of M&C Process Group
It is performed while the project work is
being done to create the deliverable
It is performed after work is completed and
deliverable is created
It is performed on the process to create
the deliverable
It is performed on the created deliverable
It is performed through Process Analysis
& Process Audit
It is performed through Inspection
It analyzes the defined processes to
recommend corrective or preventive
actions
It checks (tests) the created deliverable to
recommend defect repair
Quality Control Measurements are input
for this process – Quality Control
Measurements are used for Process
analysis
Quality Control Measurements are output
of this process
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6-Project HR Management
RAM
RACI
Organizational theory
Staffing management plan (contents)
Pre-assignment
Negotiation
Acquisition
Virtual teams
Multi-Criteria Decision Analysis (MCDA)
Interpersonal skills (examples)
Ground rules
Co-location
WAR room/Tight Matrix
Maslow's theory of needs
McGregors theory X and Y
Ouchi's theory Z
McCllends achievement theory
Herzberg's hygiene and motivation theory
List of hygiene factors
List of motivators
Vroom's expectancy theory
Conflict Resolution Techniques
Withdrawal/Avoid
Smooth/Accommodate
Compromise/Reconcile
Force/Direct
Collaborate/Problem Solve
Observation and Conversation
Sources of conflict (priority wise)
Halo effect
Types of power
Tuckman model (5 stages)
Collective bargaining agreement constraints
106

RAM -A responsibility assignment matrix (RAM) is a grid that shows the project
resources assigned to each work package. It is used to illustrate the connections
between work packages or activities and project team members. On larger
projects, RAMs can be developed at various levels.
of responsibility. One example of a RAM is a RACI (responsible, accountable,
consult, and inform) chart, project. A RACI chart is a useful
tool to use when the team consists of internal and external resources in order to
ensure clear divisions of roles and expectations. RACI
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Roles and responsibilities. The following should be addressed when listing the roles and
responsibilities needed to complete a project:
Role. The function assumed by or assigned to a person in the project. Examples of project roles
are civil engineer, business analyst, and testing coordinator. Role clarity concerning authority,
responsibilities, and boundaries should also be documented.
Authority. The right to apply project resources, make decisions, sign approvals, accept
deliverables, and influence others to carry out the work of the project. Examples of decisions
that need clear authority include the selection of a method for completing an activity, quality
acceptance, and how to respond to project variances. Team members operate best when their
individual levels of authority match their individual responsibilities.
Responsibility. The assigned duties and work that a project team member is expected to perform
in order to complete the project’s activities.
Competency. The skill and capacity required to complete assigned activities within the project
constraints. If project team members do not possess required competencies, performance can
be jeopardized. When such mismatches are identified, proactive responses such as training,
hiring, schedule changes, or scope changes are initiated.
Resource calendars. Calendars that identify the working days and shifts on which each specific
resource is available. This chart illustrates the number of hours a person,department, or entire
project team that will be needed each week or month over the course of the project.
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9.2.2.1 Pre-assignment
When project team members are selected in advance, they are considered pre-
assigned. This situation can occur if the project is the result of specific people being
identified as part of a competitive proposal, if the project is dependent upon the
expertise of particular persons, or if some staff assignments are defined within the
project charter.
9.2.2.3 Acquisition
When the performing organization is unable to provide the staff needed to
complete a project, the required services may be acquired from outside sources.
This can involve hiring individual consultants or subcontracting work to another
organization.
9.3 Develop Project Team
Develop Project Team is the process of improving competencies, team member
interaction, and overall team environment to enhance project performance. The
key benefit of this process is that it results in improved teamwork, enhanced
people skills and competencies, motivated employees, reduced staff turnover
rates, and improved overall project performance.
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One of the models used to describe team development is the Tuckman ladder
(Tuckman, 1965; Tuckman & Jensen, 1977), which includes five stages
of development that teams may go through. Although it’s common for these stages to
occur in order, it’s not uncommon for a team to get stuck in a particular stage or slip to
an earlier stage.
• Forming. Team meets and learns about the project and their formal roles and
responsibilities. Team members tend to be independent and not as open in this phase.
• Storming. Team begins to address the project work, technical decisions, and the
project management approach. If team members are not collaborative and open to
differing ideas and perspectives, the environment can become counterproductive.
• Norming. Team members begin to work together and adjust their work habits and
behaviors to support the team. The team learns to trust each other.
• Performing. Teams that reach the performing stage function as a well-organized unit.
They are interdependent and work through issues smoothly and effectively.
• Adjourning. Team completes the work and moves on from the project. This typically
occurs when staff is released from the project as deliverables are completed or as part
of carrying out the Close Project or Phase process (Section 4.6)
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9.3.2.5 Colocation
Colocation, also referred to as “tight matrix,” involves placing many or all of the
most active project team members in the same physical location to enhance their
ability to perform as a team. Colocation can be temporary, such as at strategically
important times during the project, or for the entire project. Colocation strategies
can include a team meeting room (sometimes called “war room”), places
9.3.2.6 Recognition and Rewards
People are motivated if they feel they are valued in the organization and this value
is demonstrated by the rewards given to them. Generally, money is viewed as a
tangible aspect of any reward system, but intangible
rewards could be equally or even more effective. Most project team members are
motivated by an opportunity to grow, accomplish, and apply their professional
skills to meet new challenges. A good strategy for project managers is to give the
team recognition throughout the life cycle of the project rather than waiting until
the project is completed.
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9.4 Manage Project Team is the process of tracking team member performance,
providing feedback, resolving issues, and managing team changes to optimize
project performance. The key benefit of this process is that it influences team
behavior, manages conflict, resolves issues, and appraises team member
performance.
Human Resource Management Plan. The human resource management plan
provides guidance on how project human resources should be defined, staffed,
managed, controlled, and eventually released. It includes, but is not limited to:
• Roles and responsibilities,
• Project organization, and
• Staffing management plan.
112

9.4.2.3 Conflict Management
Conflict is inevitable in a project environment. Sources of conflict include scarce
resources, scheduling priorities, and personal work styles. Team ground rules,
group norms, and solid There are five general techniques for resolving conflict. As
each one has its place and use, these are not given in any particular order:
• Withdraw/Avoid. Retreating from an actual or potential conflict situation;
postponing the issue to be better prepared or to be resolved by others.
• Smooth/Accommodate. Emphasizing areas of agreement rather than areas of
difference; conceding one’s position to the needs of others to maintain harmony
and relationships.
• Compromise/Reconcile. Searching for solutions that bring some degree of
satisfaction to all parties in order to temporarily or partially resolve the conflict.
• Force/Direct. Pushing one’s viewpoint at the expense of others; offering only
win-lose solutions, usually enforced through a power position to resolve an
emergency.
• Collaborate/Problem Solve. Incorporating multiple viewpoints and insights from
differing perspectives; requires a cooperative attitude and open dialogue that
typically leads to consensus and commitment.
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Hallo Effect;-
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124
Ouchi’s Theory Z
1. Long-Term Employment
2. Collective Decision-making
3. Individual Responsibility
4. Slow Evaluation/ Promotion
5. Implicit Informal Control with
Explicit, Formalized Control
6. Specialized Career Path
7. Holistic Concern for Employees

McClelland’s Achievement Motivation Theory
McClelland and colleagues studied the
behavioral effects of three needs
Need for Achievement
Need for Power
Need for Affiliation
Emphasized the Need for Achievement,
although they investigated all three
needs
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Motivational Theories
Maslow’s Hierarchy of Needs By Abraham Maslow –
• Self-actualization, Self development creativity, realization of potential
• Self esteem, Reputation, Respect from others, Recognition & self confidence
• Social-Love belonging, togetherness, group member
• Safety & Security,-Economic Security
• Basic – Food clothing and Shelter
McGregor’s Theory of X and Y
• X – Manager who distrust the team-Theory X organizations work on a
‘carrot and stick’ basis
• Y – Manager who trust the team
Herzberg’s Theory – poor hygiene factors destroy motivation but improving them
will not improve motivation
Motivating Agents
• Responsibility
• Self-actualization
• Professional growth
• Recognition
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Powers:
• Legitimate Power- formal Power/ Positional Power
• Reward Power- Ability to award a Bonus – (Always to be
done in Public)
• Expert Power (earned)- Being a subject matter expert
• Referent Power – Draws power by association with a higher
Authority
• Punishment Power- Ability to demote or with hold rewards
129

4- Human Resource
Salience Model – Stakeholder Analysis
Mitchell, Agle and Wood (1997-99) have come up with stakeholder analysis model, that can
help a project manager in early phase of planning process to identify stakeholder and classify
according to three major attributes -
1.Power – to influence the organization or project deliverables (coercive, financial or
material, brand or image);
2.Legitimacy – of the relationship & actions in terms of desirability, properness or
appropriateness;
3.Urgency – of the requirements in terms of criticality & time sensitivity for the stakeholder.
Based on the combination of these attributes, priority is assigned to the stakeholder.
130
3
(High Priority)
7 - Definitive
Power, Legitimacy & Urgency
Level 2
(Medium
Priority)
4 – Dominant
Power &
Legitimacy
5 - Dangerous
Power &
Urgency
6 – Dependent
Legitimacy &
Urgency
Level 1
(Low Priority)
1 – Dormant
Power
2 –
Discretionary
Legitimacy
3 – Demanding
Urgency

7-Project Communications Management
Interactive communication (Examples)
Push communication (Examples)
Pull communication (Examples)
Sender receiver model diagram
Information Management Systems (Examples)
Paralingual
Body language (Non-verbal)
Communication formula (3 situations)
Formal communication (Examples)
Informal communication (Examples)
Time spent by PM
Active listening
Emphatic listening
Feedback
Formal written (Examples)
Formal verbal (Examples)
informal written (Examples)
Informal verbal (Examples)
131

. It’s been said that 90 percent of a project manager’s time is spent communicating.
ProjectCommunications Management processes, which are as follows:
10.1 Plan Communications Management—The process of developing an
appropriate approach and plan for project communications based on stakeholder’s
information needs and requirements, and available organizational assets.
10.2 Manage Communications—The process of creating, collecting, distributing,
storing, retrieving and the ultimate disposition of project information in
accordance with the communications management plan.
10.3 Control Communications—The process of monitoring and controlling
communications throughout the entire project life cycle to ensure the information
needs of the project stakeholders are met.
132

.
133

.
Resource leveling Resource Smoothing
It applies the resource constraints to the project and may
result in change in project duration.
We apply resource smoothing after doing resource
leveling and we make use of slack, and will not result in
change of project duration.
Resource Leveling is primarily driven by resource
constraints, like you do not have more than 45 hours of
the given resource for a week.
Resource smoothing is more to do with desired limits, like
we do have 45 hours available for given resource but we
wish that we allocate 38 hours per week so we have some
breathing space.
The allocation limits identified in resource leveling must
be applied.
The desired limit identified in resource smoothing may
not be applied in some cases, if we do not have slack.
The resource leveling is done first and then we do the
resource smoothing. Since we need to first accommodate
the resource constraints before we can optimize it.
We apply resource smoothing after applying resource
leveling
134

.The communication activities involved in these processes may
often have many potential dimensions that need
to be considered, including, but not limited to:
• Internal (within the project) and external (customer, vendors,
other projects, organizations, the public);
• Formal (reports, minutes, briefings) and informal (emails,
memos, ad-hoc discussions);
• Vertical (up and down the organization) and horizontal (with
peers);
• Official (newsletters, annual report) and unofficial (off the
record communications);
• Written and oral, and verbal (voice inflections) and nonverbal
(body language).
135

.
Communication Models
The communication models used to facilitate communications and the exchange of information may vary
from project to project and also within different stages of the same project. A basic communication
model, shown in Figure 10-4, consists of two parties, defined as the sender and receiver. Medium is the
technology medium and includes the mode of communication while noise includes any interference or
barriers that might compromise the delivery of the message. The sequence of steps in a basic
communication model is:
• Encode. Thoughts or ideas are translated (encoded) into language by the sender.
• Transmit Message. This information is then sent by the sender using communication channel (medium).
The transmission of this message may be compromised by various factors (e.g., distance, unfamiliar
technology, inadequate infrastructure, cultural difference, and lack of background information). These
factors are collectively termed as noise.
• Decode. The message is translated by the receiver back into meaningful thoughts or ideas.
• Acknowledge. Upon receipt of a message, the receiver may signal (acknowledge) receipt of the message
but this does not necessarily mean agreement with or comprehension of the message.
• Feedback/Response. When the received message has been decoded and understood, the receiver
encodes thoughts and ideas into a message and then transmits this message to the original sender.
The components of the basic communication model need to be considered when project communications
are discussed.
As part of the communications process, the sender is responsible for the transmission
of the message, ensuring the information being communicated is clear and complete, and confirming the
communication is correctly understood. The receiver is responsible for ensuring that the
information is received in its entirety, understood correctly, and acknowledged or
responded to appropriately.
136

.
Communication Methods
There are several communication methods that are used to share information among project
stakeholders.
These methods are broadly classified as follows
• Interactive communication. Between two or more parties performing a multidirectional exchange
of information. It is the most efficient way to ensure a common understanding by all participants on
specified topics, and includes meetings, phone calls, instant messaging, video conferencing, etc.
• Push communication. Sent to specific recipients who need to receive the information. This ensures
that the information is distributed but does not ensure that it actually reached or was understood by the
intended audience. Push communications include letters, memos, reports, emails, faxes, voice mails,
blogs, press releases, etc.
• Pull communication. Used for very large volumes of information, or for very large audiences, and
requires the recipients to access the communication content at their own discretion. These methods
include intranet sites, e-learning, lessons learned databases, knowledge repositories, etc.
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8- Project Risk Management
Risk definition
Pure risks
Business risks
Known risks
Unknown risks
Difference between risk and issue
Risk threshold
Risk attitude
Documentation reviews (which documents?)
Checklist analysis
Assumptions analysis
Diagramming techniques
Influence diagrams
SWOT analysis
Risk register (when created?)
Purpose of Qualitative Risk analysis
Prb and Impact matrix
Risk data quality assessment
Risk urgency assessment
Risk categorization
Risl Breakdown structure
Risk prioritization number (risk score)
Sensitivity analysis using tornado diagram
Modelling and Simulation using Monte Carlo
Expected Monetary Value (EMV)
Strategies for negative risks or threats
Strategies for positive risks or opportunities
Contingency Response Strategy
Contigency Plans
Fallback Plans
Secondary risks
Residual risks
Risk re-assessment
Risk audits
Risk reserve analysis
Murphy's law
Cardinal scale
Ordinal scale
RAG scale
Watch list
Workaround
Passive acceptance
Active acceptance
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Risk Identification – which are likely to affect the project
Risk Quantification – evaluation of risk to assess the
range of possible outcomes
Sometimes treated as single process; risk
analysis/assessment
Risk Response Development – defining enhancement
steps for opportunities and response
Sometimes called response planning/mitigation
Risk Response Control – responding to changes in risk
over course of project
May be combined as risk management
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Defining a Project’s Risk Categories
Technical, quality, or performance risks Technical risks are associated
with new, unproven, or complex technologies being used on the project.
Changes to the technology during the project implementation can also be a risk. Quality risks
are the levels set for expectations of impractical quality and performance. Changes to industry
standards during the project can also be lumped into this category of risks.
Project management risks These risks deal with faults in the management of the project: the
unsuccessful allocation of time, resources, and scheduling; unacceptable work results (low-
quality work); and poor project management as a whole.
Organizational risks The performing organization can contribute to the
project’s risks through unreasonable cost, time, and scope expectations; poor project
prioritization; inadequate funding or the disruption of funding; and competition with other
projects for internal resources.
External risks These risks are outside of the project, but directly affect it—for example, legal
issues, labor issues, a shift in project priorities, or weather. “Force majeure” risks can be scary,
and usually call for disaster recovery rather than project management. These are risks caused
by earthquakes, tornados, floods, civil unrest, and other disasters
143

.
144

145

146

Decision Tree
147

148

149

Budget
150

151

152

153

154

155

156

157

158

159

160

161

162

9-Project Procurement Management
Types of contracts
FFP
FPIF
FPEPA
CPFF
CPIF (sharing ratio)
CPAF
T & M
Important procurement documents
Procurement statement of work
Source selection criteria (some examples)
Activites done in Plan Procurements
Activites done in Conduct Procurements
Activites done in Control Procurements
Activites done in Close Procurements
Bidder conferences
Force Majeure Clause
Claims administration
Procurement audits
ADR (Alternative Dispute Resolution)
Letter contract
Letter of intent
Privity
Screening system
Weighting system
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Let us understand plain vanilla contract types:
Fixed Price (FP)
Cost Reimbursable (CR)
Time and Material (T&M)
Let us assume that we are undertaking a house renovation. As part
of renovation we need to rewire the whole house. There would be 2
broad cost components for the rewiring exercise
Labor or HR cost
Wire or material cost
Let us assume that we have called an electrical contractor to lay the
electricity wiring. Let us also assume that the contractor is going to
give us a cost estimate for rewiring work. The contractor would
consider aforementioned costs components to give us a cost
estimate. There could be three scenarios.
164

165

166

167

168

169

170

171

172

173

174

175

176

Scenario I - Fixed Price
This scenario would be possible if electrical layout and design has been
finalized. The contractor can work with a well defined statement of work.
HR Cost - The contractor would look at the whole house to estimate how
much time & effort would be taken by her/him to do the work.
Material Cost - The contractor would also survey the house to make an
approximation of how much wire (quantity of wire) would be required for
rewiring.
Based on the time/effort estimates & wire quantity estimates and after
adding some profit margin, the contractor would provide us with a price
estimate for re-wiring the house. This estimate (once finalized and
accepted by us) would become part our contract. We will have to pay the
fixed price to the contractor for completing the work. Even if the
contractor overruns this price, we would not be liable to pay anything
extra.
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Scenario II - Time & Material
This scenario would be possible if electrical layout and design has not been
finalized. The contractor does not have a well defined statement of work.
HR Cost - The contractor would not be able to estimate time & effort for
completing the work as the electrical layout and design is yet to be finalized.
She/he would, rather, estimate the rate per day (it could be any other unit of time
also like hour) for her/his Laborers.
Material Cost - Again the contractor would not be able to estimate the quantity of
wire that would be required for completing the work. She/he would estimate the
rate per meter (it could be any other unit of quantity like Kg) for different types of
wires required.
The contractor would provide us with a labor rate & wire rate (after adding her/his
profit margins) for re-wiring the house. These rates (once finalized and accepted by
us) would become part our contract. These rates will remain fixed for the duration
of the contract - we will have to pay the fixed rate to the contractor for completing
the work.
For the buyer & the seller rate is fixed but the quantity of labor and wire is not
fixed.
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Scenario III - Cost Plus or Cost Reimbursable
This scenario would be possible if electrical layout and design has not been finalized. Moreover let us
assume there is a constant fluctuation in labor rates and wire rates (this practically happens as
copper/aluminum prices fluctuate on a regular basis). The contractor does not have a well defined
statement of work.
HR Cost - The contractor would not be able to estimate time & effort for completing the work as the
electrical layout and design is yet to be finalized. She/he would also not be able to determine labor
rates as they would fluctuate on a regular basis.
Material Cost - Again the contractor would not be able to estimate the quantity of wire that would
be required for completing the work.She/he would also not be able to determine wire rates as they
will fluctuate on a regular basis.
The contractor would propose that (since labor rate & wire rate cannot be fairly estimated) she/he
will share the cost incurred by her/him on a periodic basis and these costs should be reimbursed by
us. This proposal (once finalized and accepted by us) would become part our contract. Neither the
rates nor the quantity is fixed for the duration of the contract - we will have to reimburse the costs
incurred by the contractor and also provide additional fee as profit margin for the contractor.
For the buyer & the seller neither the rate nor the quantity of labor and wire is fixed.
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10- Project Stakeholder Management
Definition of stakeholder
Definition of positive stakeholder
Definition of negative stakeholder
Stakeholder analysis
Power Interest/Concern Grid
Salience model
Profile analysis meetings
Stakeholder Engagement Assessment Matrix
Stakeholder Analytical Techniques
Unaware
Resistant
Neutral
Supportive
Leading
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3-point estimation is based on 3 different estimates to improve the estimate (of cost or duration). It takes
into consideration uncertainty and risk associate with a project or an activity. We estimate using 3 different
values to arrive at a mean estimate. These 3 different values are
Optimistic value (O) , Pessimistic value (P), Most Likely value (M)
Now if we have to arrive at an estimate, we can do so by using either of the following two formulas
Simple Average E_SA=(O+P+M)/3
Average using PERT formula PERT (Program Evaluation & Review Technique) is a weighted average
formula. It gives a weight of 4 to M.
E_PERT=(O+P+4×M)/6
Refer to PMBOK® pg. 150-151 and 172-173 for further details. Now some other questions arise
Why have we given a weight of 4 to M? Why have we not given any other weight? Why have we not given
any weight to either O or P? Can we use any other formula?
We can certainly give different weights and use a different formula. The formulas mentioned in PMBOK
have some statistical background and are published after looking at various industries/projects. These
formulae (specifically PERT) were published after some statistical and research findings; when project
management (as a subject) was still evolving. Since then they have been found useful to provide more
accurate results then just a single value.
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Let us consider an example to see how these formulae work. Let us assume that we have to estimate how
much time it will take to go from our home to our work place, we can think of 3 different conditions:
Optimistic – Roads would be free of any traffic congestions and we will not encounter and Red signals
Pessimistic – There might be serious traffic bottlenecks like a major accident on the road and our vehicle
may breakdown
Most Likely – There would be regular traffic conditions
Let us assume that our 3 different estimates were 45 minutes, 225 minutes and 90 minutes respectively.
Simple Average E_SA=(45+225+90)/3 , E_SA=120 minutes
PERT Formula
E_PERT=(45+225+4×90)/6, E_PERT=105 minutes
The reader will notice that PERT estimates are more close to 'Most Likely' value and they are likely to yield
better results.
Concluding Remarks:
3-point estimation is based on 3 different values
Simple average is a form of 3-point estimation technique
PERT is a form of 3-point estimation technique
PERT and Simple Average are 2 more popular ways if arriving at 3-point estimates.
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'Project Sponsor' - It is a person or a department or an organization who
provides financial resources for the project.
'Project Sponsor' as a Role and not as a person or job title. In a
particular organization CEO might be the 'Project Sponsor' (role) but
he would little role in decision making. In another organization a
senior manager is a 'Project Sponsor' (role) as well as the decision
maker. In yet another organization 'Project Sponsor' (role) is split
between multiple managers.
It is also possible that a person in Project Sponsor's role could also
perform other roles like elucidating product requirements
(Customer), providing human resources (Functional Manager),
providing subject matter expertise (Consultant) etc.
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185

Click to Enlarge
1. What is the definition of critical path? Critical Path is the "longest path" to complete the project in "shortest
possible duration". Critical Path has least "Total Float" of all the paths. Start-A-D-E-Finish in following figure is the
critical path with "Zero" float.
•2. What is a Critical Activity? All activities on Critical Path are Critical Activities.
3. The name suggests that Critical Path is the most important path of the project. Is it not? Critical Path is the
most important path because it has longest duration with no flexibility (least total float). If project team misses
any date on Critical Path, the project is likely to get delayed. Critical Path is not the most important path
because it would have more important or more complex activities on it.
4. How can Critical Path be longest and shortest at the same time?The path is longest among all the paths on
a network diagram i.e. paths other than the Critical Path would have duration shorter than the Critical Path. In
above figure Start-A-D-E-Finish is longer than Start-B-C-Finish. The duration of Start-A-D-E-Finish is 11 days
while duration of Start-B-C-Finish is 10 days. Critical Path also defines shortest possible duration for the
project. The project cannot be completed unless all the paths on a network diagram (all activities on all the
paths) are complete. The project in above figure will be over only if both the paths (Start-A-D-E-Finish & Start-
B-C-Finish) are completed. The shortest possible duration to do so would be 11 days.
5. Can a project have multiple longest paths?Yes.
6. Why is it said that all activities on Critical Path have "Least" Total Float. Shouldn't it be "Zero" Total Float?A
network diagram can have "Negative" Total Float. This can happen in two circumstances - Fast Tracking to
meet schedule constraint or Delay while Executing. In case the project team is working with "Negative" Total
Float then the path having "Least" Total Float will be Critical Path.
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Click to Enlarge
7.Critical Path is current point forward. Activities that are complete are complete. Critical Path
should be dynamically calculated and can change based on current performance. A PM should
watch (manage) the Critical Path like a hawk.
8. So managing schedule along Critical Path is more important than the other paths. If project
team misses a date on critical path, project will get delayed. Is it a Threat for the project?
•Yes, but at the same time it is an Opportunity. If project team completes a Critical Activity
early then there is a chance of finishing the project early.
9. Can a "Near Critical Path" become Critical Path? Yes. If activities on "Near Critical Path"gets
delayed and it becomes longer than original Critical Path then "Near Critical Path" becomes
the new Critical Path. So a PM should closely manage "Near Critical Path" as well.
10. Would it be useful to add buffer to Non Critical Activities? Usually no but a buffer should be
added to activities on "Critical Path".
11. Should a buffer be added to all activities on the Critical Path? Ideally No. Instead "Critical
Chain Method" should be used. In "Critical Chain Method" a dummy buffer activity is added at
the end of Critical Chain. Critical Chain defines a few other types of buffers which are not
discussed in this article.
12. What is "Critical Chain Method"?It is safe to say that Critical Chain is refined Critical Path.
A complete discourse is out of scope for this article. The reader can also look at following
article to understand the probability of completing the project within schedule constraint.
188

clarify
• One can use different methodologies and
tools (e.g., agile, waterfall, PRINCE2) to
implement the project management
framework.
189

4- Integration Management
220
Conditions for Configuration Management:
Market competition forces new features to be added to the product.
The project took so long that product is nearing to obsoletion; therefore, a few
modifications will be applied to the product to keep it current.
The client dreamed about a new feature to be added to the product.
I hope now you don’t have any problems in cracking the questions on the PMP
Certification exam reagarding this topic.
The difference between the Change Management System and the Configuration
Management System:
•Change Management manages the changes in project baseline or process.
•An example of Change Management system can be a change in budget, schedule, etc.
•Configuration Management deals with changes in product specifications.
•An example of Configuration Management can be an extra feature added to the product.
Conditions for Change Management:
•Delay in schedule: if your schedule is delayed, you will develop a new schedule reflecting
the current situation and try to get it approved.
•Cost overrun: If you run out of money, you will need to re-estimate your cost to complete
the project and get it approved.

223
1. PERT (P + 4M + O )/ 6
Pessimistic, Most Likely,
Optimistic
2. Standard Deviation (P - O) / 6
3. Variance [(P - O)/6 ]squared
4. Float or Slack LS-ES and LF-EF
5. Cost Variance EV - AC
6. Schedule Variance EV - PV
7. Cost Perf. Index EV / AC
8. Sched. Perf. Index EV / PV
9. Est. At Completion
(EAC)
BAC / CPI,
AC + ETC -- Initial Estimates
are flawed
AC + BAC - EV -- Future
variance are Atypical
AC + (BAC - EV) / CPI --
Future Variance would be
typical
10. Est. To Complete
Percentage complete
EAC - AC
EV/ BAC
11. Var. At Completion BAC - EAC
12. To Complete
Performance Index TCPI
Values for the TCPI index of less then 1.0
is good because it indicates the efficiency
to complete is less than planned. How
efficient must the project team be to
complete the remaining work with the
remaining money?
( BAC - EV ) / ( BAC - AC )
13. Net Present Value Bigger is better (NPV)
14. Present Value PV FV / (1 + r)^n
15. Internal Rate of ReturnBigger is better (IRR)
16. Benefit Cost Ratio Bigger is better ((BCR or Benefit / Cost)
revenue or payback VS. cost)
Or PV or Revenue / PV of Cost
17. Payback Period Less is better
Net Investment / Avg. Annual cash flow.
18. BCWS PV
19. BCWP EV
20. ACWP AC
0- General Folrmulas

0- General Folrmulas
224
21. Order of Magnitude Estimate -25% - +75% (-50 to +100% PMBOK)
22. Budget Estimate -10% - +25%
23. Definitive Estimate -5% - +10%
24. Comm. Channels N(N -1)/2
25. Expected Monetary Value Probability * Impact
26. Point of Total Assumption (PTA) ((Ceiling Price - Target Price)/buyer's Share Ratio)
+ Target Cost
Sigma σ
•1σ = 68.27%
•2σ = 95.45%
•3σ = 99.73%
•6σ = 99.99985%
Return on Sales ( ROS ) Net Income Before Taxes (NEBT) / Total Sales OR
Net Income After Taxes ( NEAT ) / Total Sales
Return on Assets( ROA ) NEBT / Total Assets OR
NEAT / Total Assets
Return on Investment ( ROI )
NEBT / Total Investment OR
NEAT / Total Investment
Working Capital Current Assets - Current Liabilities
Discounted Cash Flow Cash Flow X Discount Factor
Contract related formulas
Savings = Target Cost – Actual Cost
Bonus = Savings x Percentage
Contract Cost = Bonus + Fees
Total Cost = Actual Cost + Contract Cost

225
Some interesting sites/readings worth visiting as follows:
http://www.pmi.org (PMI website)
http://www.pmzilla.com (PMZilla)
http://pmzilla.com/comprehensive-pmp-notes (PM Zilla - Summary Notes)
http://pmzilla.com/memorizing-inputs-tools-and-outputs-pmp (PM Zilla - Memorizing Inputs, Tools
and Techniques, Outputs – ITTO’s)
http://www.oliverlehmann.com (Oliver F. Lehmann)
http://www.oliverlehmann.com/pmp-self-test/75-free-questions.htm#providers_ (OFL - free PMP
Exam Self-Assessment Test and link to tons of Providers of Free PMP + CAPM Preparation Questions)
http://www.velociteach.com (Andy Crowe)
http://www.rmcproject.com (Rita Mulcahy – RMC Project Management)
http://www.cornelius-fichtner.com (Cornelius Fichtner)
http://www.project-management-prepcast.com (Cornelius Fichtner)
http://www.project-management-flash-cards.com (PM PrepCast free flash cards)
http://www.kimheldman.com (Kim Heldman)
http://www.simplilearn.com (Simplilearn)
http://www.pmstudy.com (many saying sample exams close to real one)
http://www.deepfriedbrainproject.com (cool site – PMP Exam Prep Blog)
http://www.brainbok.com (cool site – various topics)
http://quizlet.com/subject/pmp/#http://quizlet.com/subject/pmp (cool site - various subjects)
Lots, lots more . . (google it!)
0- General Sites

226
1. Which of the following people's expectations should be closely managed as
per salience model?
2.
Preferential logic
(B) Soft logic
(C) Discretionary dependency
(D) Hard logic

227
Qualitative Risk Analysis
A qualitative risk analysis prioritizes the identified project risks using a pre-defined rating scale. Risks will be
scored based on their probability or likelihood of occurring and the impact on project objectives should they
occur.
Probability/likelihood is commonly ranked on a zero to one scale (for example, .3 equating to a 30% probability of
the risk event occurring).
The impact scale is organizationally defined (for example, a one to five scale, with five being the highest impact
on project objectives - such as budget, schedule, or quality).
A qualitative risk analysis will also include the appropriate categorization of the risks, either source-based or
effect-based.
Quantitative Risk Analysis
A quantitative risk analysis is a further analysis of the highest priority risks during a which a numerical or
quantitative rating is assigned in order to develop a probabilistic analysis of the project.
A quantitative analysis:
- quantifies the possible outcomes for the project and assesses the probability of achieving specific project
objectives
- provides a quantitative approach to making decisions when there is uncertainty
- creates realistic and achievable cost, schedule or scope targets
In order to conduct a quantitative risk analysis, you will need high-quality data, a well-developed project model,
and a prioritized lists of project risks (usually from performing a qualitative risk analysis)
Summary
Qualitative: risk-level , Quantitative: project-level
Qualitative: subjective evaluation of probability & impact, Quantitative: probabilistic estimates of time & cost
Qualitative: quick and easy to perform , Quantitative: time consuming
Qualitative: no special software or tools required ,Quantitative: may require specialized tools

228
Quality Assurance
Quality assurance is an audit function that evaluates the actual project quality results against the planned or
intended results to ensure that the appropriate processes are being employed by the project team.
“Assuring” quality implies ensuring the project quality requirements are being achieved
Quality Control
Quality control is the implementation of quality processes in order to achieve the project and product quality
requirements.
“Controlling” quality implies implementing the appropriate quality steps and actions
QC versus QA Example
When your team members submit their status reports to you as project manager, you evaluate the information
and verify that it is accurate before including it in your overall project performance report. The act of validating
the information would be considered quality control. You are determining the quality of a project deliverable.
Upon compiling all of the project information into the project performance report, you evaluate the current
results of the project against the project management plan, baselines, and objectives. The evaluation of the
variances between the plan and the actuals would be considered quality assurance. You are determining the
need for any process or procedural changes based on differences between the documented requirements and
the actual project results.
Summary
While often confused, quality assurance and quality control are two distinct processes.
QC: controlling / validating the quality of the project outputs
QA: assuring the appropriate processes are being employed on the project based on the quality control results

0- Common Concepts
229
Summary
Similarities between analogous and parametric estimating:
Can be used for both duration and cost estimating
Essentially a combination of historical information (leveraging past
projects/activities) and expert judgment
Differences between analogous and parametric estimating:
Analogous is considered top-down and is less accurate than parametric. Analogous
estimating uses an “analogy” – comparing a past similar project to your current
project.
Parametric is more accurate, specifically when the underlying data is scalable.
Parametric uses a relationship between variables (a unit cost/duration and the
number of units) to develop the estimate.

0- Common Concepts
230
Precision
To state that the results are precise implies that the measurements are consistent with very little
variation.
Accuracy
To state that the results are accurate means that they are correct. This may be in terms of achieving the
desired result or being able to be measured correctly.
Example
Last year we decided to get a Wii game console. One of our favorite games is Wii Sports Resort.
When I first started playing the archery game my arrows were flying everywhere and there was no
consistency to my results - I was neither precise nor accurate.
As I started to get the feel for the controller and the movements, I was able to cluster my arrows within a
small area - unfortunately on the upper right side of the target. I was precise, but not accurate.
My husband, who is just slightly competitive and is also very coordinated, managed to get all of his arrows
directly on the bulls-eye right from the start. He is both precise and accurate.
Summary
The difference between precision and accuracy will potentially feed questions on both the PMP and the
CAPM exams. Remember that precision does not imply accuracy, nor does accuracy imply precision

0- Common Concepts
231
Project Life Cycle
The project life cycle consists of the defined project phases which are usually identified and documented within
the organization’s project management methodology. Dividing the project into phases allows for increased
control by the organization. These phases are sequential and usually overlapping.
Project life cycles will vary based on the industry, the organization, or even the type of project that is being
conducted. There are usually transitions between the phases that require some type of handoff or information
or component transfer.
Generally speaking, staffing levels and costs are low at the beginning of the project life cycle and then peak
during the middle. Risk, or uncertainty, however, is greater at the beginning of the project life cycle and
decreases as the project becomes increasingly defined.
Each project life cycle produces only one project.
Product Life Cycle
The product life cycle reflects the phases involved in any type of product: a cell phone, a laptop, a TV, a
children’s toy, an appliance. Regardless of the product, the product life cycle has the same sequential, but non-
overlapping phases:
Ideation,Creation,Introduction,Growth,Maturity,Decline.,retirement
The product life cycle can include multiple project life cycles.
Summary
The project life cycle differs by industry, organization, project type and encompasses sequential and
overlapping phases.
The product life cycle does not differ regardless of the type of product, has sequential but non-overlapping
phases, and may include multiple project life cycles.

0- Common Concepts
232
Project Statement of Work
The project statement of work (SOW) is a narrative description of products or services to be delivered by the
project and is provided by the project initiator or customer for external projects or the sponsor or requesting
organization for internal projects. If the project is being done for an external customer, the SOW may be
received from the customer as part of a bid document.
The SOW details the business need for the project, the product scope description, the strategic plan, and the
characteristics of the product the project will create.
Business Case
The business case will confirm the business need and drivers for the project and will most likely include
information on a cost benefit analysis, so as to justify the funding of the project, such as: net present value
(NPV), internal rate of return (IRR), and/or return on investment (ROI).
The business case should also reference the driver behind the project, such as: market demand, organizational
need, customer request, technological advance, legal requirement, or social need.
The business case is generally completed by the sponsor of the project.
Example
The Excelsior Corp requested that Passionate Project Management provide a customized onsite PMP exam
preparation course. Excelsior provided PPM with a statement of work detailing the specifics of the course:
number of attendees, industry-specific information to be included, target date, location, etc.
The PPM contract administrator evaluated the SOW and conducted a financial analysis to determine the
feasibility of the project based on the projected revenue. The results of the financial analysis were
documented in the project business case provided to the president of the company for contract authorization.
Summary
Both the project SOW and the business case are critical inputs to the development of the project charter (the
authorization to commence the project). The SOW is generated by the requesting party, detailing what they
are requesting, whereas the business case is developed internally, usually by the project sponsor, to provide a
financial and feasibility analysis of the project.

0- Common Concepts
233
Enterprise Environmental Factors
Enterprise environmental factors are internal and external environmental factors that can influence a project’s
success, including:
Organizational culture
Organizational structure
Internal and external political climate
Existing human resources
Available capital resources
Regulatory environment
Financial and market conditions
Enterprise environmental factors are an input to 18 of the 42 processes.
Organizational Process Assets
Organizational process assets include any of the organization’s process assets that may be used to ensure
project success.
They generally fall into two categories:
Processes, guidelines, and procedures, such as: organizational standard processes, standardized guidelines,
templates
The corporate knowledge base, such as, lessons learned, historical information, past project files (I call this: The
Repository of Goodness)
Organizational process assets are an input to 34 of the 42 processes.
Summary
Enterprise environmental factors are the internal and external influences on our project, such as the corporate
culture or the financial environment.
Organizational process assets are the procedures, guidelines, templates that we can use on our project as well
as the corporate knowledge base, such as past project reports and lessons learned.

0- Common Concepts
234
Brainstorming
Brainstorming is a group creativity technique that can be used for multiple aspects of project management.
Brainstorming involves facilitating a group of individuals in generating as many ideas on a topic as possible. To
be most effective, participants are challenged to think creatively and consider all ideas and options and are
ensured of a “safe space” to share their ideas.
Nominal Group Technique
Nominal group technique takes brainstorming a step further by adding a voting process to rank the
ideas that are generated. However, versus using simple voting, each participant must provide their input
and there is discussion regarding the relative ranking that result. This allows participants to be more engaged
in the discussion and in the solutions.
Example
As standard practice, I will conduct a brainstorming session early on in my projects to have team members
identify the risks of the project – both threats and opportunities. This allows the group to interact together
(preferably in-person, but can also be done virtually with some limitations) and the team begins to form their
identity and embrace the challenge of the project as united group.
I will then leverage a nominal group technique approach when it comes to evaluating and ranking the risks.
Everyone will write down their votes, all votes are then shared, and then we discuss the results in order to
validate our final risk ranking.
Summary
Both brainstorming and nominal group technique are group creativity techniques that can be extremely
beneficial in the planning and analysis of project management. These techniques allow team members or
groups of stakeholders to work as a team on identifying problems and solutions.

0- Common Concepts
235
Work Package
The work package level is the lowest level of a work breakdown structure (WBS). The WBS is developed during
the “Create WBS” planning / scope process. The WBS level is achieved when the work can be accurately
estimated (both cost and duration) and can be managed by one individual: the work package owner.
Although the work package can be managed by one person, the actual work within the work package (the
activities) may be completed by multiple individuals.It may be helpful to correlate “work package” to “scope”.
Activity
The work packages are decomposed into activities (or “schedule activities) to create the activity list. The activity
list will then be used to develop the project schedule.
An activity has an expected duration. If the event has no duration, it is considered a milestone. Activities also
consume budget and/or resources and are generally named in a verb-noun format.
You will notice that four of the five time planning processes have the word “activity” in their name (define
activities, sequence activities, estimate activity resources, and estimate activity durations).
It may helpful to correlate “activity” to “time”.
Example
I recently managed my daughter’s wedding. Given that she and her fiancée were both deployed with the military,
it definitely required a lot of project management!
One of the work packages identified was catering management.
Within that work package, my activities identified were: interview caterers, check references, execute contract,
determine final headcount, select linen package, issue payment, and provide feedback.
Summary
A work package is the lowest level of a WBS. You know you have arrived at the work package level when the work
involved can be accurately estimated and managed by one person.
The work package can then be decomposed into activities for inclusion on the project schedule. Activities may
also be called “schedule activities” or “tasks

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236
Lead
Lead is the acceleration of a successor activity. In other words, the second activity can begin (and be
conducted in parallel) as the first activity. Lead is only found activities with finish-to-start
relationships: A must finish before B can start. In order to leverage a lead, which will compress the
total combined duration of both activities, the dependency must be discretionary, meaning that there
is no physical limitation on completing A before B begins.
Lag
Lag is the delay of a successor activity and represents time that must pass before the second activity
can begin. There are no resources associated with a lag. Lag may be found in activities with all
relationship types: finish-to-start, start-to-start, finish-to-finish, and start-to-finish.
Example
The photo shoot will take four days and the photo editing will take six days. Instead of waiting until
the end of the 4-day photo shoot to begin editing the pictures, we start editing after the first day of
shooting. This brings the total duration from ten days down to seven days by leveraging the lead. The
photo proofs are sent to the customer upon completion of the shoot, however, there is a 15-day lag
associated with the customer review before the printing of the photos can begin.
Summary
Lead and lag are both used in the development of the project schedule.
Lead is an acceleration of the successor activity and can be used only on finish-to-start
activity relationships. Lag is a delay in the successor activity and can be found on all activity
relationship types.

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237
Effort-Effort is the number of work units required to complete the activity. Effort may also be
referred to as staff-hours, days, or weeks. In order to determine the activity duration, the effort
required to complete the activity must be determined first.
Duration -Duration is the total time to complete the activities based on the resources available
to the project. Duration does not include holidays or non-working days and may be referred to
work days or weeks.
Elapsed Time -Elapsed time is the calendar time or span required to complete the activities
based on the resources available. Elapsed time does include holidays and non-working days.
Example
Installing the new drip system for the landscaping is estimated to take 80 hours of effort.
If there is one worker committed to 40 hours per week, the duration would be 10 workdays.
(Effort = 80 hours, Duration = 10 workdays, Elapsed time = 2 weeks)
However, if there are two workers each committed to 40 hours per week, the duration would be
5 workdays.(Effort = 80 hours, Duration = 5 workdays, Elapsed time = 1 week)
Or if there are two workers committed to 10 hours per week each, the duration would be 20
workdays.(Effort = 80 hours, Duration = 20 workdays, Elapsed time = 4 weeks)
Summary
To determine the project activity durations, the PM must consider the amount of effort required
and the project resources that are available and will be used.
Effort is the number of work units.
Duration is the total time required based on the effort and the resources available (minus
holidays and non-work days).
Elapsed time is the calendar time (includes all dates, such as holidays and non-work days).

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Critical Path
The critical path method calculates the early start and finish dates and late start and finish dates
for all schedule activities.
The critical path method involves performing a forward pass analysis and a backward pass
analysis through the project schedule network paths. The forward pass determines the early start
(ES) and early finish (EF) dates (ES + duration (DU) = EF). The backward pass determines the late
start (LS) and late finish (LF): (LF – DU = LS)
The critical path is the longest path through the schedule with either zero or negative total float.
Critical activities are those schedule activities on the critical path. Near-critical activities are those
schedule activities with very little total float.
Critical Chain
The critical chain method is a technique that modifies the project schedule to account for limited
resources by adding duration buffers that are non-work schedule activities to maintain focus on
the planned activity durations.
Critical chain is completed after determining critical path by entering resource availability and the
resulting schedule produces a resource-constrained critical path, which is usually altered from the
original. Critical chain focuses on managing remaining buffer durations against the remaining
durations of task chains
Summary
The critical path method (CPM) is a popular approach to project scheduling that considers the
amount of float on project activities. Critical chain takes CPM a step further by adding time
buffers to account for limited resources.

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239
Total Float
Total float is measured as the difference between the early and late start dates (LS - ES) or the early
and late finish dates (LF – EF). Total float is shared between the activities in a sequence. A sequence is
defined as the activities between a point of path divergence and path convergence.
Total float represents the amount of time an activity can be delayed without delaying the overall
project duration and is also called “float” or “slack”.
Free Float
Free float is measured by subtracting the early finish (EF) of the activity from the early start (ES) of the
successor activity.
Free float represents the amount of time that a schedule activity can be delayed without delaying the
early start date of any immediate successor activity within the network path.
Free float is only calculated on the last activity in an activity sequence.
Example
If activity 1.4 has a duration of 6 days and is occurring concurrently with activity 1.5 which has a
duration of 9 days, activity 1.4 has 3 days of total float. Meaning, it can be delayed up to three days
without any effect on the project.
However, if activity 1.4 is delayed by 5 days, there is now a negative float situation: -2 days. This
reflects the fact that the project will now take two days longer than anticipated.
Summary
Total float, also called float or slack, is the amount of time an activity can be delayed without delaying
the overall project duration. Total float is shared between activities in a sequence.
Free float is the amount of time an activity can be delayed without delaying the early start of any
immediate successor activity.

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240
Fast-Tracking
Fast-tracking is a technique in which phases or activities that normally would be done sequentially are
performed in parallel. Fast-tracking does not result in increased cost but it does increase the risk, as
activities that were originally intended to be performed sequentially are now performed in parallel.
The ability to fast-track implies that the finish-to-start relationship between the activities was
discretionary.
Crashing
Crashing is used if fast-tracking did not save enough time on the schedule. Crashing is a technique in which
cost and schedule tradeoffs are analyzed to determine how to obtain the greatest amount of compression
for the least incremental cost.
Crashing analyzes critical activities based on the lowest crash cost per time unit allowing the team to
identify those candidate activities that would produce the greatest value at the least incremental cost.
The results of a crashing analysis can be plotted in a crash graph, where activities with the flattest slope
would be considered first, meaning that they gain the most time savings but have a smaller increase in cost
(rise).
Summary
The reality of project management is that there is usually a need to compress the project schedule and
deliver the project’s product, service, or result sooner than estimated.
Fast-tracking is always considered first as there are no increased costs. However, there is increased risk.
Crashing would be the next option. Crashing analyzes the incremental crash costs of activities to determine
and prioritize the candidates for crashing.
Both fast-tracking and crashing should be used on critical activities (those on the critical path) in order to
have an effect on the actual project schedule. If used on non-critical activities, you have just given yourself
more float

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241
Budgetary Estimate
Budgetary estimates are used when funds are being allocated on some type of a periodic basis.
The range of variance on a budgetary estimate can be from -10% to +25%.
Phased Estimate
Phased estimates are frequently used when the project is large or lengthy or is developing
something new or untried for the organization.
In phased estimates, the near-term work is estimated with a high level of accuracy ±5 - 15%
whereas future work is estimated at a high level with ±35% accuracy.
Phased estimates are considered “rolling wave” or “moving window” estimates and reflect the
fact that “we don’t know what we don’t know”.
Example
I have a small client that uses budgetary estimates for some of their projects. If the project is
estimated to cost $100,000 and take four months, they will estimate $25,000 per month.
Depending on the work actually completed during that month, the actual cost may be slightly
higher or lower.
I have a larger client that is conducting a large, multi-year, infrastructure project. The analysis
work has been estimated at $500,000, but the future work has a place holder estimate of $3M.
Summary
The organizational structure and type of project will dictate the approach to estimating.
Budgetary estimates are used to allocate funds on a periodic basis whereas phased estimates are
useful when the project is very large or the scope is not clearly defined.

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Cost Estimate
The cost estimates are simply the costs associated with the work packages or activities within the
project schedule. Depending on the work package or activity, the cost estimate may be determined
using parametric, three-point, or analogous estimating techniques.
It is important for all cost estimates to include any assumptions that were made, where did the
estimate originate, who provided the information, level of confidence, etc.
Budget
The budget is built using the cost estimates and the project schedule. The budget provides a view
of how much the project is estimated to cost both from a total and a periodic perspective. This
budget feeds the cost performance baseline which is then used as critical ingredient in performing
earned value analysis and other cost management variance analysis techniques.
The project budget must be in alignment with the organization’s funding limits in order to ensure
the funding is available and has been appropriated.
Summary
Both cost estimates and budget are needed in order to determine the cost performance baseline
and the project funding requirements.
Cost estimates are the estimated costs for each work package or activity, whereas the budget
allocates the costs over the life of the project to determine the periodic and total funding
requirements

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243
Quality
Quality is the degree to which the product or result meets the customer or end-user
requirements. Their requirements may or may not be in alignment with the documented project
requirements, however. It is simply their assessment on how well the output aligns with their
needs and expectations.
It can be said that quality is “in the eye of the beholder”. Even if I feel that my product is high
quality, I cannot assume that my customer or end-user will agree with my assessment.
Grade
Grade is a category assigned to products that have the same functional use but different technical
characteristics. Grade is usually determined through some set of pre-determined measurements
and demonstration of compliance to those measurements.
Example
Eggs are graded based on their technical characteristics. Regardless of their grade, they all can be
used for the same functions: cooking, eating, etc. (Same functional use but different
characteristics)
I may purchase high grade eggs, however, if one of the eggs is broken, I would consider it low
quality because I can’t use it. (Did not meet my requirements)
Summary
Quality is the degree to which the product meets the customer or end-user requirements whereas
grade is a category assigned to products that have the same functional use but different technical
characteristics.
High grade does not imply high quality.

0- Common Concepts
Avoid
When you avoid the risk it means you change your plan to completely eliminate the probability of
the risk occurring or the effect of the risk if it does occur.
Transfer
Risk transference occurs when the negative impact is shifted to a third party, such as through an
insurance policy or penalty clause in a contract. The risk may still occur however the financial
impact will be somewhat displaced.
Risk transference usually involves some type of contractual agreement.
Mitigate
Risk mitigation occurs when you proactively change the plan to minimize the impact or probability
of the risk occurring. Risk mitigation does not eliminate the risk and as such there will be some
residual risk remaining.
Example
We have identified a negative risk that a visitor to the model home could fall down the stairs.
To avoid the risk, the stairs are removed and an elevator is installed.
To transfer the risk, you purchase an insurance policy that would cover any injuries sustained from a
guest falling down the stairs.
To mitigate the risk, you install lighting, signs, and handrails to decrease the probability that a visitor
will fall down the stairs.
Summary
There are three proactive approaches to handling a negative risk, also called a threat:
Avoid – eliminate the risk
Transfer – shift the impact to a 3rd party
Mitigate – decrease the probability or impact
244

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Enhance versus Share versus Exploit
There are three proactive strategies for positive risks (opportunities). This risk may be enhanced, shared, or
exploited.
Enhance -Enhancing the opportunity implies changing the plan or approach to improve the probability of
the opportunity occurring or increasing the benefit of the opportunity should it occur.
Share -Sharing the opportunity occurs when you partner with another company or organization to enable
achieving the benefits of the opportunity. Sharing usually involves some type of a contractual relationship.
Exploit -Exploiting the risk is taking action to ensure that the opportunity will be realized.
Example
There is an opportunity to be first-to-market with a new product resulting in significantly increased profits
from the original business case.
To enhance the opportunity, you offer your team incentives to keep them motivated and focused on the
work.
To share the opportunity, you enter into a contractual agreement with another company that can provide a
key component required to get to market faster.
To exploit the opportunity, you fast-track and crash your schedule to ensure you will launch prior to your
competitor.
Summary
There are three proactive approaches to handling a positive risk, also called an opportunity:
Enhance – increase the probability or benefit
Share – partner with a 3rd party
Exploit – ensure the opportunity will be realized
245

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Sensitivity Analysis -A sensitivity analysis determines which risks have the most potential impact on the
project. Sensitivity charts are used to visualize impacts (best and worst outcome values) of different
uncertain variables over their individual ranges.
A tornado diagram is a type of sensitivity chart where the variable with the highest impact is placed at the
top of the chart followed by other variables in descending impact order.
Expected Monetary Value (EMV) -Expected monetary value (EMV) analysis is a statistical concept that
calculates the average outcome when the future includes scenarios that may or may not happen. An EMV
analysis is usually mapped out using a decision tree to represent the different options or scenarios.
EMV for a project is calculated by multiplying the value of each possible outcome by its probability of
occurrence and adding the products together.
Example-For a sensitivity analysis, the project risks are evaluated based on the potential financial impact of
each individual risk and then placed in rank order.
For an EMV analysis, you are evaluating two vendors:
Vendor A has a 50% probability of being on-time, a 30% probability of being late at an additional cost of
$40,000 and a 20% probability of delivering early at a savings of $20,000.
EMV: (30% x $40,000) + (20% x -$20,000) = $12,000 + ($4,000) = $8,000
Vendor B has a 30% probability of being on-time, a 40% probability of being late at an additional cost of
$40,000 and a 30% probability of delivering early at a savings of $20,000.
EMV: (40% x $40,000) + (30% x -$20,000) = $16,000 + ($6,000) = $10,000
Based on the EMV, Vendor A would be a better choice as the potential cost is lower.
Summary-Two common quantitative risk analysis techniques are sensitivity and expected monetary value
(EMV) analyses.
A sensitivity analysis ranks risks based on their impact (usually in a tornado diagram) and an EMV analysis
quantifies the potential outcomes of risk scenarios (usually using a decision tree). 246

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Deming versus Juran versus Crosby
Three commonly cited quality management theorists quoted on the exam are: W.
Edwards Deming, Joseph Juran, and Philip Crosby.
Deming -Deming was an American statistician, professor, author, lecturer, and
consultant. He believed that organizations can increase quality and reduce costs by
practicing continuous process improvement and by thinking of manufacturing as a
system, not as bits and pieces.
Juran -Juran was a 20th century management consultant and evangelist for quality
and quality management. He applied the Pareto principle to quality issues (80% of
the problems are caused by 20% of the causes) and also developed “Juran’s
Trilogy”: quality planning, quality control, and quality improvement.
Crosby -Crosby was an American businessman and author. Crosby’s response to the
quality crisis was the principle of Doing It Right the First Time (DIRFT). He applied
four major principles:
The definition of quality is conformance to requirements
The system of quality is prevention
The performance standard is zero defects
The measurement of quality is the price of non-conformance
247

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Control Chart -Control charts are used to determine whether or not a process is stable or has predictable
performance. Typically, control charts identify upper and lower control limits to determine the acceptable
range of test results. Control charts commonly have three types of lines:
• Upper and lower specification limits
• Upper and lower control limits
• Planned or goal value
Control charts illustrate how a process behaves over time and defines the acceptable range of results.
When a process is outside the acceptable limits, the process is adjusted.
Control charts can be used for both project and product life cycle processes. For example, for project
processes a control chart can be used to determine whether cost variances or schedule variances are
outside of acceptable limits.
Run Chart -A run chart is a line graph that shows data points over time. Run charts are helpful in
identifying trends and predicting future performance. Run charts are similar to control charts, plotting data
results over time, however there are no defined control limits.
Example-A control chart may be used for a pharmaceutical company that is testing a new pain medication.
The drug must stay effective in the system for a minimum of three hours but last no more than five hours,
to prevent accidental overdose. The mean time or goal efficacy duration would be four hours, with three
hours the lower control limit and five hours the upper control limit.
A run chart may be used to plot the temperature within the manufacturing plan every day for a month to
determine a trend.
Summary
While both a run chart and a control chart plot data points over time or batches, the control chart is
enhanced with defined control limits and a target or goal delineation.
248

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Histogram
A histogram is a type of bar chart showing a distribution of variables. A histogram represents each attribute
or characteristic as a column and the frequency of each attribute or characteristic occurring as the height
of the column.
Pareto Chart
A Pareto chart is a specific type of histogram that ranks causes or issues by their overall influence. A Pareto
chart assists in prioritizing corrective actions as the issues with the greatest impact are displayed in order.
In addition, the Pareto chart includes an arc representing the cumulative percentage of the causes.
A Pareto chart is named after Pareto’s Law that states that a relatively small number of causes will typically
produce a large majority of the problems or defects. This is commonly known as the 80/20 rule, where 80%
of the problems are due to 20% of the causes.
Example
A histogram may be used to represent the number of students who scored between a certain score range,
such as 0 to 20%, 20 to 40%, etc.
A Pareto chart may be used to analyze the causes of customer dissatisfaction. The causes would be ordered
by frequency of occurring, allowing the team to focus on those issues with the biggest impact on customer
satisfaction.
Summary
A histogram is a bar graph that illustrates the frequency of an event occurring using the height of the bar as
an indicator.
A Pareto chart is a special type of histogram that represents the Pareto philosophy (the 80/20 rule) through
displaying the events by order of impact.
249

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Responsibility Assignment Matrix (RAM)
A RAM is a matrix-based chart that is used to illustrate the connections between the work
that needs to be done and project team members. A RAM can be developed at varying levels
of detail, commonly at the activity or deliverable level.
Typically, the list of deliverables or activities are on the left-hand column with the team
member names across the top. Each deliverable or activity will be assigned to the appropriate
individuals. This will aid in communication amongst the team members and help expose any
gaps that may exist.
A common RAM is a RACI (responsible, accountable, consult, inform) RAM format.
Organization Chart
A project organization chart is a hierarchical chart used to show positions and relationships in
a graphic, top-down format.
Project org charts display the project team members and their reporting lines within the
project and to the overall organization. This ensures that team members and stakeholders are
aware of who is participating in the project and what the reporting structure looks like.
Summary
Both org charts and RAMs are helpful in most project team settings. The RAM clarifies roles
and responsibilities while the org chart communicates the team members participating in the
project and the reporting structure both within the project and to the broader organization.
250

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Interactive Communication-Interactive communication is the most efficient method of communication to ensure a
common understanding as it is real time. Interactive communication should be used when an immediate response
is required and when the communication is sensitive or likely to be misinterpreted.
Push Communication-Push communication is communication that is delivered by the sender to the recipients.
While the communication can be confirmed that it was sent, it does not necessarily mean it was received and
understood.
Push communication should be used when the recipients need the information but it does not require an
immediate response and the communication is non-urgent or sensitive in nature.
Pull Communication -Pull communication is a communication method that provides access to the information
however the receiver must proactively retrieve the information.
Pull communication should be used when the communication is informational only. If the recipients don’t read it, it
will not affect the project.
Example
Interactive communication methods include:
Meetings ,Phone calls, Video conferences,
Push communication methods include:
Email ,Voicemail, Postal mail,
Pull communication methods include posting information to:
A website ,A knowledge repository, A bulletin board
Summary
Although there are an unlimited number of methods for communicating information on the project, all
communication generally falls into one of three categories: interactive, push, and pull.
The project manager must balance the amount of information with the needs of the project and the recipients to
determine the most appropriate method to utilize.
251

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Residual Risk -Residual risk is the risk that remains after a risk response has been
taken. The degree of risk tolerance should be considered to ensure that the amount of
residual risk is acceptable. If not, additional risk actions may need to be taken to try
and further reduce the risk.
Secondary Risk -A secondary risk is a risk that arises as the result of implementing a
risk response. If the risk response was not taken, the secondary risk would not exist.
Secondary risks should be evaluated for appropriate action. The severity of the
secondary risk or risks may eliminate the risk response as an option if the secondary
risk falls outside of the project risk tolerance.
Example-You are planning the annual employee recognition event. It will be an
outdoor luau-themed event. Because there is a chance of rain, you decide to mitigate
the risk of the employees getting wet and not having fun by putting up a tent.
There is still some residual risk that the employees will get wet walking from the
parking lot to the tent.
There is also a secondary risk that someone will trip over the tent poles and get
injured.
Summary
Risk identification and analysis should also include residual risks (those risks that
remain after an action has been taken) and secondary risks (those risks that arise as
a result of implementing a risk response).
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Fallback Plan -A fallback plan is developed in advance of a risk event occurring and is designed
to be used when the primary risk response proves not to be effective.
Think of the fallback plan as the “Plan B”.
Having it documented in advance will ensure that the project team is able to react to the risk in an
expedient manner while hopefully minimizing any type of negative impact.
Contingent Response Strategy -A contingent response strategy is developed in advance and
designed to be used only if the risk event occurs. As with a fallback plan, the contingent response
strategy is a critical communication tool to ensure that all team members know what actions to
take when the specified risk event occurs.
Example-You are managing the annual employee recognition event: an outdoor luau. There is a
risk of rain on the day of the event but it’s a low probability. As such, you decide not to take
proactive action on the risk but rather develop a contingent response strategy should it be raining
on the day of the event.The park where the event will be held has a gymnasium. Your contingency
response strategy will be to move the event into the gymnasium should it start raining. For the
fallback plan you have the park office designated as a secondary location, should the gymnasium
be unavailable.
Summary
Risk management may not always involve taking proactive action. Certain risks may be more
appropriate for a contingent response strategy, designed to only be implemented if the risk event
occurs. If the primary response is ineffective, a fallback plan, also developed in advance, may be
implemented.
253

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Fixed Price Contracts-Fixed price contracts involve a fixed total price for the product and may also include
incentives for meeting or exceeding selected project objectives. The simplest form of a fixed price contract
is a purchase order.Fixed price contracts place more risk on the seller, as if there is any type of price
increase, the seller would be responsible for the increased costs and cannot pass them on to the buyer.
There are three common types of fixed price contracts: firm fixed price (FFP), fixed price incentive fee (FPIF),
and fixed price with economic price adjustment (FP-EPA)
Firm Fixed Price (FFP) -The FFP is the most commonly used contract type and is favored by most
organizations because the price is set and is not subject to change unless the scope of work changes. Any
cost increases due to adverse performance would be the responsibility of the seller.
Fixed Price Incentive Fee (FPIF) -A FPIF contract gives the buyer and seller some flexibility in that it allows
for deviation from performance, with a financial incentive for achieving certain metrics. Generally the
incentives are related to cost, schedule, or the technical performance of the seller. A price ceiling is set and
any costs above that ceiling are the responsibility of the seller.
Fixed Price with Economic Price Adjustment (FP–EPA) -FP-EPA contracts are used for long-term contracts
and they allow for pre-defined adjustments to the contract price due to changed conditions. This could
include inflation changes or increased or decreased costs for specific commodities. The contract is intended
to protect both the buyer and seller from external conditions over which they have no control.
Examples -You purchase 10 books from the publisher for $19.99 each. The PO is a firm fixed-price contract.
You hire an instructor to come onsite and deliver a PMP exam prep course using a fixed-price incentive fee
contract. The contract states that the instructor will receive $2,000 to facilitate the course. In addition, the
company will pay the instructor an extra $500 for each student that successfully completes their PMP exam.
You are in a long-term contract with a trucking company using a fixed-price with economic price adjustment
contract. The contract states that the trucking company will be paid $1,000 per week. If the price of fuel
increases or decreases by more than 10%, the weekly pay will increase or decrease by 5% accordingly
254

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Develop the Project Team -The develop project team process is the second HR process in the executing
process group and the intent is to improve the competencies of team members through training and
enhances the interactions of team members through team-building. (The “fun” stuff!)
There are a number of techniques used to develop the project team:
Interpersonal or “soft” skills, such as empathy, influence, creativity, group facilitation
Training team members to enhance their competencies
Team-building activities to progress them through the stages of team development (forming, storming,
norming, and performing)
Establishing ground rules, set by the team members
Co-locating the team into one physical location
Incenting the team through the use of recognition and rewards
Manage the Project Team-The manage project team process tracks team member performance, provides
feedback to the team members, resolves issues, manages changes to optimize project performance, and
may also involve disciplinary escalations to the functional manager. (The “un-fun” stuff!)
The tools and techniques used to manage the project team include:
Observing and conversing with your team members (yep. Actually looking at and talking to the people on
your team. Step away from the computer!)
Providing project performance appraisals on the team members
Utilizing the appropriate conflict management approach: confronting/problem-solving, compromising,
forcing, smoothing, withdrawing, and collaborating
Leveraging an issue log to manage the open issues within the project
255

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Quality Control -The perform quality control (QC) process evaluates the project results (outputs, deliverables)
to ensure they comply with quality standards that were defined in the quality management plan. The QC
process also identifies ways to eliminate causes of unsatisfactory results and validates that approved change
requests have been implemented as approved.
QC must be conducted prior to the verify scope process and the perform quality assurance (QA) process (where
the project processes and results will be audited and evaluated for continuous process improvement actions).
Think of QC as the internal quality check of the products or deliverables prior to giving them to the customer or
end-user. The key outputs from QC are the “validated deliverables”
Verify Scope -The verify scope process secures formal acceptance of the completed project deliverables from
the customer, end-user, or requesting party. Verifying scope includes reviewing the deliverables with the
customer to ensure that they are completed satisfactorily in order to receive formal acceptance of the
deliverables.
Think of verify scope as the quality check / user acceptance testing.
The key outputs from verify scope are the “accepted deliverables”.
Example-As part of my project management requirements, I need to produce a weekly project performance
report. When I check the data and figures within my performance report to ensure they are correct, I am
performing quality control. When I provide the performance report to my sponsor for her approval, I am
performing verify scope.
Summary-While both QC and verify scope are monitoring and controlling processes associated with the review
and approval of the deliverables, QC is the “internal” check that results in “validated deliverables”, followed by
verify scope, the “external” check that results in “accepted deliverables”.
256

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Corrective Actions-Corrective actions are taken when the project has deviated from
the planned scope, schedule, cost, or quality requirements. Corrective actions are
reactive in nature and are intended to bring the project’s performance back into
alignment with the agreed-upon project baselines.
Preventive Actions -Preventive actions are taken when the project is trending away
from the planned scope, schedule, cost, or quality requirements. Preventive actions are
proactive in nature, based on a variance and trend analysis. Preventive actions are
intended to ensure the project is delivered in alignment with the agreed-upon project
baselines.
Defect Repairs -Defect repairs are implemented when the product or deliverable does
not meet the documented quality requirements.
Summary -Change requests can include scope changes, corrective actions, preventive
actions, and defect repairs.
Corrective actions are reactive in nature and are intended to bring the project back
into alignment with the baselines.
Preventive actions are proactive in nature to ensure the project doesn’t deviate from
the baselines.
Defect repairs are used to correct products or deliverables that do not meet the
documented quality requirements 257

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Estimate at Completion (EAC)
Estimate at completion is the forecasted cost of the project, as the project progresses. There are a
number of different ways to determine the EAC.
The most common way to determine EAC is a “bottoms-up” formula where the actual costs (AC) are
added to the forecasted remaining spending – the estimate to complete (ETC).
EAC = actual costs (AC) + estimate to complete (ETC)
If the project has encountered a one-time (atypical) variance, the following formula may be used:
EAC = actual costs (AC) + budget at completion (BAC) – earned value (EV)
If the project has encountered a variance that is expected to recur and continue to affect the project
(typical), the following formula may be used:
EAC = budget at completion (BAC) ÷ cost performance index (CPI)
Estimate to Complete (ETC)
Estimate to complete (ETC) is a forecast of how much more money will need to be spent to
complete the project.
ETC can either be determined by building a bottom-up estimate, usually by asking your work
package owners, team members, or vendors for revised estimates or by deducting the actual costs
(AC) from the estimate at completion (EAC).
ETC = new estimates
ETC = estimate at completion (EAC) – actual costs (AC)
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0- Common Concepts
Example-You are three months into the five month bathroom remodeling project. The original budget
(BAC) was $1,500 and you have completed approximately 40% of the work. You currently are running over-
budget, as indicated by a cost performance index (CPI) of 0.67. Actual costs to-date have been $900.
If you learn that the contractor found some mold in the sheetrock and needed to replace it, causing a one-
time variance, you could use the atypical formula to forecast the EAC and the ETC:
EAC = AC + BAC – EV = $900 + $1,500 - $600 = $1,800 (how much we will spend at the end of the project)
ETC = EAC – AC = $1,800 - $900 = $900 (how much more we will spend from this point forward)
If, however, you learn that the workers that are being used are actually much more expensive than you
originally estimated, this would be a typical variance as it’s going to continue to affect the project.
EAC = BAC ÷ CPI = $1,500 ÷ 0.67 = $2,239
ETC = EAC – AC = $2,239 - $900 = $1,339
Notice that for the “typical” scenario, the EAC and ETC forecasts are much higher than the “atypical”
results. This is due to the fact that the variance is going to continue to affect the project.
Of course, the other option to forecast your project costs would be to simply ask your team / vendors for a
new estimate to complete the remaining work. This ETC would then be added to the actual costs (the
money already spent) to determine the EAC.
EAC = ETC + AC
Summary-As the project progresses, it will be necessary to forecast out the total anticipated funding
required. The two forecasts utilized are the
Estimate at completion (EAC) – how much the project is forecasted to cost overall – and the
Estimate to complete (ETC) – how much funding is required to complete the remaining work
259

0- Common Concepts
Budget at Completion
Budget at completion (BAC) is the total anticipated and budgeted spending for the project based
on the project estimates and assumptions.
Variance at Completion
The variance at completion is determined by subtracting the BAC from the EAC:
VAC = BAC – EAC
A negative VAC indicates that the project is forecasted to not complete with the approved
budget. A negative VAC may require either an additional funding allocation or the elimination of
some of the project scope.
A positive VAC indicates the project will not utilize the allocated budget. This may allow for
additional components to be added to the scope of the project.
Example
The bathroom remodeling project has an approved budget (BAC) of $1,500. Based on your
analysis, the forecast (EAC) is $1,885.
VAC = $1,500 - $1,885 = ($385) <-- Indicates the project will exceed the budget by $385.
Summary
Variance at completion (VAC) is a comparison of the original budget at completion (BAC) and the
revised forecast (EAC). A negative VAC is an indicator that the project may exceed the BAC.
260

0- Common Concepts
271
PM Leadership style and Situations
Interpersonal Conflict Resolution Techniques
As a project manager you have choice of a conflict management strategy which would depend on the intensity of the conflict, your leadership style, importance on maintaining
good relationships versus achieving goals.
The best approach will be the one that minimizes the obstacles to project completion.
When to use:
•When you do not have time
•To gain time
•To discourage your opponent
•To maintain neutrality or reputation
•When you think the problem will go away by itself
What this technique would imply:
•You move away from situation
•You say that you do not have time for it
The conflict would remain!! You buy time to deal with conflict later.
When to use:
•To maintain harmony, peace,and goodwill
•You do not hurt people sentiments
•You make people happy about certain aspects on situation
•You buy time
The make people happy on things which would ease on situation!! conflict reduces by some %.
When:
•To maintain your relationship with your opponent
•When goals are moderately high
•You reach a decision by having aspect from all people in conflict.
•None of the party have full solution implemented/accepted
Conflict reduces to ZERO i.e. decision is taken but both parties may not be satisfied.

0- Common Concepts
Forcing -When:
When you are sure that you are right.
When an emergency situation exists (Do or die)
When stakes are high and issues are important
When the acceptance is unimportant
You take decision for all.
People may feel displeased
Conflict reduces to ZERO i.e. decision is taken but opponent may feel down or lost.
Collaborating/Confronting/ problem solving
When
To gain commitment and create a common power base
When there is enough time and skills are complementary
To maintain future relationships
A mutual decision is taken
Everyone participates
Conflict reduces to ZERO i.e. decision is taken and everyone is excited for new decison.
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Pmi dec 13

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