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PANKAJ SHARMA
PMP,PRINCE 2 PRACTIONER
PMP
EXAM
GUIDE
PANKAJ SHARMA
CONTENTS OVERVIEW
CONTENTS OVERVIEW ______________________________________________________________ 4
Introduction
Introduction to
PMP Examination
Introduction to PMP Examination
Introduction to
PMP Examination
Introduction to PMI
Purpose of Guide to PMBOK Guide
Why Become a Certified PMP
PMP Examination
PMI Principles
Introduction to PMI
Credentials
Constantly evolving
PMP Examination
PMP Examination
Scenario based
Situational
Definitions
11
PMI Principles
The Project Scope includes all of the work and ONLY the work
Project Management Plan drives how the Project work will be carried out
12
13
Chapter 1
Project Management
Framework
Project Management
Framework
14
Project Management
Framework
Project Management Framework
Learning Objectives
After the completion of this chapter, the learner will be
able to:
Explain the PMBOK Guide project management
concepts
Explain why projects are undertaken
Describe the phases of the project life cycle
Describe the five project management process groups
Name the nine knowledge management areas
Map the process groups and the nine knowledge areas
15
Project
PMBOK
Guide
All organizations perform work as projects or as operations. There is a thing line between the
two but still both share the following common characteristics:
Temporary
Temporary means that every project has a definite beginning and end. It does not mean that the
duration is short. Some projects can last for years. The projects end when the objectives of the
project have been achieved or it is clear that the project objectives cannot be met.
Unique
Unique means that the product or service or result is different from other product or service or
result. Projects are unique even if the category of the product it creates is a large domain. For
example, buildings are constructed but every such building that is created is unique because of
the difference in location, raw materials, contractors, and so on.
Progressive Elaboration
You learn about the project as it progresses. The specifications of the product become clear as
you move further and requirements become clearer. This is also called proceeding in steps.
Example of Projects
Project
Operations and projects differ in the way that operations are ongoing but projects are
temporary.
Operations are repetitive in nature while projects create a unique product or service.
Operations objective is to sustain business while project closes after the objectives are
achieved.
Examples of Operations
OPERATIONS
Temporary
Ongoing
Unique
Repetitive
17
Project Management
Requirements gathering
Managing stakeholder expectations
Managing project constraints including scope, quality, schedule, resources, budget, and
risk.
18
Project Stakeholders
Project stakeholders are individuals and organizations involved in the project that will be directly
or indirectly impacted by the project. The stakeholders may have positive or negative influence
on the outcome of the project.
19
The stakeholders must be identified early in the project. This is often a difficult task. The project
manager needs to manage the expectations of the key stakeholders to successfully complete the
project.
Key stakeholders include:
Project Manager
Customer / User
Performing organization
Project team members
Project management team
Sponsor
Influencers
PMO
Apart from the above, there are other categories of stakeholders such as external and internal
stakeholders, team members and their families, government agencies, and so on.
Portfolio :
A portfolio refers to a collection of projects or programs and other work that
Definition are grouped together to facilitate effective management of that work to meet
as per
strategic business objectives.
PMBOK
Program:
Guide
A program is defined as a group of related projects managed in a coordinated
way to obtain benefits and control not available from managing them
individually.
Programs
Portfolios
21
Organizational Structure
Functional
Organization
Weak Matrix
Organisation
Balanced Matrix
Organisation
PMs Title
Expediter
Expediter/
Coordinator
Project Manager
Project
Manager
Project
Manager
Decision
Making
Power
Functional
manager
Functional
manager plays
a major role,
but PM will
make decisions
PM and the
Functional
Manager will
have equal
power
Project
Manager
Project
Manager
Resources
From within
a Dept.
Project
members are
from different
departments
Project members
are from
different
departments
Project
members are
from different
departments
Project
based only
Resource
Allocation
As needed
About 80%
will be
assigned to the
projects
About
100% will
be assigned
to the
projects
Resources
Reports to
Functional
manager
Functional
manager
Two manager
(FM and PM)
Project
Manager
Project
Manager
PM Reports
to
Functional
manager
Functional
manager
Functional
manager and
his/her senior
manager
Company
Senior manager
Company
senior
manager/
higher
authority
After Project
Completion
Team go
back to their
Dept. (home)
Team go back
to their Dept.
(home)
Team go back to
their Dept.
(home)
Team go back
to their Dept.
(home)
No home
move to
different
project or
get laid off
Source: A Guide to the Project Management Body of Knowledge, Fourth Edition (PMBOK Guide) 2008 Project Management Institute, Inc.
All Rights Reserved.
22
Org. Type
Advantages
Disadvantages
Matrix
Better coordination
Functional
Projectized
23
Stakeholder influence and risk are more at the start of the project and decrease as project moves
towards closure.
Cost and staffing levels are low at the start, peak as project moves into execution and finally drop
as project inches towards closure.
The cost of changes increases and correcting errors increases as the project moves towards
closure.
1.
2.
3.
4.
5.
Though the five project management process groups appear as discrete elements, in
reality they overlap with each other.
The application of project management processes is iterative in nature and is repeated
during the project life cycle.
24
Source: A Guide to the Project Management Body of Knowledge, Fourth Edition (PMBOK Guide) 2008 Project
Management Institute, Inc. All Rights Reserved.
25
Determine how you will plan and develop the project management plan
Develop the project requirements in detail and agree the final scope
Determine the required project activities and their sequencing
Develop schedule using estimated resources and costs
26
Agree what quality standards will be met by the project and how
Define how project staffing will be done
Establish the communication requirements and how it will be fulfilled
Identify what can go wrong and the plans to deal with them
Document what products or services will be acquired from outside the project
Gain formal approval and buy-in from everybody involved in the project
28
Processes
Initiation
Planning
Execution
Monitoring &
Control
Close Out
Develop Project
Charter
Develop Project
Management Plan
Monitor and
Control Project
Work
Close Project or
Phase
Knowledge
Areas
Integration
Management
Perform Integrated
Change Control
Scope Management
Scope Planning
Scope Verification
Scope Definition
Scope Control
Create WBS
Time Management
Activity Definition
Schedule Control
Activity Sequencing
Activity Resource
Estimating
Activity Duration
Estimating
Schedule Development
Cost
Estimate Costs
Cost Control
Management
Estimate Budgets
Quality Management
Quality Planning
Perform Quality
Assurance
Perform Quality
Control
Human Resource
Human Resource
Planning
Acquire Project
Team
Manage Project
Team
Management
Develop Project
Team
Manage Project
Team
29
Communication
Management
Identify
Stakeholders
Communications
Planning
Information
Distribution
Report Performance
Manage
Stakeholders
Expectation
Risk
Risk Management
Planning
Management
Risk Identification
Qualitative Risk Analysis
Quantitative Risk
Analysis
Risk Response Planning
Plan Procurement
Procurement
Management
Conduct
Procurement
Administer
Procurements
Close
Procurement
Source: A Guide to the Project Management Body of Knowledge, Fourth Edition (PMBOK Guide) 2008 Project Management Institute, Inc.
All Rights Reserved.
Ensures project includes all of the work and only the work required
Identifies, defines and controls the project work
Verifies that the deliverables meet the specified criteria
Comprises of the following five processes:
30
Collect Requirements
Define Scope
Create WBS
Verify Scope
Control Scope
Define Activities
Sequence Activities
Estimate Activity Resources
Estimate Activity Durations
Develop Schedule
Control Schedule
Estimate Costs
Determine Budget
Control Costs
Processes that ensures the project will satisfy the agreed quality standards
Identifies the relevant standards and how they will be met
Assurance activities to ensure the agreed processes are followed
Monitoring project results to determine compliance
Comprises the following three processes:
Plan Quality
31
Identify Stakeholders
Plan Communications
Distribute Information
Manage Stakeholder Expectations
Report Performance
Plan Procurements
Conduct Procurements
Administer Procurements
Close Procurements
Professional Responsibility
A PMP must follow the Project Management Institute Code of Ethics and
Professional Conduct
The responsibilities includes:
33
34
Chapter 2
Project Integration
Management
Project Integration
Framework
35
Project Integration
Management
Project Integration Management
Learning Objectives
After the completion of this chapter, the learner will be
able to:
List the various processes of Project Integration
Management
Describe the process of Develop Project Charter
Describe the process of Develop project plan
Describe the process of Direct and Manage Project
Execution.
Describe the process of Monitor and Control Project
Work
Describe the process of Perform Integrated Change
Control
Describe the process of Close Project Or Phase
Explain the various project selection methods
Explain the components of a project management plan
36
Definition Project Integration Management includes the processes and activities needed
as per
to identify, define, combine, unify, and coordinate the various processes and
PMBOK project management activities within the Project management process Groups.
Guide
Project Integration
Framework
37
Contract: This is the input if project is being done for an external customer.
38
Expert Judgment: Involves talking to all the experts on the project to identify inputs to
the charter. These can include the subject matter experts, external consultants, PMO and
other important stakeholders.
Project Charter: The Project Charter documents the business need and the following
information:
o Project purpose
o Project objectives and success criteria
o High-level requirements, project description, and risks
o Summary milestone schedule
o Summary budget
o Assigned project manager
o Name of the sponsor authorizing the charter
Payback Period
Cost Benefit Analysis
Scoring Models
Net Present Value (NPV)
Internal Rate of Return (IRR)
1. Payback period the amount of time to recover your cost. It compares the initial
investment to the cash inflows expected over the life of the product.
o For example, Initial investment on a project is Rs. 4,00,000, Expected cash
inflows: Rs. 50,000 per quarter for first two years, Rs. 100,000 per quarter
thereafter.
39
Cash inflows = Rs. 50,000 x 4 (quarters in a year) = Rs. 2, 00,000 per year for
first two years. Hence, year 1 inflow = Rs. 2, 00,000, year 2 inflow = Rs. 2,
00,000. Total Rs. 4, 00,000 in 2 years
2. Benefit Cost Ratio (BCR) or profitability Index: This is the ratio of project benefit and
the project cost.
o BCR = Revenue / Cost
o Select the project with a higher BCR
3. Present Value (PV): is the expected future cash flows expressed in todays monetary
value
o PV = FV / (1+r) n
o For example, Calculate the Present Value of $ 100,000 received three years from
now. The interest rate is 10 percent.
o PV = 100000 / (1+10/100)3 = $ 75,131
4. Net Present value (NPV) is the sum total of the Present Value of Cash Inflows
Present Value of Cash Outflows
o If NPV > 0, accept the project
o Or select the project with the greater NPV
5. Internal Rate of Return: The rate of interest at which the revenues and costs are equal.
o Select the project with a higher IRR.
40
6. Return on Investment (ROI): A return ratio that compares the net benefits of a project/
product, verses its total cost.
o ROI = Operating Income / Investments
41
Definition Develop Project Management Plan is the process of documenting the actions
as per
necessary to define, prepare, integrate, and coordinate all subsidiary plans.
PMBOK
Guide
Outputs from planning processes: Outputs from other project management planning
areas are used as an input to the project management plan. These include scope, cost,
time, quality, risk, human resource, communication, and procurement plans.
42
Definition Direct and manage Project Execution is the process of performing the work
as per
defined in the project management plan to achieve the project's objectives.
PMBOK
Guide
Approved change requests: These are authorized and documented changes to the
project scope.
Deliverables: are anything that you produce during the course of project activities.
Change requests: Change requests are issued when there are issues during project.
These can result in change in scope, time, cost, quality and other factors.
43
44
Definition Monitor and Control project Work is the process of tracking, reviewing, and
as per
regulating the progress to meet the performance objectives defined in the
PMBOK project management plan.
Guide
45
Definition Perform Integrated Change Control is the process of reviewing all change
as per
requests, approving changes and managing changes to the deliverables,
PMBOK organizational assets, project documents, and the project management plan.
Guide
Configuration Management
Configuration management system provides a standardized, effective, and efficient way to
centrally manage approved changes and baselines within the project.
46
Change request status updates: Change requests, if approved are implemented and the
status is updated in change request log.
47
Definition Close Project or Phase is the process of finalizing all activities across all of the
as per
project Management Process Groups to formally complete the project or
PMBOK phase.
Guide
Final product service or results transition: Refers to the final product, service or result
that the project was authorized to produce.
48
Chapter 3
Project Scope
Management
Project Scope
Management
Collect Requirements
Define Scope
Create WBS
Verify Scope
Control Scope
49
Project Scope
Management
Project Scope Management
Learning Objectives
After the completion of this chapter, the learner will be
able to:
50
Definition Project Scope management includes the processes required to ensure that the
as per
project includes all the work required, and only the work required, to complete
PMBOK
the project successfully.
Guide
Project Scope
Management
Collect Requirements
Define Scope
Create WBS
Verify Scope
Control Scope
The product scope is measured against the requirement and project scope is measured against the
project plan.
The success of the project is dependent on how well the requirements are captured. These
requirements include the product requirements as well as the project requirements. Product
requirements include the technical and other specifications of the product whereas project
requirements include the business and project management requirements.
51
Collect Requirements
Project charter: The Project Charter is a summary document of what the project is
supposed to accomplish. This serves as key document to create the requirements
document.
Stakeholder register: Is the list of all the stakeholders. You need to gather requirements
from the all the stakeholders using different techniques such as interviews,
questionnaires, surveys and so on.
Interviews: This is a one-to-one interaction with the stakeholders to understand the exact
needs.
Focus groups: This involves a group of people to discuss their needs with you.
2. Mind maps: This is a excellent technique to visualize how the ideas relate to each
other.
3. Affinity Diagrams: This is a way to group same kind of ideas together in a group.
4. Brainstorming: This is the most common way of collecting the requirements where a
group of people sit down together to think of new ideas.
5. Nominal Group technique: This is a way of brainstorming where you write down
the ideas and then all vote for the best ones.
Group decision making techniques: There are various methods of arriving at a decision.
These include:
1.
2.
3.
4.
Questionnaires and surveys: Use this method to elicit response from a larger set of
people.
Observations: Sometimes just observing the users gives an idea of the needs or how to
solve the problem.
Define Scope
Definition Define Scope is the process of developing a detailed description of the project
as per
and product.
PMBOK
Guide
Project scope statement: The scope statement tells you what to do (and what not to do).
The scope statement covers the following important items:
Project Objectives
Product Scope Description
Project Requirements
Exclusions
Deliverables
Acceptance Criteria
Constraints
Assumptions
Progressive elaboration: Adding more details to the already defined scope and
not increasing the project scope.
55
Create WBS
Definition The process of subdividing project deliverables and project work into smaller,
as per
more manageable components.
PMBOK
Guide
Work Breakdown Structure (WBS): Deliverable-oriented hierarchical decomposition of work.
It organizes and defines the total scope of the project.
Work Package: The lowest level WBS components that contain planned work. A work package
can be schedules, cost estimated, monitored and controlled.
Note: Work outside the WBS is outside the scope of the project.
Project
56
Scope baseline: An approved version of the detailed scope statement, work breakdown
structure (WBS), and its associated WBS dictionary.
57
Verify Scope
Inspection: Inspection includes measuring and verifying to determine whether work and
deliverables meet requirements and product acceptance criteria.
Accepted deliverables: Deliverables that meet the acceptance criteria are signed-off by
the customer.
Change requests: If the deliverables that are not accepted, a change request is raised.
The change request goes for approvals.
58
Control Scope
Definition The process of monitoring the status of the project and product scope and
as per
managing changes to the scope baseline.
PMBOK
Guide
Variance Analysis: Variance analysis is used to measure the variation of key parameters
from the original scope baseline.
59
Chapter 4
Project Time
Management
Project Time
Management
Define Activities
Sequence Activities
Estimate Activity Resources
Estimate Activity Duration
Develop Schedule
Control Schedule
60
Project Time
Management
Project Time Management
Learning Objectives
After the completion of this chapter, the learner will be able to:
61
Definition Project Time Management includes the processes required to manage timely
as per
completion of the project.
PMBOK
Guide
Project Time
Management
Define Activities
Sequence Activities
Estimate Activity Resources
Estimate Activity Duration
Develop Schedule
Control Schedule
62
Define Activities
Scope Baseline: The scope baseline consists of project deliverables, assumptions and
constraints which are important inputs to the activities.
Enterprise Environmental Factors: explained earlier
Organizational Process Assets: It includes various templates and the lessons learned
databases.
Templates: Templates refers to using the WBS of the similar projects that are being
used in the organization.
Expert Judgment: using the opinion of the project managers who have done similar
projects earlier.
63
Activity List: This is the list of activities that need to be done to complete the project.
Activity Attributes: Activity attributes comprise of the information required for each
activity. This includes the description of each activity, predecessor activities, successor
activities, and any constraints.
Milestone List: A milestone is an important event in a project. These are important from
the point of tracking the project.
64
Sequence Activities
PMBOK
Guide
65
Task Relationships
Dependency Determination:
1. Mandatory dependencies are those that are inherent in the nature of the work being
done. They often involve physical limitations. For example, Superstructure after the
foundation.
Mandatory dependencies are also called hard logic dependencies.
2. Discretionary dependencies are those that are defined by the project management
team.
Discretionary dependencies are usually defined based on knowledge of:
o Best practices within a particular application area.
o Some unusual aspect of the project where a specific sequence is desired, even
though there are other acceptable sequences.
o Discretionary dependencies may also be called preferred logic, preferential logic,
or soft logic.
3. External dependencies are those that involve a relationship between project
activities and non-project activities.
o For example, Regulatory dependencies
66
Applying Leads and Lags: A lead allows acceleration of the successor activity
whereas, lag allows a delay in the successor activity.
Schedule Network Templates: Standard schedule network templates can be used for
expediting the creation of schedule network templates.
67
Definition Estimate Activity Resources is the process of estimating the type and quantities
as per
of material, people, equipment or supplies required to perform each activity.
PMBOK
Guide
Published Estimating Data: This includes published data for estimation available for
different industries.
Bottom-up Estimating: Involves subdividing large subset into smaller activities and ity
estimating each activity. Aggregation of all the activity estimates leads to the final
estimate.
68
Activity Resource Requirements: It is the type and number of resources required for
each activity.
69
Three - point Estimates: Also called Program Evaluation and Review Technique
(PERT). PERT uses three estimates to arrive at a range for activity time.
o Most Likely - The activity duration based on the realistic effort assessment.
o Optimistic - The activity duration based on the best-case scenario for the
activity.
o Pessimistic - The activity duration based on the worst-case scenario for the
activity.
Expected Time = (Optimistic + 4 * Most Likely + Pessimistic) / 6
70
Reserve Analysis: Reserve analysis means keeping some reserve time or buffer for time
overruns. This duration is the percentage of overall duration and called contingency
reserve.
Activity Duration Estimates: are the quantitative assessments of the likely number of
work periods that will be required to complete an activity.
71
Develop Schedule
Schedule Network Analysis: It is a analytical technique that uses critical path method,
critical chain method, what-if analysis, and resources leveling to calculate the early and
late start and finish dates for the uncompleted portions of project activities.
Critical Path Method: Critical Path is the path with the longest duration. A delay in any
one of the activities on the critical path activities leads to the delay in the entire project.
Float: The float for an activity is the amount that its duration can slip without causing the
project to be delayed. The float for any activity on the critical path is zero.
Calculate the early start, early finish, late start, and late finish using forward pass and
backward pass.
When two paths intersect, for the forward pass use the larger value, and for the
backward pass use the smaller value.
72
Critical Chain Method: Critical chain is a schedule network analysis technique that
modifies the project schedule to account for limited resources.
Resource Leveling: Resource leveling is necessary when resources have been overallocated, has been assigned two activities at the same time, or a critical resource is
available only during certain times.
Resource leveling causes the critical path to change in most cases.
What-if Scenario Analysis: What-if analysis involves using various scenarios and
finding their impact on the schedule.
Scheduling Tool: Using scheduling tools and software programs to create network
diagrams.
Project Schedule: It includes the project start and end dates and provides the prediction
of duration of the entire project. Project schedule can be represented in tabular form or
the following graphical formats:
o Milestone Chart
o Bar Chart
o Schedule Network Diagram
Schedule Baseline: It is an approved version of the schedule that is used to compare the
planned and actual progress.
73
Schedule Data: Schedule data includes the supporting data apart from the milestones,
activities, assumptions and constraints.
74
75
76
Control Schedule
Definition Control Schedule is the process of monitoring the status of the project to
as per
update project progress and managing changes to the schedule baseline.
PMBOK
Guide
Variance Analysis: This involves comparing the planned versus actual dates. This is
very important. In case of any problems, corrective action can be taken.
78
Chapter 5
Project Cost
Management
Project Cost
Management
Estimate Costs
Determine Budget
Control Costs
79
Project Cost
Management
Project Cost Management
Learning Objectives
After the completion of this chapter, the learner will be able to:
80
PMBOK
approved budget.
Guide
Project Cost
Management
Estimate Costs
Determine Budget
Control Costs
81
Estimate Costs
Scope baseline: The scope statement lists the project objectives and deliverables along
with other information required for the project. The information is required in creating
the cost estimate.
Project schedule: The project schedule provides the information on the duration of the
project, which is another input for cost estimate.
Human resource plan: Information about the cost of various resources adds to the cost
estimate.
Risk register: Keeping track of the risks and hence the costs required to tackling them.
82
Bottom-up estimating: This involves adding up the cost of individual activities or work
packages and rolling up to get the total costs. This is a much more accurate estimating
method than analogous estimating.
Three - point estimates: Also called Program Evaluation and Review Technique
(PERT). PERT uses three estimates to arrive at a range for activity cost.
o Most Likely - The cost of activity based on the realistic effort assessment.
o Optimistic - The cost of activity based on the best-case scenario for the activity.
o Pessimistic - The cost of activity based on the worst-case scenario for the activity.
Expected Cost = (Optimistic + 4 * Most Likely + Pessimistic) / 6
Reserve Analysis: Reserve analysis means keeping some reserve cash for cost overruns.
These costs that are the percentage of overall costs are also called contingency costs.
Cost of Quality: Cost of quality refers to the costs associated with quality related
activities.
PM Estimating Software: Project Mangers also use specialized estimating software like
spreadsheets to calculate costs.
Vendor Bid Analysis: Vendor bid analysis is required when projects are awarded based
on bids under competitive processes. Arriving at a cost estimate for individual modules /
sub-projects becomes important if part of the project is being outsourced to a vendor.
Activity Cost Estimates: This is the cost of all the activities in the project. It includes the
cost of labor as well as the material costs.
Basis Of Estimates: This lists the rates and reasoning for arriving at various cost
estimates for the resources.
83
Project Document Updates: The project plan documents are updated with the cost
estimates.
Rough Order of Magnitude (ROM) The cost estimation with an accuracy of + 50 %, -50 %.
Types of Cost
Direct Cost- any cost that is identified specifically with a particular final cost objective.
Indirect Cost: any cost not directly identified with a single, final cost objective (more
than one project).
Fixed Cost: A periodic charge that does not vary with business volume.
Variable Cost : Cost that fluctuates based on the business volume
84
Determine Budget
Contracts: If the project work is contracted, then contract is an important input to the
budget.
Cost aggregation: The individual activity estimates are rolled up into work package
levels which are further rolled till the project level. This is used to arrive at the project
budget.
Reserve analysis: Budget reserve analysis can help in arriving at both the management
and the contingency reserve.
85
Funding limit reconciliation: Since the funds are limited, the project manager needs to
complete the project within the budget. If this cannot be achieved, a scope change might
be required or funding limit increased.
Cost performance baseline: This is a snapshot of the planned budget. The cost
performance baseline is used to compare the actual performance against the baseline.
Project funding requirements: The total funding requirements are the baseline cost and
the management reserve. It is important for the project manager to understand the funding
requirements during different phases of the project and how to secure them as well.
Project document updates: The various documents such as the cost management plan
need to be updated.
86
Control Costs
Definition Control Cost is the process of monitoring the status of the project to update
as per
project budget and managing changes to the cost baseline.
PMBOK
Guide
Earned value management: EVM is used to measure the performance of the project
against the plan. (explained under the section EVM)
Forecasting: Forecasting uses the EVM numbers to decide on preventive or corrective
actions.
To-complete performance index (TCPI): TCPI calculation is used to figure out how
well the project needs to perform in future to stay within the planned budget.
Performance reviews: These are project team meetings where the various variances are
analyzed. EVM is used to calculate the variances.
Variance analysis: The variance between the planned the actual project performance.
Project management software: There are software available that help the project
manager to keep track of their budgets.
Work performance measurements: These include the CV, SV, SPI, and CPI.
Budget forecasts: Estimate at Completion (EAC) value is calculated for budget forecast.
87
88
Name
Formula
What is it?
BAC
Budget at Completion
PV
Planned Value
PV = BAC* Planned %
Complete
EV
Earned Value
EV = BAC * Actual %
Complete
AC
Actual Cost
SPI
Schedule Performance
Index
SPI = EV/PV
SV
Schedule Variance
SV = EV-PV
CPI
CPI = EV/ AC
CV
Cost Variance
CV = EV AC
EAC
Estimate at Completion
ETC
Estimate to Complete
ETC = EAC AC
VAC
Variance at Completion
89
Indices
1. Schedule Performing Index (SPI): SPI = EV / PV
The project is ahead of schedule, if earned value is more than planned value.
That means, if SPI > 1, the project is ahead of schedule, and
If SPI < 1, the project is behind schedule
The project is under budget, if earned value is more than actual cost.
That means, if CPI > 1, the project is under budget, and
If CPI < 1, the project is over budget
Forecasting
1. Estimate at Completion: EAC = AC + ETC
2. EAC forecast for ETC work performed at budgeted rate
4. EAC forecast for ETC work considering both SPI and CPI factors
90
91
Chapter 6
Project Quality
Management
Project Quality
Management
Plan Quality
Perform Quality Assurance
Perform Quality Control
92
Project Quality
Management
Project Quality Management
Learning Objectives
After the completion of this chapter, the learner will be
able to:
93
Definition
as per
PMBOK
Guide
Project Quality
Management
Plan Quality
Perform Quality Assurance
Perform Quality Control
94
Customer Satisfaction
The product should not just satisfy the stated needs but also the some of the unstated needs of the
customer. Such requirements are common sense requirements like a product should not be made
from toxic stuff.
Conformance to requirements
This is one of the most important concepts for defining quality. This means that that the product
should meet the customer requirements. This also means that the product is as good as the stated
requirements. This highlights the importance of the requirements gathering.
95
Plan Quality
Scope baseline: Scope baseline lists the requirements which include the product
specifications as well. This document also had the acceptance criteria that includes the
quality parameters listed.
Stakeholder register: Stakeholders register has the list of stakeholders who are
interested in the quality of the product.
Risk register: Risk register helps to identify risks that might affect quality.
Organizational process assets: This would include the company quality policy.
Cost of Quality (COQ): Cost of quality refers to the costs incurred during the life cycle
of the product. These include the cost of preventing nonconformance to requirements as
well as the cost of appraising the product or service for conformance to requirements.
o Conformance Costs: These include Prevention costs as well as Appraisal Costs
o Nonconformance Costs: These include Internal Failure Costs as well External
Failure Costs.
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Conformance Costs
Nonconformance Costs
Training
Processes
Testing and
Inspection
Audits
Rework
Fast tracking
Warranty
Product recalls
Control Charts: Are used to find out which process is contributing to quality problems.
This is generally used in manufacturing industry for repetitive processes.
There is an upper control limit and a lower control limit. There is also a mean. If the data
points are outside the limits, the process is out of control. This means the process needs
adjusting.
Benchmarking: In this, a reference point from another similar project from within or
outside company is used to compare the results. This is generally done for best practices
and improvement of products.
Proprietary quality management methodologies: these Include Six Sigma, Lean Six
Sigma. CMMI etc.
Additional quality planning tools: These include:
o Brainstorming
o Affinity Diagrams
o Nominal Group Techniques: brainstorming in small groups
o Matrix Diagrams: tables, spreadsheets that help analyze complex relationships
o Prioritization Matrices: diverse sets of issues are analyzed for priority.
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Quality management plan: The Quality management plan describes how the project
management team addresses quality.
Quality metrics: are the measurements that are taken throughout the project. These
measurements are used to measure the quality. For example, schedule variance or defect
density.
Quality checklists: Checklists are defect prevention tools that use a list of characteristics
/ specifications in a product. Mostly used during inspection.
Process improvement plan: is a plan for improving the process. The process is
monitored and checked for defects to create a improvement plan.
Project document updates: any updates are made to the subsidiary plans of the project
plan.
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Definition Perform Quality Assurance is the process of auditing the quality requirements
as per
and the results from quality control measurements to ensure appropriate
PMBOK quality standards and operational definitions are used.
Guide
Quality control measurements: These include the records of quality testing. These are
used for analysis.
Plan Quality and Perform Quality Control Tools & Techniques: The include the Plan
Quality and Perform Quality Control Tools & Techniques
Quality Audits: Quality Audits are conducted for the projects in a company to check
whether the projects are following the companies processes or not. These are structured
reviews with the objective to:
o Improve performances of the project
o Incorporate the best practices
o Identify nonconformance to processes and procedures
Quality audits can be done by internal auditors or third-party agencies.
Process Analysis: This is often utilized to understand and improve the processes.
Change Requests: Change requests can be used for corrective action / preventive action
/ defect repair.
Project Management Plan Updates: This is would include update to various subsidiary
plans that are part of the project management plan.
Project Document Updates; The documents such as quality audit reports, quality
processes and so on might require updates.
100
Definition Perform Quality Control is the process of monitoring and recording results of
as per
executing the quality activities to assess performance and recommend
PMBOK necessary changes.
Guide
Prevention is keeping errors out of the process and Inspection is keeping errors out of
the hand of the customer.
Attribute Sampling is the result conforms, or it does not, whereas, Variable Sampling
is when the result is rated on a continuous scale that measures the degree of conformity.
Special causes are unusual events and Random causes are because of normal variation.
Tolerances means the result is acceptable if it falls within the range specified and,
Control Limits means that the process is in control if the result falls within the control
limits.
Cause and Effect Diagram: Also called Fishbone and Ishikawa diagrams. You list
all the possible causes of a defect.
101
Cause A
:
explain
ed
earlier
Cause B
Cause C
explain
ed
earlier
:
explain
ed
earlier
111
Defect
111
111
Cause D
Cause E
explain
ed
earlier
111
Histogram: A histogram is a vertical bar chart showing how often a particular variable
state occurred.
High
Medium
Low
Pareto Chart: Also called the 80 / 20 Rule 80% of the defects are because of 20%
causes. Pareto charts help in figuring out the most important causes of the defects.
102
Pareto diagram is a histogram, ordered by frequency of occurrence that shows how many
results were generated by type or category of identified cause.
Run Chart: These charts depict the trends in data as a line chart.
16
14
12
10
8
6
4
2
0
Critical
High
Medium
Low
Scatter Diagram: Scatter diagrams show the relationship two different variables. One
variable is plotted on the x-axis and the other is plotted on the y-axis. The pattern of their
intersecting points can graphically show relationship patterns.
3.5
3
2.5
2
1.5
1
0.5
0
0
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Approved Change Requests Review: All approved change requests should be reviewed
to verify that they were implemented as approved.
Organizational Process Assets Updates: These include the lessons learned database as
well as the completed checklists.
Project Management Plan Updates: The various plans including the quality
management plan need to be updated.
104
Chapter 7
Project Human
Resource Management
Develop HR Plan
Acquire Project Team
Develop Project Team
Manage Project Team
105
Project Human
Resource Management
Project Human Resource Management
Learning Objectives
After the completion of this chapter, the learner will be able to:
106
Definition Project Human Resource Management includes the processes that organize,
as per
manage, and lead the project team.
PMBOK
Guide
Develop HR Plan
Acquire Project Team
Develop Project Team
Manage Project Team
107
Develop HR Plan
Definition Develop Human Resource Plan is the process of identifying and documenting
as per
project roles, responsibilities, and required skills, reporting relationships, and
PMBOK creating a staffing management plan.
Guide
108
Person
Phase
Project Mgt
Analysis
Design
Develop
Testing
Tom
Peter
Sofia
Joseph
Kelly
Networking: Networking refers to the formal and informal interactions within the
company and outside to keep updated.
Human Resource Plan: The human resource management plan includes the following:
o Staffing Management Plan: The staffing management plan is the most important
part of the HR plan. It includes the following:
1. Resource Histogram
2. Training Needs
3. Rewards and Recognition Program
4. Release Criteria
5. Acquisition Plan, and more
109
o Roles and Responsibilities: Using RACI charts and other templates. (explained
above)
o Project Organization Charts: explained above
110
Definition Acquire Project Team is the process of confirming human resource availability
as per
and obtaining the team necessary to complete project assignments
PMBOK
Guide
Pre - Assignment: In some cases, the project team members are assigned in the
beginning itself and they dont need to be negotiated. This is called pre-assignment.
Negotiation: Some resources are required from different functional teams and you need
to negotiate with the functional managers for assignment. Negotiation skills are required
for the same.
Acquisition: means getting teams from external vendors outside the company.
Virtual Teams: are teams that do not work at the same locations. The teams might be
located in different countries and time zones.
Project Staff Assignments: This is when you secure a team member and assign to a
specific role.
Resource Calendars: These provide information as to when the team member will be
working on the project.
111
Project Management Plan Updates: The various documents related to HR plan need to
be updated based on the project information.
112
Definition Develop Project Team is the process of improving the competencies, team
as per
interaction, and the overall team environment to enhance project performance
PMBOK
Guide
Interpersonal Skills: The soft-skills or the interpersonal skills are very important for
solving problems in the team.
Training: Training is very important for building the competencies in the domain /
technology required for the project success.
Team Building Activities: keeping the team together is the key to project success. Team
building can be formal training sessions and status meeting to informal off sites and lunch
together with the team.
Ground Rules: Ground rules are the expectations from team members regarding their
behavior within the team. These can be as simple as being on time in the meetings and
standards on quality and productivity.
Co-location: refers to team being located together in the same location to increase
communication and productivity.
113
114
Definition Manage Project Team is the process of tracking team member performance,
as per
providing feedback, resolving issues, and managing changed to optimize
PMBOK project performance
Guide
Observation and Conversation: part of the communication skills, you need to use
observation and conversation to effectively manage the team.
Project Performance Appraisals: Project appraisals are important for giving feedback
to the team members, clarifying the role conflicts if any, and also rewarding the good
work. This becomes more important in case of projects which are longer in duration. The
team should be aware of the issues so that they can work towards the common goal of
project success.
o
o
o
o
Issues Log: is a document list of issues with the resolution dates and responsibilities.
116
Types of Power
Legitimate Power
o Also known as Formal Power or Positional Power
o Power comes from being formally in charge of the project and the people
Reward Power
o Your ability to give award a bonus or another kind of reward in order to motivate
team members.
Expert Power
o You are the subject matter expert
o The team respects you for your expertise in a specific area, and gives you
credibility because of that
Referent Power
o You are standing in for someone who has more position or power in the company
o Also comes from the charismatic personality of the project manager
o Can also come when you ally with a powerful person
Punishment Power
o You correct a team member for poor behavior. Always remember to do this oneon-one and in private.
117
Organization Theories
Maslows Hierarchy of Needs: People are driven by a hierarchy of their needs. If your
lower level needs are satisfied, you tend to be motivated by higher level needs.
o
o
o
o
o
Self
Actualization
Esteem
Social
Safety
Physiological
Herberzbergs Theory: also called Herzbergs Hygiene Theory because it deals with
Hygiene factors and motivating factors.
Hygiene factors
Salary
Compensation
Positive work conditions
Job security
Status
Company policy
Motivating Factors:
Responsibility
Work itself
Recognition
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Professional growth
Achievements
Self-actualization
Expectancy Theory
Affiliation , a strong sense from being a part of a working team and having good
relationships with coworkers
Ouchis Theory
Both Management and Workers need to be involved, and they should trust each
other
119
Halo Effect
120
Chapter 8
Project Communication
Management
Project Communication
Management
Identify Stakeholders
Plan Communications
Distribute Information
Manage Stakeholder Expectations
Report Performance
121
Project Communication
Management
Project Communication Management
Learning Objectives
After the completion of this chapter, the learner will be able
to:
122
Definition It includes the processes required to ensure timely and appropriate generation,
as per
collection, distribution, storage, retrieval, and ultimate disposition of project
PMBOK information.
Guide
Project Communication
Management
Identify Stakeholders
Plan Communications
Distribute Information
Manage Stakeholder Expectations
Report Performance
123
Identify Stakeholders
Project manager
Sponsor
Customer
Project team members
Performing organization
Project Charter: This document provides the information on sponsor of the project.
Procurement documents: The vendors and suppliers in the contract are the key
stakeholders.
Enterprise environmental factors
Organizational process assets
Stakeholder analysis: This is a critical tool that involves interviewing the stakeholders.
One can divide the stakeholders into groups based on their involvement and need of
communication.
Expert Judgment: Involves talking to all the experts on the project to identify more
stakeholders
124
Keep
Satisfied
Manage
Closely
Monitor
Keep
Informed
Power
Low
Low
Interest
High
125
Plan Communication
Stakeholder register
Stakeholder management strategy
Enterprise environmental factors
Organizational process assets
Communications technology: This has impact on how stakeholders are involved in the
project. This includes the factors such as:
1. Urgency of information: How frequently is the reporting required
2. Technology availability: Are the systems in place for the reporting requirements.
For example, are the web-based systems available if the reporting is time critical.
3. Project staffing: Are the team members trained on communication technology
available.
4. Project duration: Will the technology remain same throughout the project.
Communication models: In the basic communication model, the sender sends a message
to the receiver across a medium.
Sender
Receiver
Medium
Feedback
Noise
Encode
Decode
Communication management plan: This is a subsidiary of the project plan and can be
highly detailed and complex. It can include details such as frequency of various reports,
the methods of communication, report formats, and more.
127
Distribute Information
128
Additional Information
Nonverbal Communication
Means gestures, facial expressions, and physical appearance while
you are communicating your message
Feedback
Is when you respond to communication
Active listening
When you give feedback to someone who is speaking
129
Stakeholder register: This includes the list of stakeholders for the project.
Stakeholder management strategy: The document lists the goals and objectives of the
various stakeholders.
Project management plan: The Project management Plan contains the Communication
Plan. The communication plan lists the expectations of the stakeholders.
Issue log: The list of issues that happen during the project.
Change log: Is the list of changes that happen during the project. These changes and their
impact should be communicated to the right stakeholders.
Organizational process assets: These include various processes such as change control
procedures and historical information from earlier projects.
Interpersonal skills: Also referred as soft skills are used to keep the stakeholders
informed and working towards the common goal.
130
Change requests: These are any changes to the project plan or other documents that
involve stakeholder communication.
Project management plan updates: Any approved changes need to be updated in the
communication plan, which is part of the project management plan.
Project document updates: Project documents requiring updates can include the
stakeholder register, stakeholder management strategy and issue log.
131
Report Performance
PMBOK
Guide
Work performance information: Includes information such as deliverable dates and the
schedules.
Variance analysis: Analyzing the performance data with respect to the baseline.
Forecasting methods: Use Earned Value and other forecasting methods to check
whether the project is within budget and schedule.
Reporting systems: A system to keep track of time and money spent on the work.
132
Performance reports: These reports provide the status and the progress of work
compared to the baseline. Common formats include bar charts and variance analysis. The
details can include issues and risks, work completed during the current period and also
work planned for the next period and more.
Organizational process assets updates: Lessons learned are updated so that they
become part of historical database.
Change request: Change requests are generated when you report performance. You need
to recommend Corrective and Preventive actions to the team.
Channels of Communication
Number of Communication Channels
If there are five people on the project, then we have 10 communication channels.
This is calculates as follows: 5*(5-1) /2 = 10
133
Chapter 9
Project Risk
Management
Project Risk
Management
134
Project Risk
Management
Project Risk Management
Learning Objectives
After the completion of this chapter, the learner will be
able to:
List the various risk management processes
Describe the process of Identifying Risks
Describe the process of Perform Qualitative Risk
Analysis
Describe the process of Perform Quantitative Risk
Analysis
Describe the process of Plan Risk Responses
Describe the process of Monitor and Control Risks
135
PMBOK
monitoring and control on a project.
Guide
A Risk is any uncertain event or condition that might affect your project. Risk might have a
positive as well as a negative outcome.
The objectives of Project Risk Management are to increase the probability and impact of positive
events, and decrease the probability and impact of negative events in the project.
Project Risk
Management
136
Definition Plan Risk Management is the process of defining how to conduct risk
as per
management activities for a project.
PMBOK
Guide
Project scope document: The project scope statement contains the details of project
deliverables and their acceptance criteria. This document is an important document for
identifying the risk.
Cost management plan: It includes the processes involved in estimating, budgeting, and
controlling costs so that the project can be completed within the approved budget.
Schedule management plan: This document defines how schedule contingencies will be
reported and assessed.
Communications management plan: This document defines the interactions that will
occur on the project and determines who will be available to share information on various
risks and responses at different times
Enterprise environmental factors: Factors include the company culture and existing
systems that are dealt with and used by the project manager to run the project. The other
factors that can influence this process are risk attitudes and tolerances that describe the
degree of risk that an organization will withstand.
Organizational process asset: that can influence this process include risk categories,
common definitions of concepts and terms, risk statement formats, standard templates,
roles and responsibilities, authority levels for decision making, lessons learned and
stakeholder register.
Planning Meetings and Analysis: This involves meetings with the project stakeholders
to identify the risks. These meetings should keep happening throughout the project.
137
Risk Management Plan: describes the various risk management processes that will be
implemented, monitored and controlled throughout the project lifecycle. It can include
the following:
Methodology Defines the approaches, tools and the data sources that may be used
to perform risk management on the project
Roles and Responsibilities Defines the lead, support and risk management team
membership for each type of activity in the risk management plan, assigns people to
these roles and clarifies their responsibilities
Budgeting - Assigns resources and estimates costs needed for risk management for
inclusion in the project cost baseline
Timing Defines when and how often the risk management process will be
performed through out the project life cycle and establishes risk management
activities to be included in the project schedule.
Risk Categories provides a structure that ensures a comprehensive process of
systematically identifying risks to a consistent level of detail and contributes to the
effectiveness and quality of Identify risks process. An organization can use a
previously prepared categorization of typical risk. A risk breakdown structure (RBS)
is one approach to providing such a structure, but it can also be addressed by simply
listing the various aspects of the project. The risk categories may be revisited during
the Identify risks process. A good practice is to review the risk categories during the
Risk Management Planning process prior to their use in Identify risks process. Risk
categories based on prior projects may need to be tailored, adjusted or extended to
new situations before those categories can be used on the current project.
Risk Probability and Impact: This helps you figure out how big is the impact of
risk. The classification for risks from very low to very high can be used.
Revised stakeholder tolerances should be documented.
Reporting Formats: Describes the format and the content of the risk response plan.
Tracking: Documents if and how risk processes will be audited.
138
Identify Risks
Definition Identify Risks is the process of determining which risks may affect the project
as per
and documenting their characteristics.
PMBOK
Guide
Quality management plan: contains information related to the quality management plan
which is an important input to Identify risk process as the project specific approach may
generate or alleviate risk by its nature or structure.
139
Project documents: that may be useful while identifying risks are assumptions log, work
performance reports, network diagrams, baselines and other project information that may
be useful in identifying risks.
Checklist Analysis: can be based on historical information gathered from earlier similar
projects. The lowest level of Risk Breakdown Structure (RBS) can also be used as a
checklist. Checklists can be updated at the end of the project completion to add new risks,
if any. Checklists are not a very much efficient method of identifying risks.
Assumptions are tested for their validity. The consequences that might occur if the
assumptions were false are also analyzed. In such cases the assumptions are considered as
risks.
SWOT Analysis: This lets you analyze the Strengths, Weaknesses, Opportunities and
Threats to identify the probable risk events
Risk Register: The identified risks are mentioned in the document called a Risk Register,
which becomes a component of the project management plan. Following items can be
included in the Risk Register.
List of identified risks The list can state the EVENT that may occur, the IMPACT
and if CAUSE, EVENT may occur, then listing of EFFECT. Root causes of the risk
events can also be listed
List of potential responses If identified during the process of risk identification,
responses should be documented and it may be a useful input to the plan Risk
Responses process
Identified Risks
Potential Responses
Risk Register
141
Root causes
Definition Perform Qualitative Risk Analysis is the process of prioritizing risks for
as per
further analysis or action by assessing and combining their probability of
PMBOK occurrence and impact.
Guide
Risk Probability and Impact Assessment: It examines the likelihood that each specific
risk will occur and evaluates the potential effect of any of the project objectives such as
time, cost, scope or quality. It also evaluates the positive opportunities and negative
threats. To assess the probability and impact of each risk, a meeting or interview with
subject matter experts either internal or external to the organization is conducted where
levels are assigned to each risk and also the potential effects of these risks is evaluated in
case the risk occurs
Probability and Impact Matrix: assigns ratings to each risk and classifies them for
either performs quantitative risk analysis or plan risk responses. Ratings are assigned to
risks based on the combination of probability and impact. The risk may guide in
providing risk responses as indicated below:
Risks that have a negative impact on the project objectives if they occur (threats) and
that are in the high risk (black zone of the matrix), may require priority action and
aggressive response strategies.
Threats in low risk (medium gray zone) may not require proactive management
action beyond being placed on a watch list or adding a contingency reserve.
For opportunities, those in the high-risk (black zone) that can be obtained most easily
and offer the greatest benefit should, therefore be targeted first Opportunities in the
low-risk (Medium gray zone) should be monitored
142
Source: A Guide to the Project Management Body of Knowledge, Fourth Edition (PMBOK Guide) 2008 Project Management Institute, Inc.
All Rights Reserved.
Risk Data Quality Assessment: It involves determining the quality or usefulness of the
data collected to evaluate the risk as per the risk management plan. It involves examining
degree to which the risk is understood, and the accuracy, quality, reliability and integrity
of the data about risk. If data quality is unacceptable, it may be necessary to gather
higher-quality data.
Risk Categorization: Project risks can be categorized by the source of risk (e.g., using
the RBS), areas of the project affected (e.g. ,using the WBS) or other useful category
(e.g. , project phase, etc.) to determine areas of the project most exposed to the effects of
uncertainty. Grouping risks by common root causes can lead to developing effective risk
responses.
Risk Urgency Assessment: determines how soon the potential risks may occur, and it
also identifies near- term responses for those risks.
Risk register updates: Risk register is initiated during identify risk process, and is
updated with information from Perform Qualitative Risk Analysis.
143
144
Definition Perform Quantitative Risk Analysis is the process of numerically analyzing the
as per
effect of identified risks on overall project objectives.
PMBOK
Guide
o 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 (i.e.
analysis under uncertainty). The EMV of opportunities will generally be expressed as
positive values while those of risks will be negative. EMV is calculated by
multiplying the value of each possible outcome by its probability of occurrence and
adding them together.
Source: A Guide to the Project Management Body of Knowledge, Fourth Edition (PMBOK Guide) 2008 Project Management
Institute, Inc. All Rights Reserved.
146
o Modeling and Simulation: A project simulation uses a model that translates the
uncertainties or potential risks specified at a detailed level of the project into their
potential impact on project objectives.
Simulation techniques compute the project model using the inputs such as cost or
schedule to determine the probability distribution. Simulation techniques should be the
preferred one for predicting schedule or cost risks as compared to other techniques
Simulations are typically performed using the Monte Carlo technique. In a simulation, the
project model is computed many times (iterated) with the input values randomized from a
probability distribution function (e.g. cost of project elements or duration of schedule
activities) chosen for each iteration from the probability distribution of each variable. A
probability distribution is then calculated.
Risk Register Updates: The register initiated in the Identify Risks process and is
updated in Perform Qualitative Risk Analysis process. The risk register is a component of
the project management plan. Updates include the following components:
o Probabilistic analysis of the project. Estimates are made of potential project
schedule and cost outcomes, listing the possible completion dates and costs with their
associated confidence levels. This output typically expressed as a cumulative
distribution is used with stakeholder risk tolerances to permit qualification of the cost
and time contingency reserves
o Probability of achieving cost and time objectives. With the project facing the risks,
the probability of achieving project objectives under the current plan can be estimated
using quantitative risk analysis results
o Prioritized list of quantified risks. This list of risks includes those that pose the
greatest threat or present the greatest opportunity to the project. These include the
risks that require the greatest cost contingency and those that are most likely to
influence the critical path.
o Trends in quantitative risk analysis results. As the analysis is repeated a trend
may become apparent that leads to conclusions affecting risk responses
147
Definition Plan Risk Responses is the process of developing options & actions to enhance
as per
opportunities and to reduce threats to project objectives
PMBOK
Guide
148
o Exploit .This strategy may be selected for risks with positive impacts where the
organization wishes to ensure that the opportunity is realized. This strategy seeks
to eliminate the uncertainty associated with a particular upside risk by making the
opportunity definitely happen. Directly exploiting responses include assigning
more talented resources to the project to reduce time to completion or to provide
better quality than originally planned.
o Share. Sharing a positive risk involves allocating ownership to a third party who
is best able to capture the opportunity for the benefit of the project. E.g. forming
risk-sharing partnerships, teams, special-purpose companies or joint ventures,
which can be established with the express purpose of managing opportunities.
o Enhance . This strategy modifies the size of an opportunity by increasing
probability and /or positive impacts and by identifying and maximizing key
drivers of these positive-impact risks. Seeking to facilitate or strengthen the cause
of the opportunity and proactively targeting and reinforcing its trigger conditions,
might increase the probability
o Accept. Accepting an opportunity is being willing to take advantage of it if it
comes along, but not actively pursuing it.
Contingent Response Strategy: Some responses are designed for use only if certain
events occur. For some risks, it is appropriate for the project team to make a response
plan that will only be executed under certain predefined conditions, if it is believed that
there will be sufficient warning to implement the plan. Events that trigger the
contingency response such as missing intermediate milestones or gaining higher priority
with a supplier, should be defined and tracked.
Risk Register Updates: Components of the Risk register at this point include:
o Identified risks their descriptions, areas of the project (e.g. WBS element) affected,
their causes (e.g. RBS element) and how they may affect project objectives
o Risk owners and their assigned responsibilities
o Output from the Perform Qualitative and Perform Quantitative Risk Analysis
processes, including prioritized lists of project risks and probabilistic analysis of the
project
o Agreed upon response strategies
o Specific actions to implement the chosen response strategy
o Symptoms and warning signs of risks occurrence
o Budget and schedule activities required to implement the chosen responses
149
o Contingency reserves of time and cost designed to provide for stakeholders risk
tolerance.
o Contingency plans and trigger that call for their execution
o Fallback plans for use as a reaction to a risk that has occurred and the primary
response proves to be inadequate
o Residual Risks that are expected to remain after planned response have been taken as
well as those that have been deliberately accepted
o Secondary risks that arise as a direct outcome of implementing a risk response
o Contingency reserves that are calculated based on the quantitative analysis of the
project and the organizations risk thresholds.
150
Definition Monitor & Control Risks is the process of implementing risk response plans,
as per
tracking identified risks, monitoring residual risks, identifying new risks, and
PMBOK evaluating risk process effectiveness throughout the project.
Guide
Risk reassessment indicates reassessing the identified risks and identification of new
risks as defined in the risk management plan. Project risk reassessment should be
performed regularly and it can be included as an agenda item at the project status
meetings.
Risks audits are scheduled audits that document the effectiveness of risk responses with
respect to their dealing with identified risks and their associated root causes. This aids in
determining the effectiveness of the risk management process.
Variance and trend analysis Performance data provides the data for variance and trend
analysis. Using this data and applying the earned value analysis and similar methods of
project variance and trend analysis; it is possible to monitor the overall project
performance.
Reserve analysis. During the planning phase, contingency reserves are defines as a part
of risk response plan. During execution some of the reserves get exhausted. This tool
determines if the remaining reserves are sufficient to tackle the remaining risks.
152
Chapter 10
Project Procurement
Management
Project Procurement
Management
Plan Procurements
Conduct Procurement
Administer Procurements
Close Procurements
153
Project Procurement
Management
Project Procurement Management
Learning Objectives
After the completion of this chapter, the learner will be
able to:
154
PMBOK
project team
Guide
Project Procurement
Management
Plan Procurements
Conduct Procurement
Administer Procurements
Close Procurements
155
Plan Procurements
When decisions are made to buy versus leasing options, both the direct as well as
indirection costs related to purchase are taken into consideration.
Fixed Price (FFP) means that you are going to pay one amount regardless
of how much it costs the contractor to do the work
156
Fixed Price Plus Incentive Fees (FPIF) means that you are going to pay
a fixed price for the contract and give a bonus based on some performance
goal
Fixed Price with Economic Price Adjustment (FP EPA) This type
of contract is used in case of long term contracts, where pre-defined
adjustments are made every year based on some reliable financial index.
Cost Plus Fixed Fee (CPFF) you pay the seller back for the costs
involved in doing the work, plus you agree to an amount that you will pay
on top of that.
Cost Plus Award Fee (CPAF) you agree to pay the legitimate costs but
the majority of the fee is based on performance of the seller based on the
subjective criteria set in the contract. This cannot be subject to appeals.
Cost plus incentive fee (CPIF) means you will reimburse costs on the
project and pay a pre-determined incentive fee based upon performance
goals set in the contract.
Time and Materials (T&M) means that you will pay a rate for each of
people working on your project plus their material costs. The Time part
means that the buyers pay a fixed rate for labor.
A procurement plan may be formal or informal, highly detailed or broadly framed, based
on the needs of the project.
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Source Selection Criteria: Source selection criteria are used to select the seller.
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Conduct Procurements
Definition The process of obtaining seller responses, selecting a seller and awarding a
as per
contract.
PMBOK
Guide
Bidder Conferences: These are also called vendor conferences or pre-bid conferences.
These involve the meetings with prospective sellers before submission of proposal. The
objective of the meeting is for clear understanding of the requirements and to avoid any
preferential treatment.
Independent Estimates: In some cases, the buyer would create the estimates themselves
and also by the third-parties. These would be compared with the sellers responses for
final selection.
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Advertising: This involves placing an advertisement for getting in touch with sellers. In
government-funded projects, this is a requirement.
Internet Search: Using internet to search for approximate price range of the product is
also a practice. This is not useful in case of complex procurement.
Procurement Negotiations: This involves negotiating with the sellers on the various
terms of the contract. The project managers do not do the negotiations themselves. They
work closely with the legal department of the company for these negotiations.
Selected Sellers: The selected sellers are the list of sellers who have qualified based on
their proposals.
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Administer Procurements
Contract Change Control System: This involves process to change the procurement
contract. It can involve the approvals, paperwork and the dispute resolution
mechanism required for the change control.
Inspection and Audits: Inspections and audits are conducted by the buyer to ensure
quality of the procurement as defined in the contract. Nonconformance can be raised
and the supplier can be penalized based on the terms in the contract.
Performance Reporting: This includes the performance reports by the seller which
are used by the buyer to monitor the project work.
Payment Systems: Payment system refers to how the payments are made to the
seller. The Accounts Payable system of the buyer makes the payments after the
payments are validated and authorized.
Claims Administration: Claims arise when there is some dispute between the buyer
and the seller. The contracts have terms and conditions on how the disputes should be
resolved and since the contract is a legal document, the claims need to be settled as
per the terms in the contract.
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Close Procurements
Procurement Audits: This refers to the structured review of the complete process of
procurement. It is used to document the lessons learned database and also for the future
contacts.
Negotiated Settlements: All the terms of the contract need to be completed. This
includes any claims or disputes arising of the contract.
Closed Procurements: Close procurements involves buyer providing the seller with a
formal written notice that the contract has been completed.
Organizational Process Assets Updates: This includes updated to the lessons learned
database and procurement file.
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Negotiations Techniques
Fair and Responsible: a negotiator may claim that the price for a
product is equitable because thats what another company is paying.
Delay: are useful when tempers are beginning to flare, to divert from a
subject, etc (Ex: arrival of refreshments, request for recess etc)
Fait Accompli: a party may claim that what is being asked for has
already been accomplished and cannot be changed
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Chapter 11
Professional Responsibility
And Ethics
Professional Responsibility
And Ethics
Project Management Institute Code of
Ethics and Professional Conduct
Ensure Integrity
Contribute to PM Knowledge Base
Respect Diversity
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Professional Responsibility
And Ethics
Professional Responsibility and Ethics
Learning Objectives
After the completion of this chapter, the learner will be
able to:
Understand Project Management Institute Code of Ethics
and Professional Conduct.
Understand Professional Responsibility and Ethics
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Introduction
Everyone who is a PMP must follow the Project Management Institute Code of Ethics and
Professional Conduct.
Ensure Integrity
Contribute To PM Knowledgebase
Respect Diversity
Ensure Integrity
Perform research on the project done within your organization for the purpose of
discovering best practices.
Share lessons learned.
Write articles on Project Management.
Support education of the project team members and other stakeholders.
Coach and mentor team members.
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Gain knowledge of project management best practices and other technical and people
management skills.
Look for new information and practices that help the organization or its projects.
Continue to learn about the industry where you work.
Understand your weaknesses and strengths, plan your own professional development, and
continue to learn.
Respect Diversity
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