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PMI Project Management Principles

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This material is intended to provide project leaders with a foundational understanding of leading practice project management processes, activities, tools, techniques, and deliverables as prescribed the Project Management Institute (PMI).

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PMI Project Management Principles

  1. 1. PMI Project Management Principles A Point of Reference (based on the 5th Edition PMBOK® Guide) By Tom Tiede
  2. 2. 2 Agenda This material will cover the following project management topics: • What is PMI and the PMP? • Why PMI Project Management Principles are Useful to Know • A Few Basic PMI Definitions • Five Process Groups o Initiating o Planning o Executing o Monitoring and Controlling o Closing • Ten Knowledge Areas o Integration o Scope o Time o Cost o Quality o Human Resources o Communication o Risk o Procurement o Stakeholders • Project Management Terms, such as: o Triple Constraint o Project Charter o Project Management Plan o Work Breakdown Structure (WBS) o Predecessor Relationships o Earned Value Management o Gold Plating o Responsibilities Assignment Matrix o Forming, Storming, Norming, Performing, Adjourning o Communication Noise o Risk Probability and Impact Matrix o Contract Type o Stakeholder Power vs. Interest Grid • Code of Ethics and Professional Conduct o Honor o Responsibility o Respect o Fairness o Honesty
  3. 3. 3 What is PMI and the PMP? The Project Management Institute (PMI) is the world’s largest membership association for the advocacy of Project and Program management. • Over 400,000 current members across 180 countries • Over 600,000 PMI certification holders • Their most widely recognized certification is the PMP (Project Management Professional). The PMP credential recognizes your: o Experience, o Education, and o Competency to lead and manage projects • Earning the PMP credential requires: o A bachelor’s degree and 4,500 hours of documented project management experience, or a secondary degree and 7,500 hours of documented project management experience o 35 hours of certified project management training o Passing the certification exam • Regardless of your inclination to pursue PMP certification, PMI project management principles apply to your role as a project leader or stakeholder The purpose of this material is to share a few PMI project management principles that apply to your role as a project leader or stakeholder
  4. 4. 4 Why Is This Useful to Know? Leveraging prescribed PMI project management principles reduces the risk and impact of costly project omissions, changes, and errors. Project Initiation Cost of Resolving Project Omissions, Changes, or Errors Project Planning Project Execution Project Closure (Illustrative) The PMI approach places great emphasis on project initiation and planning when requirements are clearly defined and agreed upon and the full scope of the project is planned
  5. 5. 5 Let’s Start with a Few PMI Definitions • PMBOK ® - the Project Management Book of Knowledge from which PMI defines terms, standards, and good practices • Portfolio – Projects, programs, and operations managed as a group to achieve strategic objectives • Program - A group of projects and program activities managed in a coordinated way • Project – a temporary endeavor undertaken to create a unique product, service, or result • Project Management – the application of knowledge, skills, tools, and techniques to project management activities to meet project requirements • Project Manager – the person authorized by the performing organization to direct the team accountable for realizing project objectives • Project Stakeholder – includes all project team members and anyone impacted by or impacting the project • Triple Constraint – the foundation of project management is balancing scope, time, and cost. Quality is at the center of the triple constraint Portfolio Programs Projects A few basic definitions: Time Cost Quality Scope
  6. 6. 6 Project Management Process Groups Initiating Planning Executing Monitoring & Controlling Closing A process group is a logical grouping of activities, inputs, tools, techniques, and outputs required for any type of project. Define a new project or new phase, identify stakeholders, and obtain authorization “Authorize the Work” Develop an integrated project management plan to attain project objectives “Plan the Work” Complete the work and satisfy project objectives “Work the Plan” Track and review project progress and performance; manage variance and change “Control the Plan” Finalize all activities and formally close the project or phase “End the Work” • Project Charter • Stakeholder Register • Project Mgt. Plans & Related Documents - Scope - Requirements - Schedule - Cost - Quality - Human Resources - Communication - Risk - Procurement - Change - Stakeholders • Project Deliverables • Work Performance Data • Team Performance Assessments • Project Communications (e.g. status reports) • Selected Suppliers & Agreements • Change Requests • Issue Log • Change Logs • Approved Change Requests • Work Performance Information • Schedule Forecasts • Cost Forecasts • Updates to Project Plan • Quality Control Measurements • Verified Deliverable • Accepted Deliverables • Final Product, Service, or Result (i.e. purpose of project) • Closed Procurement (e.g. formal signature of acceptance) Process Groups Activities Key Outputs
  7. 7. 7 Applying Project Management Process Groups The five process groups overlap and follow a basic cycle of “plan, do, check, act” until project closure. Process Group Overlap Time Initiating Planning Executing Monitoring & Controlling Closing Initiating Planning Executing Monitoring & Controlling Change ? Complete ? Yes Yes Closing No No “Plan, Do, Check, Act”
  8. 8. 8 Knowledge Areas A project manager is responsible for applying and managing the following ten knowledge areas: Identify, define, combine, unify and coordinate activities within the Project Management Process Groups Integration Ensure the project includes all work required Scope to complete the project successfully Time Manage the timely completion of the project Manage the planning, estimating, budgeting, financing, funding, monitoring, and controlling of cost to enable the project to be completed within the approved budget Cost Determine quality policies , objectives, and responsibilities so that the project will satisfy the needs for which it was undertaken Quality Organize, manage, and lead the project team, including the identification of roles, responsibilities, required skills, and reporting relationships Human Resources Ensure timely and appropriate planning, collection, creation, distribution, storage, retrieval, management, control, monitoring and disposition of project information Communication Identify and assess risks, plan responses, and control risk to increase the likelihood and impact of positive events and decrease the likelihood and impact of negative events on the project Risk Purchase or acquire and control products, services, or results needed from outside the project team Procurement Identify people, groups, or organizations that could impact or be impacted by the project; analyze expectations, and develop strategies to engage stakeholders in decisions and activities Stakeholders
  9. 9. 9 Knowledge Areas & Process Groups Activity within each knowledge area is applied based on the appropriate process group. Process Groups Knowledge Areas (Below) Initiating Planning Executing Monitoring & Controlling Closing Integration Applicable Applicable Applicable Applicable Applicable Scope Applicable Applicable Time Applicable Applicable Cost Applicable Applicable Quality Applicable Applicable Applicable Human Resources Applicable Applicable Communication Applicable Applicable Applicable Risk Applicable Applicable Procurement Applicable Applicable Applicable Applicable Stakeholders Applicable Applicable Applicable Applicable Each shaded intersection has defined activities, inputs, tools & techniques, and outputs
  10. 10. 10 1. Integration Management - Process Activities Integration management connects all of the knowledge areas together from beginning (project initiation) to end (project closure). Change Requests Develop Project Charter Develop Project Mgt. Plan Project Mgt. Plan Direct & Manage Project Work Monitor & Control Project Work Updates Reports Change Requests Perform Integrated Change Control Updates Change Log Approved Change Requests Close Project or Phase Final Product Service, or Results Project SOW Business Case Agreements Approved Project Documents, Work Performance Change Requests Project Charter Deliverables, & Data Project Management Plan Updates Develop a document that formally authorizes the project Define, prepare, coordinate and integrate all subsidiary plans into a comprehensive plan Lead and perform the work to accomplish project objectives Track, review, and report progress to meet performance objectives Review all change requests, approve changes, and manage changes to deliverables and the project management plan Finalize all activities across all Process Groups to formally complete the project or phase Key: Initiating Planning Executing Monitoring & Controlling Closing Note, additional inputs, outputs, tools and techniques not depicted may apply
  11. 11. Project Charter A project charter formally authorizes the project and the project manager to apply resources to project activities. Per PMI, without a charter, there is no project. 11 • A typical charter will identify: o Business need or justification o Scope (high level) o Objectives (such as the intended product, service, or result) o Requirements (high level) o Risks (high level) o Assumptions and constraints o Stakeholders (primary) o Timing (anticipated) o Costs (anticipated) • The charter must be signed by someone who can invest authority for the project (typically senior management or a sponsor) Project Charter
  12. 12. The project management plan is the collection of all plans and related documents pertaining to planning, executing, monitoring, controlling, and closing the project. 12 Project Management Plan Procurement Project Communication Management Plan Change Scope Cost Process Improvement Stakeholders Risk Quality Schedule Configuration
  13. 13. 2. Scope Management - Process Activities This area includes collecting requirements, defining scope, creating the work breakdown structure (WBS), and validating and controlling scope. Accepted Deliverables 13 Plan Scope Management Collect Requirements Define Scope Create WBS Validate Scope Control Scope Scope Baseline (Scope Baseline, WBS, WBS Dictionary) Updates Project Documents Workshops Interviews Benchmarking Context Diagrams Decomposition of Work Change Requests Inspection Project Scope Statement Reqs Documentation Reqs Traceability Matrix Scope Mgt;. Plan Reqs Mgt. Plan Change Requests Project Charter Project Scope is the work performed to deliver a product, service, or result that satisfies specified features and functions Determine, document, and manage stakeholder needs and requirements to meet objectives Create a plan that documents how the project scope will be defined, validated, and controlled Develop a detailed description of the project and product Subdivide project deliverables into smaller, more manageable components Gain formal acceptance of completed project deliverables Monitor status of the project scope and manage changes to the scope baseline Key: Initiating Planning Executing Monitoring & Controlling Closing Note, additional inputs, outputs, tools and techniques not depicted may apply Scope
  14. 14. The WBS is the decomposition of the work to be performed. The output is called the Scope Baseline. 14 Work Breakdown Structure (WBS) Scope Baseline: • Scope Statement – description of project scope, major deliverables, assumptions, and constraints • WBS – hierarchical decomposition of the total scope of work • WBS Dictionary – provides details regarding the deliverables, activities, and scheduling information of each component of the WBS Project Title Deliverable 1 Work Packages Deliverable 2 Work Packages Control Account Planning Packages Work Packages Illustrative WBS Used when insufficient detail is available at the work package level Break down the work into the smallest level for which cost and time can be assessed and administered
  15. 15. 15 3. Time Management – Process Activities Time management includes all activity related to developing and managing the project schedule. Plan Schedule Management Define Activities Sequence Activities Estimate Activity Resources Estimate Activity Durations Develop Schedule Schedule Baseline Project Schedule Project Calendars Control Schedule Exp. Judgment Decomposition Rolling Wave Planning PDM Dependencies Leads/Lags Exp. Judgment Bottom Up PMIS Exp. Judgment Analogous Parametric 3 Point Reserve Anal. Critical Path Compression Resource Optimization PMIS Project Schedule Network Diagrams Activity Resource Requirements RBS Activity Duration Estimates Schedule Mgt. Plan Activity List Milestone List Schedule Forecasts Project Charter Scope Baseline Establish the policies, procedures, and documentation for planning, developing, managing, executing, and controlling the project schedule Define and document specific actions to be performed to produce project deliverables Identify and document relationships among project activities Estimate the type and quantities of material, human resources, or suppliers required to perform each activity Estimate the number of work periods needed to complete individual activities with estimated resources Analyze activity sequences, durations, resource requirements, and schedule constraints to create the project schedule Monitor the status of project activities to update project progress and manage changes to the schedule baseline to achieve the plan Key: Initiating Planning Executing Monitoring & Controlling Closing Note, additional inputs, outputs, tools and techniques not depicted may apply
  16. 16. 16 Time (Schedule) Management Terms Below are a few of many terms project managers should know when developing and managing a project schedule. PMI Terms Descriptions 3-Pt. Estimating Based on estimated Pessimistic (P), Optimistic (O), and Most Likely (M) durations Analogous Estimating High level, top down estimate based on similar projects (usually by a SME - subject matter expert) Bottom-Up Estimating Estimate at the lowest level of the WBS (level 3) and then roll up for the total project estimate Parametric Estimating Based on an existing, comparable parameter (e.g. $/ft. in the same neighborhood) Reserve Analysis Contingency (buffer based on known risk) & include in project budget or Managerial (buffer based on unknown risks) Rolling Wave Planning An iterative technique used when future details aren't known; near term is planned in detail; future is higher level Predecessor Relationships Finish to Start (FS) Finish to Finish (FF) Start to Start (SS) Start to Finish (SF) Default relationship; B cannot start until A is finished B cannot finish until A is finished B cannot start until A starts Rare, A starts before B finishes (e.g. when replacing an old system B with a new system A) A B A B A B A B Free Slack The latest an activity can start without delaying next activities Total Slack The latest an activity can start without delaying project finish date Float Often referred to as the same as Slack Lag Lag (a delay) = the successor must wait due to some delay after the predecessor is complete Lead Lead (an accelerant) = the successor can begin before the predecessor is complete Schedule Compression Crashing or fast tracking the schedule to adjust the schedule to align with the plan Fast Tracking Compression technique based on overlapping sequential activities (risky) Resource Leveling Adjusting peaks and valleys to create a level usage of resources Resource Smoothing Adjusting peaks and valleys to create a level usage of resources AND also accounts for individual resource limitations
  17. 17. 4. Cost Management – Process Activities This area includes defining how project costs will be managed, estimating activity costs, determining the budget, and controlling costs. 17 Plan Cost Management Estimate Costs Determine Budget Cost Baseline Project Funding Requirements Control Costs Work Performance Info Cost Forecasts Change Requests Updates Analogous Parametric Bottom Up 3 Point Reserve Exp. Judgment Aggregation Reserve Analysis Funding LImits Earned Value TCPI Forecasting PMIS Reserve Anal. Cost Mgt. Plan Activity Cost Estimates Basis of Estimates IRR NPV ROI Opportunity $ Payback Establish the policies, procedures, and documentation for planning, managing, expending, and controlling project costs Develop an approximation of the monetary resources needed to complete project activities Aggregate estimated costs of individual activities or work packages to establish an authorized cost baseline Monitor the status of the project to update project costs and manage changes to the cost baseline Key: Initiating Planning Executing Monitoring & Controlling Closing Note, additional inputs, outputs, tools and techniques not depicted may apply
  18. 18. 18 Earned Value Management (EVM) EVM is a means of measuring project cost and schedule vs. the plan. Earned Value (EV) = budgeted cost for work actually completed Time Dollars Cost Baseline (“S” Curve) Approved Time-Phased Budget BAC Budget at Completion (BAC) = total project budget Estimate to Complete (ETC) = cost to complete the project based on current spending efficiency ETC EAC Estimate at Completion (EAC) = current projected final cost based on current spending efficiency Variance at Completion (VAC) Cost Variance (CV) Cost Performance (CPI) = EV/AC Schedule Variance (SV) Schedule Performance (SPI) = EV/PV Planned Value (PV) = budgeted cost for work scheduled Actual Cost (AC) at point in time AC PV EV Point in Time
  19. 19. 19 5. Quality Management – Process Activities Quality management includes identifying quality requirements and standards, auditing requirements and control measurements, assessing quality performance, and recommending changes, when needed. Plan Quality Management Perform Quality Assurance Control Quality Cost/Benefit Cost of Quality 7 Basic Tools Benchmarking Sampling Quality Mgt. Plan Process Improvement Plan Quality Metrics Quality Checklists Quality Audits Controls Charts Process Analysis Updates Verified Deliverables QC Measures Validated Changes Measurements Identify quality requirements and/or standards for the project and its deliverables, and document how the project will demonstrate compliance Audit the quality requirements and the results from quality control measurements to ensure appropriate standards and operational definitions are used Monitor and record results of quality activities to assess performance and recommend necessary changes Key: Initiating Planning Executing Monitoring & Controlling Closing
  20. 20. 20 Quality Management Philosophies and Principles PMI quality management principles are based on a few popular philosophies. Quality Philosophies: • Total Quality Management (Deming) – proactive approach with statistical analysis • Zero Defects (Crosby) – Do it right the first time • Fitness for Use (Juran) – Satisfy customer needs • Continuous Improvement (Kaizen) – proactive approach to process improvement • Gold Plating – unacceptable practice of providing more than requested • Cost of Quality – cost of conforming is less than cost of non-conforming • Design of Experiments – isolate factors that influence results • 6 Sigma – strive for 99.9997% error free • ISO 9000 – document what you do; do what you document Quality Principles: • Define and satisfy customer needs • Prevent rather than inspect • Be proactive rather reactive • Validate project processes • Measure against approved standards • Continually improve • Take accountability
  21. 21. 21 Quality Management Tools and Terms Project managers should be familiar with common quality management tools and terms. Tools Description 1. Cause and Effect Diagrams Fishbone (Ishikawa) diagram 2. Flowcharts Basic flow chart or GERT diagram with feedback loop 3. Checksheets Check list (e.g. pre-flight list to ensure you are "cockpit ready" before taking flight) 4. Pareto Diagrams Cumulative histogram (e.g. 80/20 rule) 5. Histograms Depiction of volume or frequency of occurrences of several events 6. Control Charts Depiction of process output over time with UCL & LCL at 3 sigma from mean 7. Scatter Diagrams Depicts pattern of results across two variables Terms Description Benchmarking Comparing actual or planned processes to comparable projects to identify best practices Design of Experiments Variable based analysis (freeze all variables but one and assess outcome) Statistical Sampling Using a % of the population and extrapolating the results within an acceptable confidence level Quality Audits Identify best practices; identify gaps; share best practices; offer assistance to improve; highlight lessons learned Process Analysis Assess process, identify root causes, alleviate root causes Inspection Examination of work product and comparison to documented standards (e.g. reviews, audits) 85/15 Rule 85% of quality relates to mgt.; 15% is worker related 80/20 Rule 80% of problems come from 20% of the issues Rule of 7 Must have 7 consecutive data points above or below mean to consider process "out of control" Mean Time Before Failure MTBF, example quality metric Mean Time to Repair MTTR, example quality metric Grade vs. Quality Not the same; you can have a lower grade product with high quality and vice versa (e.g. automobile models) Upper Control Limit UCL = 3 sigma above mean (average) Lower Control Limit LCL = 3 sigma below mean (average) Upper Specification Limit USL is customer established and can be above or below UCL Lower Specification Limit USL is customer established and can be above or below LCL
  22. 22. 6. Human Resource Management - Process Activities Human resource management consists of planning, acquiring, developing, and managing the project team. 22 Plan HR Management Acquire Project Team Develop Project Team Manage Project Team Change Requests Updates Org Charts Job Descriptions Org. Theory Pre- Assignment Acquisition Negotiation Training Team Building Ground Rules Recognition Rewards HR Mgt. Plan Project Staff Assignments Resource Calendars Team Performance Assessments Observations Conversations Conflict Mgt. Performance Appraisals Define roles, responsibilities, required skills, and reporting relationships Confirm availability and obtain the necessary team Improve competencies, team interaction, the team environment, and enhance project team performance Track team member performance, provide feedback, resolve issues, and manage changes to the team to optimize team performance Key: Initiating Planning Executing Monitoring & Controlling Closing Note, additional inputs, outputs, tools and techniques not depicted may apply
  23. 23. 23 Roles and Responsibilities Responsibility assignment matrix (RAM) charts such as a “RACI” let each team member know who is responsible for each activity and deliverable. RACI Person Activity Ann Ben Carlos Denny Develop Schedule A R I I Collect Requirements I A R C Develop Test Plan I A R C Develop Training Plan A C I R • (R) Responsible - those who do the work • (A) Accountable - The one who: o Is ultimately answerable for the completion of the deliverable o Delegates the work to those responsible o Approves the work that the responsible person provides • (C) Consulted – those whose opinions are sought (typically subject matter experts); typically this is a two way communication • (I) Informed – those who are kept up-to-date on progress; typically this is a one way communication
  24. 24. 24 Project Life Cycle - Team Building & Leadership Styles Project managers should be aware of typical team building dynamics and situational leadership styles across a project life cycle. Team Building: Forming Storming Norming Performing Adjourning Leadership Style: Directing Coaching Facilitating Supporting Initiating Closing Project Life Cycle Team Building Stages • Forming – creating the team • Storming – team chaos as people start working with one another • Norming – team behavior starts to normalize • Performing – team performs as a unit • Adjourning – team completes work and disbands Time Situational Leadership Styles • Directing – provide specific, clear instructions and closely supervise • Coaching – solicit input, offer rationale and examples • Facilitating –maintain team progress; delegate day-to-day control • Supporting – support and motivate the team to complete objectives
  25. 25. Conflict is inevitable. A project manager should be aware of typical sources of project conflict and recommended techniques to resolve them. 25 Conflict Management Sources of Conflict Conflict Resolution Techniques • Scheduling Priorities • Scarce Resources • Personal Work Styles • Methodology/Details • Cost/Budget • Personalities Recommended: 1. Collaborate/Problem Solve 2. Compromise/Reconcile 3. Force/Direct Not Recommended: 1. Smooth/Accommodate 2. Withdraw/Avoid Higher Probability of Conflict Lower
  26. 26. 26 7. Communication Management - Process Activities Roughly 90% of a project manager’s job is communication. Plan Communication Management Communciation Mgt. Plan Manage Communications Project Communications Control Communications Req. Analysis Technology Models Methods Meetings Models Method Systems Reporting Exp. Judgment Systems Meetings Work Performance Information Change Requests Develop a communication approach based on stakeholder’s informational needs Create, collect, distribute, store, and retrieve information Monitor and control communication throughout the entire project life cycle Key: Initiating Planning Executing Monitoring & Controlling Closing Note, additional inputs, outputs, tools and techniques not depicted may apply
  27. 27. 27 Communication Management Project managers should be aware of the basics of effective communication across the broad stakeholder community. Transmit Communication Paths N N N N • # of Communication Paths equals [N x (N-1)]/2 • N equals # of Stakeholders • Example: [4 x (4-1)]/2 = 6 Communication Methods • Interactive – between two people • Push – send to specific recipients • Pull – recipient actively seeks information Communication Types • Active listening – receiver verifies correct interpretation • Effective listening – receiver observes visual and vocal cues • Feedback – sender receives feedback from receiver • Nonverbal - ~55% of communication (e.g. body and facial language) • Para-lingual – Voice characteristics Communication Model Sender/Encode Decode/Receiver Acknowledgement Response Noise Noise
  28. 28. 28 8. Risk Management – Process Activities Risks are possible events that could impact the project in a positive (an opportunity) or negative (a threat) way. Plan Risk Management Identify Risks Risk Register (Risks & Triggers) Perform Qualitative Analysis Perform Quantitative Analysis Plan Risk Response Control Risks Updates Updates Project Documents Risk Mgt. Plan Updates Updates Define how to conduct risk management activities Determine and document the characteristics of risk which may affect the project Prioritize risks for further analysis or action by assessing their probability of occurrence and impact Analyze the effect of identified risks on overall project objectives Develop options and actions to enhance opportunities and reduce threats to project objectives Implement risk response plans, track identified risks, monitor residual risks, identify new risks, and evaluate risk process effectiveness Key: Initiating Planning Executing Monitoring & Controlling Closing Note, additional inputs, outputs, tools and techniques not depicted may apply
  29. 29. 29 Risk Probability and Impact Matrix A probability and impact matrix can be used to evaluate the impact of a risk and the probability of its occurrence. High Moderate Low Moderate High Probability of Occurrence Level of Impact Positive Risk Responses • Share – split the responsibility and benefit to maximize the opportunity • Exploit – take steps to ensure success • Enhance – improve the size of the risk event and impact • Accept – do nothing Negative Risk Responses • Avoid – get rid of the potential problem • Transfer – re-assign to another party • Mitigate – minimize the bad characteristics of the risk • Accept – do nothing Probability and Impact Matrix The higher the combined probability and impact of the risk event the greater the need to develop a risk response plan
  30. 30. 30 Risk Management Project managers should be aware of risk management terms. Risk Management Terms • Monte Carlo – simulation of possible outcomes • Risk Breakdown Structure – breakdown by category (e.g. internal, external, technology, organizational, etc.) • Risk Trigger – an indicator that an event “could” occur • SWOT Analysis – strengths, weaknesses, opportunities, and threats • Expected Monetary Value (EMV) – summation of probability x impact of alternative decisions (…not to be confused with EVM – earned value management) • Contingency Reserves – for known risks (include in budget and schedule) • Management Reserves – for unknown risks (excluded from baselines for budget and schedule) • Residual Risk – risk remaining after risk response • Secondary Risk – potential risk as a result of risk response • Workaround – “wing it” response when other risk response plans don’t work • Types of Risk Tolerance o Averse – Avoids risk o Seeker – Seeks risk o Neutral – Middle ground
  31. 31. 31 9. Procurement Management – Process Activities Procurement management includes planning, selecting, contracting, controlling, and closing outsourced products and services. Procurement Mgt. Plan Plan Procurement Mgt. Conduct Procurements Control Procurements Work Performance Info Updates Change Requests Close Procurements Procurement Mgt. Plan SOW RFPs Selection Criteria Make Buy Decision Selected Suppliers Agreements Resource Calendars Exp. Judgment Make Buy Analysis Exp. Judgment Bidder Conf. Ind. Estimates Advertising Seller Proposals Inspect/Audits Reporting A/P Systems Claims Admin. Records Mgt. Audits Negotiations Record Mgt. Closed Procurements OPA Udpates Document project procurement decisions, specify the approach, and identify potential sellers Obtain seller response, select a seller, and award a contract Manage procurement relationship, monitor contract performance, and make changes and corrections as appropriate Complete each project procurement, including finalizing open claims, updating records to reflect final results, and archiving information Key: Initiating Planning Executing Monitoring & Controlling Closing Note, additional inputs, outputs, tools and techniques not depicted may apply
  32. 32. 32 Contract Types Project managers should be aware of the benefits and risks of different contract types from a buyer’s perspective and a seller’s perspective. Buyer’s Risk Low High FFP FPIF FP EPA T&M PO CPFF CPIF CPAF CPPC Seller’s Risk High Low • (FFP) Firm Fixed Price – allows buyer to budget fixed price; requires seller to detail scope and accurately estimate price; very common • (FFIF) Fixed Price Incentive Fee – includes incentive to motivate seller to produce at greater speed • (FF EPA) Fixed Price Economic Price Adjustment – compensates for year to year economic changes • (T&M) Time and Materials – typically used for smaller initiatives • (PO) Purchase Order – typically used for commodity items • (CPFF) Cost Plus Fixed Fee – typically variable costs are cost-plus and predictable costs are fixed fee • (CPIF) Cost Plus Incentive Fee – actual costs plus incentive to motivate seller to produce at greater speed • (CPAF) Cost Plus Award Fee – actual costs plus award based on customer satisfaction with agreed criteria • (CPPC) Cost Plus Percent of Cost – actual cost plus % of actual; the higher the cost, the higher the fees
  33. 33. 33 Procurement Terms Project managers should be familiar with additional procurement terms in the table below: Terms Description Make or Buy Analysis Is it more practical to insource or outsource (based on a cost comparison between the two)? Bidder Conference Prior to bid submission, offers opportunities for prospective sellers to obtain requirements clarification from buyer Independent Estimates Used to validate proposal information Contract (CCOLA) Must have 5 Components: Capacity, Consideration, Offer, Legal Purpose, Acceptance Point of Total Assumption Point at which seller is responsible for all cost overruns; PTA = (Ceiling Price - Target Price)/Buyer Share + Target Cost Ceiling Price % of Target Cost (e.g. Ceiling = 140% of target cost) Target Cost Expected cost of work in the contract Target Price Equals Target Cost + Target Profit Share Ratio Ratio of split between buyer and seller of cost savings or overruns (e.g. 70/30) RFP Request for Proposal, typically used for higher priced, customized services or products RFQ Request for Quote, typically used for small dollar commodity type products IFB Invitation to Bid, used for government sealed bids (similar to RFP) Design Scope of Work (SOW) Buyer provides exact details; generally results in fixed price contract Functional Scope of Work (SOW) Buyer provides functionality needed; generally results in cost plus contract Sole Source Go direct to a supplier without any available competition (e.g. supplier holds the patent) Single Source Go direct to a supplier although competitors are available (e.g. "preferred supplier") Negotiation PMI prefers "win/win" negotiation approach Standard Terms & Conditions Typical common (non-negotiable) contract items with a tight range or parameters Special Provisions Typically added to account for changes to standard terms and conditions Claims Administration Means of administering contested changes or disagreements regarding compensation ADR Alternative dispute resolution (e.g. arbitration) used when claims cannot be negotiated between buyer and seller
  34. 34. Key: Initiating Planning Executing Monitoring & Controlling Closing 34 10. Stakeholder Management – Process Activities It is critical to project success to identify stakeholders, address their requirements, meet their expectations, and foster their engagement. Identify Stakeholders Plan Stakeholder Management Manage Stakeholder Engagement Stakeholder Register Stakeholder Mgt. Plan Issue Log Change Requests Updates Control Stakeholder Engagement Work Performance Info Change Requests Updates Exp. Judgment Stakeholder Analysis (Power/ Interest) Interpersonal Skills Management Skills Stakeholder Engagement Matrix (Unaware, Neutral, Resistance, Leading) Identify the people, groups, or organizations that could impact or be impacted by the decision, activity, or outcome of the project. Develop appropriate management strategies to effectively engage stakeholders throughout the project life cycle based on their needs and potential impact on project success Communicate and work with stakeholders to meet their needs and expectations, address issues as they occur, and foster appropriate stakeholder engagement throughout the project life cycle Monitor overall project stakeholder relationships and adjust strategies and plans for engaging stakeholders Note, additional inputs, outputs, tools and techniques not depicted may apply
  35. 35. 35 Stakeholder Power vs. Interest Grid All stakeholders are different and, therefore, need to be managed differently based on their relative authority (power) and level of concern (interest). Stakeholder Power vs. Interest Grid Keep Satisfied Manage Closely Monitor Keep Informed High Moderate Low Moderate High Power Interest
  36. 36. 36 PMI Code of Ethics and Professional Conduct All PMI members must agree to adhere to a high personal standard of ethical and professional behavior. Tenets of Code: 1. Honor o Do what is right and honorable o Set high standards for yourself and aspire to meet those standards is all aspects of life 2. Responsibility – Take ownership of: o The decisions you make or fail to make o The actions you take or fail to take o The consequences that result 3. Respect o Show high regard for yourself, others, and the resources (e.g. people, money, reputation, safety) entrusted to you o Engender trust confidence, performance excellence, and mutual cooperation in an environment of diverse perspectives and views 4. Fairness o Make decisions and act impartially and objectively o Conduct yourself in a way free from competing self interest, prejudice, and favoritism 5. Honesty o Understand the truth o Act in a truthful manner both in your communication and in your conduct
  37. 37. 37 Summary This material covered the following project management topics: • What is PMI and the PMP? • Why PMI Project Management Principles are Useful to Know • A Few Basic PMI Definitions • Five Process Groups o Initiating o Planning o Executing o Monitoring and Controlling o Closing • Ten Knowledge Areas o Integration o Scope o Time o Cost o Quality o Human Resources o Communication o Risk o Procurement o Stakeholders • Project Management Terms, such as: o Triple Constraint o Project Charter o Project Management Plan o Work Breakdown Structure (WBS) o Predecessor Relationships o Earned Value Management o Gold Plating o Responsibilities Assignment Matrix o Forming, Storming, Norming, Performing, Adjourning o Communication Noise o Risk Probability and Impact Matrix o Contract Type o Stakeholder Power vs. Interest Grid • Code of Ethics and Professional Conduct o Honor o Responsibility o Respect o Fairness o Honesty Thank you for taking the time to review this material!

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