ProjectManagement Professional(PMP) CertificationEBE… · project ProjectManagementProfessional(PMP)® Certiﬁcation-FourthEdition

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Project ManagementProfessional (PMP)® CertificationFourth Edition


Project Management Professional(PMP)® Certification - Fourth EditionPart Number: 85042Course Edition: 1.2

ACKNOWLEDGMENTS

Project TeamContent Developer: Divya Jose, Pradeep Reddy and Reshma R • Content Manager: Adrian Bk • Graphic Designer: Karthik PB,Mohammed Baroda, Vasanth K. and Charles Amalorpavaraj • Project Manager: • Media Instructional Designer: Divya Jose,Pradeep Reddy and Reshma R • Content Editor: Peter Bauer • Materials Editor: Frank Wosnick • Business Matter Expert:Dhananjay M. Gokhale • Technical Reviewer: Dhananjay M. Gokhale • Project Technical Support: Mike Toscano • ProjectLead: Abbas A

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Project Management Professional (PMP)® Certification - Fourth Editionii

NH (EBEE)


PROJECT MANAGEMENT PROFESSIONAL(PMP)® CERTIFICATION- FOURTHEDITION

LESSON 1 - EXAMINING PROFESSIONAL PROJECT MANAGEMENT

A. Identify Project Management Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Subprojects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Project Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Project Management Office (PMO) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Project Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Types of Project Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

The Project Life Cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

General Characteristics of a Project Life Cycle . . . . . . . . . . . . . . . . . . . . 12

Project Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Governance Activities in the Project Life Cycle . . . . . . . . . . . . . . . . . . . . 13

Phase-to-Phase Relationships in a Project. . . . . . . . . . . . . . . . . . . . . . . . . 13

Progressive Elaboration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Organizational Cultures and Styles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Organizational Culture’s Influence on Projects . . . . . . . . . . . . . . . . . . . . 15

Project Management Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Project Management Inputs, Tools and Techniques, and Outputs . . . . 16

Project Management Process Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Project Management Process Group Interactions . . . . . . . . . . . . . . . . . 16

Knowledge Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Enterprise Environmental Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

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Contents iii


Organizational Process Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

B. Identify Professional and Social Responsibilities. . . . . . . . . . . . . . . . . . . . . . 23

The PMI Code of Ethics and Professional Conduct . . . . . . . . . . . . . . . . . 23

Upholding Responsibilities to the Profession . . . . . . . . . . . . . . . . . . . . . . . 24

Upholding Responsibilities to the Customer and to the Public . . . . . . . . 25

Adhering to Other Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

C. Identify the Interpersonal Skills Required for a Project Manager . . . . . . . . 28

Interpersonal Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Leadership Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Team Building Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Motivation Skills. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Communication Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Influencing Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Decision Making Skills. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Six Phases of Decision Making. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Political and Cultural Awareness Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Negotiation Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

LESSON 2 - INITIATING A PROJECT

A. Examine the Project Management Context . . . . . . . . . . . . . . . . . . . . . . . . . 38

Program Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Portfolio Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Relationships Among Project, Program, and Portfolio Management . . 39

Operations Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Project and Operations Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Agile Project Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

CONTENTS

Project Management Professional (PMP)® Certification - Fourth Editioniv


B. Examine Project Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Business Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Project Selection Criteria. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Project Selection Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Project Selection Decision Models. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Capital Budgeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Scoring and Rating Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Feasibility Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Cost-Benefit Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

C. Prepare a Project Statement of Work. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Project Statements of Work (SOW). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

D. Create a Project Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Project Charters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

The Develop Project Charter Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Develop Project Charter Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Develop Project Charter Tools and Techniques . . . . . . . . . . . . . . . . . . . . 55

Develop Project Charter Output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Business Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Business Case Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

E. Identify Project Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

The Identify Stakeholders Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Identify Stakeholders Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Identify Stakeholders Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . 61

Identify Stakeholders Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Stakeholder Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Stakeholder Registers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

The Stakeholder Analysis Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Stakeholder Management Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

CONTENTS

Contents v


LESSON 3 - PLANNING PROJECT WORK

A. Identify the Elements of a Project Management Plan . . . . . . . . . . . . . . . . . 72

The Project Management Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

The Develop Project Management Plan Process. . . . . . . . . . . . . . . . . . . 73

Develop Project Management Plan Inputs . . . . . . . . . . . . . . . . . . . . . . . 74

Develop Project Management Plan Tools and Techniques . . . . . . . . . . 74

Develop Project Management Plan Output . . . . . . . . . . . . . . . . . . . . . . 75

B. Document Stakeholder Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

The Collect Requirements Process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Collect Requirements Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Collect Requirements Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . 77

Collect Requirements Outputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Facilitated Workshops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Group Creativity Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Group Decision Making Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

Requirements Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

Requirements Management Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

The Requirements Traceability Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

C. Create a Scope Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

The Project Scope Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

Components of the Scope Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

The Define Scope Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Define Scope Inputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Define Scope Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Define Scope Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Product Analysis Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Techniques for Alternatives Identification. . . . . . . . . . . . . . . . . . . . . . . . . 90

Project Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

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Project Management Professional (PMP)® Certification - Fourth Editionvi


D. Develop a Work Breakdown Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

Work Breakdown Structures (WBS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

The Create WBS Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

Create WBS Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

Create WBS Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

Create WBS Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

Code of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

LESSON 4 - DEVELOPING PROJECT SCHEDULES

A. Create an Activity List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Work Package . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

The 8/80 Rule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

The Define Activities Process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

Define Activities Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

Define Activities Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

Define Activities Outputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

B. Create a Project Schedule Network Diagram. . . . . . . . . . . . . . . . . . . . . . . . 116

The Sequence Activities Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Sequence Activities Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Sequence Activities Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . 117

Sequence Activities Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

Activity Dependencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Types of Activity Dependencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Precedence Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Precedence Relationship Types. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

Lag. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

Lead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

Project Schedule Network Diagrams. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

The Precedence Diagramming Method (PDM). . . . . . . . . . . . . . . . . . . . 122

Summary Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

Conditional Diagramming Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

CONTENTS

Contents vii


C. Estimate Activity Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

Project Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

The Estimate Activity Resources Process . . . . . . . . . . . . . . . . . . . . . . . . . . 128

Estimate Activity Resources Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

Estimate Activity Resources Tools and Techniques. . . . . . . . . . . . . . . . . . 129

Estimate Activity Resources Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130

Schedule Management Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130

D. Estimate Duration for Project Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

The Estimate Activity Durations Process. . . . . . . . . . . . . . . . . . . . . . . . . . . 134

Estimate Activity Durations Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

Estimate Activity Durations Tools and Techniques . . . . . . . . . . . . . . . . . . 135

Estimate Activity Durations Outputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

E. Develop a Project Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

Project Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

The Develop Schedule Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

Develop Schedule Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

Develop Schedule Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . 141

Develop Schedule Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

Standard Schedule Diagramming Notations . . . . . . . . . . . . . . . . . . . . . . 142

The Critical Path . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143

Float. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144

Total Float . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144

Free Float . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

Schedule Network Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

The Critical Path Method (CPM). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

The Critical Chain Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

The What-If Scenario Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

Resource Leveling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

Schedule Formats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

F. Identify the Critical Path . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

Critical Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

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G. Optimize the Project Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159

Schedule Compression . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159

Fast-Tracking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160

Crashing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160

Crash Cost Plotting Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161

H. Establish a Schedule Baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

Schedule Baselines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

LESSON 5 - DEVELOPING COST ESTIMATES AND BUDGETS

A. Estimate Project Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

The Estimate Costs Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

Estimate Costs Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

Estimate Costs Tools and Techniques. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

Estimate Costs Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176

Common Estimate Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176

Analogous Estimating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177

Bottom-Up Estimating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178

Parametric Estimating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178

Estimating Techniques Advantages and Disadvantages. . . . . . . . . . . . 179

B. Estimate the Cost Baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

Cost Baselines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

The Determine Budget Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184

Determine Budget Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184

Determine Budget Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . 185

Determine Budget Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

Funding Limit Reconciliation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186

Contingency Allowances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186

Cost Assignment Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187

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C. Reconcile Funding and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191

LESSON 6 - PLANNING PROJECT QUALITY, STAFFING, AND

COMMUNICATIONS

A. Create a Quality Management Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198

Quality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198

Quality Management Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198

The Plan Quality Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198

Plan Quality Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199

Plan Quality Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199

Plan Quality Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200

Process Improvement Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201

Process Improvement Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201

Total Quality Management (TQM). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202

Standards and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203

The ISO 9000 Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204

Cost of Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204

Checklists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205

Flowcharts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206

Control Charts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207

Benchmarking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209

Design of Experiments (DOE) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209

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B. Document the Project Roles, Responsibilities, and ReportingRelationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213

The Develop Human Resource Plan Process . . . . . . . . . . . . . . . . . . . . . . 213

Develop Human Resource Plan Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . 214

Develop Human Resource Plan Tools and Techniques . . . . . . . . . . . . . . 214

Develop Human Resource Plan Outputs . . . . . . . . . . . . . . . . . . . . . . . . . 215

Organizational Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215

Organizational Structure Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216

Organization Charts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216

Relative Authority in Organizational Structures . . . . . . . . . . . . . . . . . . . . 218

Project Interfaces. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218

The Responsibility Assignment Matrix (RAM) . . . . . . . . . . . . . . . . . . . . . . . 219

Staffing Management Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221

Staffing Management Plan Components. . . . . . . . . . . . . . . . . . . . . . . . . 221

C. Create a Communications Management Plan . . . . . . . . . . . . . . . . . . . . . . 225

Communications Management Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 225

The Plan Communications Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225

Plan Communications Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226

Plan Communications Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . 226

Plan Communications Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227

Communications Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228

Communications Requirements Analysis . . . . . . . . . . . . . . . . . . . . . . . . . 228

Communications Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228

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LESSON 7 - ANALYZING RISKS AND PLANNING RISK RESPONSES

A. Examine a Risk Management Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236

Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236

Project Risk Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236

Business Risk vs. Insurable Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237

Types of Business Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237

Types of Insurable Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237

Risk Management Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238

The Plan Risk Management Process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238

Plan Risk Management Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238

Plan Risk Management Tools and Techniques . . . . . . . . . . . . . . . . . . . . . 239

Plan Risk Management Output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239

Risk Management Plan Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240

Risk Breakdown Structures (RBS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241

Effect-Based Risk Classification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241

Source-Based Risk Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242

Probability Scales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242

Impact Scales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242

Levels of Uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243

Risk Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243

Risk Tolerance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244

Levels of Risk Tolerance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244

B. Identify Project Risks and Triggers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248

Triggers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248

The Identify Risks Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248

Identify Risks Inputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249

Identify Risks Tools and Techniques. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250

Identify Risks Output. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250

Information-Gathering Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251

Risk Registers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252

Risk Categories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252

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C. Perform Qualitative Risk Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255

Qualitative Risk Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255

The Perform Qualitative Risk Analysis Process . . . . . . . . . . . . . . . . . . . . . . 256

Perform Qualitative Risk Analysis Inputs. . . . . . . . . . . . . . . . . . . . . . . . . . . 256

Perform Qualitative Risk Analysis Tools and Techniques . . . . . . . . . . . . . 257

Perform Qualitative Risk Analysis Output. . . . . . . . . . . . . . . . . . . . . . . . . . 257

Risk Data Quality Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258

Probability and Impact Risk Rating Matrix . . . . . . . . . . . . . . . . . . . . . . . . . 258

Components of Risk Registers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259

The Ongoing Risk Assessment Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260

D. Perform Quantitative Risk Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264

Quantitative Risk Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265

The Perform Quantitative Risk Analysis Process . . . . . . . . . . . . . . . . . . . . 265

Perform Quantitative Risk Analysis Inputs . . . . . . . . . . . . . . . . . . . . . . . . . 265

Perform Quantitative Risk Analysis Tools and Techniques . . . . . . . . . . . . 266

Perform Quantitative Risk Analysis Output . . . . . . . . . . . . . . . . . . . . . . . . 266

Quantitative Risk Analysis Update Components . . . . . . . . . . . . . . . . . . . 267

Project Risk Ranking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267

Basics of Probability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268

Probability Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269

Uniform Distribution PDF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270

Normal Distribution PDF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270

Triangular Distribution PDF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271

Decision Making Under Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272

Quantitative Analysis Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273

Simulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274

Monte Carlo Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274

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E. Develop a Risk Response Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278

The Plan Risk Responses Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278

Plan Risk Responses Inputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279

Plan Risk Responses Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . 279

Plan Risk Responses Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279

Negative Risk Strategies (Threats) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280

Positive Risk Strategies (Opportunities) . . . . . . . . . . . . . . . . . . . . . . . . . . . 281

Contingency Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281

Contingency Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282

LESSON 8 - PLANNING PROJECT PROCUREMENTS

A. Plan Project Procurements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290

The Plan Procurements Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290

Plan Procurements Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291

Plan Procurements Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . 292

Plan Procurements Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292

Procurement Management Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293

Teaming Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293

Risk-Related Contract Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293

B. Prepare a Procurement Statement of Work . . . . . . . . . . . . . . . . . . . . . . . . . . 297

Procurement Statements of Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297

Specifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298

Outsourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298

Make-or-Buy Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299

Factors in Make-or-Buy Decisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299

Lease, Rent, or Buy Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299

C. Prepare a Procurement Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303

Procurement Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303

Types of Procurement Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303

Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304

Components of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304

Types of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305

Source Selection Criteria. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307

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LESSON 9 - EXECUTING PROJECT WORK

A. Identify the Direct and Manage Project Execution Process . . . . . . . . . . . . 316

The Direct and Manage Project Execution Process . . . . . . . . . . . . . . . . . 316

Direct and Manage Project Execution Inputs. . . . . . . . . . . . . . . . . . . . . . 316

Direct and Manage Project Execution Tools and Techniques . . . . . . . . 317

Direct and Manage Project Execution Outputs . . . . . . . . . . . . . . . . . . . . 317

Project Management Information Systems (PMIS). . . . . . . . . . . . . . . . . . 318

Common PMIS Problems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318

Work Authorization Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319

Work Performance Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320

Project Execution Direction and Management Techniques. . . . . . . . . . 320

B. Execute a Quality Assurance Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323

Quality Assurance Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323

The Perform Quality Assurance Process . . . . . . . . . . . . . . . . . . . . . . . . . . 323

Perform Quality Assurance Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324

Perform Quality Assurance Tools and Techniques . . . . . . . . . . . . . . . . . . 325

Perform Quality Assurance Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326

Quality Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326

Topics of Quality Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326

C. Acquire the Project Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329

The Acquire Project Team Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329

Acquire Project Team Inputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330

Acquire Project Team Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . 331

Acquire Project Team Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332

Virtual Teams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332

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D. Develop the Project Team. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335

The Develop Project Team Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335

Develop Project Team Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336

Develop Project Team Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . 336

Develop Project Team Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337

Team Development Stages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337

Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338

Team-Building Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339

Co-location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339

Reward and Recognition Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339

Rewarding Individual Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340

E. Manage the Project Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343

The Manage Project Team Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343

Manage Project Team Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344

Manage Project Team Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . 344

Manage Project Team Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345

Causes of Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346

Conflict Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346

Conflict Management Approaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346

Tasks of Performance Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347

F. Distribute Project Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350

The Distribute Information Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350

Distribute Information Inputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351

Distribute Information Tools and Techniques. . . . . . . . . . . . . . . . . . . . . . . 352

Distribute Information Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352

G. Manage Stakeholder Relationships and Expectations. . . . . . . . . . . . . . . . 355

The Manage Stakeholder Expectations Process . . . . . . . . . . . . . . . . . . . 355

Manage Stakeholder Expectations Inputs . . . . . . . . . . . . . . . . . . . . . . . . 355

Manage Stakeholder Expectations Tools and Techniques . . . . . . . . . . . 356

Manage Stakeholder Expectations Outputs . . . . . . . . . . . . . . . . . . . . . . 357

CONTENTS

Project Management Professional (PMP)® Certification - Fourth Editionxvi


LESSON 10 - MANAGING PROJECT PROCUREMENT

A. Examine the Conduct Procurements Process . . . . . . . . . . . . . . . . . . . . . . . 364

The Conduct Procurements Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364

Conduct Procurements Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364

Conduct Procurements Tools and Techniques. . . . . . . . . . . . . . . . . . . . . 365

Conduct Procurements Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366

Qualified Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367

B. Obtain Responses from Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371

C. Determine Project Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374

Weighting Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374

Procurement Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375

Term vs. Completion Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376

LESSON 11 - MONITORING AND CONTROLLING PROJECT WORK

A. Identify the Monitor and Control Project Work Process . . . . . . . . . . . . . . . . 384

The Monitor and Control Project Work Process . . . . . . . . . . . . . . . . . . . . . 384

Monitor and Control Project Work Inputs. . . . . . . . . . . . . . . . . . . . . . . . . . 385

Monitor and Control Project Work Tools and Techniques . . . . . . . . . . . . 385

Monitor and Control Project Work Outputs . . . . . . . . . . . . . . . . . . . . . . . . 386

Monitor and Control Project Work Process Best Practices . . . . . . . . . . . . 386

B. Develop an Integrated Change Control System . . . . . . . . . . . . . . . . . . . . . 388

Integrated Change Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388

Change Control Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388

Causes of Project Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 389

Configuration Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390

Process Control Structures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390

CONTENTS

Contents xvii


C. Utilize the Integrated Change Control System . . . . . . . . . . . . . . . . . . . . . . . 393

The Perform Integrated Change Control Process . . . . . . . . . . . . . . . . . . 393

Perform Integrated Change Control Inputs . . . . . . . . . . . . . . . . . . . . . . . 394

Perform Integrated Change Control Tools and Techniques . . . . . . . . . . 395

Perform Integrated Change Control Outputs . . . . . . . . . . . . . . . . . . . . . 395

Change Management Advantages . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396

Formal Acceptance of Project Work. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396

D. Review Deliverables and Work Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399

The Verify Scope Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399

Verify Scope Inputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400

Verify Scope Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400

Verify Scope Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400

Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401

Inspection Report Components. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401

E. Control the Project Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403

The Control Scope Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403

Control Scope Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404

Control Scope Tools and Techniques. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405

Control Scope Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405

CONTENTS

Project Management Professional (PMP)® Certification - Fourth Editionxviii


LESSON 12 - MONITORING AND CONTROLLING PROJECT SCHEDULE AND

COSTS

A. Control the Project Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 414

The Control Schedule Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 414

Control Schedule Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 414

Control Schedule Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . 415

Control Schedule Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415

Earned Value Management (EVM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416

EVM Variables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416

Planned Value (PV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 417

Earned Value (EV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 417

Actual Cost (AC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418

EVM Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418

Schedule Performance Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . 418

Schedule Variance (SV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420

Schedule Performance Index (SPI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420

SPI Trend Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421

Working with EVM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421

B. Control Project Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 426

The Control Costs Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 426

Control Costs Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427

Control Costs Tools and Techniques. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427

Control Costs Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 428

Cost Variance (CV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429

The Cost Performance Index (CPI). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430

Performance Measurement Analysis Techniques . . . . . . . . . . . . . . . . . . 430

Performance Reporting Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431

Budget at Completion (BAC) Calculations . . . . . . . . . . . . . . . . . . . . . . . 431

Estimate to Complete (ETC) Calculations. . . . . . . . . . . . . . . . . . . . . . . . . 431

Estimate at Completion (EAC) Calculations. . . . . . . . . . . . . . . . . . . . . . . 432

To-Complete Performance Index (TCPI). . . . . . . . . . . . . . . . . . . . . . . . . . 432

CONTENTS

Contents xix


LESSON 13 - MONITORING AND CONTROLLING PROJECT PERFORMANCE

AND QUALITY

A. Perform Quality Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444

The Perform Quality Control Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444

Perform Quality Control Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444

Perform Quality Control Tools and Techniques. . . . . . . . . . . . . . . . . . . . . 445

Perform Quality Control Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 446

Variance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 447

Causes of Variance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 447

The Analyzing Variances Task . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448

Tolerances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448

The 6-Sigma Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449

Variability Indications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449

Pareto Diagrams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449

The 80/20 Rule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450

Statistical Sampling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450

The Statistical Sampling Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451

Attribute Sampling Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451

Variable Sampling Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452

B. Report on Project Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455

The Report Performance Process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455

Report Performance Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455

Report Performance Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . 456

Report Performance Outputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 456

Forecasting Methods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457

Benefits of Creating Performance Reports . . . . . . . . . . . . . . . . . . . . . . . . 458

CONTENTS

Project Management Professional (PMP)® Certification - Fourth Editionxx


LESSON 14 - MONITORING AND CONTROLLING PROJECT RISKS AND

PROCUREMENTS

A. Monitor and Control Project Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466

The Monitor and Control Risks Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466

Monitor and Control Risks Inputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466

Monitor and Control Risks Tools and Techniques . . . . . . . . . . . . . . . . . . . 467

Monitor and Control Risks Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467

The Project Risk Response Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 468

B. Administer Project Procurements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472

The Administer Procurements Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472

Administer Procurements Inputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472

Administer Procurements Tools and Techniques . . . . . . . . . . . . . . . . . . . 473

Administer Procurements Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 474

The Duties of the Procurements Administrator . . . . . . . . . . . . . . . . . . . . . 475

Changes to Contract Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 476

Legal Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 476

Types of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477

Types of Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477

Breaches of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477

LESSON 15 - CLOSING THE PROJECT

A. Close Project Procurements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 486

The Close Procurements Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 486

Close Procurements Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 486

Close Procurements Tools and Techniques. . . . . . . . . . . . . . . . . . . . . . . . 487

Close Procurements Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 487

Procurement Audits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 488

Elements of Procurement Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 489

Procurement Audit Lessons Learned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490

CONTENTS

Contents xxi


B. Close the Project or Phase Administratively . . . . . . . . . . . . . . . . . . . . . . . . . 493

The Close Project or Phase Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494

Close Project or Phase Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494

Close Project or Phase Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . 494

Close Project or Phase Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495

Administrative Closure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495

Project Records to Archive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495

Lessons Learned Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496

Considerations of Lessons Learned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496

Closeout Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 497

APPENDIX A - PMP® CERTIFICATION MAPPING

APPENDIX B - UPDATES TO THE PMBOK® FOURTH EDITION GUIDE

LESSON LABS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505

SOLUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545

INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 629

CONTENTS

Project Management Professional (PMP)® Certification - Fourth Editionxxii


ABOUT THIS COURSEIf you are taking this course, you probably have some professional exposure to the duties of aproject manager, or you may be considering embarking on a career in professional projectmanagement. Your ability as a project manager to demonstrate best practices in projectmanagement—both on the job and through professional certification—is becoming the standardto compete in today’s fast-paced and highly technical workplace. In this course, you will applythe generally recognized practices of project management acknowledged by the Project Man-agement Institute (PMI) to successfully manage projects.

Project management is one of the hottest careers in the world today. Project managers withproven skills and experience can find exciting, high-visibility opportunities in a wide range offields. This course is specifically designed to provide you with the proven, practical body ofproject management knowledge and skills that you need to demonstrate project managementmastery on the job. Additionally, this course can be a significant part of your preparation forthe Project Management Professional (PMP)® Certification Exam. The skills and knowledgeyou gain in this course will help you avoid making costly mistakes and increase your competi-tive edge in the project management profession.

Course DescriptionTarget StudentThis course is designed for persons who have on the job experience performing project man-agement tasks, whether or not project manager is their formal job role, who are not certifiedproject management professionals, and who might or might not have received formal projectmanagement training. The course is appropriate for these persons if they wish to develop pro-fessionally, increase their project management skills, apply a formalized and standards-basedapproach to project management, seek career advancement by moving into a formal projectmanager job role, as well as to apply for Project Management Institute, Inc. (PMI) ProjectManagement Professional (PMP)® Certification.

Course PrerequisitesFamiliarity with project management concepts and some working experience with project man-agement are required. Experience with a specific project management software tool is notrequired.

• Microsoft Word Level 1 is required.

INTRODUCTION

Introduction xxiii


• Project Management Fundamentals is recommended.

How to Use This Book

As a Learning GuideEach lesson covers one broad topic or set of related topics. Lessons are arranged in order ofincreasing proficiency with project management; skills you acquire in one lesson are used anddeveloped in subsequent lessons. For this reason, you should work through the lessons insequence.

We organized each lesson into results-oriented topics. Topics include all the relevant and sup-porting information you need to master project management, and activities allow you to applythis information to practical hands-on examples.

You get to try out each new skill on a specially prepared sample file. This saves you typingtime and allows you to concentrate on the skill at hand. Through the use of sample files,hands-on activities, illustrations that give you feedback at crucial steps, and supporting back-ground information, this book provides you with the foundation and structure to learn projectmanagement quickly and easily.

As a Review ToolAny method of instruction is only as effective as the time and effort you are willing to investin it. In addition, some of the information that you learn in class may not be important to youimmediately, but it may become important later on. For this reason, we encourage you tospend some time reviewing the topics and activities after the course.

As a ReferenceThe organization and layout of the book make it easy to use as a learning tool and as an after-class reference. You can use this book as a first source for definitions of terms, backgroundinformation on given topics, and summaries of procedures.

Course ObjectivesIn this course, you will apply the generally recognized practices of project managementacknowledged by the Project Management Institute (PMI) to successfully manage projects.

You will:

• describe professional project management.

• initiate a project.

• plan project work.

• develop project schedules.

• develop cost estimates and budgets.

• plan project quality, staffing, and communications.

• analyze risks and plan risk responses.

INTRODUCTION

Project Management Professional (PMP)® Certification - Fourth Editionxxiv


• plan project procurements.

• execute project work.

• manage project procurement.

• monitor and control project work.

• monitor and control project schedule and costs.

• monitor and control project performance and quality.

• monitor and control project risks and procurements.

• close the project.

INTRODUCTION

Introduction xxv

Copyright © Element K CorporationProject Management Professional (PMP)® Certification - Fourth Editionxxvi

NOTES


Examining ProfessionalProject Management

In this lesson, you will describe professional project management.

You will:

• Identify project management processes.

• Identify professional and social responsibilities of a project manager.

• Identify the interpersonal skills required by a project manager.

Lesson Time2 hour(s), 30 minutesLESSON 1

LESSON 1

Lesson 1: Examining Professional Project Management 1


IntroductionSuccessfully managing your projects requires effective planning up-front, as well as an adher-ence to the industry’s best practices through every step of the process. By identifying theproject management process groups that are considered standards for excellence, you will bebetter prepared to initiate a project in your organization and position it for success. In this les-son, you will identify the effective practice of project management and related projectmanagement processes. You will also identify the guidelines for ethical behavior and profes-sional conduct that are outlined in the Project Management Institute Code of Conduct andunderstand the interpersonal skills necessary to complement your project management skills, sothat you will be ready to move forward strategically and with confidence.

At this point in your professional development, you are ready to further advance your practiceof project management. You can do this by developing a solid understanding of the field andits underlying structure and elements, which include stakeholders and project life cycles. Youwant to be able to identify the project management process groups that are recognizedindustry-wide as good practice. And as a professional project manager striving for excellence,you want to be sure that you meet the high standards for ethical behavior and professionalconduct for project managers outlined in the PMI Code of Conduct. Also, having a goodknowledge of interpersonal skills is essential for managers to work efficiently with differentkinds of people in the organization.

The following figure shows the mapping of the project management processes to the projectmanagement process groups and the knowledge areas.

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Project Management Professional (PMP)® Certification - Fourth Edition2


Figure 1-1: The project management framework.

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TOPIC AIdentify Project ManagementProcessesBefore you can begin planning and managing your project, you need to define the project’sneeds, determine which processes are appropriate, and determine the degree of rigor needed tomeet the project objectives. To do this, you will identify the project management processes thatare generally recognized as good practice on most projects across industry groups and the ninerelevant knowledge areas that the Project Management Institute, or PMI, has identified. In thistopic, you will identify project management processes and the project management processgroups.

Business organizations around the world are using project management as a competitive advan-tage to achieve corporate strategic objectives. Effective project managers combine their skillsand knowledge with appropriate processes to meet project objectives and deliver results in linewith corporate strategies. By identifying the main elements of effective project managementpractice and project management processes, you can enhance the chances of success over awide range of projects across application areas and industries.

ProjectsDefinition:

A project is a temporary work endeavor that creates a unique product, service, orresult. It has a clearly defined beginning and end. The end of a project is reached wheneither its objectives are met, the need for the project no longer exists, or it is deter-mined that the objectives cannot be met. Projects can vary widely in terms of budget,team size, duration, expected outcomes, and industries.

Example: The Intranet Website Creation ProjectConsider a project authorized by a firm to create an intranet website that would displayits employee related information. The outcome of the project is the website, and theduration will depend on the complexity and size of the work involved. The project willcome to an end when the website is posted on the server and is ready for use byappropriate users.

SubprojectsDefinition:

A subproject is an independently manageable component of an existing project. Aproject can have multiple subprojects, and they in turn can have even smaller sub-projects. Usually, a subproject is given on contract either to an external enterprise or toanother functional unit in an organization.

Example: Subprojects in a Car ProjectThe project team working on the interior design of a solar powered car decided to sub-contract the designing of seats and the air-conditioning system to two individualexternal vendors as subprojects.

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Project ManagementDefinition:

According to the PMI, project management is defined as “the application of knowl-edge, skills, tools, and techniques to project activities to meet project requirements.”Managing projects typically involves scheduling; identifying requirements; establishingobjectives; balancing quality, scope, time, and cost; and addressing the concerns andexpectations of the stakeholders.

Project management is different from the management of routine, ongoing work initia-tives. Projects generally involve temporary initiatives, unique circumstances, and cross-functional teams. Projects may involve new or specially formed teams taking on newtasks and attempting unfamiliar skills, processes, or work efforts.

Example: Responsibilities of a Project ManagerIn any given project, some of the common responsibilities of a project manager wouldinclude communicating cross-functionally, managing the efforts of people who do notreport directly to them, and delivering the work on time, within the allotted budget andspecifications for quality.

PMP® CertificationFor information about the PMP® certification process and examination, visit the PMIwebsite www.pmi.org and review the “Career Development” page information. Theprocess for obtaining PMP® credentials requires specific professional experience andformal training, including completing 35 hours of specific project management educa-tion; successfully completing this course fulfills that educational requirement.

PMBOK ReferenceFor more information on project management, refer to the PMBOK® Guide, FourthEdition 2008, p. 6 and 7. The name PMBOK® Guide refers to the book, A Guide tothe Project Management Body of Knowledge, published by the Project ManagementInstitute, Inc. The PMBOK® Guide is considered the definitive text for informationabout the practice of project management. Element K is a Registered Education Pro-vider (REP) for the PMP® certification examination.

Linear PresentationAlthough project management is an iterative, cyclical process in real life, it is neces-sarily presented in a linear manner throughout this course.

ProgramsDefinition:

A program is a group of related projects that have a common objective. It offers greatcontrol over the constituent projects and delivers benefits that the organization can useto meet its goals. A program is managed by a program manager, and the individualprojects are managed by project managers who work for the program manager. How-ever, all projects need not always be a part of programs. Projects that do not have acommon objective, but still are managed in a group, are generally known as “multipleprojects.”

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Example: A Retail Chain Expansion ProgramA retailing company launched a new program that aims at expanding a retail chain.This expansion program consists of many projects, such as market research to establishdemand, construction of new stores, franchise selection, designing the marketing cam-paign, and consolidation of customer base by establishing loyalty programs.

PortfoliosDefinition:

A portfolio is a collection of projects, programs, and other operational work to achievethe strategic business objectives of an organization. The projects in a portfolio may ormay not be interdependent, but they are grouped to give management a broader viewof the organization’s projects and their adherence to organizational objectives. For aproject to be part of a portfolio, its attributes such as cost, resource requirements,timelines, strategic goals, and benefits should be in line with other projects in the port-folio. Portfolios are generally managed by a senior manager or senior managementteams.

Figure 1-2: A portfolio and its contents.

Example: A Company PortfolioAn alternate energy producing company designed a breakthrough technology capitaliz-ing on solar energy. The company’s strategy is to exploit the technical know-how in allpossible areas to generate revenue and become a trendsetter. It initiated a portfolio thatcontains various programs and independent projects to identify the potential use of thistechnology in power generation, transportation, and domestic and industrial markets.The portfolio also included other operational work such as administration and logisticsrelated activities. It was essential for the company to ensure that these operationalworks continuously support the projects and programs.

Programs vs. PortfoliosProgram management includes related and interdependent projects, which is differentfrom a portfolio, which may collect several otherwise unrelated projects if they all sup-port major goals or a significant product line.

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OperationsDefinition:

Operations are ongoing and repetitive tasks that produce the same outcome every timethey are performed. The purpose of operations is to carry out day-to-day organizationalfunctions, generate income to sustain the business, and increase the value of organiza-tional assets. Operational processes are aligned with the business requirements of theorganization. Therefore, when organizations update or adopt new objectives based onorganizational needs, customer requirements, or market demand, these processes arecontinuously revised to accommodate the changes. Such process revisions can be con-sidered to be an internal project.

Example: Operations in a Petrochemical IndustryOne of the major petrochemical companies has set up a new refinery to meet itsincreasing market demand. The company plans to break-even in three years by achiev-ing the desired volume of output from its new plant. Once the new plant is set up, theoperations to be carried out in the new branch include daily production, routine main-tenance of the plant, wages and salary credits to employees, purchase of raw materials,grievance handling, logistics, and supply of finished products to the market.

Project Management Office (PMO)Definition:

A Project Management Offıce (PMO) is a centralized, permanent, ongoing administra-tive unit or department that serves to improve project management performance withinan organization. The people in the PMO provide support on project management con-cepts, tools, training, and mentoring to project managers; they may or may not actuallydo hands-on project management themselves. The PMO will try to maintain standardsacross projects and improve efficiency. It has the authority to make key decisions inthe projects. In some organizations, the project managers are provided or assigned bythe PMO.

PMOs function differently in different organizations, depending on the business needs.Unlike programs, the projects supported by the PMO may not be related to each other.The structure and function of the PMO depends upon the respective organizationalrequirements. The PMO may be referred to in some organizations as the “projectoffice,” “program office,” “central project office,” “project management center of excel-lence,” or “program management office.”

Some organizations may have PMOs that are exclusively assigned to handle largeprojects and programs. These PMOs are sometimes called Autonomous Project Teams(APT).

Some of the primary functions of the PMO include:

• Maintaining project historical information.

• Managing shared resources across projects managed by the PMO.

• Monitoring project timelines, budget, and quality at an enterprise level.

• Identifying and implementing new project management methodologies.

• Creating effective project policies and templates.

• Helping project managers develop estimates and schedules.

• Managing communication across projects.

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Example: A Newspaper PMOA regional newspaper chain identified a business need to decrease editorial costs onspecial issues and features in all its editions. Every project manager at the chain wasoperating independently, developing individual solutions to problems, and hiring writ-ers and photographers to produce local articles that would be published only once. Theproject managers came out with new processes and economies of scale, such as buyinginexpensive, generic articles from a wire service and publishing them in all editionssimultaneously. The PMO in this case introduced standardized processes for calculat-ing, leveling, loading, and developing project budgets and also helped the projectmanagers with updating the project schedules. The PMO also planned for developingproject data references and organized a best practices sharing session every month.

Project StakeholdersDefinition:

A project stakeholder is a person who has a business interest in the outcome of aproject or who is actively involved in its work. Stakeholders take on various roles andresponsibilities; their participation in the project will have an impact on its outcomeand its chances for success.

Stakeholders may have competing interests, needs, priorities, and opinions. They mayhave conflicting visions for the project’s successful outcome. Project managers mustidentify the internal as well as external stakeholders as early as possible, learn whattheir needs are, and secure their participation in defining the project’s parameters andsuccess criteria. While it may be difficult to negotiate to a consensus early in theproject, it is far less painful and costly than getting to the end of the project only tolearn that someone’s needs were not met or were misunderstood.

Example: Project Stakeholders Involved in the New Stadium ProjectThe New York Yankees’ baseball organization broke ground on a proposed $800 mil-lion Bronx stadium in 2006. Stakeholders for this project included the staff,management, and owners of the New York Yankees; Major League Baseball; localchambers of commerce; local and statewide elected officials; the engineers, architects,and construction workers employed by the project; and fans. New York City budgetedan additional $1 million to train another group of stakeholders, the local residents, todeal with the effects of the massive construction project.

Types of Project StakeholdersProject stakeholders can be of different types.

Project Stakeholder DescriptionCustomers/users The customers/users may be multiple individuals or companies with

varying requirements and specifications. Some of their responsibilitiesinclude:

• Defining the needs for the project output.

• Taking the delivery of the project output.

• Paying for the project output.

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Project Stakeholder DescriptionSponsor Sponsors may be individuals or groups that provide financial assis-

tance to the project. If the sponsor is outside of the company, such asa customer, the duties listed here may be the responsibility of theproject manager:

• Has the financial resources for the project.

• Signs and publishes the project charter.

• Has ultimate responsibility for project success.

• Signs off on all planning documents and change requests.

• Authorizes team to use resources.

• Champions and supports the project manager and team.

• Reviews progress and quality.

• Cuts through red tape and expedites activities.

Portfolio managers/portfolioreview board

Portfolio managers or the executives in the portfolio review board area part of the project selection committees and belong to the high-levelproject governance side of the organization. Their review consider-ations may include:

• Gauging the Return on Investment (ROI) of the project.

• Identifying the value of the project.

• Analyzing the risks involved in taking up the project.

• Identifying the factors that may influence the project.

Program managers Program managers in coordination with the project managers managerelated projects in a program to obtain maximum benefits. They alsoprovide guidance and support to every individual project.

Project Management Office(PMO)

A PMO is an administrative unit that supervises and coordinates themanagement of all projects in an organization. It focuses on provid-ing:

• Administrative support services, which include processes, method-ologies, policies, standards, and templates.

• Training and mentoring support to project managers and projectteam members.

• Support and guidance in managing projects and usage of tools.

• Support for resource allocation.

• Assistance in better communication among project managers, spon-sors, and other stakeholders.

Project managers Project managers are individuals responsible for managing all aspectsof the project. The project manager:

• Works with stakeholders to define the project.

• Plans, schedules, and budgets project activities with team input.

• Works with the team to carry out project plans.

• Monitors performance and takes corrective action.

• Identifies, monitors, and mitigates risks.

• Keeps the sponsor and the stakeholders informed.

• Requests and documents scope changes.

• Provides timely report on project metrics.

• Acts as a liaison between the project team and other stakeholders.

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Project Stakeholder DescriptionProject management team The project team members who perform project management activi-

ties.

Project team The project team comprises the project manager, project managementteam, and other individual team members. The individual team mem-bers perform project work and might not be involved in themanagement side of the project. The project team contains peoplefrom different groups who possess knowledge on specific subjects orhave unique skill sets to carry out project work.

Functional managers Functional managers are individuals who are a part of the manage-ment in the administrative or functional side, such as humanresources, finances, accounting, or even procurement of the businessin the organization. They sometimes act as subject matter experts ormay provide services needed for the project.

Operations managers Operations managers manage the core business areas such as thedesign, manufacturing, provisioning, testing, research and develop-ment, or maintenance side of the organization. Some of theirfunctions include:

• Directly managing the production and maintenance of the finalproducts and services that the organization provides.

• Handing off technical project documentation and other records tothe operations management group upon project completion.

Sellers and business partners Sellers are external parties who enter into a contractual agreementwith the organization and provide components or services needed forthe project. In the same way, business partners are external to thecompany and provide specialized support in tasks such as installation,customization, training, or support.

Types of Stakeholders Involved in the New Stadium ProjectIn the previous example of the New York Yankees’ new stadium project, there wereseveral types of stakeholders. The New York Yankees’ owners were sponsors; MajorLeague Baseball, the local chambers of commerce, and local and statewide electedofficials were the customers; the engineers, architects, and construction workersemployed by the project were project team members.

Positive and Negative StakeholdersPositive stakeholders usually benefit from the successful outcome of a project, whilethe negative stakeholders are keen on the negative outcome of a successful project. Agood example of positive stakeholders is business leaders from a community who ben-efit from an industrial expansion project because it involves economic growth for thecommunity. The negative stakeholders in this scenario will be the environmentalgroups who are more concerned about the environment, and will consider the projectas harmful to the environment.

Furthermore, the positive stakeholders can go to the extent of getting the needed per-mits to proceed with the project because they are more interested in the project’ssuccess. But, the negative stakeholders can block the progress of the project bydemanding more environmental reviews.

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The Role of a Project ManagerProject managers are responsible for meeting project objectives and their job role isdifferent from that of a functional or operations manager. Based on the organizationalstructure, a project manager may report to a portfolio or program manager. The projectmanager works in tandem with his or her manager to meet the project objectives andensure that the project plan is in alignment with the overall program plan.

A project manager should have the following characteristics.

• Knowledge: Having a good knowledge of project management.

• Performance: Performing well in projects through the application of the knowl-edge of project management practices.

• Personal effectiveness: Including the project manager’s attitude, personality, andleadership skills.

The Project Life CycleProjects are typically broken down into manageable, sequential phases of work activities.These project phases, taken together, are referred to as the project life cycle. A project lifecycle may have four or five phases, which can vary because the life cycle is customized tomeet the needs of specific projects.

The project life cycle is marked by the beginning and end of the project. At the start-up, theproject’s general scope and timing are determined. In the next phase, detailed planning occursfollowed by another phase of actual project work activities. In the final phase, project-closingactivities occur.

Figure 1-3: The project life cycle.

Product vs. Project Life Cycle RelationshipsProduct development typically takes place in several stages, which include introduc-tion, growth, maturity, and decline. These stages constitute the product life cycle.

A product life cycle contains product phases that are determined based on the manu-facturing and control needs of the organization. In this life cycle, product phase-outgenerally happens at the last phase. Normally, a project life cycle is included withinone or more product life cycles. So it is important to differentiate the project life cyclefrom that of a product. If a project produces a service or result as its outcome, then it

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will have a project life cycle and not a product life cycle. But if the outcome is aproduct, then it may have many possible relationships to the project life cycle. Forexample, developing a new product can be a project by itself, or if an existing producthas new functions or features, then developing a new model of the product can be aproject of its own.

There are many facets to a product life cycle that can run as projects. Some of theexamples include conducting market research, performing a feasibility study, runningan ad campaign, and installing a product. In these cases, a product will have manyprojects associated with it and the product gains only when they are handled collec-tively.

General Characteristics of a Project Life CycleThough projects differ in nature, size, and complexity, they display certain common character-istics. At the beginning of the project, the cost and staffing levels are quite low. They reach thepeak once the work is carried out and drop rapidly upon project completion. The influences,uncertainties, and risks involved with stakeholders are high at the project start and diminishover the life of the project.

Likewise, the ability to influence the characteristic of the final product, without impacting theproject cost, is high during the initial phases of a project and is lower towards project comple-tion.

Figure 1-4: The variance of project cost and stakeholder influence, risk, and uncer-tainty based on project time.

Project GovernanceProject governance is a comprehensive methodology to control a project and ensure its suc-cess. It is carried throughout the life cycle of a project and provides guidance in the form ofproject phase reviews to monitor and control the project. Every phase in the project is formallyinitiated to decide on the deliverables expected out of that phase. A management review is per-formed at the start of every phase to decide whether to begin the activities of a particularphase. This assumes significance in cases where the activities of the prior phase are not yetcomplete.

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Governance Activities in the Project Life CycleAt the beginning of each phase, it is a good practice to verify and validate the former assump-tions made to the project, analyze risks, and explain in detail the processes required to achievea phases’ deliverables. After the key deliverables of a particular phase are produced, a phase-end review is necessary to ensure completeness and acceptance. Even though this methodsignifies the start of the subsequent phase, a phase can be closed or the project terminatedwhen huge risks are involved for the project or when the objectives are no longer required.

Phase-to-Phase Relationships in a ProjectProjects that are multi-phased generally follow a sequential process that ensures greater controlover the project and aids in achieving the desired product, service, or result. There are threetypes of phase-to-phase relationships: sequential, overlapping, and iterative. Sometimes, multi-phased projects will have more than one phase-to-phase relationship occurring during the lifecycle of a project. In such cases, factors such as the level of control, effectiveness, and thedegree of uncertainty decide the relationship that can be applied between phases. Based onthese factors, all three types of relationships can be applied between different phases of aproject.

Each of the phase-to-phase relationships has specific characteristics.

Relationship Type DescriptionSequential This type of relationship:

• Contains consecutive phases.

• Starts only when the previous phase is complete.

• Reduces the level of uncertainty, which may eliminate the option forshortening the schedule.

Overlapping This type of relationship:

• Contains phases that start prior to the completion of its precedingphase.

• Increases the level of risk and can cause rework if the subsequentphase begins before it receives accurate information from the previousphase.

Iterative This type of relationship:

• Includes one phase at a time that will be planned and carried out.

• Requires planning for the next phase as the work in the current phaseprogresses.

• Is largely helpful in environments that are quite uncertain and unde-fined.

• Reduces the chances for long term planning.

• Helps in minimizing project risk and maximizing the business value ofthe product.

• Is an extension or corollary of the overlapping relationship, but in thiscase the same phase repeats itself multiple times—once in every itera-tion.

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Progressive ElaborationThe phases of the project life cycle are arranged to allow for progressive elaboration, in whichsuccessive layers of detail are added to the plans as the project progresses. Usually, thesequence of the phases defined by most project life cycles involves some type of handoff ordeliverable. Most often, deliverables from one phase are approved before work begins on thenext phase. For example, design specifications are approved and handed off before the designphase begins. However, a subsequent phase may begin before approval is gained on thedeliverables of a previous phase if the risks are considered acceptable. It helps the projectmanagement team plan work to a greater level of detail as the project progresses.

According to PMI, “Progressive detailing of the project management plan is often called rolling wave planning.”

Figure 1-5: Detail is added to plans in progressive elaboration.

Organizational Cultures and StylesProjects are greatly influenced by the various cultures followed by the organizations. Some ofthe factors that form a part of organizational culture are policies, values, management styles,and work environment.

Factor DescriptionPolicies The organizational policies and procedures influence the projects the com-

pany undertakes. For example, the organizational procedures will determinehow to implement new strategies and if the work environs will be formal orinformal.

Values The values, beliefs, and expectations of an organization have a major impacton the organizational culture. For example, the organization’s strategicdecision-making choices, preferences, and approach will vary based on itsvalues and beliefs.

Management style The management style of the organization is another factor that affects theorganizational culture. For example, factors, such as managers following acoaching style of management or controlling style of management, theemployees being allowed to give feedback, and the implementation of theirfeedback, are all dependent upon the different styles followed by manage-ment.

Work environment The work ethics followed by the organization also constitute the organiza-tional culture. For example, some organizations may allow employees towork anytime from 7:00 AM to 7:00 PM, and some others may want themto work strictly from 8:00 AM to 5:00 PM and work late nights if theirworkload is high.

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Organizational Culture’s Influence on ProjectsSeveral aspects of projects are influenced by the organizational culture.

Project Aspect DescriptionProject policies and proce-dures

The project policies and procedures should reflect that of the organiza-tion’s as they are interdependent.

Project selection The criteria for the selection of projects are determined by the organi-zational culture. For example, a competitive, ambitious, and assertiveorganization will select projects with high risks while a highly rigidand authoritarian organization might not take projects with high risks.

Project management style The project manager should adapt to the management style of an orga-nization. For example, a project manager cannot follow a permissivemanagement style in an autocratic organization where all decisions aremade unilaterally.

Team performance assess-ments

A project manager should adhere to a company’s policies when assess-ing the performance of a team. For example, an employee should notbe promoted to the next level unless he or she meets all the standardsset by the organization.

Project Management ProcessesA process is a sequence of activities designed to bring about a specific result in response to abusiness need. Project management processes are all the activities that underlie the effectivepractice of project management; they include all the phases of initiating, planning, executing,monitoring and controlling, and closing a project. Project management processes may produceproject deliverables, such as schedules and performance reports, or product deliverables, suchas software interface specifications or a building’s foundation.

Project management processes are recognized within the profession as good practice; applyingthem appropriately improves the chances of success on nearly any project. Since not everyprocess takes place on every project, determining which processes are appropriate for a givenproject is referred to as tailoring. The project manager and the project team are responsible fortailoring the applicable processes to meet the needs of a specific project or phase.

Figure 1-6: The project management processes.

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Project Management Inputs, Tools andTechniques, and OutputsProject management processes are implemented through inputs, tools and techniques, and out-puts. Inputs are the information and data that project managers draw on, create, or gather toguide their work for a specific process to achieve project goals; inputs can be new informationor information that has been derived during the course of the project. Tools and techniques arethe methods, templates, or approaches that project managers employ within a particular pro-cess, using a combination of inputs, to achieve stated goals. Outputs are the end results anddeliverables achieved during project management processes and can become inputs into subse-quent processes.

Figure 1-7: The relationship between project management inputs, tools and tech-niques, and outputs.

Project Management Process GroupsProject management processes are organized into five groups.

Process Group DescriptionInitiating Initiating processes involve defining the need for a new project or the

new phase of an existing project, and obtaining a commitment to moveforward.

Planning Planning processes are used to create the project scope, refine objectives,and develop a strategy to accomplish the work in the project or phase.

Executing Executing processes involve carrying out the work mentioned in theproject management plan in order to meet project specifications.

Monitoring and controlling Monitoring and controlling processes include regular monitoring ofproject performance and track progress that was made in the project orphase. They also include changes that are to be made to the plan whenrequired and make corrective actions needed to get back on track.

Closing Closing processes involve finalizing the project activities, handing off theproject or phase output, gaining formal acceptance, tying up administra-tive and contractual loose ends, and finally closing the project or phase.

Project Management Process Group InteractionsOutputs from one project management process become inputs to others. Feedback loops arebuilt in, particularly between the planning, executing, and monitoring and controlling processgroups. Project management process groups interact with each other; they are not discrete, one-time events. Processes repeatedly overlap throughout the project life cycle.

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Figure 1-8: The process group interactions.

The process groups are not phases and would usually be repeated for each subproject or phase.Typically, once a project is initiated, you move into the planning processes where you developa project management plan. From there, you start executing the plan and controlling and moni-toring work results in the executing and monitoring and controlling processes. The work resultsyour team generates may indicate a need for modifications to the project schedule, budget, orscope statement, which requires more planning. The loop continues between planning, execut-ing, and monitoring and controlling until the project’s objectives are completely andsatisfactorily met. Then, you move into the closing process group.

Knowledge AreasEach of the nine knowledge areas is an identified area of project management described interms of its component processes and defined by its knowledge requirements.

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Figure 1-9: Overview of project management knowledge areas and project manage-ment processes.

Knowledge Area DescriptionProject integration management Ensures that the various elements of the project are properly

coordinated.

Project scope management Ensures that the project includes all the work required, and onlythe work required, to successfully complete the project.

Project time management Ensures timely completion of the project.

Project cost management Ensures that the project is completed within the approved budget.

Project quality management Ensures that the project will satisfy the needs for which it wasundertaken.

Project human resource management Ensures the most effective use of project team members.

Project communications management Ensures timely and appropriate generation, collection and dis-semination, storage, retrieval, and ultimate disposition of projectinformation.

Project risk management Identify, analyze, and respond to project risks.

Project procurement management Ensures the purchase or acquisition of the products, services, orresults needed to perform project work external to the projectteam.

At this point, this is just an overview of the component processes. As you proceed through this course, you willexamine in detail each of the nine project management knowledge areas and their component processes.

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Enterprise Environmental FactorsEnterprise environmental factors are the internal or external factors that can have a positive ornegative influence on the project outcome. These factors can either support or limit the projectmanagement options and act as inputs for planning processes. Examples of enterprise environ-mental factors may include organizational culture, the human resources pool, marketplaceconditions, stakeholder risk tolerances, political situations, and project management informationsystems.

Organizational Process AssetsOrganizational process assets are any asset that can be used to influence the success of aproject. Policies, procedures, guidelines, formal and informal plans, lessons learned documents,and even historical information come under the organizational process assets. They may alsoinclude completed schedules, earned value data, and risk data. Any updates to the organiza-tional process assets are handled by the project team members.

Organizational process assets can be classified into two categories.

Category DescriptionProcesses and procedures These are the processes and procedures the organization uses for

performing project related tasks. Examples may include:

• Policies, product and project life cycles, and quality policiesand procedures.

• Standard guidelines, proposal evaluation criteria, work instruc-tions, and performance measurement criteria.

• Templates such as work breakdown structures, project sched-ule network diagrams, and contract templates.

• Tailored guidelines and criteria for organizational processesthat will satisfy specific project needs.

• Organizational communication requirements and project clo-sure guidelines.

Corporate knowledge base This is a corporate knowledge repository for storing and retriev-ing information. Examples may include:

• Process measurement databases that provide measurement dataon processes and products.

• Project files such as scope, cost, schedule, and qualitybaselines; performance measurement baselines; project calen-dars; and risk registers.

• Lessons learned knowledge bases and historical information.

• Issue and defect management databases.

• Configuration management knowledge bases.

• Financial databases.

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ACTIVITY 1-1Identifying Project Management Processes

Before You Begin:From the C:\085042Data\Examining Professional Project Management folder, open the OGCBusiness Transformation Scenario Overview document and the Project Management Frameworkimage.

Scenario:You are a project manager for Our Global Company (OGC), a large office products provider.You are one of 10 project managers within your organization that will be involved in imple-menting a business transformation strategic plan that calls for acquiring large, successfulcompetitors in the high-growth, high-population-density metropolitan areas of North America.

The competitors that are identified for acquisition must have a unique, creative business modelthat can be integrated into a synergistically superior overall OGC model. It is the developmentand roll-out of this business model that is the focus of this program. The plan is backed byventure capital funds and as such has some very high expectations in highly specified timeframes.

Review the OGC Business Transformation Scenario Overview document before answering thequestions in this activity.

You may also find it helpful to review the Project Management Framework image beforeanswering the questions in this activity.

1. Upon review of the document, at which point in the project management process areyou?

a) Initiating

b) Planning

c) Executing

d) Monitoring and controlling

e) Closing

2. Match each stakeholder with the appropriate responsibility.

Sponsors a. Supervises and coordinates the man-agement of all projects in anorganization.

Customers/users b. Performs project work and might notbe involved in the management sideof the project.

Project managers c. Defines needs for the project output.Project team d. Keeps the sponsor and the stakehold-

ers informed.Operations managers e. Signs and publishes the project char-

ter.The PMO f. Manages the core business area of the

organization.

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3. Based on the OGC Business Transformation Scenario Overview document, who are theappropriate stakeholders for the Business Transformation program? Choose all thatapply.

a) Senior executives

b) Venture capital principals

c) CEOs and CFOs

d) Program IT staff

e) OGC travel

4. Which project management process will you apply to refine program objectives andthe courses of action the project team will take to meet program objectives?

a) Initiating

b) Planning

c) Executing


e) Closing

5. Which project management process group will you apply to regularly measure progressand identify variances from the project management plan?

a) Initiating

b) Planning

c) Executing


e) Closing

6. Which project management process group will you apply to integrate people and otherresources to fulfill the project management plan for the program?

a) Initiating

b) Planning

c) Executing


e) Closing

7. True or False? OGC follows an overlapping phase-to-phase relationship in the currentprogram.

True

False

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ACTIVITY 1-2Identifying Programs, Portfolios, and Operations

Scenario:In preparation for the Business Transformation, OGC funded and launched an EnterpriseProject Management Office (PMO). Over the past two years, you have managed several suc-cessful, high-profile, concurrent projects within OGC and you have been selected along withseveral other project managers to be included in the PMO. The PMO charter is to:

• Assess the project management capabilities of the organization.

• Facilitate and manage the many projects that would become necessary for theBusiness Transformation to be successful.

• Facilitate the project prioritization of all projects greater than $10,000.

• Audit projects for compliance to project management processes and metrics.

• Ensure that all of the projects included in the portfolio are aligned with the busi-ness’ strategic objectives and priorities.

Since you have never been involved in a PMO, you have decided to take some time to betterunderstand what is involved.

1. Which statement is not a responsibility of a PMO?

a) To plan and execute projects and subprojects based on the overall business objec-tives.

b) To primarily approve and reject projects that do not support business goals.

c) To audit projects for compliance to project management processes and metrics.

d) To ensure that all of the projects included in the portfolio are aligned with the busi-ness’ strategic objectives and priorities.

2. Who provides the software, templates, and standardized policies for a project?

a) Stakeholders

b) Human resources

c) Project Management Office (PMO)

d) Project budget

3. True or False? Based on the scenario, OGC is using specific criteria to determine whichprojects will be included in the portfolio.

True

False

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4. Which statement best describes a program?

a) A set of repetitive ongoing tasks.

b) A set of related projects that have a common objective.

c) A collection of projects that are grouped to achieve the strategic business objectivesof an organization.

d) A temporary endeavor that is undertaken to create a unique product, service, orresult.

5. Which tasks produce the same outcome every time they are performed?

a) Programs

b) Projects

c) Portfolios

d) Operations

TOPIC BIdentify Professional and SocialResponsibilitiesAs you advance in your development as a project manager, you need to make sure that you arefamiliar with and maintain compliance with the PMI Code of Ethics and Professional Conductand its comprehensive guidelines. Developing a sound understanding of the Code of Ethics andProfessional Conduct and using it as the basis for all your interactions will help you move for-ward with confidence, always adhering to the highest standards of excellence, whether you areinteracting with the public, with your customers, or within your own organization. In thistopic, you will identify the elements of the PMI Code of Ethics and Professional Conduct aswell as how the Code relates to the everyday practice of project management.

As a project manager striving to achieve new levels of excellence, you want to build yourreputation as a professional with high standards for ethical behavior. You want to be able tomake appropriate, ethical decisions about interacting with customers, and you want to representyourself and your services fairly and accurately. By recognizing and following the guidelinesset forth in the PMI Code of Ethics and Professional Conduct, you will ensure that you areacting professionally, ethically, and appropriately in all your business dealings.

The PMI Code of Ethics and Professional ConductThe PMI Code of Ethics and Professional Conduct provides a framework for ethical behaviorand professional conduct by project management professionals. These guidelines relate to yourpractice of project management both within the profession and beyond, in your interactionswith customers and the public. The purpose of the code is to instill confidence in the projectmanagement profession and to help an individual become a better practitioner. The code relatesto values considered most important to the global project management community: responsibil-ity, respect, fairness, and honesty.

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Even though the PMBOK® Guide refers to the PMI Code of Ethics and Professional Conduct, it will not receive agrade as an individual category in the examination.

More Information on the PMI Code of Ethics and Professional ConductTo view the Code of Ethics and Professional Conduct document, navigate to theC:\085042Data\Examining Professional Project Management folder.

Upholding Responsibilities to the ProfessionResponsibilities to the profession include compliance with all applicable laws as well as orga-nizational rules and policies.

Guidelines:To uphold responsibilities to the profession, consider the following guidelines:

• Take ownership for the decisions we make or fail to make, the actions we take orfail to take, and the consequences that result.

• Accept only those assignments that are consistent with our background, experi-ence, skills, and qualifications.

• Fulfill the commitments that we undertake; do what we say we will do.

• Protect any proprietary or confidential information that has been entrusted to us.Report possible violations of the PMI Code of Ethics and Professional Conduct byindividuals in the field of project management, and cooperate with PMI concern-ing ethics violations and the collection of related information.

• Disclose to clients, customers, owners, or contractors, significant circumstancesthat could be construed as a conflict of interest or an appearance of impropriety.

• Behave in a truthful and ethical manner. This includes complying with all appli-cable laws, regulations, and ethical standards governing professional practice,respecting the intellectual property developed or owned by others, and providingtruthful advertising concerning your qualifications and services.

Example: Responsibilities to the ProfessionDavid was a project manager supervising the expansion of a large municipal publiclibrary. Stakeholders in this project included government agencies, taxpayers, the vot-ers who had voted to authorize the city to issue bonds for the project, and privatedonors who had contributed more than $5 million towards costs.

Several non-certified project managers were working on David’s team. David not onlyhad to accurately represent his own credentials and qualifications when working withproject stakeholders, but also to behave ethically when mentoring his proteges. Whenthey asked him for special tutoring and exam tips, David said no. Although he wantedto see the less-experienced project managers on his team achieve certification status, hecould not breach the confidentiality of the PMP® exams by offering them inappropriatecoaching or advice.

David also had to concern himself with even the appearance of impropriety. He had tomake sure that none of the private donors accrued inappropriate benefits by makingcontributions to the building campaign. He maintained transparency with the projectschedule and its books, keeping them open for inspection, so that all the stakeholderscould monitor the work that was being done and how funds were being spent.

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Upholding Responsibilities to the Customer and tothe PublicA project manager’s responsibilities to customers and to the public relate to the ethics of pub-lic representations, confidentiality, and conflicts of interest.

Guidelines:To uphold your responsibilities to customers and the public, consider the followingguidelines:

• Provide truthful representations in all of your advertising, public statements, andin any of your estimates concerning costs, your services, and your expectedresults.

• Uphold the policies, rules, regulations, and laws that govern your work, profes-sional, and volunteer activities.

• Negotiate in good faith.

• Respect the property rights of others.

• Respect the confidentiality of sensitive information.

• Ensure that a conflict of interest does not compromise the legitimate interests of aclient or customer, or influence your professional judgments.

• Refrain from offering or accepting inappropriate payments, gifts, or other forms ofcompensation for personal gain.

Example: Responsibilities to the Customer and to the PublicProject managers’ responsibilities to their customers and to the public include projectsthat are publicly funded or that have an impact on public safety. When a municipalityhires a project management firm to oversee construction of a public bridge, forexample, the burden of responsibility is on the firm to ensure that contractors areworking within applicable laws.

When the construction costs skyrocketed during the building of a public elementaryschool, one proposed solution was to lower costs by employing teams of undocu-mented workers, in violation of state and federal labor laws. Such failure to upholdresponsibilities to the customers and to the public may leave project managers vulner-able to losses from litigation and damage to reputation.

Adhering to Other ResponsibilitiesIn addition to the Code of Ethics and Professional Conduct, the PMI has identified severaladditional professional and social responsibilities for project managers.

Guidelines:To maintain compliance with additional professional and social responsibilities, con-sider the following guidelines:

• Adhere to appropriate ethical and legal standards. Upholding such standards ofprofessionalism will contribute to the integrity of the field and set a positiveexample for others to follow.

• Advance the field of project management by contributing ideas and research find-ings to the shared body of knowledge. Share professional expertise and experienceto help others increase their skills and competence in the field.

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• Promote interaction within the project management community by contributing toa culture of understanding and respect. Share information regarding successes,challenges, and obstacles overcome in order to help others improve their profes-sional skills.

• Demonstrate transparency in the decision-making process.

• Earnestly seek to understand the truth. Strive to create an environment in whichothers feel safe to tell the truth.

• Do not engage in or condone behavior that is designed to deceive others, includ-ing but not limited to, making misleading or false statements, stating half-truths,providing information out of context or withholding information that, if known,would render your statements as misleading or incomplete.

Example: Other ResponsibilitiesHurricane Katrina struck the coastal areas of Louisiana and Mississippi in the UnitedStates in 2005, resulting in more than 1,000 deaths and billions of dollars in propertylosses. In response, a group of PMI leaders formed the Project Managers’ DisasterRecovery Coalition in a shared effort to provide project management, planning, andlogistics services to devastated areas. The coalition’s stated goals were two-fold: “toassist fellow project managers from PMI chapters in stricken areas; and to provide pro-fessional services to governments, companies, and organizations in the effort torebuild.” This is a notable example of project managers’ adherence to their additionalprofessional and social responsibilities.

ACTIVITY 1-3Identifying Professional and Social Responsibilities

Scenario:As with most project managers, you have more than one project to manage at OGC. You areone of eight project managers within OGC managing a large, nationwide IT infrastructureproject. The project involves approximately 200 technical staff, many of whom are subcontrac-tors. You are in the 12th month of the 18 month life of the project. To date labor costs havebeen about $22 million program-wide, which is within the project’s budget. The roll-out of thenew technology is on schedule and the customer is pleased.

You arrive at the address listed for one of the subcontractors in your area and you discoverthat there is not an office. You call the subcontractor’s telephone number and get a voice mailindicating you will receive a call back within four hours. You attempt to find the subcontrac-tor’s technicians in order to get better contact information, but you cannot find any actualtechnicians. You know that the subcontractor has been listed in the project’s accounting forwork completed. The ‘no-show’ rate on-site for technicians, both employees and subcontrac-tors, is about 10%, a phenomenon that has historically introduced a lot of ‘slip’ in similarprojects’ controls.

In summary, there are two technicians that are being paid in your area but no one knows whothey are. Because most of this work is done at night in several cities within a large geographi-cal area, it is unusual for project managers to actually meet with every technician. Allsubcontracting, time sheet management, and approval for payments are done at the programlevel in the corporate office. Further discreet inquiries show that there appears to be two tothree technicians in each of the top five busiest geographic areas that cannot be found whoaccount for 5 percent of the $22 million spent to date.

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1. Based on the scenario, what unethical behavior has been described?

2. Within the context of your organization, what steps would you take next and withinwhat time frame?

3. What would you expect your manager, the overall program manager, to do next and inwhat time frame?

4. In a general fashion, outline what your organization has in place that might facilitatethe resolution of this problem.

5. What would you change in your organization to prevent the above scenario fromoccurring?

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TOPIC CIdentify the Interpersonal SkillsRequired for a Project ManagerYou identified the professional and social responsibilities defined in the PMI Code of Ethicsand Professional Conduct. Adhering to the highest standards of excellence and improving onyour capabilities in project management requires knowledge of the interpersonal skills requiredto effectively carry out the role of a project manager. In this topic, you will identify the inter-personal skills required by a project manager.

In any team sport, success depends not only on the ability and skill of the team captain, butalso on how effectively the captain is able to lead, motivate, and guide the team. Similarly, aproject is not a simple task that can be executed by the project manager alone; it involveseveryone right from project stakeholders to individual team members. The role of human rela-tions in deciding the outcome of a project cannot be understated. It is, therefore, essential thataspiring project managers cultivate and enhance their interpersonal skills to carry out theirresponsibilities successfully. Project managers with positive interpersonal skills increase pro-ductivity in the organization.

Interpersonal SkillsInterpersonal skills are abilities that an individual should possess to work harmoniously andefficiently with others. Being in the project management profession, it is important that youdevelop a balance of conceptual, technical, and interpersonal skills that will enable you to ana-lyze situations and deal with them appropriately. Some of the important interpersonal skillscritical to effectively manage a project are:

• Leadership

• Team building

• Motivation

• Communication

• Influencing

• Decision making

• Political and cultural awareness

• Negotiation

Leadership SkillsLeadership is the capacity of a person to guide and inspire others to achieve results. The abil-ity to lead can be characterized as learning from one’s mistakes, building relationships, takinginitiatives, and inspiring others through positive influence. Characteristics of effective leader-ship include self-awareness, personal accountability, and personal integrity. Thesecharacteristics are important for a manager to establish rapport, enhance credibility, and gainothers’ trust.

Though the leadership capabilities of a manager are important throughout all the phases of aproject, it is critical at the beginning of a project or phase where the emphasis will be to com-municate the vision and motivate and inspire team members for higher project performance.

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Leadership StyleLeadership style indicates how a person prefers to interact with others in various situa-tions. They are based on low or high assertiveness and low or high responsiveness. Anunderstanding of characteristics of leadership styles will help you, as a leader, to assessthe behaviors, feelings, and tendencies that comprise self-awareness.

A four-quadrant approach best represents leadership styles. Many categorizations ofleadership styles are based on the concepts of assertiveness and responsiveness. Ofcourse, this is not an exact method of determining a leader’s personal style, but it isuseful for generalizing how leaders make decisions and interact with other people.Variations may exist on a situational basis. No one style of leadership works for everysituation, and no one person will always be using the same style in all interactions.However, knowledge of characteristics of these styles is helpful when considering yourinteractions with others.

AssertivenessAssertiveness refers to the degree of effort that a person puts into influencing othersand their surroundings. If you interact with others and your surroundings with theintention of influencing them, then you may be high in assertiveness. You would seekto understand, but not necessarily to be understood by others. Conversely, if youexhibit low assertiveness, then you are most likely not noticing your own influence onothers and your surroundings. Generally, you may make decisions based on others’analyses and perceptions, rather than your own.

ResponsivenessResponsiveness refers to the degree of effort that a person puts into responding to oth-ers and their surroundings. If you put more energy into responding to others and yoursurroundings than on completing tasks, you are probably closer to high responsiveness.If you tend to focus more on tasks than ideas, then you are probably closer to lowresponsiveness.

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Team Building SkillsTeam building is an ongoing process of helping the project team work collaboratively, ratherthan individually, to achieve a common purpose. Good leadership and team building activitiescultivate a work environment that fosters teamwork, creates a sense of ownership across theteam, helps build mutual trust, facilitates the exchange of high quality information, and enablessound decision making and effective project control. Good team building skills help you tohandle project related issues as a team without making individual team members accountablefor those issues. It is essential for any manager to develop a good team environment that pos-sesses these qualities.

Certain barriers deter good teamwork. It is the prime duty of a manager to help the team over-come these barriers to perform good teamwork.

Barriers to Teamwork DescriptionWithholding information Team members sometimes do not share their knowledge.

Encourage your team members to share their knowledge andexperience. Holding back information hinders effective prob-lem solving and lowers team effectiveness.

Guarded ideas If team members feel they will be punished or receive nega-tive reactions from freely sharing their ideas, they will tendto be very cautious.

Uncontested ideas Team members may avoid challenging each other’s ideas.While this may appear to be a team that is unified, it is morelikely that team members are masking their feelings or areunwilling to share information. If they challenge each other’sideas, they can discover innovative ways to solve problems.

Ineffective meetings Meetings need to be well structured to be productive. Provideopportunities for all members to participate and make deci-sions.

Unrealistic goals Team members sometimes set unreachable targets for them-selves. Team members need to continually clarifyexpectations and control scope creep, which is the tendencyof projects to expand beyond their original bounds.

Unhealthy competition It can happen that team members compete with each otherinstead of working together as a team. Intra-team rivalry canprevent your team from successfully accomplishing its goals.

Wariness Team members do not always trust each other. You need toinstill a sense of confidence in the abilities of individual teammembers and in the ability of the team to overcome problemstogether.

Motivation SkillsMotivation skills are imperative for managers to get work done from their project team mem-bers and improve team performance. Motivation is what makes a team member want toaccomplish goals with a high level of quality rather than just doing the minimum workrequired. A manager should understand that all individuals in the team are unique and havetheir own expectations, values, and objectives. Some of the motivation factors that individualsconsider necessary and important are job satisfaction; challenging work; a sense of accomplish-ment, achievement, and growth; financial compensation; and rewards and recognitions.

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Motivational TechniquesConsider a variety of methods of recognizing employees’ contributions:

• Say “Thank you.”

• Ask their advice and give them credit for ideas.

• Greet your employees when you see them.

• Invite them to coffee or lunch, alone or with members of the team.

• Give verbal praise in private, in a team meeting, or in small groups.

• Give team members a chance to shine. Allow them the opportunity to speak at aconference or a meeting.

• Allow increased autonomy.

• Communicate their achievements to higher level management.

• Send employees to seminars or conferences and ask them to report back to theteam.

• Give awards and commendations.

• Or, make speeches that recognize individual contributions.

Communication SkillsEffective communication is where everyone is kept informed, knows exactly what to do, andhas all of the information to do their jobs. It is essential that a manager is able to clearlyexpress his or her ideas to others, and that the manager understands what other people are try-ing to say. The ability to motivate, delegate, organize, solve problems, and obtain informationdepends on effective communication. Listening is another important aspect of communication.By using effective listening techniques, a manager can manage conflicts, make appropriatedecisions, and provide suitable solutions.

Influencing SkillsA manager who possesses influence can get along well with others and prefers to use persua-sion, as opposed to coercion, when interacting with others. The ability to influence someone isbased on credibility, trust, support, and collaboration. A manager can achieve a level of influ-ence by demonstrating good listening and responding skills, a sense of humor, and the abilityto express oneself. Influential managers tend to be sociable and optimistic, and they demon-strate an obvious enthusiasm for their work. Managers who can apply influence get resultsbecause people want to work with them.

Decision Making SkillsIn the business world, you do not often make decisions alone. Major decisions are the result ofcollaboration and negotiation, so as a manager you need to establish your credibility in orderto affect the decision making process. You must employ sound decision making skills andengage in active collaboration. Given the complexity of many business decisions that requireinput from multiple sources, you must establish your credibility as a decision maker and learnto foster critical thinking when interacting with your project team.

Six Phases of Decision MakingProject managers along with the team can use the six-phase model for better decision making.

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Phase InvolvesDefine the problem Exploring and clarifying the problem or situation.

Generate solutions or alternatives forthe problem

Brainstorming ideas, solutions, or alternatives for the problem.

Put ideas into action Evaluating the pros and cons of the discussed alternative andselecting the best solution for implementation.

Plan for solution action Contributor’s acceptance and commitment to make the solutionwork.

Plan for solution evaluation Evaluation, post-implementation audit, and lessons learned.

Evaluate the outcome and process Evaluating how well the problem was solved and project goalsachieved.

Political and Cultural Awareness SkillsPolitical skills and cultural awareness are among the managerial skills that should be acquiredto effectively manage projects in an organization. Political environments, internal or external tothe organization, will have a huge impact on a project. The right kind of political awarenessand effective political leadership is therefore necessary to build an environment of trust andcreate a win-win atmosphere in the organization.

Cultural differences can either be individual or corporate in nature and may involve both inter-nal and external stakeholders. There might be situations when people working on a projectcome from diverse backgrounds and their cultural upbringing and beliefs may differ from eachother. These differences when not understood properly may sometimes impact project progress,affect the decision making process, and lead to unnecessary stress in the work environment,which in turn affects project performance. To effectively manage cultural diversity, it is essen-tial to get to know about the individual team members, and communication planning should bemade a mandatory task as part of the overall project plan.

The word “politics” in this context does not refer to governmental or public politics, but it is the politics of pro-fessional relationships.

Negotiation SkillsNegotiation is an approach used by individuals or organizations with mutual or opposite inter-ests to come together to reach a final agreement. Negotiation is indispensable to projectmanagement and, when done effectively, will contribute to the success of a project. Some ofthe skills or behaviors that managers can adapt to negotiate successfully are:

• Analyzing the situation.

• Differentiating the needs and wants of both parties.

• Focusing on issues and interests rather than on positions.

• Being realistic when making proposals.

• Impressing the other party while giving concessions to indicate that you are providingthem something of value.

• Ensuring a win-win situation for both parties at the end of the deal.

• Communicating in an appropriate manner.

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ACTIVITY 1-4Identifying the Interpersonal Skills Required for a ProjectManager

Scenario:Carl Thompson, a senior manager at OGC, is conducting an interpersonal skills training pro-gram for all the managers as part of the management initiative. The training module mainlyfocuses on the skills mentioned in the PMBOK® Guide. You are one of the project managersattending the training program. During the training session, the trainer gives you some real-time scenarios and wants you to give an appropriate response based on them.

1. One of your team members, a shy person, values working quietly on projects andappreciates an ordered and secure work environment. Which assignment do you thinkwould be most motivating for this person?

a) An assignment with frequent changes and interruptions.

b) An assignment to lead a new team.

c) An assignment to work on independent research.

d) An assignment to represent the company in the public eye.

2. You have directed one of your team members to complete a task, and he has tried totake your directions and work on the project independently. Once the job is com-pleted, you are disappointed to find that it was not done the way you had envisionedit. As a manager, which response would you consider most appropriate?

a) I guess I did not adequately explain to you what I had in mind. Let me try to explainit better.

b) I feel very disappointed that you did not do what I specifically asked you to do.

c) If you are not willing to follow my directions exactly, I will find someone who is.

d) I guess if I want something done right, I have to do it myself.

3. Tom is a manager who maintains an optimistic outlook and lifts employees’ spirits withhis unique sense of humor. The employees feel that Tom listens to their concerns andlooks out for them in an ever-changing organization. As a result of this, his employeeswant to work harder. This results in Tom’s team having one of the highest productivityrates in the organization. His employees’ morale is usually fairly high, and they feellike they can have fun occasionally on the job. Tom appreciates how much work theteam processes daily. Based on this scenario, what interpersonal skill is Tom display-ing?

a) Communications skills

b) Decision making skills

c) Team building skills

d) Influencing skills

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4. You are leading a team that is contemplating instituting new work processes to helpimprove productivity. Your productivity has fallen off, deadlines are not being met,and the team members are complaining about a lack of resources as well as beingoverworked. The management has blamed the employee’s work habits and ineffi-ciency, while employees have complained about management’s failed leadership andgeneral myopia. What is the most important decision you will make while tackling yourteam’s problems?

a) Develop an individual strategy to deal with each problem.

b) Search for an underlying cause of problems.

c) Avoid involving individuals from outside your immediate team.

d) Always assume that the cause of your problem was a major change.

Lesson 1 Follow-upIn this lesson, you discovered that a solid foundation is the essential building block to success-fully managing projects. You identified the project management process groups that arerecognized in the trade as good practice on any given project most of the time across indus-tries. You also identified the high standards for ethical behavior and professional conduct thatare outlined in the PMI Code of Conduct, along with the interpersonal skills required for aproject manager. Now you are better prepared to initiate a project in your organization, ensur-ing that your project starts out right and is positioned for success.

1. How do you think that developing the ability to tailor each of the five project manage-ment process groups to meet the needs of a specific project or phase will improve yourchances of success?

2. How do you think that adhering to the guidelines included in the PMI Code of Conductwill help you navigate difficult interactions within your practice of project manage-ment?

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Initiating a Project

In this lesson, you will initiate a project.

You will:

• Identify how larger-scale project management efforts function within an organization.

• Identify factors in the project selection decision-making process.

• Prepare a project statement of work.

• Create a project charter.

• Identify project stakeholders.


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Lesson 2: Initiating a Project 35


IntroductionProject management is an integrated endeavor composed of five interlinked process groups andtheir component processes. Initiating is the first of five process groups that you will performon virtually every project you manage. In this lesson, you will initiate a project, a critical firststep in laying the foundation for your project’s success.

Starting a project is like starting a new job; the more you know about the company, your teammembers, and what is expected of you, the more likely you are to hit the ground running andmake a good impression. Ensuring that your project starts out right will save you time andresources. It will also eliminate the need to backtrack once your project is officially underway.

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TOPIC AExamine the Project ManagementContextBefore you can initiate a project, you need to identify how project management functionswithin an organization and how each part of project management relates to the whole. In thistopic, you will identify the coordinated and interdependent efforts of program management,portfolio management, and operations management, and explore the ways in which they servethe strategic objectives of the business.

You want to work effectively within the hierarchy of centralized project management efforts,and to do this you need to be conversant with the project management context: the overlappingways in which people use project management inside the workplace.

Program ManagementDefinition:

Program management is the centralized, coordinated process of managing a program inaccordance with the business’ strategic objectives. It helps realize benefits that cannotbe obtained from managing individual projects. The distinguishing characteristic ofprogram management is that it requires managers to manage related and interdependentprojects by allocating resources, prioritizing efforts, resolving issues, and maintainingthe related projects’ alignment with business objectives in an integrated manner.

The following is a real-world example.

Example: NEH ProgramsThe National Endowment for the Humanities is a government agency that supportsresearch, education, and public programs in the humanities domain. One large NEHprogram, “We the People,” has a strategic objective of strengthening American historyeducation. In this case, program management coordinates many interdependent projectsaround the country, including museum exhibitions, teachers’ workshops, and supple-mentary materials such as the publication of history books.

Portfolio ManagementDefinition:

Portfolio management is the effective management of programs and independentprojects to achieve strategic goals of an organization. Portfolio management allowsmanagers a global, top-down view of the health and viability of all the projects in thegroup. The projects collected in a portfolio and managed together may or may not beinterdependent, but they are grouped together to give management the long view of theorganization’s projects and their adherence to organizational objectives.

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Example: Managing a Portfolio in an Insurance CompanyThe senior manager of an insurance company’s information management group usesportfolio management to oversee several unrelated projects, including information tech-nology expenditures, customer relationships, and data warehouse support. Part of thiseffort includes making sure that all of the projects included in the portfolio, across theboard, are aligned with the business’ strategic objectives and priorities.

Levels of HierarchyIt is unlikely that a project manager would have responsibility for portfolio manage-ment, which, in the hierarchy of most organizations, would remain in the hands of themost senior levels of management. As you strive for greater professional growth andPMI® certification, you should have an understanding that portfolio managementresides at the top level of the organizational hierarchy, and program managementresides between that and individual project management.

Relationships Among Project, Program, andPortfolio ManagementIn large organizations, projects are generally managed through programs and portfolios, withprojects at the lowest level, programs in the next level, and portfolios at the top of the hierar-chy. The relationships among the project, program, and portfolio are generally cyclical, in thatthe information flows from the higher to the lower levels during the initial phases and fromlower to higher levels during later phases.

Portfolios, programs, and projects interact with each other, and this interaction is consideredwhen initiating a project or program, updating the constituent programs and projects withchanges made to the portfolio, conducting project and program governance, and providinginformation to the portfolio or program during the program or project life cycle. The relation-ships among individual projects and programs and portfolios are interrelated with the strategiesand priorities of the organization. Organizational planning, therefore, focuses on this interrela-tion and determines the prioritization, directs project funding, and provides support toconstituent projects.

Comparative Overview of Project, Program, and Portfolio ManagementThe table provides a comparative overview of project, program, and portfolio manage-ment.

Characteristic Project Program PortfolioScope Project objective or

scope is definedwhen the projectstarts and is pro-gressivelyelaborated through-out its life cycle.

Program scope is usu-ally comprehensiveand provides signifi-cant benefits tobusiness objectives.

The business scope ofthe portfolio changeswith the strategicorganizational goals.

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Characteristic Project Program PortfolioChange Project managers

must identify andimplement processesto manage and con-trol changes in theprojects.

Changes can occurfrom both inside andoutside the program.Program managers areresponsible for manag-ing and controllingthese changes andguiding the projectmanagers to manageproject changes.

Changes in the broadenvironment aremonitored by theportfolio managers.

Planning Project planningoccurs throughoutthe project lifecycle. As a projectprogresses, high-level information isintroduced into thedetailed projectplans.

A program plan isdeveloped during theinitial stages of theprogram. Detailedhigh-level plans arecreated later—at thecomponent level.

Portfolio managersmanage the requiredprocesses and com-munication related tothe portfolio.

Management Project managershandle or managetheir respectiveproject teams.

Program managersprovide vision andoverall leadership fortheir constituentprojects and also man-age program staff.

Portfolio managersmanage the portfoliomanagement staff.

Success Success is measuredby the quality of theproduct, complianceto project timelines,budget, and degreeof customer satis-faction.

Success is measuredby the degree to whichthe program attains thebenefits, fulfills theneeds for which it wasundertaken, andachieves businessobjectives.

Success is measuredin collective perfor-mance of allcomponents in theportfolio.

Monitoring Project managersmonitor the produc-tion of products orservices that theproject is intendedto produce.

Program managersmonitor the progressof a program’s con-stituent projects, andensure that the pro-gram components meetthe overall goals,schedules, budget, andthe expected programbenefits.

Portfolio managersmonitor collectiveperformance andvalue indicators.

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Operations ManagementDefinition:

Operations management is the management of resources and processes involved inproducing and delivering products and services. It ensures that business operations areefficient and effective and that the quality of goods or services produced is optimal.The operational processes and products are aligned with the business requirements ofthe organization. Therefore, the operations manager must ensure that these processesand products are continuously revised to accommodate the changes made to the busi-ness and organizational requirements. Operations management also includes identifyingthe best practices and implementing them in the existing processes and systems.

Example: Operations Management in a Petrochemical CompanyA petrochemical company has assigned Steven Edwards as the operations manager ofits new refinery. Steven has been handling the operations of the new facility since lastmonth. He has identified the roles and responsibilities required to effectively carry outthe identified operational works and defined the processes and procedures to be fol-lowed by each team. He also talked with the operations managers of other plants toidentify the best practices they follow. In addition to this, Steven is also involved inmanaging daily production activities; administering routine maintenance of the plant;handling wage increases; and supervising raw material purchases, grievance-handling,logistics, and supply of finished products to the market. He also ensures that his workis in line with the current organizational strategies and procedures.

Project and Operations ManagementIn an organization, projects and operations complement each other in order to achieve organi-zational goals and objectives. This is primarily done by splitting the management of activitiesinto project and operations management. Project management involves planning, organizing,and managing resources involved in a project and thus ensuring the successful completion ofspecific project goals and objectives. Projects are undertaken to meet a specific objective andare time bound and temporary in nature. On the other hand, operations management involvesmanaging ongoing endeavors that produce repetitive outputs. Organizations may change theiroperations based on any change in the business or organizational objectives.

During the project life cycle, project management and operations management interact at vari-ous points such as:

• When developing new products, upgrading existing products, or expanding outputs.

• When improving the operations or the product development process.

• During the closeout phases.

Agile Project ManagementAgile project management refers to taking an iterative approach to managing a project through-out its life cycle. It allows the project manager to continually re-evaluate progress,development, and priorities and make adjustments as needed. It is a fluid, dynamic process thatemphasizes face-to-face communication.

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Figure 2-2: The Agile project management process.

ACTIVITY 2-1Describing Project Management Context

Scenario:OGC is a $2 billion company established in the United States. Its annual turnover has beenincreasing consistently. There are several programs under the five portfolios that meet the com-pany’s strategy. You are a project manager at OGC and are required to oversee projects fromdifferent programs. Periodically, the senior management reviews the projects and takes action ifit does not meet the strategic goals.

1. Based on the scenario, who is responsible for portfolio management within the organi-zation?

a) Project managers

b) Project sponsors

c) Stakeholders

d) Senior management

2. How would you describe portfolio management?

3. Who is responsible for a group of similar projects?

a) Program manager

b) Project manager

c) Operations manager

d) Portfolio manager

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TOPIC BExamine Project SelectionNow that you have a sound understanding of how project management functions within anorganization, you need to identify the ways in which decision makers make critical choicesamong competing projects. In this topic, you will identify some of the most significant compo-nents of project selection, which include project selection criteria, project selection methods,and project selection decision models. You will also explore some of the different approachesfor conducting analyses, such as capital budgeting and feasibility analyses.

In increasingly competitive business environments, there will always be projects competing forfunding, resources, and priority. As a professional project manager, you will typically not beresponsible for selecting the projects that your organization will pursue, but you need to under-stand the methodologies behind making sound choices about which projects to pursue,prioritize, and fund, and when. Applying appropriate project management methodology to thisarea will increase your chances for success.

Business RequirementsDefinition:

Business requirements are the pressing organizational needs or market stimuli thatdrive decision-makers to sponsor projects and to prioritize competing projects. Theymay also be referred to as “problems” and “opportunities.” Business requirementsforce management to make critical choices about which projects to authorize, andwhen.

Example: Business ForcesBusiness requirements may include forces such as:

• Market demands.

• Organizational needs.

• Customer requests.

• Technological advances.

• Legal requirements.

• Social needs.

Project Selection CriteriaDefinition:

Project selection is the act of choosing a project from among competing proposals.Project selection criteria are the standards and measurements an organization uses toselect and prioritize projects. The organization’s strategic goals provide a source for atleast one dimension of selection criteria. Any project selected should be clearly linkedto one or more strategic goals. Other selection criteria may be qualitative or quantita-tive. Qualitative criteria deal with the project’s fit with the organization’s capabilities.Quantitative criteria may specify financial targets that the project must meet.

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As a professional project manager, you will typically not be responsible for selecting the projects thatyour organization will pursue, but you need to understand the methodologies that decision makers usewhen choosing which projects to pursue, prioritize, and fund.

Example: Project Selection Criteria at a Financial Services OrganizationA financial services organization considering a project proposal to integrate their cus-tomer and financial databases may develop the following project selection criteria:

• Links to the organization’s strategic goal of obtaining a technological advantageover the competition.

• Qualitative criteria—Feasible to produce using only internal resources.

• Quantitative criteria—Meet or exceed the defined internal goal of increasing newsales revenue by 10 percent.

Project Selection MethodsDefinition:

Project selection methods are any systematic approaches that decision makers use toanalyze the value of a proposed project. These evaluations may be formal and verydetailed or informal “guesstimates,” depending on the organization and its needs. Ide-ally, they should take into account the organization’s strategic objectives, as well ashistorical information about past successes and failures.

Example: Selecting ProjectsA financial services firm that has the opportunity to implement two new projects buthas resources for only one by the end of a fiscal year might perform an analysis of theprojected cost, projected duration, and projected financial benefits to prioritize the onethat will give the greater financial return within a short period of time.

Project Selection Decision ModelsA project selection decision model provides a framework for comparing competing project pro-posals by helping decision makers compare the benefits of one project alternative with another.

Method DescriptionBenefit measurement models Analyze the predicted value of the completed projects in different

ways. They may present the value in terms of forecasted revenue,Return on Investment (ROI), predicted consumer demand in the mar-ketplace, or the Internal Rate of Return (IRR).

Mathematical models Use different types of mathematical formulas and algorithms to deter-mine the optimal course of action. They may consider variables suchas business constraints, the highest possible profit that could be madeon a project, and the laws and safety regulations that govern businessoperations.

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Project Selection FactorsProject selection can be difficult because each project may present a complex array ofseemingly incomparable selection criteria. Economic and technological considerationsoften influence project selections. In many application environments where ecological,health, and ethical impacts are increasingly important, often the only way to choosefrom many different project alternatives is by relying on unsubstantiated professionaljudgment or past experience. To improve the efficiency and effectiveness of the assess-ment, many organizations use formal decision models to select the appropriate projectto initiate.

Capital BudgetingCapital budgeting helps senior executives make determinations about when and whether tomake significant investments in capital expenditures such as new equipment, machinery, andfacilities. Capital budgeting is often used if a project is large or if it is likely to involve thepurchase of fixed assets. In these cases, the decision makers may use formal methods such aspayback period, discounted cash flow, and Net Present Value (NPV).

Scoring and Rating SystemsA scoring and rating system is used to find the best available solution or outcome.

Rating System DescriptionDecision tree In a decision tree model, selection criteria are arranged along the

branches of a tree flowchart. The project is evaluated against criterion#1 on branch #1. If the project meets the criterion, it travels down tobranch #2, where it is evaluated against criterion #2, and so on. If theproject fails to meet any one criterion, it is removed from consider-ation.

Criteria profiling This is similar to the decision tree in that the project is evaluatedusing one criterion at a time. However, in this model the project con-tinues to be considered even if it fails to meet some of the criteria. Atthe end of consideration, the project is scored on the number of crite-ria met. The score is then compared to other projects also underconsideration. The standard format of criteria profiling is considered anunweighted factor model because the same score is assigned to eachcriterion in the profile.

Weighted factor This type of model is similar to criteria profiling, but different criteriamay be weighted and factored into the scoring. For example, a projectmay get one point for meeting a low-priority criterion and three pointsfor meeting a high-priority criterion.

Q-sorting In a Q-sorting model, groups of people rate the relative priority of anumber of projects. The process begins by determining rating criteria.Each group member is given a deck of cards with a different projectlisted on each card. Each group member sorts the deck into high,medium, and low priority, based on the pre-determined criteria. Thehigh priority projects are further sorted to identify very high priorityprojects. The group compares their high priority project selections.Any projects they decide to pursue would be chosen from among theconsensus of high priority projects.

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Rating System DescriptionDelphi technique The Delphi technique allows experts to be located remotely and

remain anonymous, yet still participate in group decision making.People participating in a Delphi process are given criteria, asked torate a project on a zero-to-ten scale, and provide reasons for their rat-ings. The resulting statistics are fed back to the participants along witha summary of the group’s reasoning. Participants can then revise theirrating based on the group findings. The process repeats until some pre-determined score is reached.

Feasibility AnalysisDefinition:

A feasibility analysis gives management the technical and operational data they need tomake a decision about project selection. In many cases, the feasibility analysis is basedon expert judgment about current technological developments, in-house technical capa-bilities, and historical data relating to previous project phases.

If the feasibility analysis is a formal study, it should include:

• Description of the problem that the project is expected to solve.

• Summary of relevant historical data about previous project phases.

• Summary and evaluation of available technologies that could be used to solve theproblem, including the potential output quality of each.

• Evaluation, based on current assessment of the organization’s technical capabilityand readiness to use each technology.

• Estimate of the costs and time to implement each alternative.

• Statement of assumptions or constraints used to derive the previous evaluationsand estimates.

• Recommendation as to the best alternative to pursue, based on projected cost,time, and quality.

• Statement of project goals and major development milestones.

Example: Feasibility Analysis Performed by a Utility CompanyA Canadian utility company produced a feasibility analysis to analyze a proposedproject involving the use of wind turbines to generate renewable electricity and offsetlosses incurred from rising oil prices. The data to be analyzed included:

• Historical data, such as wind data collected over a year, a wind energy assess-ment, and a wind speed frequency distribution.

• Technical data, including an analysis of the anticipated power quality and stability.

• Financial and economic data, including detailed information about projected costs,capital expenditures, and operational and management costs.

• A summary of impacts on the environment, sound, wildlife, public safety, andland use.

• A conclusion, which summarized the analysts’ findings and made a recommenda-tion regarding the wind turbine’s feasibility.

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Cost-Benefit AnalysisDefinition:

A cost-benefit analysis presents a project’s estimated costs alongside its predicted ben-efits to help decision makers make informed decisions about project selection. Cost-benefit analyses may be formal or informal. Although they contain quantitativeinformation, they are merely forecasted expectations, rather than hard data. It is impor-tant to recognize and document any assumptions used to derive the cost and benefitforecasts.

The costs include current operating costs and expected project costs related to thefunction under analysis. The benefits include quantifiable benefits, such as increasedsales or reduced costs expected as a result of the project, and intangible benefits, suchas enhanced image or brand awareness that can only be described subjectively.

Example: Cost-Benefit Analysis for Developing an E-Commerce Capability in aRetail Firm

The senior management of a large retail firm is considering a proposal for the develop-ment and addition of an e-commerce capability on their existing website to increaserevenue. Before committing, management asks each department director to evaluate thefeasibility and provide rough cost estimates. The directors then agree that the project isindeed feasible given their current capabilities and should cost around $25K.

The VP of Sales and Marketing estimates that the e-commerce site will result in a 5%increase in sales in the next five years. Given the company’s current threshold of $1million, the estimated improvement would result in an additional $50K in sales overthe next five years. With the $25K in upfront costs, the net benefit is estimated to be$25K. The cost-benefit analysis results in a rough estimation of the company’s netgain.

Lost Opportunity CostsProjects 1, 2, and 3 were considered for funding. These projects showed a net profit of$120K, $350K, and $400K, respectively. The logical decision, with minimal informa-tion, is to select project 3. If the project team selects project 3 and does not executeprojects 1 and 2, the team loses the profit that could be gained by executing thoseprojects. In this example, the team loses $470K because they did not execute thoseprojects. This is lost opportunity costs.

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ACTIVITY 2-2Reviewing Project Selection

Scenario:So that you can best understand the priorities and focus of the PMO selection process, you aremeeting with OGC’s senior management. But before the meeting, you wish to test your knowl-edge on the standard project selection processes.

1. Match the rating and scoring system on the left with its description on the right.

Decision tree a. A type of screening system decisionmodel that uses a branch diagram tochoose among two different alterna-tives.

Criteria profiling b. A decision model using groups ofpeople to rate the relative priority ofa number of alternatives.

Weighted factor c. A group technique that extracts andsummarizes anonymous group inputto choose among various alternatives.

Q-sorting d. A decision model that applies a mul-tiplier based on importance to eachcriterion, which is factored into thescoring.

Delphi technique e. A decision model used to evaluateand score alternatives on each crite-rion.

2. Choose the option to which the OGC’s project selection criteria should be linked.

a) Their strategic objectives

b) Their cost-benefit analysis

c) Their feasibility analysis

d) Root cause analysis

3. In OGC’s decision-making methodology, there are 10 weighted project criteria thatyield a score which determines the project’s priority. One of those criteria is purelysubjective for those times when an emphasis on go-with-your-gut is appropriate. Theresulting statistics are fed back to the participants along with a summary of thegroup’s reasoning. Participants can then revise their rating using a zero-to-ten scale.The process repeats until some pre-determined score is reached. Which combinationof scoring and rating systems is being used?

a) Decision tree and weighted factor

b) Decision tree and Q-sorting

c) Weighted factor and Q-sorting

d) Weighted factor and Delphi technique

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4. You have moved into the feasibility analysis and cost-benefit analysis of project selec-tion. One project budgeted for $100,000 came out of the selection process. This is thecompany-wide training initiative to be implemented for all project managers to adhereto PMO project management standards and guidelines. The intent of the training is toensure that each member of the project management team understands the scope,time, and costs in managing competing project requirements. The program will includespecific technology training in the use of a software tool that OGC recently purchasedthat totaled $20,000 so that managers can create, manage, and track their projects.Currently only 10% of the project managers are using the software. One senior man-ager is questioning the need for the budget to be as high as $100,000. What are yourjustifications for the allotted budget? What are the benefits?

TOPIC CPrepare a Project Statement of WorkAs a project manager looking for efficiencies and performance improvement in your projects,you need to plan how to acquire project resources by crafting effective statements of work,which provide enough detail that internal resources and potential sellers can evaluate theircapability to perform it. In this topic, you’ll focus on creating an effective statement of work.

Effective project management requires you to reduce costs, avoid rework, and streamlineefforts when possible. An effective statement of work describes the work being sought in suffi-cient detail so that potential sellers and internal resources can evaluate their capability toperform it appropriately. This saves time, effort, and money, and increases your project’schances for meeting the requirements of the business.

Project Statements of Work (SOW)Definition:

A Project Statement of Work (SOW) is a document that describes the products or ser-vices that the project will supply, defines the business need that it is designed to meet,and specifies the work that will be done during the project.

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Example: A Project Statement of Work

Figure 2-3: Project statement of work for the OGC PM Training Roll-Outproject.

Internal or External SOWA SOW may be internal, supplied by the project’s sponsor in response to an organiza-tional need, or external, supplied by a potential client during a bidding process. Anexternal project SOW could be included with a request for a proposal or as part of acontract.

How to Prepare a Project Statement of WorkAn effective statement of work describes the work being procured in sufficient detail so thatinternal resources and potential sellers can evaluate their capability to perform this work. Inaddition, the SOW will serve as a basis for developing the procurement documents during thesolicitation process.

Guidelines:To prepare an effective statement of work, follow these guidelines:

• Review the product description to ensure that you fully understand the scope ofthe work being procured.

• Consult technical experts to define specifications clearly, concisely, and com-pletely.

In some cases, inputs for creating a SOW will be given either by clients or vendors based onbusiness requirements.

• Determine appropriate SOW format.

— If your organization has a preferred or mandated SOW format, be sure to useit and comply with any standards and policies regarding content.

— If there is no standard SOW format for your organization, you may be ableto modify a SOW from a previous, similar project.

• Present the information in a logical sequence.

• Use consistent terminology and level of detail throughout the SOW.

• Determine if any collateral services are required from a seller external to the orga-nization as a part of the contract.

— What are the seller’s performance reporting requirements?

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— Will the seller be required to provide any post-project operational support?

• Determine the acceptable criteria for the product or service.

• Make sure your SOW includes the following key elements:

— Clear identification of the project name and deliverable name or identificationnumber.

— A summary of work requested and benefits.

— The major deliverables or key events anticipated.

• List all major identifiable results of the work being performed on theproject.

• List the estimated date of completion for each deliverable.

— All resource requirements.

• List every person, work group, or material that will perform or be usedto perform actual work on the project.

• Provide a brief description of what they will be doing.

• Estimate the actual hours of work they will devote to the project.

— A description of the expected commitments from other departments or peopleand how they will impact the project.

— A list of all risks and concerns.

• Include any event or activity that has the potential of affecting thetimeline for completion.

• Pay attention to any assumptions made in identifying work and scope.

— A description of the project completion criteria.

— A list of outstanding issues.

• Have the SOW reviewed by a knowledgeable third party to ensure that it is com-plete, correct, and understandable.

Example: Statement of Work for a Carnival ProjectThe City of Butterfield Visitors’ Bureau has decided to hold a carnival as a touristattraction. To create a SOW for this project, the project manager enlisted the help ofher organization’s chief negotiator and a lawyer. She also hired a consultant to definethe specifications of the various carnival rides and attractions that would be utilized.

The organization had no existing preferred SOW format, so the project teamresearched SOWs used by other companies for similar events. They ensure that theSOW is laid out in a logical sequence and uses consistent terminology throughout.

The statement also defines acceptable service criteria and includes key elements suchas a schedule and acceptance standards. Before sending this SOW to prospective bid-ders, the project team had the document reviewed and validated by an independentlegal firm.

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DISCOVERY ACTIVITY 2-3Preparing a Project Statement of Work

Data Files:

• Blank OGC Project Statement of Work

Before You Begin:Review the Prepare a Statement of Work guidelines and then read the scenario.

Scenario:The Business Transformation Project is the first time that OGC has undertaken such a largeenterprise-wide project. For this reason, the senior executives and core individuals of the Busi-ness Transformation PMO will be selecting key individuals to create a project charter toprovide project management training for all team members. The intent of this training is toallow team members the ability to efficiently use a recently purchased software tool to createand manage all project schedules. The training will also include internal process training forthe Business Transformation Project with an overview of the management system that has beendeveloped for tracking and reporting on multiple, simultaneous projects. The goal of OGC is tocomplete this high-priority training before the initiation of the primary Business Transforma-tion Project.

• Without exception, all managers will use the project management scheduling andtracking software tool. OGC plans to use a local training center to provide train-ing on the standard features of the software. The goal is to locate a trainingprovider that can accommodate at least 12 individuals at a time; that can offerbasic, intermediate, and advanced training for the software; and that can provideafter-training support.

• OGC will also provide internal training on the use of customized reporting fea-tures and customized views that stray from standard software training. There arehigh expectations that the scheduling and tracking capabilities of this softwarewill provide senior management with the most up-to-date information on the sta-tus of each individual project and its impact on the business transformation.

• Only 10 percent of the project managers in OGC have actually used the softwaretool to manage their projects. There are approximately 50 managers who will takethe training, and three members of the PMO have been selected to create theproject Statement of Work (SOW).

The format of the Project SOW used in this activity is just an example of how a Project SOW can beformatted.

1. What might be a logical first step in preparing the SOW?

a) Verify if you should use the standard OGC SOW format.

b) Present the information in a logical sequence.

c) Provide a description of the project completion criteria.

d) List every person or work group that will perform actual work on the project.

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2. Based on the scenario, which one or more of the following should be included in theSOW?

a) A clear description of what is required for the internal and external training.

b) The specifications as to how both the internal and external training will be producedand methods for ensuring that the specifications have been met.

c) A detailed breakdown of all deliverables that will be required to complete theproject.

d) A list of the human resources or work groups that will perform actual work for thetraining project.

e) The estimated date of completion for both the internal and external training classes.

3. Yes or No? Based on the scenario, do you think that it will be necessary for OGC to cre-ate an additional external SOW for this training project?

Yes

No

4. From the C:\085042Data\Initiating a Project folder, open the List of Deliverables andResources document to use as a guide while creating the project statement of work.

5. From the C:\085042Data\Initiating a Project folder, open the Blank OGC Project Statementof Work document and, based on the scenario, complete the project statement of work.

6. Compare your Project Statement of Work document with the Completed OGC ProjectStatement of Work document, in the C:\085042Data\Initiating a Project\Solutions folder.

TOPIC DCreate a Project CharterDetermining the appropriate project management processes to apply to your project is animportant step in the initiating process. However, before you can apply organizationalresources to project activities, you need formal authorization to do so. In this topic, you willcreate a project charter.

To accomplish project objectives, you need the support of the organization behind you. With-out it, you may be unable to convince anyone that your project is valuable to the organizationor obtain the resources you need. An effective project charter ensures that you gain your orga-nization’s support for the project and the authority to apply resources to project activities.

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Project ChartersDefinition:

The project charter is a document that provides a clear, concise description of thebusiness needs that the project is intended to address. It makes a project official; itauthorizes the project manager to lead the project and draw on organizational resourcesas needed. The project charter documents initial assumptions about the project, anyknown constraints, and the expected results.

Example: A Project Charter

Figure 2-4: Project charter for the OGC PM Training Roll-Out project.

Sample Project CharterTo view a sample project charter, open the C:\085042Data\Initiating a Project\Solutions\Completed Project Charter document.

The Develop Project Charter ProcessDevelop project charter is the first process in the project integration management knowledgearea. The purpose of developing a project charter is to formally launch and authorize a newproject or to authorize an existing project to continue into its next phase. A project receivesauthorization when the initiator signs the project charter. To be successful, the project mustlink to the ongoing work of the organization and it must match its goals and capabilities withbusiness requirements. The project charter may be developed by an initiator such as a sponsoror it may be delegated to the project manager. If the project charter is created by the sponsor,it is advisable that the project manager is also involved in the development process.

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Figure 2-5: The develop project charter process.

Develop Project Charter InputsVarious components provide input into the develop project charter process.

Input DescriptionProject statement of work A document describing the products or services to be delivered by the

project.

Business case A document that justifies the investment made on a project and deter-mines the benefits expected from the project. The reasons for creatingthe business case include market demand, organizational and socialrequirements, and customer requests.

Contract If the project is commissioned for an external customer, a contractfrom the customer’s organization is an input for project charter devel-opment.

Enterprise environmental fac-tors

These are internal or external influences that affect project success.For project charter development, these items include company culture,government or industry standards, stakeholder risk tolerances, marketconditions, human resources, and information systems.

Organizational process assets The processes and procedures for accomplishing work and the corpo-rate knowledge base for storing and retrieving information. For projectcharter development, organizational process assets include policies,procedures and guidelines, templates, methods for approving and issu-ing work authorization, and communication requirements. Thecorporate knowledge base may include a process measurement data-base, project files, configuration management, financial data, andhistorical information.

Develop Project Charter Tools and TechniquesOnly one tool and technique is used in developing the project charter.

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Tools and Techniques DescriptionExpert judgment Knowledge provided based upon expertise in a knowledge area, an

application area, an industry, or discipline relevant to the project char-ter development process. Expert judgment may be from internal orexternal sources such as stakeholders, professionals, subject matterexperts, industry groups, PMO, and functional units.

Develop Project Charter OutputThe only output from the develop project charter process is the project charter.

Output DescriptionProject charter Documents information such as project purpose, project objectives, high-level

project requirements, description, and risks, and summary milestone schedule andbudget. Responsibility for the creation of a project charter varies widely fromorganization to organization. In many companies, the project manager is respon-sible for its creation, but it is issued by the sponsor.

Business CasesDefinition:

A business case is a brief document that justifies the investments made for the projectand describes how a particular investment is in accordance with the organization’spolicy. It outlines the technical, investment, and regulatory factors that influence aproject. The business case provides a framework to link an investment proposal to theachievement of an organizational objective.

Example: Business Case for the Geothermal Energy ProjectSenior management at OGC called a meeting to review project selections by the PMO.As project manager, Barbara Tolliver is required to present a business case that out-lines the technical, investment, and regulatory factors influencing the geothermalenergy project. Barbara used a cost estimate to justify the investments made for theproject.

Business Case ComponentsA number of components need to be added to a business case.

Component DescriptionBusiness need Substantiates the business reason for conducting the project.

Project contribution Determines the project’s contribution toward the organization’s objec-tives.

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Component DescriptionStakeholders Lists the project stakeholders, their expectations, and contributions toward

the project.

Constraints Compiles the limitations of the project.

Strategic risks Lists the risks that the project may face and the possible risk manage-ment measures.

Benefits evaluation Analyzes and outlines the key benefits to be obtained.

Project roles Lists the members of the project team and their respective job roles inthe project.

Benefits realization plan Provides an outline of the benefits realization plan.

Contingency plan Outlines the alternate solutions for unplanned events.

How to Create a Project CharterAn effective project charter clearly communicates the project’s importance to the organizationand formally authorizes the project.

Guidelines:To create an effective project charter, follow these guidelines:

• Use a corporate template, if one is in existence at your company.

• Include the project and authority identification information:

— Title of the project and the date of authorization.

— Name and contact information of the project manager.

— Name, title, and contact information of the initiating authority (usually thecustomer or sponsor).

• Include a clear, concise description of the business need, opportunity, or threatthat the project is intended to address:

— What are the circumstances that generated the need for the project?

— What is the market demand for the product or service?

— Consider any legal requirements associated with the project.

• Include summary descriptions of the product or service of the project:

— What is the required outcome of the project?

— What are the critical characteristics of the product or service?

• Include a description of the project’s relationship to the business need it isintended to address:

— Why is it important to do the project now?

— How will this project address the business need, opportunity, or threat forwhich it is intended?

• Consider any known constraints and/or assumptions:

— Are there any known time, cost, scope, quality, or resource issues or factorsthat will limit the way you and your project team can approach the project?

— Are there any factors or issues that you and your project team will presumeto be true, real, or certain in order to begin planning your project?

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• Ensure the person with the required knowledge and authority signs the projectcharter.

• Distribute the signed charter to the appropriate project stakeholders:

— Project team members.

— Customer and, if relevant, sellers (vendors).

— Relevant functional managers.

— Finance and/or accounting departments.

Example: Creating a Project Charter for an Internal Process ImprovementProject

Catherine Long, a vice president at your company, is authorized to initiate an internalprocess improvement project. She develops a project charter to formally authorize theproject. The Process Improvement project is named in the memo and the memo’s dateserves as the authorization date. The memo establishes the authority of her colleague,John, as the project manager and provides John’s contact information. BecauseCatherine is the project sponsor, she includes her contact information and has theauthority to reassign people, release materials, and spend the money required to pro-ceed with this project.

The business need of improving the internal processes and procedures to improve timeto market while striking the appropriate balance between quality and speed is clearlystated. The memo provides a brief description of the service and product of the project,which is to analyze the current processes and procedures and make recommendations.

The known constraints of completing the project with minimal impact on currentproject schedules within three months are included in the memo. Catherine’s signatureis on the memo, which is being distributed to all the department directors, vice presi-dents, and project managers who might be affected by or involved in this project. Italso establishes the priority of the project and asks these groups to lend their support.

DISCOVERY ACTIVITY 2-4Creating a Project Charter

Data Files:

• Blank Project Charter

Before You Begin:From the C:\085042Data\Initiating a Project folder, open the Blank Project Charter document.

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Scenario:Your project SOW is completed and you have just finished another meeting with Vicky Morris,who requested that you create the project charter for the training initiative. Vicky will sign theauthorization for the project upon its completion. The project has been given the name “OGCPM Training Roll-Out.” The PMO has allocated a budget of $100,000 for this project. Theproject must finish no later than September 20th due to the start of phase one of the businesstransformation.

Before creating the project charter, you decide to review your notes from previous meetings.

• The training will include an overview of the management system that has beendeveloped for tracking and reporting on multiple, simultaneous projects. One ofthe organizational goals is to complete this training before the initiation of allother business transformation projects.

• There are high expectations that by initiating this project, the scheduling andtracking capabilities of this software will provide senior management with themost up-to-date information on the status of each individual project and its impacton the business transformation project.

• All managers will be required to use the project management scheduling andtracking software when managing their future projects.

• OGC plans to use a local training center to provide training on the standard soft-ware due to classroom and computer limitations within OGC.

• The training provider must be able to provide the application training at a basic,intermediate, and advanced level.

• The training provider must be able to offer support after training.

• OGC will provide in-house additional training tailored for the business transfor-mation program.

• There are approximately 50 managers who will need to complete the training.

• The supervisors of these managers would like to know their performance in thetraining.

• Development of a pre- and post-assessment is required.

1. How would you describe the goals and objectives of this project?

2. How would you describe the project’s impact to the organization?

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3. Are there any assumptions that you would include? If so, describe them.

4. Based on what you know at this point, how would you describe the primarydeliverables for this project?

5. Yes or No? At this time, are there any real constraints in the project charter?

Yes

No

6. Open the file C:\085042Data\Initiating a Project\Blank Project Charter and, based on thescenario, complete the project charter.

7. Compare your Blank Project Charter document with the C:\085042Data\Initiating a Project\Solutions\Completed Project Charter.

TOPIC EIdentify Project StakeholdersYou have a project charter providing the formal authorization to apply organizational resourcesto project activities. Before you can begin the planning process, it is vital to identify thegroups or individuals who will have a role to play either directly or indirectly in the project. Inthis topic, you will identify the stakeholders of your project.

Stakeholders are an integral part of any project and extensively support the success of theproject. It is imperative that you document the relevant information regarding the stakeholders’interests and expectations as they strongly influence a project’s product or service.

The Identify Stakeholders ProcessDuring the identify stakeholders process, the project manager identifies all stakeholders that areimpacted by the project and documents information that is relevant regarding their interests,involvement, and impact on project success. Stakeholders exert influence on the project and itsdeliverables, and their interests may be positively or negatively affected by the execution orcompletion of the project.

Stakeholders need to be classified based on factors such as their level of interest and influencein a given project. This would enable the project manager to prioritize the level of importanceto be assigned for a specific stakeholder.

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Figure 2-6: The identify stakeholder process.

Identify Stakeholders InputsThe project manager uses four inputs to identify stakeholders that are impacted by the project.

Input DescriptionProject charter Provides information about internal and external parties who are impacted

by the project, namely project sponsor(s), customers, key team members,groups and departments participating in the project, and other people andorganizations affected by the project.

Procurement documents Provide information to indicate if the project involves procurement or isbased on an established contract. The parties involved in the contract, thesuppliers, are key project stakeholders and are added to the project stake-holders list.

Enterprise environmentalfactors

The enterprise environmental factors that can influence the identify stake-holders process include:

• The culture and structure of the organization or company.

• Government or industry standards, namely product standards or regula-tions.

• Availability or unavailability of web-based project management sys-tems in the organization.

• Extent of complexity and presence of confidentiality needs on theproject.

Organizational processassets

The organizational process assets that can influence the identify stake-holders process include:

• Stakeholder register templates.

• Lessons learned from previous projects.

• Stakeholder registers from previous projects.

Identify Stakeholders Tools and TechniquesTwo tools and techniques are employed to identify stakeholders for the project.

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Tools and Techniques DescriptionStakeholder analysis The process of systematically gathering and analyzing quantitative and

qualitative information to determine the stakeholders whose interests needto be considered throughout the project. It helps identify stakeholder rela-tionships to build coalitions and partnerships that can enhance the project’schance of success.

Expert judgment Identification and listing of stakeholder groups and individuals with special-ized training or knowledge on the subject area can be sought from seniormanagement, other units within the organization, key stakeholders, projectmanagers who worked on similar projects, Subject Matter Experts (SMEs)in business or project area, industry groups and consultants, and profes-sional and technical associations. Expert judgment is obtained throughindividual consultations, such as one-on-one meetings and interviews.Expert judgment could also be obtained through a panel format, such asfocus groups and surveys.

Identify Stakeholders OutputsThere are two outputs of the identify stakeholders process.

Output DescriptionStakeholder register Contains the list of the identified project stakeholders with information

on their identification, assessment, and stakeholder classification details.

Stakeholder managementstrategy

Defines an approach to increase the support and minimize negativeimpacts of stakeholders throughout the entire project life cycle.

Stakeholder AnalysisStakeholder analysis is the formal process of identifying all of the stakeholders of a project bygathering and analyzing quantitative and qualitative information, and building coalitions at theonset of a project by identifying their needs, objectives, goals, issues, and impact.

Stakeholder analysis is performed through a series of steps:

1. Identify all potential stakeholders of the project.

2. Classify stakeholders based on their potential impact or support on the project.

3. Plan for likely stakeholder reaction or response and plan how to enhance their support andmitigate potential negative impact on the project.

Ideally, project managers will question the stakeholders about their interest in the project, theirdesired outcome, their goals, and any lessons learned from prior projects. This increases theeffectiveness of the stakeholder analysis process. As the project progresses, the analysis will bevalidated against the current state of project work and stakeholders’ changing needs.

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Figure 2-7: The stakeholder analysis process.

Stakeholder RegistersDefinition:

A stakeholder register is a document that identifies stakeholders of a project withinformation that includes their identification, assessment, and stakeholder classification.Typical stakeholder register entries may include the stakeholder name, organizationalposition, location, role in the project, contact information, requirements, expectations,influence on the project, specific interest in the project or a phase, whether internal orexternal, and whether for, against, or neutral to the project.

Example: A Stakeholder Register

Figure 2-8: Stakeholder register for the OGC PM Training Roll-Out project.

The Stakeholder Analysis MatrixDefinition:

A stakeholder analysis matrix is a document that describes the strategies used to man-age the stakeholders of a project. The project manager prepares the stakeholderanalysis matrix during the identify stakeholders process. The stakeholder analysismatrix is a shared document, and therefore it is imperative that the project managerexercise proper judgment and due caution with regards to the kind of information anddetail that need to be included in it.

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Example: A Stakeholder Analysis Matrix

Figure 2-9: A stakeholder analysis matrix template used to manage theproject stakeholders.

Stakeholder Management StrategyDefinition:

A stakeholder management strategy is a management strategy that is created to ensuremaximum support and to minimize the negative impacts of stakeholders throughout theentire project life cycle. The stakeholder management strategy is created by the projectmanager during the identify stakeholders process. The strategy information is ideallyrepresented in a stakeholder analysis matrix.

Example: Components of a Stakeholder Management Strategy DocumentA typical stakeholder management strategy document could include:

• Stakeholder Identification—a list of the identified stakeholders along with theiridentification related information.

• Stakeholder Map—a chart showing the interest of different stakeholders and levelsof participation required from each identified stakeholder.

• Stakeholder Analysis Influence and Importance Matrix—a matrix that describesthe stakeholders based on their influence and importance to the project.

• Stakeholder List—a list of various stakeholder groups involved in the project andtheir management.

• Stakeholder Communication—a description of how the project will engage variousstakeholders that includes communication routes and frequency for each stake-holder or group of stakeholders.

• Communication Efficiency—specifies how the efficiency of the communicationprocess will be measured.

How to Identify Project StakeholdersIt is important to identify the stakeholders early in the project; analyze relevant informationregarding their interests, expectations, importance, and influence; and devise a strategy toensure their involvement to maximize positive influences and mitigate potential negativeimpacts.

Guidelines:To identify project stakeholders, follow these guidelines:

• Perform a review of project and related information to ascertain the list of internaland external parties who may be impacted by the project. The documents or infor-mation are a valuable source for stakeholder identification. These may include:

— Project charter

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— Procurement documents

— Organization or company structure

— Organization or company culture

— Government or industry standards

— Stakeholder register templates

— Lessons learned from previous projects

— Stakeholder registers from previous projects

• Identify groups or individuals with specialized training or knowledge who canhelp in the comprehensive identification and listing of the stakeholders.

• Perform interviews of the identified stakeholders to gain knowledge of their roles,departments, interests, knowledge levels, expectations, and influence levels withinthe organization.

• Analyze your lists to identify the key stakeholders of the project. These includeanyone in a decision-making or management role who is impacted by the projectoutcome, such as the sponsor, the project manager, and the primary customer.

• Determine and classify the potential impact or support that each stakeholder couldgenerate during the project life cycle and define an approach strategy. You need toprioritize the key stakeholders to plan for efficient communication and manage-ment of their expectations.

• Assess how stakeholders would react or respond in various situations during theproject life cycle. You need to plan how to influence the stakeholders to enhancetheir support to the project and also mitigate any potential negative impacts aris-ing from them.

• Document stakeholder information to include identification, assessment, and stake-holder classification in the stakeholder register.

• Devise a stakeholder management strategy to increase support and minimize nega-tive impacts of stakeholders to the project.

Example: Identifying the Computer Networks Upgrade Project StakeholdersAndrew is the project manager for the computer networks upgrade project within yourcompany. He collects project information that includes the project charter, the organi-zation structure, the organization’s policy documents, lessons learned and stakeholderregister of previous projects, and other related documents related to the current net-working and computer resources deployed within the company. He studies theinformation gathered to identify the stakeholders from senior management.

Andrew interviews the key stakeholders, namely the department heads for marketing,finance, human resources, content development, media development, and quality con-trol, and expands the list of identified stakeholders based on these interviews. Theadditional stakeholders would be the department heads for IT services, customer sup-port, purchase, administration, and accounts. Further, Andrew classifies thestakeholders based on their potential impact or support to the project. Andrew docu-ments the details of the stakeholders in the stakeholder register and based on hisassessment of each stakeholder, he defines the stakeholder management strategy in astakeholder analysis matrix.

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DISCOVERY ACTIVITY 2-5Identifying Project Stakeholders

Data Files:

• Blank OGC PM Training Roll-Out Stakeholder Register

Before You Begin:From the C:\085042Data\Initiating a Project folder, open the OGC Quality Plans TrainingStakeholder Register and OGC Project Charter documents.

Scenario:Vicky Morris, the sponsor, has authorized the OGC PM Training Roll-Out project. As part ofthe project charter, a preliminary list of project stakeholders was identified. Your intent as aproject manager is to be able to identify all the stakeholders for the project. You can refer tothe stakeholder register for a similar project, the “OGC Quality Plans Training” project, todetermine the likely stakeholders of your project. You are in the process of creating the stake-holder register for your OGC PM Training Roll-Out project.

1. How would you approach ascertaining the total list of project stakeholders for the OGCPM Training Roll-Out project?

2. True or False? Members of the OGC PM Training Roll-Out project team are consideredto be stakeholders.

True

False

3. How would you identify the positive and negative stakeholders of the project?

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4. Which statements are true of the stakeholder management strategy?

a) Identifies key stakeholders who can impact the project.

b) Describes the government and industry standards to be applied to stakeholder man-agement.

c) Describes the level of participation for each identified stakeholder in the project.

d) Identifies the stakeholder groups and their management.

5. How would you establish levels of stakeholders based upon their interest in the projectand the impact they can have on the project?

6. What is the documentation needed for each level of stakeholder?

7. Which documents can you use as a basis for your stakeholder register?

8. Open the Blank OGC PM Training Roll-Out Stakeholder Register document from the C:\085042Data\Initiating a Project folder, and based on the scenario, complete thestakeholder register.

9. Compare your Blank OGC PM Training Roll-Out Stakeholder Register document with theCompleted OGC PM Training Roll-Out Stakeholder Register document in the C:\085042Data\Initiating a Project\Solutions folder.

Lesson 2 Follow-upIn this lesson, you explored the significant elements of initiating a project, which is one of thefive interlinked process groups and a critical part of every project you will ever manage. Byeffectively initiating your project and laying a solid foundation for the work that will follow,you will significantly increase your chances for success.

1. Consider the importance of making sound decisions about project selection. How doyou think this will affect your eventual chances for success?

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2. Consider the benefits of identifying project stakeholders. How do you think you canuse this process to your advantage on your next project?

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Planning Project Work

In this lesson, you will plan project work.

You will:

• Identify the elements of the project management plan.

• Document stakeholder requirements.

• Create a scope statement.

• Develop a Work Breakdown Structure (WBS).

Lesson Time3 hour(s)LESSON 3

LESSON 3

Lesson 3: Planning Project Work 69


IntroductionWith your project defined at a high level and authorized by the sponsor, you’re ready to beginplanning your project. Project planning is the second of five project management processgroups that you will perform on most projects you manage. In this lesson, you’ll use the firstfour component processes in the planning process group to plan project work.

As the project manager, it’s up to you to define how the project will be carried out. You’ll alsobe responsible for identifying the stakeholders’ needs so that you can ensure their satisfaction.With the project objectives and scope clearly defined and documented, you can lead yourproject toward the agreed-upon measures of success.

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TOPIC AIdentify the Elements of a ProjectManagement PlanYour project has been authorized and the charter names you project manager. You’re eager toget started. But before any progress can be made, you’ll need to plan how your team will man-age the project to its successful completion. In this topic, you’ll identify the elements of aproject management plan.

Developing a realistic, usable, dynamic project management plan helps the project team stayfocused on the objectives and purpose of your project. Continually updating your project man-agement plan as new information becomes available will help you to circumvent problemsbefore they develop and ensure project work occurs according to the plan.

The Project Management PlanDefinition:

A project management plan is a plan that details how a project will be executed toachieve its objectives. A well-defined plan consists of certain components, including:

• A list of the project management processes that will be utilized and the level ofimplementation for each.

• A description of the tools and techniques that will be used to complete those pro-cesses.

• An extensive description of the tasks to be completed to fulfill the objectives.

• Plans for monitoring and controlling changes to the project.

• Details on configuration management.

• Performance measurement baselines.

• Techniques for communication with stakeholders.

• A definition of the project life cycle.

• A plan for identifying, documenting, and addressing open issues.

Project management plans may be very detailed or a simple summary, and mightinclude any number of subsidiary management plans.

Subsidiary Plan DescriptionScope management plan Provides guidance on how project scope will be defined,

documented, verified, managed, and controlled.

Requirements management plan Documents how requirements will be analyzed, docu-mented, and managed throughout the project.

Schedule management plan Describes the scheduling methodology, the schedulingtool(s) to be used, and the format and established criteriafor developing and controlling the project schedule.

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Subsidiary Plan DescriptionCost management plan Describes the format and establishes the criteria for plan-

ning, structuring, estimating, budgeting, and controllingproject costs.

Quality management plan Describes how the performing organization’s qualitypolicy will be implemented by the project managementteam throughout the project.

Process improvement plan Details the steps for analyzing processes to identifyactivities that enhance their value.

Human resource plan Provides guidance on how the human resources requiredfor a project should be defined, staffed, managed, con-trolled, and eventually released.

Communications management plan Provides details that document the approach to communi-cate efficiently and effectively with the stakeholders.

Risk management plan Describes how risk management is structured and per-formed on the project.

Procurement management plan Describes how the procurement processes will be man-aged from developing procurement documents throughcontract closure.

The subsidiary plans may be formal or informal, highly detailed, or broadly framed, and are created based on therequirements of the project.

Example: Project Management Plan for a Supermarket ChainA national supermarket chain sought to reduce the average amount of time its custom-ers spent waiting in the checkout lines. The project management plan listed themanagement processes thought to be necessary and the tools used to complete thoseprocesses.

The plan also included the tasks to be completed (hiring more clerks, expandingcheckout areas), plans for controlling changes to the project (a designated change con-trol board), details on configuration management, performance measure baselines,stakeholder communication plans (weekly regional manager meetings), a project lifecycle (implementation, evaluation, and analysis), and the plan for addressing openissues.

The plan also contained a cost management plan and a quality assurance managementplan.

The Develop Project Management Plan ProcessThe develop project management plan process involves documenting the appropriate actions todefine, create, integrate, and coordinate the subsidiary management plans as one single plan.The project management plan is created and modified through a series of integrated processesuntil the project closes. Therefore, the process results in the progressive elaboration of theproject management plan that is updated with changes, which are controlled and approvedthrough the perform integrated change control process.

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Figure 3-2: The develop project management plan process.

Develop Project Management Plan InputsThere are four inputs to a successful project management plan; they will be defined by theorganization’s infrastructure and culture, the type of project, and how complicated the projectis.

Input DescriptionProject charter The project charter formally authorizes the project, provides authority

to the project manager to commit resources, and is the starting pointfor the project management plan. It also provides information on theresults that it is expected to satisfy such as project purpose or justifi-cation, project objectives and success criteria, project requirements,project description, summary milestone schedule, and summary bud-get.

Outputs from planning processes Baselines and subsidiary management plans that are outputs fromother planning processes are inputs to the develop project manage-ment plan process. The baselines and subsidiary management plansare integrated to create the project management plan and any updatesto these in the respective planning processes would require theproject management plan to be updated.

Enterprise environmental factors Factors that may influence the project’s success should always beconsidered during plan development. These could include anythingfrom existing assets (information systems, human resources) to exter-nal factors (governmental regulations, marketplace conditions).

Organizational process assets Existing processes that may impact a project’s success. These mayinclude policies, guidelines, historical information, or knowledgegained from previous projects.

Develop Project Management Plan Tools andTechniquesThe tool and technique commonly employed in the creation of the project management plan isexpert judgment.

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Tools and Techniques DescriptionExpert judgment Insight in specialized areas that will generate valuable technical and

management content for the project management plan.

Develop Project Management Plan OutputThe sole output from the develop project management plan process is the project managementplan.

Output DescriptionProject management plan A formal document that defines how the project is executed, monitored

and controlled, and closed. This includes all the subsidiary managementplans and baselines.

ACTIVITY 3-1Identifying the Elements of a Project Management Plan

Data Files:

• OGC Project Management Plan

Before You Begin:From the C:\085042Data\Planning Project Work folder, open the OGC Project ManagementPlan document.

Scenario:As one of the project managers of OGC’s Business Transformation project, you will beresponsible for putting together a project management plan. Before you begin, you havedecided to review the elements that the OGC PMO requires all project managers to include inany project that has a budget of $10,000 or more.

1. As you review the OGC Project Management Plan outline, identify the elements thatyour organization requires, if any, for your project management plans.

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2. Match the project management plan input with the appropriate description.

Project charter a. This input uses baselines and subsid-iary management plans that areintegrated to create or update theproject management plan.

Outputs from planningprocesses

b. This input uses existing processesthat may impact a project’s successsuch as policies, guidelines, orknowledge gained from previousprojects.


c. This input includes factors that influ-ence the project’s success, such asanything from existing assets to exter-nal factors that should always beconsidered during plan development.


d. This input authorizes and providesvital information relating to theproject based on which the projectmanagement plan is built.

3. Which subsidiary plan of the project management plan deals with closure of contracts?

a) Scope management plan

b) Procurement management plan

c) Process improvement plan

d) Communications management plan

TOPIC BDocument StakeholderRequirementsYou identified the elements and are integrating the various subsidiary plans into the projectmanagement plan. In the process of finalizing your project management plan, you need to beaware of the project stakeholder requirements and document them so as to avoid missing criti-cal information. In this topic, you will document stakeholder requirements.

As a project manager, you have to analyze the needs of the project stakeholders. A clear andauthentic documentation of those needs will be critical to the project’s success. Identifying anddocumenting the stakeholder’s needs will permit you as a project manager to provide probablesolutions, and to assure the stakeholders that none of their needs are being overlooked.

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The Collect Requirements ProcessIn the collect requirements process, the project manager defines and documents the stakehold-ers’ needs and expectations to meet the project objectives. The requirements need to beelicited, analyzed, and recorded in sufficient detail from the sponsor, customer, and other stake-holders of the project to enable measurement during project execution.

The collected requirements form the basis for planning the cost, schedule, and quality for theproject.

Figure 3-3: The collect requirements process.

Project and Product RequirementsRequirements are further categorized into project requirements and product require-ments depending on the needs of the project. Project requirements could typicallyinclude the business, project management, and the delivery requirements of the project.Product requirements could typically include the technical, security, and performancerequirements of the product.

Collect Requirements InputsThe collect requirements process uses two inputs to identify the requirements of the projectstakeholders.

Input DescriptionProject charter Provides the high-level project or product descriptions that are used to

develop the detailed project requirements.

Stakeholder register Identifies stakeholders who can provide information on the detailed projector product requirements.

Collect Requirements Tools and TechniquesProject or product requirements are captured and managed using a variety of tools and tech-niques.

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Tools and Techniques DescriptionInterviews Used to get information from stakeholders by talking to them directly. It

aids in identifying and defining the features and functions or the desiredproject deliverables.

Focus groups A trained moderator guided interactive discussion that includes stakehold-ers and subject matter experts to elicit their expectations and attitudestowards the proposed product, service, or result of the project.

Facilitated workshops Interactive group focused sessions that bring together key cross-functionalstakeholders to define the project or product requirements. It is a primarytechnique to define cross-functional requirements and reconcile stakeholderdifferences to the project much faster than individual discussions.

Group creativity techniques Group activities that are organized to identify project and product require-ments, and include brainstorming and the Delphi technique.

Group decision makingtechniques

An assessment process of multiple alternatives to generate, classify, andprioritize project or product requirements.

Questionnaires and surveys Written sets of questions designed to quickly accumulate information froma broad audience. It is used when statistical analysis is appropriate for thecollect requirements process.

Observations A direct way of viewing individuals in their work environment or whileusing the product to identify the project or product requirements. Alsoreferred to as job shadowing.

Prototypes A method of obtaining feedback on requirements by providing a workingmodel of the expected product.

Collect Requirements OutputsThere are several outputs from the collect requirements process.

Output DescriptionRequirements documentation Describes how the individual requirements would meet the busi-

ness need for the project. Its format ranges from a simpledocument listing all the requirements categorized by stakeholderand priority to more elaborate forms containing executive sum-mary, detailed descriptions, and attachments.

Requirements management plan Documents how the project requirements will be analyzed, docu-mented, and managed throughout the project life cycle.

Requirements traceability matrix A table that links the requirements to their origin and tracks themthroughout the project life cycle.

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Facilitated WorkshopsDefinition:

Facilitated workshops are group sessions that bring together key multidisciplinary orcross-functional stakeholders to define the project or product requirements for theproject. Facilitated workshops are an important technique to quickly define cross-functional requirements of the various stakeholders of the project. It helps to buildtrust, foster relationships, reconcile differences, and improve communication among thestakeholders, thereby leading to enhanced stakeholder consensus. Because multiple per-spectives are available, the issues or questions related to the requirements are resolvedquickly.

Example: Conducting Facilitated Workshops for OGC’s Warehouse ManagementSoftware Project

Vicky Morris, the project sponsor, has approved the project charter for OGC’s Ware-house Management Software project. The project charter lists stakeholders fromvarious departments such as the Process Development and Implementation departmentand the key project managers and administration personnel, especially those arrangingthe training logistics. It also includes key PMO staff, and the Chief of the BusinessTransformation team. To build stakeholder consensus, Mark Anderson, the projectmanager of OGC’s Warehouse Management Software project, decides to conduct afacilitated workshop rather than holding one-on-one discussions with the key stake-holders. He invites the key project stakeholders for a “Warehouse ManagementEssential Requirements” workshop.

Mark coordinates discussions with key stakeholders during the workshop to define therequirements of this project. Discussions in the workshop highlight the differencesamong various stakeholder requirements. Mark is not only able to reconcile the stake-holder differences, but also to obtain a consensus on all the project requirements.

Group Creativity TechniquesGroup creativity techniques are group activities organized within organizations to identifyproject or product requirements for a project.

Group Creativity Technique DescriptionBrainstorming Used to generate and create multiple ideas related to project and product

requirements.

Nominal group technique A voting process is used in this technique to rank the most useful ideasobtained through brainstorming. This ranking allows for further brain-storming or for prioritization.

The Delphi technique A group technique that extracts and summarizes anonymous group inputto choose among various alternatives.

Idea or mind mapping Ideas created through brainstorming are consolidated into a map thatreflects the commonality, differences in understanding, and generation ofnew ideas.

Affinity diagram This technique enables the sorting of a large number of ideas collectedduring brainstorming into distinct categories for review and analysis.

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Group Decision Making TechniquesGroup decision making techniques are assessment processes that assess multiple alternatives toarrive at an expected outcome. These techniques are used to generate, classify, and prioritizeproject or product requirements. The outcome is the resolution of future action for the project.

Various methods are adopted to reach a group decision.

Method DescriptionUnanimity Everyone in the group agrees on a single course of action.

Majority Requires support from more than 50% of the members of the group to indicatethe selected decision.

Plurality The largest batch in the group decides for the group even if a majority is notachieved.

Dictatorship One individual makes the decision for an entire group.

Requirements DocumentationDefinition:

Requirements documentation describes how individual requirements meet the businessrequirements of the project. The requirements that are documented in the requirementsdocumentation must be unambiguous, traceable, complete, consistent, and acceptable tokey stakeholders of the project.

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Example: Requirements Document

Figure 3-4: A requirements document for the OGC PM Training Roll-Outproject.

Sample Requirements DocumentTo view a sample requirements document, open the C:\085042Data\Planning ProjectWork\Solutions\Completed OGC Requirements Document document.

Requirements Management PlansDefinition:

A requirements management plan is a plan that describes how the project requirementswill be analyzed, documented, and managed throughout the project life cycle. Phase-to-phase relationships between various phases of the project strongly influence howrequirements are managed. Components of the requirements management plan requireproject managers to choose the most effective relationships to aid the success of theproject and document this approach in the plan.

Components of the requirements management plan include:

• Methods to plan, track, and report requirement activities.

• Configuration management related activities.

• Process for requirements prioritization.

• Project or product related metrics.

• Traceability matrix for requirements.

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Example: Requirements Management Plan for OGC’s Warehouse ManagementSoftware Project

Mark Anderson, the project manager for OGC’s Warehouse Management Softwareproject, prepares the requirements documentation for the project. Mark documents therequirements collected during the “Warehouse Management Essential Requirements”workshop and through subsequent interviews conducted with each stakeholder. He cre-ates the requirements management plan with information on how these requirementswill be analyzed, documented, and managed throughout the project life cycle.

The Requirements Traceability MatrixDefinition:

A requirements traceability matrix is a tabular document that links the project or prod-uct requirements to their origin and traces them throughout the project life cycle. Therequirement traceability matrix links each requirement to the business and projectobjectives, WBS, product design and development, and test scenarios. It also ensuresthat approved requirements in the requirements documentation are met at the end ofthe project. It also provides a structure for managing changes to the project or productscope.

Example: A Requirements Traceability Matrix

Figure 3-5: Requirements traceability matrix for the OGC Warehouse Manage-ment Software project.

Forward traceability in the figure implies that it is possible to trace a requirement to elements in theoutputs of later phases in the project life cycle.

How to Document Stakeholder RequirementsThe success of a project depends on the effective capture and management of the variousproject and product requirements. Care should be taken in defining and documenting the needsand expectations of various project stakeholders in order to meet the project objectives.

Guidelines:To effectively define and manage project and product requirements, follow these guide-lines:

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• Study the project charter to identify the high-level project requirements and prod-uct descriptions.

• Examine the stakeholder register to identify stakeholders who can provide infor-mation on detailed project and product requirements.

• Use various methods to collect project or product requirements. These methodsinclude:

— Interviews

— Focus groups

— Facilitated workshops

— Group creativity techniques

— Group decision making techniques

— Questionnaires and surveys

— Observations

— Prototypes

• If possible, provide a working model or prototype of the expected product toobtain feedback on requirements.

• Create the requirements documentation to describe how individual requirementsmeet the business need for the project. Ensure that the requirements are measur-able, testable, traceable, complete, consistent, and acceptable to key stakeholders.

• Review and validate the requirements management plan along with the key stake-holders and make sure it:

— Describes methods to plan, track, and report requirement activities.

— Describes configuration management related activities.

— Includes process for requirements prioritization.

— Includes project or product related metrics.

— Provides a traceability matrix for requirements.

Example: Identifying the OGC Warehouse Management Software ProjectRequirements

Mark, the project manager for OGC’s Warehouse Management Software project, isdefining and documenting the requirements for the project. From the project charterauthorized by Vicky Morris, he lists the high-level project requirements and productdescriptions. He interviews the key stakeholders of the project who provide him withthe detailed project and product requirements. He also analyzes the stakeholder registerto determine the other stakeholders of the project and enhances his list of projectrequirements by conducting a facilitated workshop to determine the remaining needsand expectations of the stakeholders.

Mark gets the project team to develop a prototype for the Warehouse Managementsoftware and distributes it to key stakeholders for their review and obtains their feed-back on the functional requirements of the project.

Using the requirements obtained from the stakeholders, Mark creates the requirementsdocumentation for the project. He also creates the requirements management plan,which includes the requirements traceability matrix that documents how the require-ments will be analyzed, documented, and managed throughout the project life cycle.

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DISCOVERY ACTIVITY 3-2Documenting Stakeholder Requirements

Data Files:

• OGC Project Charter

• WIP OGC Requirements Document

Before You Begin:From the C:\085042Data\Planning Project Work folder, open the OGC Project Charter docu-ment.

Scenario:Vicky Morris, the sponsor, has authorized the project charter and named you as the projectmanager for the OGC PM Training Roll-Out project. As project manager, you are responsiblefor documenting the various needs and expectations of the stakeholders of the project.

Before interviewing and documenting stakeholder requirements, you decide to review yournotes from earlier meetings with key stakeholders:

• The training will include an overview of the management system that has beendeveloped for tracking and reporting on multiple, simultaneous projects. One ofthe organizational goals is to complete this training before the initiation of allother business transformation projects.

• There are high expectations that by initiating this project, the scheduling andtracking capabilities of this software will provide senior management with themost up-to-date information on the status of each individual project and its impacton the business transformation project.

• All managers will be required to use the project management scheduling andtracking software when managing their future projects.

• OGC plans to use a local training center to provide training on the standard soft-ware due to classroom and computer limitations within OGC.

• The training provider must be able to provide the application training at a basic,intermediate, and advanced level.

• The training provider must be able to offer support after training.

• OGC will provide in-house additional training tailored for the business transfor-mation program.

• There are approximately 50 managers who will need to complete the training.

• The supervisors of these managers would like to know their performance in thetraining.

• Development of a pre- and post-assessment is required.

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1. What would you do to identify the internal stakeholders for the OGC PM Training Roll-Out project?

2. Where would you start the process of finding the external stakeholders for the OGC PMTraining Roll-Out project?

3. Which is the method used to identify requirements by studying the individuals in theirwork environment or while using the product?

a) Surveys

b) Facilitated workshops

c) Observations

d) The Delphi technique

4. For the OGC PM Training Roll-Out project, which one or more of these tools and tech-niques could you use initially to identify the requirements of the stakeholders?

a) Interviews

b) Focus groups

c) Facilitated workshops

d) Prototypes

5. In which output document would you store the guidelines on requirementsprioritization along with product related metrics for the OGC PM Training Roll-Outproject?

a) Requirements documentation

b) Requirements traceability matrix

c) Requirements management plan

d) Idea/mind map

6. Which documents can you use as a basis for your requirements documentation?

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7. Open the C:\085042Data\Planning Project Work\WIP OGC Requirements Document docu-ment and based on the scenario, complete the requirements documentation.

8. Compare your WIP OGC Requirements Document with C:\085042Data\Planning ProjectWork\Solutions\Completed OGC Requirements Document.

TOPIC CCreate a Scope StatementYou have the first of many subsidiary plans incorporated into your project management plan.Now you can focus on the define scope process, a critical planning process essential to achiev-ing project success. In this topic, you will create a scope statement.

A clear and concise scope statement will help you define the success that will guide yourproject. Without a strong scope statement, you could end up spending valuable time andresources on work that isn’t even supposed to be part of your project.

The Project Scope StatementDefinition:

A scope statement defines the project and what it does and does not need to accom-plish. A project scope statement is created at an early stage in the project to reflect thestakeholders’ common understanding of major activities to be performed in the project,and to provide a basis for future project decisions about what should and should not beincluded in the project.

Depending upon the size and scope of the project, a project scope statement shouldtypically include:

• Project objectives, deliverables, and requirements.

• Project constraints and assumptions.

• Product acceptance criteria.

It may also include initial project organization, defined risks, schedule milestones, ini-tial work breakdown structure, and approval requirements.

The project management team refines the project scope statement in the define scopeprocess.

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Example: A Project Scope Statement

Figure 3-6: Project scope statement for the OGC PM Training Roll-Out project.

Sample Project Scope StatementTo view a sample project scope statement, open the C:\085042Data\Planning ProjectWork\Solutions\Completed Project Scope Statement document.

Components of the Scope StatementThere are several components of the scope statement.

Component DescriptionProject objectives These are the measurable success criteria for the project. Project objectives

are called critical success factors in some organizations.

Product description The characteristics of the product, service, or result of the project under-taken.

Project requirements The conditions or capabilities the deliverables of the project must meet tosatisfy a standard, contract, specification, or government or industry regu-lation.

Project deliverables Any tangible, measurable result or outcome required to complete a projector portion of a project. The scope statement should include a list of thesummary-level subproducts that, taken together, constitute completion ofthe project.

Project boundaries The parameters of what is and what is not included within a project.

Product acceptance criteria The process and criteria for accepting finished products or services result-ing from a project.

Project constraints Factors that limit the way that the project can be approached. These limita-tions may concern time, cost, scope, quality, resources, and others. Forexample, you may be given a project deadline or overall budget that yourproject must work within.

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Component DescriptionProject assumptions Statements that must be taken to be true in order for the planning to begin.

For example, if your project requires that you incorporate energy costs intoyour budget, you may want to make the assumption that the price of oil onthe project start date will remain the same as it is today in order to createproject cost estimates.

The Define Scope ProcessDuring the define scope process, the project manager defines the scope of the project and final-izes a project scope statement. Scope definitions are shaped by the deliverables, assumptions,and constraints that are documented during project initiation.

Figure 3-7: The define scope process.

Triple ConstraintsTriple constraints are limitations that concern scope, time, and cost. These factors areinterrelated and exist in a state of equilibrium. As the project progresses, if one ofthese factors is altered, the other two factors should be balanced to accommodate thechange without compromising the quality of the product or service.

Define Scope InputsThere are several common inputs for scope definition.

Input DescriptionProject charter The scope statement will be derived from the project charter. There-

fore, if a charter is not used in a performing organization, thencomparable information must be generated.

Requirements documentation Describes how the individual requirements would meet the businessneed for the project.

Organizational process assets Any relevant, existing process assets such as procedures, and tem-plates that are likely to impact the define scope process.

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Define Scope Tools and TechniquesA well-defined scope statement can be created using a variety of tools and techniques.

Tools and Techniques DescriptionExpert judgment Experts in different areas across the project may contribute to the

project scope statement.

Product analysis The process of translating project objectives into tangible deliverablesand requirements. It includes techniques such as product breakdown,system analysis, and value analysis.

Alternatives identification The process of creating different plans to achieve project goals.

Facilitated workshops Help to quickly define the cross-functional project or product require-ments of various stakeholders.

Define Scope OutputsThere are two outputs from the define scope process.

Output DescriptionProject scope statement Details, either directly or by reference, the project deliverables and

the work to be performed to meet the deliverables. It helps theproject team to make detailed plans, guides in project execution, andprovides the baselines with which the change requests can be evalu-ated.A detailed project scope statement includes the project scope descrip-tion, product acceptance criteria, project deliverables, projectexclusions, project constraints, and project assumptions.

Project document updates The scope definition may necessitate changes to the initial projectdocuments that include the stakeholder register, requirements docu-mentation, and the requirements traceability matrix.

Product Analysis TechniquesThere are several product analysis techniques, each of which is an evaluation of the project’send product and what it will take to create this product.

Technique DescriptionFunctional analysis Analyzing all of the things that a product does, including primary

and related functions, to identify unnecessary functions that mightdrive up cost on a product.

Value engineering and valueanalysis

Identifying and developing the cost versus benefits ratio for eachfunction of a product. A method for controlling costs while main-taining performance and quality standards. Very common in militaryand construction contracts.

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Technique DescriptionQuality function deployment Identifying what the customer’s needs are, and translating those

needs into technical requirements. Appropriate for each stage of theproduct development cycle.

Systems engineering Analyzing products holistically, integrating factors such as users,usage environment, and related hardware or software with whichthe product must function.

Techniques for Alternatives IdentificationAlternatives identification techniques are methods for generating as many alternative solutionsand plans as possible during project planning.

Technique DescriptionLateral thinking A creative approach to problem solving in which the team attempts to

think about a problem in new ways and generate a fresh solution.

Brainstorming A general creativity technique for generating possible alternatives. Brain-storming methods can be structured or unstructured in approach. The goalis to generate as many ideas as possible from as many team members aspossible.

Delphi technique A group technique that extracts and summarizes anonymous expert groupinput to choose among various alternatives. Often used to arrive at an esti-mate or forecast.

Project ObjectivesDefinition:

Project objectives are the criteria used to measure whether a project is successful ornot. Objectives must be:

• Specific in terms of scope.

• Quantifiable in terms of time, cost, and quality.

• Realistic and attainable.

• Consistent with organizational plans, policies, and procedures.

• Inclusive of at least one objective.

Projects may have one or several objectives, and subobjectives may be added to theproject in order to further clarify the project goals.

Example: Project Objectives for the Arithmetic on a Stick ProjectThe following objective was developed for a project devoted to the development of aneducational product, “Arithmetic on a Stick.”

“Develop a handheld interactive math game for three- to six-year-olds that includesfour levels of instruction, practice, and remediation in early math skills, based onnational math standards, produced by June 1, 2009, for less than $2.5 million.”

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Note how the objective has the characteristics of a quantifiable objective:

• The objective specifies the scope: handheld interactive math game for three- tosix-year-olds that includes four levels of instruction, practice, and remediation inearly math skills.

• It is quantifiable in terms of time: by June 1, 2009.

• It is quantifiable in terms of cost: less than $2.5 million.

• A quality measurement is specified: based on national math standards.

How to Create a Scope StatementA well-defined scope statement provides a basis for project stakeholders to make future deci-sions about the project’s scope. It also serves as a baseline for monitoring the scope duringexecution.

Guidelines:To create an effective detailed scope statement, follow these guidelines:

• Refine the project objectives, deliverables, and product scope description from therequirements documentation.

• Re-examine the project requirements. Do they need to be re-prioritized withrespect to the results of the stakeholder analysis?

• Review the project boundaries. If the stakeholder analysis revealed expectationsthat are out of alignment with the project objectives, it may be necessary to addthese expectations to the list of excluded items.

• Update the preliminary project constraints, risks, and assumptions. As the projectscope comes more into focus, the constraints, risks, and assumptions will mostlikely need to be reconsidered.

• Create schedule milestones so that the client and project team have dates for set-ting goals and measuring progress.

• Include a revised overall cost estimate and define any cost limitations.

• Identify and document known risks.

• Map out the internal organization with regard to personnel, including manage-ment, project teams, and stakeholders. Be sure to include the managementrequirements, which will define how the project scope and changes therein aremanaged.

• Document project specifications and approval requirements.

• Finalize the procedure for accepting completed products.

Example: Creating a Scope StatementAs project manager for the launching of an educational product, “Arithmetic on aStick,” Hector reviewed the objectives, deliverables, and product scope descriptionfrom the requirements documentation. They had not changed very much.

However, Hector altered the project requirements to include a new, more aggressivedeadline in response to stakeholder needs.

Hector amended the project boundaries to encompass several new parameters, includ-ing that it would not conform to international math standards. Conforming tointernational math standards was a stakeholder expectation that was not feasible andfell outside the project scope.

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Hector reviewed the preliminary constraints, risks, and assumptions and made nochanges. He did modify the schedule to include milestones. Those marked the pro-jected completion dates for major project components. Meanwhile, Hector’s teamprepared a revised cost estimate.

To keep the project focused, Hector put together a list of management requirements.This document defined how the project scope would be managed. Hector also drafted aproject team hierarchy, which defined the roles and stature of project team members.

Finally, Hector worked with the team to review and refine the project specifications,approval requirements, and procedure for accepting the completed product.

Once the scope statement was completed, he distributed it to the project team andstakeholders.

DISCOVERY ACTIVITY 3-3Creating a Scope Statement

Data Files:

• Blank Project Scope Statement

Scenario:It is now time for you to create the detailed scope statement that will be included in the ScopeManagement Plan for the OGC PM Training Roll-Out. Vicky Morris, the PMO director, hasprovided you with the PMO’s scope statement template.

To create the scope statement, you gather the following information:

• All managers will be assessed at 75% or higher in their understanding of OGCproject management methodologies and best practices. All managers will beassessed at 75% or higher in their understanding of the OGC project managementsoftware.

• Development of the OGC Project Management Plan reference manual and devel-opment and implementation of the internal training content and instruction for allproject managers is required. Project management software training is to be com-pleted by all project managers within the organization.

• All training must be completed on or before September 20th. The training pro-vider will provide the pre-and post-assessment for assessing managers at 75% orhigher in their understanding of the project management software. The OGC Inter-nal Training Team will create a pre-and post-assessment for assessing managers at75% or higher in their understanding of OGC project management methodologiesand best practices.

• Development of the OGC Project Management Plan guidelines that will be thefocus of the internal training is required. A project management plan referencedocument will be developed to be used by all project managers during the busi-ness transformation program.

• OGC project management methodologies and best practices must be implementedby all project managers who are involved in the Business Transformation Pro-gram. These methodologies and best practices also help to increase the knowledgeof all project managers in the use of the project management software.

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You are now ready to create the scope statement.

1. Which documents can you use as a basis for your scope statement?

2. From the C:\085042Data\Planning Project Work folder, open the Blank Project ScopeStatement document and based on the scenario, complete the scope statement.

3. Compare your completed document with the C:\085042Data\Planning Project Work\Solutions\Completed Project Scope Statement document.

TOPIC DDevelop a Work Breakdown StructureYou developed a scope statement that clearly states the objectives and lists your project’smajor deliverables. Now you can break down the major deliverables into smaller, more man-ageable pieces. In this topic, you will develop a Work Breakdown Structure (WBS).

It’s always easier to successfully complete a project by breaking it down into smaller, moremanageable chunks. Creating an effective Work Breakdown Structure (WBS) helps improvethe accuracy of your time, cost, and resource estimates by providing a baseline for perfor-mance measurement and project control.

Work Breakdown Structures (WBS)Definition:

A Work Breakdown Structure (WBS) is a logical grouping of project deliverablesarranged in a hierarchical structure. A WBS defines the total scope of work required tocomplete the project. The deliverables and their component sub-deliverables are repre-sented on the WBS in levels of descending order. The smallest, most granulardeliverable that cannot be further subdivided is called a work package. A work pack-age must describe a deliverable that can be adequately scheduled, budgeted, andassigned to an individual person or group.

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Figure 3-8: A work breakdown structure.

Thorough work breakdown structures feature several input elements, such as organiza-tional process elements, the project scope statement, the project scope managementplan, and approved change requests.

Deliverables listed at each level on the WBS equal the sum of all of the items on the level directlybeneath them.

Example: Work Breakdown Structure in Movie MakingMovie making is a great example of a process that commonly employs work break-down structures. A film director is responsible for the coordination of several differentdepartments, such as the set designers, photographers, and editors.

Creating a robust WBS allows the director to more easily manage the numerous crewsworking on the film. It will organize every component of the film into separate workpackages, each with its own deliverables, deadlines, and budget.

Organization of Work in a WBSIn a WBS, major components of work can be grouped by:

• Major project deliverables.

• Life cycle phases.

• Organizational or functional responsibility.

• Geographical location.

The Create WBS ProcessThe create WBS process is the method of dividing the project deliverables into smaller, moremanageable components. This helps create a deliverable-oriented hierarchical decomposition ofwork to be executed by the project team.

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Figure 3-9: The create WBS process.

For more information on WBS, refer to Project Management Institute, 2008, “Practice Standard for Work Break-down Structures – Second Edition,” —Newton Square, PA: PMI.

Create WBS InputsThere are several common inputs for creating a WBS.

Input DescriptionProject scope statement The deliverables listed in the WBS will all be drawn from the project

scope statement.

Requirements documentation Describes how the individual requirements would meet the businessneed for the project.

Organizational process assets Existing process assets are likely to impact project WBS creation.These include policies, procedures, and templates for the WBS, projectfiles, and lessons learned from previous projects.

Create WBS Tools and TechniquesThere is only one tool and technique for creating a WBS.

Tools and Techniques DescriptionDecomposition The subdivision of the project work, separating deliverables and their

required work into manageable, measurable, assignable, and more spe-cific work packages.Decomposition of the project work involves activities such as:

• Identification and analysis of deliverables and related work.

• Structuring and organization of the WBS.

• Breaking down the upper WBS levels into lower level detailed com-ponents.

• Development and assignment of identification codes for the WBScomponents.

• Verification of the decomposed work.

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Create WBS OutputsA well-executed WBS yields several outputs.

Output DescriptionWBS The primary result of the create WBS process that will organize deliverables

and work packages into a manageable hierarchy.

WBS dictionary An auxiliary document containing details about each element in the WBS;may contain information such as description of work, code of accounts identi-fication, milestones, contract information, cost, quality requirements, resourcerequirements, time estimates, or resource information for measuring perfor-mance and completeness.

Scope baseline Includes the detailed project scope statement, the WBS, and the WBS dictio-nary.

Project documentupdates

Project documents such as requirements documentation should be updated toinclude any approved changes introduced when creating the WBS.

Code of AccountsDefinition:

A code of accounts is any system for numbering the elements in a WBS. A code ofaccounts system allows project managers to more easily track individual WBS compo-nents, which is especially helpful in the areas of performance, reporting, and cost.

Example: Code of Accounts Specified by a School DistrictA school district requires its schools to comply with a uniform code of accounts sothat it can easily record, track, and document specific types of revenues and expendi-tures in every school. The code of accounts could be shown as Function/Category/Program. If functions include administrative salaries (30), teacher salaries (31), andconsultants’ fees (32); categories include para-professional expenditures (100) and pro-fessional expenditures (101); programs include regular instructional (411), specialeducation (417), and languages (419), then the fee paid to a consultant leading ateacher training workshop in special education services would be coded 32/101/417.

How to Develop a Work Breakdown StructureProcedure Reference: Develop a Work Breakdown Structure (WBS)

To develop a WBS:

1. Gather the reference materials and other inputs you will need. Some of the mate-rials needed include:

• The scope statement.

• The requirements documentation.

• A WBS template, if available.

• Constraints and assumptions.

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• Relevant historical information.

• Other planning inputs that may impact scope definition.

2. Determine how you are going to organize the work of your project. Regardless ofthe organization, these elements represent the level directly below the projectname on your WBS. The WBS can be created using various methods.

• Subdividing the project into phases as the first level of decomposition andthen subdividing the phases into product and project deliverables as the sec-ond level of decomposition.

• The project can be subdivided into major deliverables, which can be the firstlevel of decomposition.

• Making the subprojects conducted outside the organization the first level ofdecomposition and the supporting contract work the second level of decom-position.

3. Identify the major deliverables, or subprojects, for the project. The majordeliverables should be listed in the scope statement or contract, but your teammay think of more deliverables that are necessary to achieve the project’s objec-tives.

If you are organizing your project work by major deliverables, this step will rep-resent the level directly below the project name. If you are organizing your workby some other method, the major deliverables will probably be two levels belowthe project name.

The PMI recommends that you include project management as a major deliverable on the WBS.

4. Analyze each element to determine whether it is sufficiently decomposed. Caneach deliverable be adequately scheduled, budgeted, and assigned to an individualperson or group? If yes, you’ve reached the work package level; decompositionfor this element is complete. Skip the next step and go to Step 6. If no, furtherdecomposition is required for this element. Move on to Step 5.

5. Break down each WBS element into subdeliverables until you reach the workpackage level. For each element, ask yourself, “In order to create this deliverable,what subdeliverables will we have to produce?” Repeat Step 4.

6. Validate your WBS using a bottom-up approach. Starting at the work packagelevel, ensure that:

• The lower-level components are necessary and sufficient for the completionof each decomposed item.

• Each element is described as a deliverable (preferably as a noun), and is dis-tinguishable from all other deliverables.

• Each element can be adequately budgeted, scheduled, and assigned to anindividual person or group.

Remember that, although it is not necessary to have the same number of lev-els for each deliverable, a disproportionate number of levels may indicatethat the deliverable is inappropriately decomposed. Analyze the element todetermine whether one of the higher-level components should be broken intotwo subdeliverables or whether two or more subdeliverables should be com-bined.

Make any necessary modifications before moving on to Step 7.

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7. Using your organization’s or project’s code of accounts, assign a unique numericcost code for each element, indicating its branch and level on the WBS for costperformance tracking and reporting.

DISCOVERY ACTIVITY 3-4Developing a Work Breakdown Structure

Data Files:

• OGC WBS

Before You Begin:From the C:\085042Data\Planning Project Work folder, open the OGC WBS document.

Scenario:You have been asked to create a high-level Work Breakdown Structure for the PM TrainingRoll-Out. It has been decided that all WBS codes for the business transformation projects willstart with a 3-character prefix. The prefix is being used to track deliverables across all businesstransformation subprojects. The 3-character prefix for the PM Training Roll-Out is TRN. Basedon this project’s SOW, you have listed the following deliverables.

• Assemble Internal Training Team

— Identify Resources

• Needs Assessment

• Determine External Training Provider

— Create SOW

• Content and Training Delivery Planning

• Training Development

• Develop Training Delivery

Review the deliverables in the OGC WBS document and answer the questions in this activity.

1. When creating the WBS for the OGC Training Roll-Out, what types of reference materi-als and other inputs could you use?

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2. Based on the scenario, which work breakdown structure in Group 1 of the OGC WorkBreakdown document follows PMI recommendations for the OGC Training Roll-Outproject?

a) WBS A

b) WBS B

c) WBS C

d) WBS D

3. As the project manager, you are asked to decompose the WBS deliverables. Whichactivity would you perform during decomposition?

a) Assign unique ID numbers to each deliverable.

b) Break the deliverables down into smaller components.

c) Arrange the deliverables into categories, based on risk.

d) Organize the deliverables, based on which project team is responsible for theircompletion.

4. The scenario shows two deliverables that have been partially decomposed during arecent meeting. Which of these activities are decomposed? Choose all that apply.

a) Assemble Internal Training

b) Identify Resources

c) Needs Assessment

d) Determine External Training Provider

5. In Group 2, which WBS would most resemble the inclusion of the decomposeddeliverables?

a) WBS A

b) WBS B

c) WBS C

d) WBS D

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OPTIONAL DISCOVERY ACTIVITY 3-5Creating a WBS

Scenario:You are a project manager in the IT department of OGC. You are currently assigned to aproject that involves creating a new Warehouse Management System for the production team.The project has been officially kicked-off and the project charter and the scope statement havebeen released. You are now creating a work breakdown structure for the new project. Youknow that the major breakup of the Warehouse Management System project work wouldinclude, managing the project, software design and development, system test, software installa-tion, and providing support services.

Before creating the WBS, review the following points you recorded from the kick-off meetingconducted last week and subsequent discussions with the stakeholders of this project.

• The Project Management work component will involve planning project activities,managing project schedule, cost, scope, project tasks, project communications,human resources, space and facilities, risks, procurements, and quality.

• The Software Design and Development work component will involve the softwaredesign, software build, and the unit test sub components.

— The Software Design subcomponent will involve specifying software require-ments, defining the software work package, software prototyping, anddetailed designing of the software unit.

— The Software Build subcomponent will involve software unit coding anddebugging.

— The Unit Test subcomponent will involve planning for unit test, preparing theunit test case, conducting the unit test, and maintaining the unit test records.

• The System Test work component will involve testing the module and subsystem,testing system integration, acceptance testing, and classifying the identifieddefects, tracking defect resolution, and verifying with the metrics.

• The Support Services work component will involve configuration management,quality assurance, development tools and utilities, development environmentupkeep, internal product liaison, and providing technical training to the team.

• The Installation work component will involve planning for software installation,user support documentation, enabling user communications and providing training,installation management and coordination, testing and verifying the installation,and monitoring the installation performance.

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1. Based on the scenario, develop the second-level work components for the WBS.

2. Based on the points you recorded from the kick-off meeting and discussions with thestakeholders, what work packages would you include in the Project Management workcomponent?

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3. To the WBS you have created, add the subcomponents for the Software Design andDevelopment work component and their corresponding work packages.

4. Complete the remainder of the Warehouse Management System project WBS.

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Lesson 3 Follow-upIn this lesson, you learned that an effective project management plan will ultimately define theexecution, monitoring, controlling, and closing of your project. You examined the various com-ponents of a successful management plan, including the finalized scope statement. You alsocreated the requirements document, which records your stakeholder requirements. Using thesecomponents, you developed a work breakdown structure and organized your project manage-ment plan accordingly. With this knowledge and these skills, you are better prepared to notonly create a strong project plan, but also to manage it successfully.

1. What factors of the define scope process are the most important to your organization?

2. In your experience, what are the most critical inputs to developing a WBS?

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Copyright © Element K CorporationProject Management Professional (PMP)® Certification - Fourth Edition104

NOTES


Developing ProjectSchedules

In this lesson, you will develop project schedules.

You will:

• Define activities.

• Create a project schedule network diagram.

• Estimate activity resources.

• Estimate activity durations.

• Develop a project schedule.

• Identify the critical path.

• Optimize the project schedule.

• Establish a schedule baseline.


LESSON 4

Lesson 4: Developing Project Schedules 105


IntroductionNow that you have planned your project work, you are poised to begin implementation bydeveloping project schedules, which will drive and guide all the work in your projects. In thislesson, you will advance your skills by creating the organizational tools you will use in sched-ule development: a comprehensive project activity list, a robust project network schedulediagram, and estimations of activity duration. You will also utilize techniques for adjustingflexibility within schedules.

The project schedule is the guiding light of every project, and as such is an essential compo-nent of any project management effort. As you strive to achieve PMP® certification and toadvance your skills as a professional project manager, you need to maintain a powerful com-mand of all of its related elements. Developing effective project schedules, as well asdeveloping the skills to manage schedules in response to organizational constraints on time andresources, will help you bring your projects in on time and on budget.

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TOPIC ACreate an Activity ListThe first step in developing a project schedule is to accurately define project activities, so thatyou can be sure the activities are tied to the project scope and you can mitigate scope creep. Inthis topic, you’ll gather your WBS and other relevant information to create an activity list.

The activity list is a fundamental building block for an effective project schedule and budget.Defining the activities helps ensure all project activities remain within the project scope so youcan avoid missing critical activities. If you define exactly what needs to be done, you canavoid performing unnecessary work.

ActivitiesDefinition:

An activity is an element of project work that requires action to produce a deliverable.Activities lay the foundation for estimating, scheduling, executing, and monitoring andcontrolling the project work. The characteristics of an activity are:

• It has an expected duration.

• It consumes budget and/or human resources.

• It is named in verb-noun format.

Example: Activity ExamplesSome examples of activities are:

• Revising a user manual.

• Making a sales presentation.

• Reserving a conference room.

Each of these items requires action to produce a deliverable. Each has an expectedduration and will consume budget and human resources. Finally, they are all named inverb-noun format.

Activity ComponentsActivities can be broken down into smaller components. For example, the activity“reserve conference room,” could be broken down in the following way:

• Determine budget.

• Determine size requirement.

• Determine date needed.

• Identify possible room alternatives.

• Select room.

• Call to reserve room.

• File confirmation when received.

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Activity vs. TaskAlthough the words “activity” and “task” may be interchangeable in common usageand in many organizations, they are not considered synonyms in the PMBOK® Guide.One of your goals as a professional project manager seeking certification should be toalign your language with the language used in the PMBOK® Guide whenever possible.Use the word “activity” to refer to the components of work performed during thecourse of a project. Use the word “task” sparingly, typically only in reference tobrands of project-management software.

Work PackageDefinition:

Work package refers to the planned work or the deliverables that are contained in thelowest-level component of the work breakdown structure. The work package can bedescribed as a manageable work effort, or a level at which the cost and schedule forthe work can be easily estimated. Work packages can be broken down or subdividedinto smaller, even more manageable and executable components, called activities.

Because activity definition is the first step in the schedule development process, activities are alsoreferred to as schedule activities.

Note that every single component of work is not typically tracked on the masterproject schedule. However, work package owners—those responsible for the comple-tion of the work packages—may develop a schedule containing the itemizedcomponents of work necessary to complete the activities in the work package.

Example: Sample Work Packages

Figure 4-2: A work breakdown structure showing the work packages.

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The 8/80 RuleThe 8/80 rule refers to a general guideline regarding work packages: they require more than 8,but fewer than 80, hours of effort to complete. The 8/80 rule helps project managers create thework package list by identifying which work components should be considered work packages.Any work component that can be completed in fewer than 8 hours does not rise to the level ofa work package. Any work component requiring more than 80 hours of work is too monumen-tal to be categorized that way.

Large ProjectsWhile the 8/80 rule may be a useful guideline on small projects, it would be impracti-cal to apply it to large projects, which would necessitate tracking millions of workpackages.

The Define Activities ProcessThe define activities process is the identification and documentation of the specific activitiesthat must be performed to produce the project’s deliverables. Activities are usually defined bydecomposing the work packages. Defining specific activities at this level gives the project teama tool with which to effectively estimate, schedule, and monitor the progress, cost, and execu-tion of project work. Defining activities is achieved through a variety of different methods,such as the reuse of existing project templates.

Figure 4-3: The define activities process.

Example: Defining Activities During Movie ProductionFilm studios routinely use work breakdown systems and activities definition during theproduction of their movies. In fact, movies are essentially just large projects. The origi-nal film treatment is like a project charter and the screenplay is really just a set ofdeliverables.

Before a scene can be shot, for instance, the filmmakers must engage in detailed activ-ity definition. The location must be scouted, the set must be prepared, and the crewmust be assembled. As a result, each activity can be effectively managed, ensuring thework package is successfully completed.

Define Activities InputsSeveral inputs are commonly used to define activities.

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Input DescriptionScope baseline A component of the project management plan. It includes the detailed

project scope statement, the WBS, and the WBS dictionary that provideinformation on the project scope, deliverables, constraints, and assump-tions.


Include external variables such as availability of software or ProjectManagement Information Systems (PMIS).

Organizational process assets Include existing policies or rules for defining activities and the lessons-learned document that provides historical information regarding similaractivities in previous projects.

Define Activities Tools and TechniquesSeveral tools and techniques are used to define activities.

Tools and Techniques DescriptionDecomposition Breaking down WBS work packages into separate activities. The WBS

and the WBS dictionary serve as a base to create the activities.

Rolling wave planning Method in which short-term planning is in-depth (for example, detailedWBS work packages) and long-term plans are less defined.

Templates Activity lists from previous projects can be used as a model for newprojects. Templates may also contain related activity attributes informa-tion such as resource skills, and the hours of effort required.

Expert judgment Information sourced from subject matter experts or team members withrelevant experience in developing the project scope statements, WBS,and project schedules can be used to define activities.

Define Activities OutputsThorough definition of activities will result in several outputs.

Output DescriptionActivity list A definitive list of activities that must be completed to produce deliverables.

Activity attributes Information describing the activities by listing the different components associ-ated with the activities, which include responsible team members andmanpower required. Activity attributes are used to develop project schedules,and to select, order, and sort planned activities.

Milestone list Helps identify and prioritize activities during scheduling by indicating if themilestones are mandatory or are optional.

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How to Define ActivitiesAccurately defining project activities ensures that all project activities are tied to the projectscope, which will mitigate the potentially damaging effects of scope creep.

Guidelines:To define activities and create an activity list, follow these guidelines:

• First, gather the inputs and resource materials you will need. These may include:

— The WBS.

— An activity list template.

— The scope statement.

— Relevant historical information.

— Constraints and assumptions.

• Analyze and decompose each work package of the WBS into activities that willbe required to produce the deliverable.

— Conduct brainstorming sessions with the project team to ensure that norequired activities are overlooked.

— Consult the scope statement to ensure that activities will enable you to meetthe project objectives.

• Consult records of similar projects to identify possible activities.

• Consult subject matter experts about unfamiliar material.

• Evaluate all constraints and assumptions for their possible impact on activity defi-nition.

• Once you have decomposed each work package into activities, evaluate youractivity list:

— Ensure that the descriptions accurately reflect the actions to be performed.

— Verify that the activity descriptions are as specific as possible. For example,if the desired outcome is a revised user manual, describe the activity as“revise user manual,” rather than “produce new user manual.”

— Confirm that the activities listed for each work package are necessary andsufficient for satisfactory completion of the deliverable.

— Verify that the list is organized as an extension of the WBS.

Example: Creating an Activity List for a Web Design ProjectA project team for a web design company used their WBS and an activity list from aprevious, similar project to create an activity list for their initial design work package.The team used historical records of that project to help identify the activities thatmight be required to complete the deliverable. Depending on which they select, thelength of time may be lengthened or shortened.

Additionally, an outside multimedia expert was consulted about activity identification.Finally, to make sure the activities supported the project objectives, the team reviewedthe scope statement. The project team gathered inputs and resource materials to createthis activity list for the work package.

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DISCOVERY ACTIVITY 4-1Creating an Activity List

Scenario:You are now ready to create the activity list for the Assessing Needs WBS. You are reviewingyour notes from a recent brainstorming meeting with your team where you documented thefollowing:

• All WBS codes for this project start with the prefix TRN0002.

• Training Needs Review with Key Resources: Business Transformation StrategicPlanning group and the PMO Steering Committee.

• From the Strategic Planning group, gather high-level business transformationproject management needs that the content should address.

• From the PMO Steering Committee, identify new project management processesthat should be included in the content.

• Review the training content based on the information gathered for deficiencies andget feedback from both the Strategic Planning group and the PMO Steering Com-mittee.

• Review existing documentation for OGC project management methods.

• Document all findings to complete the training material review.

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1. The first step in creating an activity list is to gather your resource materials. Whichitems below will be helpful in creating your list?

a) Cost-benefit analysis

b) The WBS

c) The scope statement

d) Activity lists from similar projects

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2. In the provided table, list the activities and the appropriate WBS codes that are neces-sary and sufficient for the successful completion of the Assessing Needs work package.

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TOPIC BCreate a Project Schedule NetworkDiagramYou created an activity list for your project. Now you can sequence the project activities andestablish the relationship between them. In this topic, you will delve into the sequence activi-ties process and create a project schedule network diagram. You will also examine thesequencing process and helpful scheduling tools.

You are the project manager for the launching of a new product line. If you do not understandthe sequence in which the project work must occur, you cannot develop an effective schedule.You will end up with rework and additional costs. Creating a project schedule network dia-gram for your project will help you uncover the true nature of the relationship between tasks,avoiding unnecessary work and expense.

The Sequence Activities ProcessThe sequence activities process is a planning process that involves identifying and document-ing interactivity dependencies among project activities for the purpose of creating the projectschedule. All activities, except the first and the last, have at least one predecessor and succes-sor. Activities may be sequenced manually, or automatically using project managementsoftware or other automated techniques.

Figure 4-4: The sequence activities process.

Example: Sequencing Activities Using Flow ChartA basic example of activity sequencing is the common flow chart: a simple list ofactivities that must occur in a specific order for the desired outcome to occur. Projectactivity sequencing is really a matter of determining the optimum order to begin workon each activity.

Sequence Activities InputsThere are several inputs for sequencing activities.

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Input DescriptionActivity list Includes all activities that must be sequenced to create a project

schedule.

Activity attributes Describe the sequence of events or their defined predecessor andsuccessor relationships.

Milestone list Serves as a logical starting point for sequencing of activities. Itmay also list the scheduled dates for some milestones.

Project scope statement Contains the product description, which could affect sequencing. Itis therefore recommended that the product scope be reviewed foraccuracy during activity sequencing.

Organizational process assets Inputs that can influence the sequence activities process. Forexample, files from a corporate knowledge base can be used forscheduling methodology.

Sequence Activities Tools and TechniquesThere are several tools and techniques for sequencing activities.

Tools and Techniques DescriptionPrecedence Diagramming Method(PDM)

Creates a project schedule network diagram with boxes, ornodes, representing activities, and arrows representing dependen-cies.

Dependency determination Establishes dependencies among the activities, creating logicalsequences.

Applying leads and lags Allows for the acceleration or delay of successor activities toaccurately define the logical relationship affecting the overallproject schedule.

Schedule network templates Existing models can speed the preparation of the project activi-ties.

Sequence Activities OutputsThere are two common outputs of activity sequencing.

Output DescriptionProject schedule network dia-grams

Show the sequence of all project activities and the logical relation-ship that exists between them.

Project document updates Documents that need to be updated after activity sequencinginclude activity lists, activity attributes, and the risk register.

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Activity DependenciesDefinition:

An activity dependency is a logical relationship that exists between two project activi-ties. The relationship indicates whether the start of an activity is contingent upon anevent or input from outside the activity. Activity dependencies shape the sequenceamong project activities.

Example: Activity Dependencies for Designing Room LayoutsAn architect has designed a residence and has a vision for the room layouts. However,he will not be able to assess the functionality of the design until the builders haveframed in the structure with walls, windows, and a roof. Once the structure is in place,he will be able to reassess the plans to determine if modifications are necessary.

Types of Activity DependenciesThere are three common types of activity dependencies.

Dependency DescriptionMandatory A mandatory dependency is inherent to the work itself. They are usually

affected by physical constraints. Activities must be done in a specificsequence for the work to be successful. Also known as “hard logic.”Example: Books can’t be bound before they’re printed.

Discretionary A discretionary dependency is defined by the project and project manage-ment team at their discretion. It is defined based on the best practicesfollowed in a specific application area or on specific requirements. If thereis no mandatory or external dependency between two activities, the teamhas some flexibility in activity sequencing. Also known as “soft logic,”“preferential logic,” and “preferred logic.”Example: The sponsor would like to see the book’s cover design as soonas possible, so the team may decide to have the cover artwork done beforethe inside illustrations.

External An external dependency is contingent on inputs from outside the projectactivities.Example: The books can’t be printed until the shipment of paper arrives.

Precedence RelationshipsDefinition:

A precedence relationship is the logical relationship between two activities thatdescribes the sequence in which the activities should be carried out. Each activity hastwo open points: Start and Finish points. Precedence relationship considers appropriatelogic while connecting these points. Precedence indicates which of two activitiesshould come first (the predecessor activity) and which should come later (the successoractivity). Precedence relationships are always assigned to activities based on the depen-dencies of each activity.

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Example: Precedence Relationship Between Two ActivitiesAn example of the precedence relationship can be: Drywall installation must finishbefore painting can begin.

Precedence Relationship TypesPrecedence relationships may vary in the way they start and finish.

Precedence Relationship Type Description and ExampleFinish-to-Start (FS) The precedence relationship between two activities where the

predecessor activity must finish before the successor activitycan start. Can be expressed as, “Activity A must finish beforeActivity B can begin.”Example: The foundation for the house must be finished(Activity A) before the framing can start (Activity B). Thetotal time for these two activities is the sum of A + B.

Finish-to-Finish (FF) The precedence relationship between two activities where thepredecessor activity must finish before the successor activitycan finish. Can be expressed as, “Activity A must finish beforeActivity B can finish.”Example: Construction must be finished (Activity A) beforethe building inspection can be finished (Activity B). The totaltime to complete both activities is based on when B begins.

Start-to-Start (SS) The precedence relationship between two activities where thepredecessor activity must start before the successor activitycan start. Can be expressed as, “Activity A must start beforeActivity B can start.”Example: The building design must start (Activity A) beforethe electrical layout design can start (Activity B). As with theFF example, the total time for activities A and B will vary,depending on when Activity B starts. But in SS, there is alonger window of time during which Activity B can begin.

Start-to-Finish (SF) The precedence relationship between two activities where thepredecessor activity must start before the successor activitycan finish. Can be expressed as, “Activity A must start beforeActivity B can finish.”Example: The electrical inspections must start (Activity A)before you can finish the drywalling (Activity B). The totaltime for Activities A and B can vary widely, depending on therelative duration of each activity. This type is rarely used.

LagDefinition:

A lag is a delay in the start of a successor activity. Some relationships require a lagbefore a subsequent activity can begin. Lags are determined by an external or manda-tory dependency and may affect activities with any of the four precedencerelationships.

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Example: Effects of Lag in FS RelationshipWhen lag is introduced into a finish-to-start (FS) relationship, the overall elapsed timerequired for the chain of activities increases. The start and finish dates of the successoractivity are delayed when there is a lag.

Figure 4-5: FS relationship with lag.

Possible LagsThere are several reasons why lags occur. Examples of two possible lags are:

• The permit application takes six weeks to process.

• The adhesive must dry until tacky before the laminate can be installed.

In the first example, the activity that follows the submission of the permit applicationis delayed by six weeks due to an external dependency of the application processingtime. In the second example, the installation of the laminate activity is delayed by theamount of time the adhesive takes to dry. This is a lag due to a mandatory depen-dency, because the delay is inherent to the work itself.

LeadDefinition:

A lead is a change in a logical relationship that allows the successor activity to startbefore the predecessor activity ends in an FS relationship. A lead is implemented whenyou need to accelerate a successor activity in order to shorten the overall projectschedule.

Leads will vary in length, depending on the acceleration required by the amendedschedule. Sometimes, a lead introduces a risk of rework as the successor activity startsbefore the completion of the predecessor activity, and the complete, comprehensiveinputs may not be available.

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Example: Effects of Lead in FS Relationship

Figure 4-6: FS relationship with lead.

Possible LeadThe programmer for a website may decide to start programming the home page fourdays before the interface design is approved. Starting the programming may shortenthe overall project schedule by four days. However, if the design is not approved, theremay be significant rework for the programmer, resulting in the loss of some or all ofthe four day gain.

Project Schedule Network DiagramsDefinition:

A project schedule network diagram is a graphical representation of the sequence ofproject activities and the dependencies among them. Project schedule network dia-grams read from left to right or top to bottom and are typically accompanied bysummary information. The diagram can either include the entire project or just specificparts of it. Parts of a schedule network diagram may be referred to as a subnetwork ora fragmented network.

The summary information describes the basic approach used to sequence project activities.

Project schedule network diagrams may differ in that they may be:

• Very detailed or more high level.

• Generated manually or with software.

• Constructed using a variety of methods.

• Of several types, including the precedence diagramming method.

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Example: A Project Schedule Network Diagram

Figure 4-7: A project schedule network diagram representing the projectactivities.

The Precedence Diagramming Method (PDM)Definition:

The Precedence Diagramming Method (PDM) produces a project schedule networkdiagram that uses rectangular boxes, or nodes, to represent activities and arrows to rep-resent precedence relationships between activities. This type of diagram:

• Always reads from left to right.

• Shows duration only in the nodes.

• May be created manually or with software.

• May report a group of related activities as an aggregate activity.

• May use all precedence relationship types.

Example: A Project Schedule Network Diagram Using PDMA project has ten activities, which are represented by the letters A through J, and theproject team has determined the precedence relationships for each activity. The follow-ing table shows the precedence relationships.

This figure shows the project schedule network diagram that was constructed using theprecedence diagramming method.

Figure 4-8: A project schedule network diagram using the precedence dia-gramming method.

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Summary ActivitiesDefinition:

A summary activity is a group of related activities that, for reporting purposes, isshown as a single aggregate activity in a bar chart or graph. It may also be called a“hammock activity.” Some summary activities have their own internal sequence ofactivities, but others include separate activities. A summary normally spans severalactivities and encompasses fixed resources or costs associated with one type of activity.

Example: A Summary Activity

Figure 4-9: A summary or hammock activity.

Conditional Diagramming MethodsDefinition:

Activity sequences that must be revisited or repeated are called loops, while activitiesthat will be implemented only under specific conditions are called conditionalbranches. A conditional diagramming method is any network diagramming method thatallows for nonsequential activities such as loops or conditional branches. Typically,activities in these types of diagrams are represented by rectangles, decision points arerepresented by diamonds, and directional flow is indicated by arrows.

Conditional diagramming methods will vary based on which method is used. The mostcommon conditional diagramming methods are the Graphical Evaluation Review Tech-nique (GERT) and system dynamic models.

When creating a network diagram, you may want to create a “Start” node that connects by arrows toall of the nodes for activities with no dependencies.

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Example: GERT Network Diagrams

Figure 4-10: A GERT network diagram with loop.The graphic below illustrates a GERT network diagram with conditional branch.

Figure 4-11: A GERT network diagram with conditional branch.

PMI® has discarded the usage of GERT in all the editions of the PMBOK® Guide. However, it is betterto be aware of this technique as well.

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How to Create a Project Schedule NetworkDiagramProcedure Reference: Create a Project Schedule Network Diagram

To create a project schedule network diagram using PDM, one of the most commonlyused types, with all the activities having the most common precedence relationship,Finish-to-Start (FS):

1. Determine the dependencies among project activities using your activity list andproduct descriptions.

2. Identify predecessor and successor activities.

a. Create a table with two columns.

b. In the first column, list each activity to be sequenced. Identify each with aletter.

c. In the second column, write the letter of the predecessor activities for eachactivity.

3. Create nodes for all activities with no predecessor activities or dependencies.

4. Create nodes for all activities that are successor activities to the nodes alreadycreated.

5. Draw arrows from the predecessor activities to the successor activities.

6. Continue drawing the network diagram, working from left to right until all activi-ties are included on the diagram and their precedence relationships are indicatedby arrows. Include any known lags or leads.

7. Verify the accuracy of your diagram. Check to ensure that:

a. All activities on the activity list are included in the diagram.

b. All precedence relationships are correctly indicated by arrows going from thepredecessor activities to the successor activities.

c. Any known lags or leads are indicated on the diagram.

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DISCOVERY ACTIVITY 4-2Creating a Project Schedule Network Diagram

Data Files:

• OGC Activity List

Before You Begin:From the C:\085042Data\Developing Project Schedules folder, open the OGC Activity Listdocument.

Scenario:Your activity list for Assembling Internal Training Team (WBS TRN0001) and AssessingNeeds (WBS TRN0002) is complete. You have evaluated the discretionary, mandatory, andexternal dependencies and have entered the precedence relationships into a table in the OGCActivity List document.

You have scheduled a meeting with your team to discuss the project activities. To prepare forthe meeting, you will use the OGC Activity List document to create a network diagram for theactivities starting with WBS TRN0001, Assembling Internal Training Team.

1. During a recent meeting with your team, a decision was made to add five daysbetween identifying resources and defining roles and responsibilities due to othercommitments that some members of the team need to address in other projects. Willthis be a lag or lead relationship that you should account for? Please explain.

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2. Referring to the OGC Activity List document, for the Assessing Needs activity, which ofthe following activities are summary activities? Choose all that apply.

a) Training Needs Review with Key Resources

b) Identify High-Level BT PM Needs

c) Training Needs Review with PMO Steering Committee

d) Review Current Documentation for Deficiencies

3. Referring to the OGC Activity List document, draw your network diagram for WBSTRN0001, Assembling Internal Training Team. Make sure that all the required activitiesare included in your network diagram. Make sure your diagram shows the sequenceconstraints from left to right. Check to make sure the activities that are connected byarrows correctly indicate their precedence relationship. Include inside each node theWBS Code, duration, and lag or lead time.

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TOPIC CEstimate Activity ResourcesYou identified the logical dependencies and precedence relationships between the projectactivities and created a project schedule network diagram for your project. Now you can deter-mine the types and quantities of resources needed to accomplish project work. In this topic,you will estimate activity resources.

If your project team lacks the required skills or materials to perform an activity, your projectmay fail to meet milestones along the way. If the missed milestones are for activities on yourproject’s critical path, your entire project is in serious jeopardy of being late. Costs may sky-rocket. Your reputation as a project manager who can meet deadlines to which you havecommitted could be damaged. On the other hand, effective activity resource estimating willhelp ensure that you have all the resources you need to meet your designated milestones andensure project success and stakeholder satisfaction.

Project ResourcesDefinition:

Project resources refer to any useful material object or any person needed for theproject work to be completed.

Project resources will vary greatly in size, cost, and function. They typically fall intoone of the following categories: labor, materials, facilities, equipment, consultants, ser-vices, supplies, or utilities. Project resources are almost always limited in quantity, andtherefore require thoughtful allocation.

Example: Resources Required to Organize a SeminarA project for a Human Resources team could be to present an annual employee healthand wellness seminar. Resources would include the conference room, which would beused for the seminar; the tangible information materials, such as brochures and pam-phlets that would be given to employees; the visiting consultants, who would be hiredto make presentations and answer employees’ questions; and the vendors, who wouldparticipate in the seminar and offer their services.

The Estimate Activity Resources ProcessThe estimate activity resources process involves determining specific resources necessary forcompleting project activities. Such estimates should also include the quantities and availabilityof each resource. Numerous factors can affect which resources are available and whichresources you need to complete your project.

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Figure 4-12: The estimate activity resources process.

Example: Activity Resource Estimation for Hosting a Training SessionEvery project requires activity resource estimating. Before you can host a training ses-sion, you need to identify the supplies and materials that will be necessary, how manypeople will be attending, and what ancillary materials are necessary to complete thetask. Will you need to prepare handouts? Are there other supplementary materials youwant to make available? Have you reserved a room large enough to accommodate allthe participants?

Estimate Activity Resources InputsThere are several common inputs for estimating activity resources.

Input DescriptionActivity list Lists the activities that are in need of resources to complete a

project successfully.

Activity attributes Contain the fundamental information about all the activityresources in the activity list.

Resource calendars List availability of resources for each activity. Composite calendarswill list additional information such as the available list ofresources and the skills and capabilities of human resources.Resource calendars are used to estimate resource utilization.

Enterprise environmental factors Include factors that can influence the estimate activity resourcesprocess such as resource availability and skillsets.

Organizational process assets Include organization’s policies, procedures, and guidelines abouthiring procedures and resource acquisitions. It also includes histori-cal information about resources used in previous projects.

Estimate Activity Resources Tools and TechniquesThere are several tools and techniques for estimating activity resources.

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Tools and Techniques DescriptionExpert judgment May be necessary to consult outside experts if resource inputs are out-

side the project team’s knowledge sphere.

Alternatives analysis Identifies different ways of accomplishing activities and the differentresources required by each method.

Published estimating data Studies and commercial publications about production rates, resourcecost, and labor requirements, for different countries and regions.

Bottom-up estimating Decomposes work in an activity to the last executable level and gener-ates activity resource estimates by adding the resources required byeach activity. This technique is used when a detailed understanding ofthe project or part of the project is available to decompose the activi-ties into more depth. The accuracy of the estimates received using thistechnique is generally very high.

Project management software Can generate and organize resource information, such as cost esti-mates and breakdown structures, which helps optimize resourceutilizations.

Estimate Activity Resources OutputsThere are several possible outputs for the estimate activity resources process.

Output DescriptionActivity resource requirements Description of identified resources (and quantities) necessary

to complete project activities.

Resource breakdown structure Hierarchy of identified resources, organized by category andtype. Category includes labor and equipment and type includesresource skills and grade levels. The resource breakdownstructure helps organize and report the project schedule infor-mation along with the resource utilization data.

Project document updates Documents that are updated when estimating activityresources. Updated documents include activity lists, activityattributes, and resource calendars.

Schedule Management PlansDefinition:

A schedule management plan, one of the subsidiary plans in the overall project plan, isan approach to developing, maintaining, and managing the project schedule.

A typical schedule management plan describes:

• The purpose of the plan.

• Approved schedule development tools and techniques, such as a particular projectmanagement software.

• The number, types, and purposes of the project schedules to be developed andmaintained.

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• How changes to the schedule baseline will be managed.

• Who is responsible for developing and maintaining the project schedules.

• How and when schedule performance will be reported.

Example: Schedule Management Plan for the Arithmetic on a Stick ProjectThe Schedule Management Plan document contains the schedule management plan forthe Arithmetic on a Stick project. It clearly describes the project team’s approach todeveloping the schedule and for making changes to the schedule baseline. The plannames the person responsible for maintaining the project schedules and contains apolicy for schedule performance reporting.

You can open the Schedule Management Plan document from the C:\085042Data\Developing ProjectSchedules folder.

How to Estimate Activity ResourcesAccurate estimations of the resources required to complete project deliverables are vital indeveloping a realistic project schedule and budget.

Guidelines:To determine the resource requirements for your project, follow these guidelines:

• Determine what resources are necessary to complete each activity in the workpackages.

• Determine what quantity of resources is necessary to complete each activity.

• Generate possible alternatives for unavailable resources and areas where:

— Resources are known to be constrained.

— The work is new to your organization so new resources will need to bebrought in.

— Many different resourcing options are known to exist.

— There have been disagreements about resource requirements in the past.

— Certain activities are high risk.

• Analyze the scope statement to ensure you’ve identified all the resources requiredto perform the project work.

• Consider organizational policies that could affect resource acquisition and usage.

— Can you use contract labor to take advantage of lower hourly rates for cer-tain types of work?

— Is renting equipment preferred over purchasing?

— Must suppliers be selected only from a list of those approved and qualified?

— Are there any resource usages that require authorization from upper manage-ment?

• Identify and use expert judgment resources. Consider the following sources:

— Knowledge base on your project team.

— Organizations within your company.

— Colleagues in the industry.

— Technical or professional associations.

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— Subject matter experts.

— Other project managers of projects with aspects similar to your project.

• Analyze the resources already available to you.

— Does the available in-house staff have the required skills and experience orwill you have to procure some resources?

— Will you have access to the materials, facilities, and equipment you need toperform the work when it is scheduled to be done?

Most project managers use a spreadsheet program to capture the resource requirementsfor their projects. This allows flexibility in formatting the information and lets you outputthe columns you want for a particular purpose.

Example: Determining Resources for the Website Design ProjectRobert is trying to determine the resources required for the initial design work packagefor a website project. The art director has provided him with a list of resources he willneed. Since there are no in-house graphic designers available, Robert authorizes him tohire a contractor.

The computer and workstation and black-and-white printer are overhead items that arealready available to the art department. However, there is no color printer on site andthe software program will need to be purchased. The company’s policies require thatthis equipment be rented rather than purchased. As an alternative, Robert directed theart department to utilize a commercial printing facility for presentation items thatrequire color.

DISCOVERY ACTIVITY 4-3Estimating Activity Resources

Scenario:You now have all of the appropriate activities listed with their unique WBS codes, and youhave established the appropriate relationships with each predecessor for the OGC PM TrainingRoll-Out. It is now time to estimate the activity resources for your project. During previousmeetings it was determined based on the work packages that the following resources will berequired for these roles:

• Training Manager

• Four Team Members

• OGC Lead Trainer

• OGC Trainer

• OGC Business Transformation SME

• OGC Instructional Design Lead

• OGC Content Developer

• External Training Coordinator

• Software Training Vendor

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One area of concern is based on recent discussions as to whether OGC has the instructionalexpertise to design the content for the internal training. This is something that will need to bedetermined quickly if the project should meet the deadline.

1. What are some additional factors that you would consider when identifying theresources to fill the identified roles?

2. What are some things that you would consider when determining the software trainingvendor?

3. As the project manager, what factors would you consider to make a decision onwhether to outsource development of the internal training content?

4. What other types of resources, other than people, would you list for this project?

TOPIC DEstimate Duration for ProjectActivitiesYou have identified the activity resources that will be needed for each scheduled activity in awork package. Now it is time for you to determine how long each activity will take. In thistopic, you will estimate activity durations.

Estimating activity durations is important because missing delivery dates almost always resultsin cost overruns. Leaping in with a can-do attitude is one thing, but realistic assessments ofwhat must be done and how long it will take will keep you from making promises you cannotkeep. Without accurate activity duration estimates, you cannot create a meaningful, realistic,and useful schedule.

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The Estimate Activity Durations ProcessThe estimate activity durations process involves the act of estimating the duration of work thatwill be needed to complete individual project activities using the available resources. It usesinformation on factors such as activity scope of work and resource calendars. The inputs forestimating activity durations are collected from people or groups who are familiar with thework an activity involves. The resulting activity duration estimates will shape the preliminaryproject schedule. They contain assumptions made when making the estimate—for example, theavailability of required resources—and a range of variance for the provided estimate, such asplus or minus ten percent, or plus or minus two days.

Figure 4-13: The estimate activity durations process.

Example: Estimating Activity Durations for Training an AssistantYour department head asks how long you think it will take to train a new assistant.You have never worked with this assistant before, so you are unsure how to estimatethe activity duration.

In this case, you might make a comparison with previous projects at your company. Ifyour company has trained other people in the past for similar positions, you can usethe old training duration as a model for the new training project. The more similar twoprojects are, the more similar their durations are likely to be.

Elapsed TimeElapsed time is the actual calendar time required for an activity from start to finish. Anactivity that requires two weeks to complete would take four calendar weeks ofelapsed time if there’s a two-week plant shutdown in the middle.

EffortEffort is the number of person-hours or person-days required for completion of anactivity. The estimates of effort provide the basis for cost estimating and resource allo-cation.

Estimate Activity Durations InputsThere are several inputs to the estimate activity durations process.

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Input DescriptionActivity list Lists activities for duration estimation.

Activity attributes Contain details about activity resources, which help estimateduration.

Activity resource requirements Resource availability will influence how easily and quickly therequired quantities of resource requirements can be met, thusimpacting the overall activity duration.

Resource calendars Contain information about resource availability and capability,which affects duration.

Project scope statement Contains constraints and assumptions such as availability ofinformation and existing conditions that could affect activitydurations.

Enterprise environmental factors Include existing duration estimation databases, whether internalor commercial, productivity metrics, and contract terms andrequirements may provide estimates and reference data.

Organizational process assets Include existing policies or files such as project calendars andlessons learned from past projects may prove useful.

Estimate Activity Durations Tools and TechniquesThere are many tools and techniques for estimating activity duration.

Tools and Techniques DescriptionExpert judgment Helps estimate durations for each activity. It will most often come

from work package owners with relevant experience or from histori-cal information documentation. However, if the activity is outsidethe organization’s knowledge sphere, it may be necessary to conferwith external contractors or consultants for their expert judgment.

Analogous estimating A top-down estimating technique using durations of previous similaractivities to estimate future durations.

Parametric estimating Some durations can be estimated by multiplying a productivity rateby the quantities to be performed for a specific work category.

Three-point estimates Incorporate three types of estimates into a singular duration estimatescenario: most likely, optimistic, and pessimistic.

Reserve analysis Extra time added to duration estimates that can serve as a buffer asrecognition of scheduled risk (contingency reserves).

PERT AnalysisThe three-point estimates technique is based on PERT (Program Evaluation andReview Technique) analysis, which uses a weighted average of the three estimate types(most likely, optimistic, and pessimistic) to calculate the expected activity duration.The formula is as follows: [optimistic time + 4(most likely time) + pessimistic time]/6.

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Estimate Activity Durations OutputsThere are two possible outputs for estimating activity durations.

Output DescriptionActivity duration estimates Approximate number of work units required to complete project activi-

ties. Lags are not considered when estimating activity durations.

Project document updates New activity attributes and assumptions may be added as a result ofduration estimation.

How to Estimate Duration for Project ActivitiesAccurate activity duration estimates form the basis of an accurate project schedule.

Guidelines:To ensure your estimates are as accurate and realistic as possible, follow these guide-lines:

• Involve the work package owners or others who are very familiar with the workof the activity.

In general, the people responsible for doing the work are the ones who can bestestimate the effort and duration for the activities under their control. The projectmanager will, however, be responsible for actually making the estimates, based onnumbers provided by the experts. In some cases, the project manager may takesole responsibility for making the duration estimates. Some examples are:

— Small projects in which the project manager is very familiar with the activi-ties required.

— Projects with activities that are well defined, and for which there is good his-torical information from very similar past projects.

• Consult historical information.

— Are there any detailed records from previous, similar projects that you coulduse to derive your estimates?

— Are there any relevant commercial duration estimating databases?

— Do any project team members have experience with similar activities?

• Determine how you want to quantify the work that needs to be done: in terms ofthe estimated hours of labor that will be needed, the number of units to be pro-duced, and the number of customers to be served.

• Consider resource requirements and capabilities.

— Which people will be assigned to this activity?

— How will the skills of the assigned staff affect the duration estimates?

• Determine the appropriate estimation method to use.

— If it is early in the planning phase or if there is good historical data, considerusing analogous estimating.

— If there is inadequate historical data, consult subject matter experts.

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— Use quantitatively based durations to estimate activities when quantities ofwork units can be multiplied by the productivity rate.

— If you are using the three-point estimating technique, ask the estimators forthe best-case, most likely, and worst-case estimates.

• Modify the constraints and assumptions from the other planning processes.

• Verify the accuracy of your estimates.

— What is the probability associated with this estimate?

— What was this estimate based upon?

— Are there any risks associated with this estimate?

• Consider the need for reserve time.

As more information becomes available about the activity or work package, the reserve time canbe modified.

• Include the list of assumptions made in the creation of the estimates.

• Include a range of variance for each estimate.

Example: Estimating Activity Duration for a Website ProjectPaul, the project manager for the company’s website project, asked his work packageowners to provide estimates for each of their activities.

Tracy, the art director, needs to hire a contractor to do the design work. Also, she isunsure how long the design reviews will take. Based on these factors, she submitted anactivity duration estimate to Paul. Tracy’s estimate defines work units as days, accord-ing to Paul’s specifications.

Her estimate also specifies who will be used on the project and how their skills willaffect the duration. She has used a quantitative method for her estimate and includedrelevant assumptions made earlier. Finally, Tracy’s estimate includes a range of vari-ance for each duration.

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DISCOVERY ACTIVITY 4-4Estimating Activity Durations

Data Files:

• Estimating Activity Duration

Before You Begin:From the C:\085042Data\Developing Project Schedules folder, open the Estimating ActivityDuration document.

Scenario:After determining the resources that you will need to complete the OGC PM Training Roll-Outproject, you are now ready to estimate the durations for each activity:

• Assemble Internal Training Team—This team will be responsible for identifyinginternal training needs and managing the effort to fulfill those needs. Externalresources representing both the need areas and the audience are identified andincorporated into the team.

• Assessing Needs—Identifies potential areas of training that would be most benefi-cial to the Business Transformation Program. Beneficial is defined by theorganizational components represented in the team.

You have given the group a list that includes each activity’s WBS, name, predecessor relation-ship, and assigned resource. The goal of the meeting is to determine the durations for theseactivities.

1. For the summary task, Resources Identification, the team members explained that,based on past experience, they would need a week to complete the interviews, if allof the managers were available during that week. When asked how many hours theyexpected to work during the week, they responded with 10 hours. Based on theirresponse to this question, what will the elapsed time be for these activities?

a) 10 hours

b) One week

c) 50 hours

d) A day and a half

2. When the team members determined how long they thought it would take to completethe manager interviews, what type of duration estimating technique were they prob-ably using?

a) Parametric estimating

b) Analogous estimating

c) Reserve analysis

d) Expert judgment

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3. In the Estimating Activity Duration document, what will be the total duration for thesummary activity, Training Needs Review with Key Resources?

a) 1 day

b) 2 days

c) 4 days

d) 11 days

4. Do you find it helpful in the activity list to have milestones represented with zeroduration? Why or why not?

TOPIC EDevelop a Project ScheduleYou identified the necessity of effective activity duration estimating in successful scheduleplanning. Now you will put that to good use by moving on to the next stage of scheduledevelopment. In this topic, you will develop a project schedule.

The project schedule is one of the most important tools for keeping upper management andproject stakeholders informed about the project’s status and for tracking performance. Given itsimportance and high visibility, you want to make sure that the schedule you create is realistic.If you don’t take the time to establish realistic start and finish dates, it is unlikely that yourproject will finish on time.

Project SchedulesDefinition:

A project schedule is the project team’s plan for starting and finishing activities onspecific dates and in a certain sequence. The schedule also specifies planned dates formeeting project milestones.

With its supporting detail, the schedule is the main output of the develop schedule pro-cess. The purpose of the project schedule is to coordinate activities into a master planin order to complete the project objectives on time. It is also used to track scheduleperformance and to keep upper management and project stakeholders informed aboutproject status.

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Example: A Project Plan Listing the Project Schedule

Figure 4-14: A project schedule for a website design project (deliverable cat-egories in bold).

The Develop Schedule ProcessThe develop schedule process is the act of defining specific start and end dates for each projectactivity. The end result of the develop schedule process is the project schedule. The projectmanager analyzes the activity sequences, durations, resource requirements, and schedule con-straints to create the schedule. As the project progresses, the project schedule is revised ormodified continuously to accommodate the changes in the project work.

Figure 4-15: The develop schedule process.

Develop Schedule InputsIn order to develop a well-constructed project schedule, several elements should be included.

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Input DescriptionActivity list Lists activities that are the building blocks of project schedules.

Activity attributes Information about responsibility assignment, location of the work,and type of work to be performed is important when assigningdates to activities.

Project schedule network diagrams Show the sequence of all project activities.

Activity resource requirements Can affect project schedules depending on how difficult the require-ments are to fulfill.

Resource calendars Provide information about when work can be performed and whichresources are available.

Activity duration estimates Approximate number of work units required to complete projectactivities.

Project scope statement Contains assumptions and constraints, both of which can affect theproject schedule.

Enterprise environmental factors Existing environmental factors may include a schedule develop-ment software.

Organizational process assets Existing assets may include a project calendar or a schedulingmethodology.

Develop Schedule Tools and TechniquesThere are many tools and techniques available for use in developing a project schedule.

Tools and Techniques DescriptionSchedule network analysis Produces the project schedule through a mix of analysis methods.

Critical path method Analysis that calculates early and late start and finish dates for allactivities in the project.

Critical chain method Alters the project schedule to accommodate limits on resources.Involves adding buffer activities to keep focus on activity durations.

Resource leveling Assists in making scheduling decisions when there are resource man-agement concerns.

What-if scenario analysis Analysis that involves creating a scenario (“What if X happens?”),and then calculating various possible project durations. This analysisis helpful in assessing different schedules under adverse conditions.

Applying leads and lags Leads and lags may need to be applied to accommodate other sched-uling elements. Improper use may distort the project schedule.

Schedule compression Involves shortening the schedule without affecting the scope of theproject.

Scheduling tool Automates or accelerates the schedule development process. May beused along with commercial project management software orin-house, custom-built applications.

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Develop Schedule OutputsIn addition to the project schedule and its supporting detail, the develop schedule process canproduce several outputs.

Output DescriptionProject schedule Includes start and finish dates for each activity. Project schedule out-

puts may include:

• A resource histogram, table, or network diagram showing resourcerequirements by time period.

• Alternative schedules, such as high-level, detailed, best-case orworst-case, with or without imposed dates.

• Contingency reserves.

• Optionally, additional items including cash-flow projections andorder and delivery schedules.

Schedule baseline Version of the schedule created through schedule network analysis.Features approved baseline start and finish dates.

Schedule data Includes milestones and activities and their attributes, constraints, andassumptions.

Project document updates Documents that are updated during the develop schedule processinclude:

• Activity resource requirements: May be impacted and requireupdates if resource leveling is used to develop the schedule.

• Activity attributes: May be altered, especially if resource require-ments are updated.

• Calendar: Used as a basis for project scheduling. The calendarunits may change for each project.

• Risk register: Updated with opportunities and threats that arisewhile scheduling assumptions.

Standard Schedule Diagramming NotationsProject network diagrams use standard diagramming nomenclature.

Figure 4-16: Standard schedule diagramming notations for an activity.

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Notation DescriptionES Early start. The earliest time an activity can start. Usually, the ES of the first

activity in a network diagram is zero. The ES of all other activities is the latestEarly Finish (EF) of any predecessor activities (assuming that any successoractivity starts as soon as all its predecessor activities are finished).

EF Early finish. The earliest time an activity can finish. The EF for the first activityis the same as its duration. For all other activities, EF is the latest EF of all of anactivity’s predecessor activities plus its duration.

LF Late finish. The latest time an activity can finish. The LF for the last activity isthe same as its EF time. The LF for any predecessor activity is the earliest LS ofany of its successor activities.

LS Late start. The latest time an activity can start. The LS for the last activity is itsEF minus its duration. The LS for any predecessor activity is its LF minus itsduration.

DU Duration. The number of work periods required for completion of an activity.

The Critical PathDefinition:

The critical path is the network path that has the longest total duration. Activities onthe critical path cannot be delayed or the whole project will be delayed unless subse-quent activities are shortened.

The critical path is calculated by doing a forward pass to calculate the ES and EF foreach activity and then a backward pass to calculate the LS and LF for each activity.The path with the longest total duration and no scheduling flexibility is the criticalpath.

Although it is easy to calculate the critical path by using software, students preparing for the PMP®

certification exam should be aware that you may be asked to calculate a critical path with paper andpencil during the exam.

Example: Critical Path of Activities

Figure 4-17: A network diagram showing the critical path of activities.

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FloatDefinition:

Float is the amount of time an activity can be delayed from its ES without delayingthe project finish date or the consecutive activities. Float occurs only in activities thatare not on the critical path. Float is also called “slack.” There are two types: total floatand free float.

Example: Float in Project Activities

Figure 4-18: A schedule network diagram showing float.

Total FloatDefinition:

Total float is a type of float where the total amount of time an activity requires can bedelayed without delaying the project finish date. Total float for an activity can be cal-culated by subtracting its EF from its LF or its ES from its LS.

When you see the term “float” by itself, it generally refers to total float.

Example: Total Float in ActivitiesIn this CPM diagram, Activity C has an ES of 25 days. However, should it begin onits Late Start (LS) date, the value is 36. Therefore, the amount of time the start datecan be delayed without affecting the finish date is 11 days. The Total Float (TF) valueis 11 (36 – 25 = 11).

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Figure 4-19: CPM network diagram with total float.

Free FloatDefinition:

Free float is the amount of time an activity can be delayed without delaying the ES ofany activity that immediately follows it. It allows flexibility of the start or finish timewithin that activity only. If there is a string of activities with float, free float will beavailable only for the activity at the end of the string. Free float on the activity is cal-culated by subtracting the EF of an activity from the ES of its successor activity.

Example: Free Float in ActivitiesIn the CPM diagram, the free float for activity E can be calculated by subtracting theEF from the ES of the successor activity, which in this case is Activity H. The freefloat value is Activity H’s ES (61) – Activity E’s EF (50), or 61 – 50. The free float is11.

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Figure 4-20: CPM network diagram with free float.

Schedule Network AnalysisDefinition:

Schedule network analysis is a technique used to calculate the theoretical early and latestart and finish dates for all project activities. In other words, it helps create a projectschedule. This method also generates float or slack.

Schedule network analysis may be achieved using one of four methods:

• Critical Path Method (CPM)

• Critical chain method

• What-if scenario

• Resource leveling

Example: Developing a Schedule for a Marketing Campaign ProjectYou are trying to craft a schedule for the creation of a new marketing campaign, whichwill involve finding a new advertising agency, creating the advertisements, and produc-ing marketing materials. Because the project contains so many different workpackages, you decide that schedule network analysis is necessary. Using a project man-agement software application, you are able to define the network path from “requestfor proposals” to “launch campaign.” From there, you can estimate the points in theschedule where there is slack and adjust the activities accordingly.

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The Critical Path Method (CPM)Definition:

The Critical Path Method (CPM) is a schedule network analysis method that uses asequential finish-to-start network logic and calculates one early and late start and finishdate for each activity using a single duration estimate. The longest path through thenetwork—the critical path—is identified. Then float is calculated to identify activitieswhere there is some scheduling flexibility. CPM is the mathematical analysis techniqueused in most types of project management software.

Example: A Project Schedule Showing the Critical Activities

Figure 4-21: Critical path method involves calculating one early and late startand finish date for each activity.

The Critical Chain MethodDefinition:

The critical chain method is a schedule network analysis method that allows you toconsider resource limitations and adjust the schedule as appropriate to work withinthose limitations. The critical chain is established by analyzing the critical path along-side the resources that are actually available. The critical chain method is also used toplan and manage reserves or buffers and helps mitigate possible cost and schedulerisks.

Example: A Project Schedule

Figure 4-22: A project schedule allows you to consider resource limitationsand adjust the schedule.

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The What-If Scenario AnalysisDefinition:

The what-if scenario analysis method allows you to consider different situations thatmight occur and influence the schedule; it assesses the feasibility of the schedule undervarious adverse conditions. It allows you to compute different schedules based onpotential delays, or the unplanned events that are a normal part of business life, suchas key employees resigning during a project. The outcomes are also used to mitigatethe impact of unexpected situations when preparing risk response plans. This methodhelps in selecting the optimum plan.

Example: What-If Scenario for Planned Move of Corporate HeadquartersA project manager could use the what-if scenario analysis method to compute differentschedules for a planned move of corporate headquarters to a new facility. He wouldbase his computations on several scenarios, such as: What if the contractor for the newbuilding brings the goods in late? What if key decision makers are allocated elsewhereduring the planning process? What if there is a union strike affecting the constructionworkers?

Resource LevelingDefinition:

Resource leveling is used to analyze the schedule model. It allows you to readjust thework as appropriate so that people are not overly allocated. It is also used to addressscheduling activities when critical resources are only available at certain times.Resource leveling is normally done after the critical path has been initially identified.The critical path frequently changes as a result of resource leveling. Resource levelingtools are found in many types of project management software.

The most common scheduling conflicts are under-allocation of resources to a critical task and over-allocation of a critical resource.

Example: Resource Leveling at a Construction CompanyDaniel, a project manager who worked for a construction company, always managedseveral simultaneous projects. His project resources included construction workers whowere paid varying hourly wages. By using the resource leveling method via a tool inhis project management software, Daniel could make sure that the most expensivehourly workers, including electricians and stone masons, were appropriately and con-sistently allocated.

Automated LevelingMost project management software packages have resource leveling capabilities. How-ever, make sure you analyze the results before accepting them. Automated levelingoften pushes out the project’s completion date. Resources may be reallocated to workat times that are inappropriate due to other constraints.

Schedule FormatsThe project schedule can be presented in several different formats, depending on the circum-stances.

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Graphical Format CharacteristicsBar chart • Shows the start and end dates, expected durations, and the dates and

order of project milestones.

• Can show precedence relationships between activities.

• Can show the percentage of an activity completed to date and actualprogress in relation to planned progress.

• Typically lists activities or work packages vertically on the left. Timeis represented with horizontal bars that correspond to the activitiesand show projected start and end dates.

• Often used for project status presentations to upper management.

• A detailed view is effective in reviewing project status with theproject team.

Milestone chart • Provides a summary level view of the project’s schedule in terms ofits milestones.

• Uses an icon or symbol to show scheduled milestone events.

• Milestones are typically listed from the left to right of the chart.

• Time intervals—divided into hours, days, weeks, or months—are usu-ally presented horizontally across the top or bottom of the chart.

• Effective in demonstrating the project’s overall schedule to projectteam members, stakeholders, and upper management.

Project schedule networkdiagrams with dates

• Helps assign start and finish dates to activities on the project schedulenetwork diagram.

• Useful when you need to communicate project status in terms ofactivity precedence relationships.

Examples for Different Schedule FormatsThe following figures show a bar chart, a milestone chart, and a project schedule net-work diagram with dates assigned to each activity.

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Figure 4-23: A bar chart.

Figure 4-24: A milestone chart.

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Figure 4-25: A network diagram with dates.

How to Develop a Project ScheduleProcedure Reference: Develop a Draft Project Schedule

To develop a draft project schedule:

1. Perform a mathematical analysis to determine the time periods within whichactivities could be scheduled once resource limits and other known constraints areapplied.

2. Evaluate the possible impact of any constraints and assumptions on scheduledevelopment.

3. Consider the availability of your resources.

• Will you have the staff you need to perform the work when it is scheduled tobe done?

• Will you have access to the materials, facilities, and equipment you need toperform the work when it is scheduled to be done?

4. Consult project calendars and assign dates to activities.

• Are there any holidays during which your project team will not conduct workactivities?

• Will your project team conduct work activities on weekends?

• When will your key project team members be taking vacations?

• Are there any unmovable milestone dates that must be met?

5. Assess the feasibility of the schedule under adverse conditions by conductingwhat-if scenario analysis.

6. Consider external resource date constraints, if applicable.

• Are there any regional or national holidays not previously accounted for?

• Do you need to make considerations for travel time for meetings?

7. Select project management software that best meets the needs and budget of yourproject. If your organization does not require the use of a particular software pro-gram, ask yourself the following questions to make the selection:

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• How complex is the project?

• Do I need to manage more than one project at a time?

• How easy will the software be to learn and to use?

• How well will the software adapt to projects that vary greatly?

• What type and depth of analyses do I need to perform?

• What is the reputation of the software company?

• What do other project managers in the field use and what do they recom-mend?

8. Review rough drafts of the schedule with the project team, sponsor, and customer.You may also need to review the rough drafts with functional managers to ensurethat there are no conflicts with functional resources.

9. Choose the format in which you’ll publish the schedule.

• If your audience only requires a summary-level view of the project’sprogress in terms of milestones, consider using a milestone chart.

• If you are reviewing the schedule with your project team, consider publishinga detailed bar chart or a network diagram with dates.

• If you are preparing a presentation for key project stakeholders or uppermanagement, consider printing the schedule in several different formats toshow various views of the project’s progress versus planned progress.

10. Distribute the preliminary schedule to all program office personnel, functionalteam members, functional management, and the customer or sponsor to obtainapproval.

11. Following approval, baseline the schedule and distribute to the team.

Example: Developing Project Schedule for the Website ProjectAs project manager for your company’s website project, you perform mathematicalanalysis without regard for resource limits. This helps you determine the time periodswithin which project activities can be scheduled. Next, you evaluate the constraints andassumptions from earlier planning processes.

After reviewing your resource pool, you consult the project calendars. Using projectmanagement software, you enter all holidays, weekends, and vacation days of keyteam members into the schedule.

Next, you print a rough draft of the schedule in a Gantt chart format and call a reviewmeeting with the project team, sponsor, and affected managers.

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DISCOVERY ACTIVITY 4-5Developing a Project Schedule

Data Files:

• May 2009 Calendar

Before You Begin:From the C:\085042Data\Developing Project Schedules folder, open the May 2009 Calendardocument.

Scenario:Now that you have the list of activities, estimated durations, and estimated resources, it is timeto draft the project schedule to determine the start and finish dates for the project activities.The project is scheduled to start on May 11th and must finish no later than September 20th.

To draft the schedule, you refer to the May 2009 Calendar document.

In this activity, you will develop the project schedule for a work package, and not the entire project.

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1. What other inputs will you need to have available before developing the project sched-ule?

a) Resource calendars

b) Schedule baseline

c) Project scope statement

d) Specific milestone dates that must be met

2. Use the supplied table to draft the project schedule for the work package, WBSTRN0001, Assembling Internal Training Team.

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TOPIC FIdentify the Critical PathNow that you have drafted a project schedule, you are ready to establish the start and finishtimes for each of the activities in your project and determine the duration of the entire project.That means you will need to know the critical path through your project activities. In thistopic, you will identify the critical path.

Sometimes, the resources you are counting on may not be available when they are scheduledto be. How do you know when this means your project cannot be successfully completed? Theanswer is that you must identify the critical path during the develop schedule process. Identify-ing the critical path allows you to determine which activities have scheduling flexibility beforeyou complete your project schedule.

Critical ActivitiesDefinition:

Critical activities are the activities that are on the critical path. Generally, for allactivities along the critical path, ES = LS and EF = LF. There can be no flexibility inthe start time or the finish time for these activities. Activities that are not on the criti-cal path usually have some flexibility in their start and finish times.

Example: Critical Activities in a Project

Figure 4-26: Critical activities lie on the critical path (Activities A, B, F, G,and H).

Near-critical ActivityNear-critical activities are project work schedule activities that have a minimumamount of total float. These activities have a high potential of becoming critical.

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The project team determines the near-critical activities for a project based on expertjudgment. For example, the project team, based on past experience with similarprojects, defines that an activity with a total float of 1 is a near-critical activity for theproject. Therefore, all activities having a total float of 1 are near-critical activities forthis project.

How to Identify the Critical PathProcedure Reference: Identify the Critical Path

To identify the critical path for a project with finish-to-start precedence relationships:

1. Conduct a forward pass to determine ES and EF times for each activity.

a. Use zero (0) for the first activity’s ES.

b. Enter the first activity’s duration as its EF.

c. Calculate the ES for each successor activity using the latest EF from any ofits predecessor activities plus or minus any leads or lags.

d. Calculate the EF for each successor activity by adding its duration to its ES.

e. Move through all the activities until you have an ES and EF for each one.

2. Perform a backward pass to determine LS and LF times for each.

a. Enter the last activity’s EF for its LF time.

b. Subtract the last activity’s duration from its EF to determine its LS.

c. Calculate the LF for each predecessor activity using the earliest LS from anyof its successor activities plus or minus any leads or lags.

d. Calculate the LS for each predecessor activity by subtracting its durationfrom its LF.

e. Move backward through all the activities until you have the LF and LS foreach one.

3. Calculate float.

a. For each activity, subtract its EF from its LF to determine total float.

b. For each string of activities with float, calculate the free float for the lastactivity in the string by subtracting its EF from its successor activity ES.

There is software available that will quickly compute these elements, including the critical path,but you may be expected to perform these calculations yourself, on paper, in order to pass thePMP® certification exam.

4. Identify the critical path as the path with the longest duration and least amount offloat.

Example: ES, EF, LS, LF, and Float CalculationsThis figure shows a CPM network diagram with ES, EF, LS, LF, and float calculatedand its critical path identified. The activities in the network all have FS relationships.

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Figure 4-27: Identifying the critical path.

Note the following characteristics in the CPM figure:

• The ES for the first activity (A) equals zero.

• The EF for the first activity is its ES plus its duration (0 + 10 = 10).

• The ES for all successor activities is the latest EF of any of its predecessor activi-ties plus or minus any leads or lags between the two activities.

For example, the ES for activity D is the same as the EF for activity C (29), andthe ES for activity G is the EF for activity F (41) plus an 8-hour FS lag, which isindicated as FS 8 (41 + 8 = 49).

Although the ES of the first activity can be zero, it can also have the value one. But when the ESof the first activity is one, then the duration should be calculated as ES + DU - 1. The ES of thesuccessor activity will then be the EF of the predecessor activity plus one.

For example, if the ES of the first activity is one, then its EF would be 1 + 10 - 1 = 10 and theES of the second activity would be 11.

• The EF for all subsequent activities is its ES plus its duration. For example, theEF of activity B (25) is its ES (10) plus its duration (15).

• The LF for the last activity is the same as its EF time (66).

• The LS for the last activity (61) is its EF (66) minus its duration (5).

• The LF for any predecessor activity is the same as the earliest LS of any of itssuccessors plus or minus any leads or lags between the two activities.

For example, the LF of activity E is the same as activity H LS (61), and the LFfor activity F (41) is the LS for activity G (49) minus the 8-hour FS lag (49 - 8 =41).

• The LS for any predecessor activity is its LF minus its duration. For example, theLS for activity E (48) is its LF (61) minus its duration (13).

• Only the three activities that are not on the critical path (C, D, and E) have totalfloat (TF = 11).

• Only the last activity in that string (activity E) has free float (FF = 11).

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• The critical path is indicated by bold lines with arrows and includes activities A,B, F, G, and H. It is the path with the longest total duration and zero float.

DISCOVERY ACTIVITY 4-6Identifying the Critical Path

Data Files:

• OGC Critical Path

Before You Begin:From the C:\085042Data\Developing Project Schedules folder, open the OGC Activity List andthe OGC Critical Path documents.

Scenario:You have listed the activities, estimated durations, estimated resources, and drafted the projectschedule. Next you are going to calculate the critical path to document in the network diagramany float that you currently have in the schedule. At this point, you will focus on the first twophases of the OGC PM Training Roll-Out project.

1. Perform a forward pass to determine the Early Start (ES) and Early Finish (EF) for eachactivity. Enter your answers in the appropriate place in the network diagram. What isthe ES for activity TRN1.1, Identify Team Lead?

2. What is the EF for activity TRN1.1?

3. What is the ES for activity TRN1.2.1, Human Resources?

4. What is the EF for activity TRN1.2.1, Human Resources?

5. Calculate the ES and EF for the remaining activities. Why is the ES for activitiesTRN1.2.3 and TRN1.2.4 the same as the ES for TRN1.2.2?

6. Determine the float for this network. Which activities have total float in this network?

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7. What is the critical path?

TOPIC GOptimize the Project ScheduleNow that you have drafted your project schedule and identified the critical path, you are readyto begin the hands-on management of the schedule, which involves successfully negotiatingorganizational constraints on time and resources. To do so, you must identify the tools thatproject managers use to respond to resource fluctuations, ordinary setbacks, and delays whileresponding to the perennial business need of bringing in the project on time. In this topic, youwill optimize the project schedule.

Setbacks, delays, constraints on time and resources, and competing priorities are all part ofeveryday life in business, and they will affect every project you work on. You want to be ableto work effectively in the face of these challenges by optimizing your project schedule, whichmeans using project management tools to work around these problems so that you can supportthe needs of the business.

Schedule CompressionDefinition:

Schedule compression is the shortening of the project schedule without affecting theproject scope. Setbacks or revised deadlines can cause production problems, in whichthere is little time to do a lot of work. When these issues occur, product quality isoften sacrificed. Schedule compression alleviates the pressure of completing too manyactivities in too little time without negatively affecting the project scope. Compressionmay be achieved in one of two ways: fast-tracking and crashing.

Example: Schedule Compression when Building and Installing CabinetsA carpenter and his sub-contractor are building and then installing cabinets in a newhousing development. The realty company has a higher demand than expected and asksthe carpenter to move up his finish date by three weeks. In order to meet this deadline,the carpenter decides to change the order of assignments for the remaining carpentrywork. He tells the sub-contractor to work on the installation of the cabinets while hefinishes building the cabinets. This changes the precedence. Instead of finishing thebuilding of all the cabinets and then installing them, the installation is able to startbefore the building of the cabinets is complete as in the original schedule. Due to theincrease in production, the carpenter finishes a week ahead of schedule, rather thanthree weeks behind.

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Fast-TrackingDefinition:

Fast-tracking is the process of compressing total project duration by performing someactivities concurrently that were originally scheduled sequentially.

Typically, fast-tracking involves identifying FS relationships that could be done in par-allel, either as FF, SF, or SS relationships, or by simply adding some leads to FSactivities.

Some fast-tracking may entail looking very creatively at the network diagram to see ifsome discretionary dependencies could be done completely independently. Usually noadded costs are incurred from fast-tracking; however, it can result in increased risk andrework.

Example: Fast-Tracking Activities to Produce a New ProductSponsors are pressuring Carol to bring a new product to market quickly. Carol decidesto fast-track some activities by putting a lead relationship between the development ofthe new product and the writing of the associated user manual. The total duration ofthe two activities is shortened, since writing the manual can start before the productdevelopment is completed. Consequently, the project duration is shortened, as well.

CrashingDefinition:

Crashing is a schedule compression method that analyzes cost and schedule trade-offsto determine how to obtain the greatest schedule compression for the least incrementalcost. Crashing typically involves allocating more resources to activities on the criticalpath in an effort to shorten their duration and thereby increases project costs.

To crash a schedule, analyze:

• Duration estimate under normal (for example, not compressed) conditions.

• Cost associated with the normal condition.

• Duration estimate under the crash condition.

• Cost associated with the crash condition.

The formula for calculating crash costs per week is (crash cost – normal cost) / (nor-mal time – crash time).

Example: Crashing the Company Website ProjectAs project manager for the company website project, you are asked to compress theschedule for the design deliverable. There are 11 activities, five of which are on thecritical path. Using the formula (crash cost – normal cost) / (normal time – crashtime), you calculate the crash costs per week for each of the five activities to deter-mine which activities would provide the greatest duration reduction for the leastincremental cost. Your calculations are:

NormalTime (wk)

Crash Time(wk)

Normal Cost($)

Crash Cost($)

Crash Cost/Wk($)

A 10 8 15,000 23,000 4,000

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NormalTime (wk)

Crash Time(wk)

Normal Cost($)

Crash Cost($)

Crash Cost/Wk($)

B 12 11 10,000 14,500 4,500

C 8 6 5,000 8,000 1,500

D 6 3 6,000 7,500 500

E 9 6 12,000 18,000 2,000

Totals 45 34 48,000 71,000 -

While you haven’t yet analyzed the effect of crashing the activities, you can determinefrom your calculations that:

• Activities D and C are the best candidates for crashing.

— Activity D has a net gain of three weeks at a cost of just $500 per week.

— Activity C reduces the schedule by two weeks at a cost of only $1,500 perweek.

• Activity E is another possible candidate with a three-week reduction at a cost of$2,000 per week.

• Activity B, which has a crash cost of $4,500 per week and a reduction of onlyone week, is the worst candidate for crashing.

• The order in which the activities should be crashed is D, C, E, A, and B.

• The total number of weeks by which the project could be shortened if all of theactivities on the critical path are crashed is 11 (45 – 34).

• The total additional cost if all activities on the critical path are crashed is $23,000($71,000 – $48,000).

Crash Cost Plotting MethodsDefinition:

Crash cost plotting methods are techniques for analyzing the crash costs through creat-ing a graph or a visual representation that clearly illustrates those costs. With the Xaxis showing the duration and the Y axis showing the cost, the activities are plotted onthe grid from right to left, starting with the activity with the lowest crash cost perweek. Activities with flatter slopes are the activities with relatively larger time savingsfor the associated cost. Crashing may result in increased risk and rework; the projectteam needs to identify the point where it becomes impractical to crash the scheduleany further.

Example: Presenting a Project’s Crash CostsIn this example, the project manager has plotted the crash costs against total projectcosts and total project duration in weeks. Notice that the crash cost plotting illustratesthe activities that have the greater savings of time as well as savings of associatedcosts.

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Figure 4-28: Plotting crash costs on a graph.

How to Optimize the Project ScheduleProcedure Reference: Optimize the Project Schedule

To compress the schedule when necessary:

1. Consider your resource leveling options.

— Can you pull needed resources from activities with float and apply them tocritical activities?

— Can you authorize overtime or comp time to meet your project requirements?

— Is shift work possible?

— Can an activity be contracted out to free up resources during a criticalperiod?

2. Consider fast-tracking the project.

— Can any activities on the critical path be done concurrently that were origi-nally scheduled sequentially?

— Are there any discretionary dependencies that could be done completely inde-pendently?

— Are there any increased costs associated with fast-tracking activities?

— What are the associated risks?

3. Analyze activities on the critical path to determine if crashing the schedule willproduce a viable option.

— Are there any activities on the critical path that can be shortened if moreresources are added?

— What are the costs associated with crashing those activities?

— Which activities will provide the biggest duration decrease while incurringthe least amount of incremental cost?

— What are the resource allocation implications of crashing the activity? Willsome key resources be overextended? Will all resources be available whenneeded?

— Are there any quality implications associated with crashing the activities?

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4. Analyze each activity on the critical path to determine whether reducing scope isa viable option for reducing duration.

5. Recalculate the critical path after compressing the schedule.

6. Review any schedule changes with key stakeholders.

7. Revise the schedule and distribute to the team.

Example: Optimizing the Schedule for the Company’s Website ProjectYou have created a draft schedule for your company’s website project. At the draftschedule review meeting, the sponsor informs you that the schedule must be com-pressed by a week so that the new website will go live in time to coincide with amajor industry conference.

You analyze the critical path and discover that two activities could be performed con-currently, instead of sequentially. You fast-track the activities and gain the neededweek, then review the critical path and confirm that it has not been altered.

You review the revised schedule with the project sponsor and obtain approval. Theschedule becomes the baseline for the project.

DISCOVERY ACTIVITY 4-7Crashing a Project Schedule

Scenario:You are assisting the project manager in crashing the schedule due to some recent contractordelays. You have transferred the normal activity durations from the network diagram to a tablealong with the normal cost estimates. Together you have determined how much each activitycan be crashed and the associated crash cost estimates. You are just about done, but you arehaving trouble evaluating the real impact crash costs will have on this project.

To calculate the project durations under normal conditions, use the following graphic.

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1. Which activity has the highest crash cost per week? Which has the lowest?

2. Which activities are on the critical path for this project?

3. What is the project duration under normal conditions?

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4. Which activities are the best candidates for crashing, and in what sequence?

5. Plot the slope for crashing each activity on the critical path. Use the graph to makeyour plots.

6. Which activity is the best candidate for crashing? Why?

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7. If you crashed all the activities identified on the original critical path, what would hap-pen to the duration for that network path?

8. If you crashed all activities identified on the original critical path, what would happento the total project cost?

9. What would happen to the total project cost if you decided to crash every activity inthe project?

10. What other factors would you need to consider when deciding whether to crash thisschedule?

11. What should you do if the normal time and the crash time for an activity are the same?

TOPIC HEstablish a Schedule BaselineNow that you have optimized the schedule, you need to create a schedule baseline in order toget management approval for your project schedule. In this topic, you will establish a schedulebaseline.

As a project manager, it is your responsibility to get management approval for your projectschedule so that you can begin your project on the right footing, setting the stage for propermonitoring and measuring of schedule performance throughout the life cycle of the project.The schedule baseline is the key mechanism for gaining that approval and so your ability togenerate the appropriate baseline will be critical to project success.

Schedule BaselinesDefinition:

A schedule baseline is the management-approved version of the project schedule; it isdrawn from the schedule network analysis and includes baseline start and finish dates.It provides the basis for measuring and reporting schedule performance. It is a formalpart of the project management plan.

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Example: A Schedule Baseline

Figure 4-29: A chart showing a schedule baseline.

How to Establish a Schedule BaselineObtaining approval from the stakeholders for your project will be vital as you move throughthe project life cycle and monitor schedule performance. By establishing a schedule baseline,you will further enhance the project’s integrity by securing approval from the project manage-ment team and stakeholders.

Guidelines:To establish the schedule baseline, follow these guidelines:

• Gather your preliminary project schedule, which includes the project’s start andfinish dates. Make sure that all of its components are accurate and up-to-date,including resources, durations, calendars, predecessor dates, task dependencies,cost estimates, and constraints. Confirm that resources have not been over-allocated.

• Distribute the proposed schedule baseline to the appropriate stakeholders andproject management team for approval. This approval is a formal requirement, andas such, it should be received in writing from the project sponsor.

• Incorporate any changes to the schedule baseline as required by the managementteam.

• Changes to your schedule baseline may require additional resources or more time;these changes will affect the project cost and will require you to update your costbaseline as well.

• Revisions made to the schedule baseline after it has been approved will need tobe made through a formal change process approved by management.

• Save the original schedule baseline. During the life cycle of the project, changeswill be made as the schedule baseline is updated and revised; you will need topreserve the historical data included in your original schedule baseline.

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Example: Establishing the Schedule Baseline when Launching a New Line ofProducts

A cosmetics company is launching a new line of products. The project manager needsto establish a schedule baseline and secure approval from both company managementand the group of stakeholders, which includes the company’s sales and marketingteams. The project manager will begin by distributing the preliminary product rolloutschedule along with resource calendars, cost estimates, and any related constraints. Hewill distribute the schedule to the appropriate parties for formal approval.

Before the team members give their approval, they will submit changes to the sched-ule; the project manager will be responsible for incorporating those changes. Makingthese changes will impact the cost baselines as well, and the project manager will needto follow the organization’s formal change process and secure approval from manage-ment before continuing. Finally, he will save the original schedule baseline andpreserve the historical data related to this product launch.

DISCOVERY ACTIVITY 4-8Establishing a Schedule Baseline

Scenario:As the project manager for the PM Training Roll-Out project, you have completed all prelimi-nary project work. All stakeholder requirements have been collected; project scope has beendefined; the WBS has been created; activities have been defined and sequenced; and activityresources and durations have been estimated. You are preparing to baseline the project sched-ule.

1. What should be done before establishing the schedule baseline?

a) Distribute the stakeholder register templates to the project management team forapproval.

b) Distribute the procurement documents to the appropriate stakeholders and projectteam for approval.

c) Distribute the project management plan to the appropriate stakeholders and projectmanagement team for an in-depth review, then after revising, obtain approval by theproject sponsor.

d) Distribute the project charter to the appropriate stakeholders and project manage-ment team for approval.

2. How would you describe the difference between the draft schedule and the schedulebaseline?

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3. Which tasks will you be able to do once the schedule baseline has been established andproject execution has begun?

a) You will be able to determine project or activity slippage.

b) You will be able to determine a variance in the start and finish dates for the project.

c) You will be able to determine if resources are over-allocated.

d) You will be able to determine if the amount of scheduled work for each work pack-age has changed.

4. True or False? When the schedule baseline is first saved, the schedule variance foreach activity should be equal to zero.

True

False

Lesson 4 Follow-upIn this lesson, you identified the major elements of project schedules, which include activitylists, project network schedule diagrams, estimates of activity duration, and techniques forresponding to organizational constraints by adjusting flexibility within schedules. You will nowbe able to develop effective project schedules and manage schedules in response to organiza-tional constraints on time and resources so that you can bring your projects in on time and onbudget.

1. Consider the importance of creating an activity list. How do you think that creating anactivity list for your projects will help ensure that your project activities are tied tothe project scope?

2. Reflect on the advantages of creating a project schedule network diagram. How do youthink this will help you organize your project more effectively?

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NOTES


Developing Cost Estimatesand Budgets

In this lesson, you will develop cost estimates and budgets.

You will:

• Estimate project costs.

• Estimate the cost baseline.

• Reconcile funding and costs.


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Lesson 5: Developing Cost Estimates and Budgets 171


IntroductionGood project management requires the ability to create accurate estimates regarding the costsof project completion. It also requires you to have a budgeting process that helps you to moni-tor progress against expectations and to work with the sponsor to make adjustments to theschedule or scope as changes arise. In this lesson, you will develop cost estimates and budgets.

The ability to deliver projects on time and on budget is a key element of good project manage-ment. You want to be able to create accurate estimates regarding the work that must be doneand the costs that will be incurred, as well as monitor progress against expectations. By identi-fying methods of creating accurate cost estimates and the budgets that will guide your projects,you can effectively meet expectations and deliver the desired results.

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TOPIC AEstimate Project CostsYou have developed your project schedules and determined the activities and resource require-ments for your project. But how much will those resources cost? Estimating project costs willprovide the answer. In this topic, you will estimate project costs.

Inappropriately high cost estimates may discourage sponsors from pursuing projects that havethe potential for success. Conversely, estimates that are too low could waste precious resourceson a project that ultimately proves unfeasible. As a project manager, it is your responsibility toestimate project costs as accurately and realistically as possible. Mastering the tools and tech-niques for estimating project costs will help you to effectively control project costs.

The Estimate Costs ProcessEstimate costs is the process of projecting the total expenditures necessary for the completionof your project. Logical estimates provide a basis for making sound decisions about projectsand they establish baselines against which the success of the projects can later be measured.Cost estimating also involves identifying and considering cost alternatives. A different type ofcost estimate and level of accuracy may be required for different phases of the project lifecycle.

A cost estimating method might be chosen due to:

• Software availability.

• Team member experience.

• Project life cycle phase.

• Time constraints.

• Project definition.

• Personal preference.

Figure 5-2: The estimate costs process.

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Example: Cost Estimation for a Software Application ProjectYour team is trying to estimate costs of an extensive software application project.However, some of the functionality has not yet been finalized, leaving only half of theWBS truly defined. Your team creates definitive estimates for each of the defined workpackages. Then, you use historical information from similar projects to approximatethe costs for each undefined work package.

Estimate Costs InputsAccurate cost estimating requires numerous inputs.

Input DescriptionScope baseline The scope baseline includes the approved detailed project

scope statement along with its associated WBS and WBS dic-tionary.

• Project scope statement: Contains relevant information,such as project requirements, constraints, assumptions, anddeliverables.

• WBS: Provides the relationship between individual projectcomponents and deliverables.

• WBS dictionary: The WBS dictionary along with thestatements of work provide specific details of work activi-ties and deliverables.

Project schedule The project schedule includes start and finish dates for eachactivity, and details of resources along with the time neededfor them to complete project work that will incur project cost.

Human resource plan The human resource plan includes the components necessaryfor developing cost estimates such as the project staffingattributes, personnel rates, and its related rewards and recogni-tions.

Risk register Risks that have an impact on cost.

Enterprise environmental factors External factors, such as market trends, unavoidable budgetrestructuring, or commercial financial analysis may affect costestimation.

Organizational process assets Intra-organizational cost estimating policies or templates, teamexperience, or data from old projects.

Estimate Costs Tools and TechniquesThere are many tools and techniques that can be used to estimate cost.

Tools and Techniques DescriptionExpert judgment Variables such as labor costs, material costs, inflation, and risk factors

can influence cost estimates. Expert judgment along with historicalinformation will provide an insight on the information related to priorsimilar projects.

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Tools and Techniques DescriptionAnalogous estimating Uses the cost of a previous project with similar scope or activities to

predict the cost of future activities.

Parametric estimating Relies on the statistical relationship that exists between historical infor-mation and variables so as to arrive at an estimate for parameters suchas duration and cost.

Bottom-up estimating Estimates the cost of individual activities then “rolls up” to higher lev-els.

Three-point estimate Incorporates three types of estimates into a singular cost estimate sce-nario: most likely, optimistic, and pessimistic.

Reserve analysis Contingency funds that are built into a cost estimate for as-yetunknown costs. Reserve analyses run the risk of inflating a cost esti-mate.

Cost of Quality (COQ) A technique that focuses on the cost of ensured quality. Peripheralcosts include quality planning, control, and assurance.

Project management estimatingsoftware

Project management cost estimating software simplifies the cost esti-mation process, can accelerate estimation time, and is applicable tomost projects, regardless of scale or scope.

Vendor bid analysis Cost estimation is based on the responsive bids obtained from vendors.Results must often be revisited once contract approval has beengained.

Estimate Costs OutputsIn addition to cost estimates, there are several possible outputs from the estimate cost process.

Output DescriptionActivity cost estimates Provide estimates on probable costs necessary to finish project work. This

includes costs on direct labor, materials, equipment, facilities, services, infor-mation technology, contingency reserves, or indirect costs, if any.

Basis of estimates Supporting or additional information needed to justify the cost estimates.Details can include project scope, justification for the estimate, range of esti-mates, the assumptions, constraints, confidence level on the estimate, andexpected range of estimates.

Project document updates Updated project documents may include the risk register, human resourceplan, activity list, project schedule, and training plans.

Common Estimate TypesThis table describes some common estimate types and their associated degrees of accuracy.

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Type or Level of Accuracy Description or Accuracy RatingRough Order of Magnitude (ROM) Generally made early in the project. Developed without basis

of detailed data and often based on very high level historicaldata, expert judgment, or a costing model. Accuracy: -50 per-cent to +100 percent.

Budgetary Often used for appropriation purposes. Accuracy: -10 to +25percent.

Range of estimate Often used as an alternative to ROM where the accuracy of theestimate is not well known. So, rather than $10M ±30 percent,the estimate could be stated as $7M to $13M. Accuracy: ± 35percent.

Approximate estimate Based on more information than ROM estimates, but still lacksthe detail required for high accuracy. May be possible if theproject is similar to previous ones with reliable historical datafor costing or where a proven costing model is applicable.Accuracy: ± 15 percent.

Definitive estimate (or “control” or“detailed”)

Based on detailed information about the project work. Devel-oped by estimating the cost for each work package in theWBS. Accuracy: - 5 percent to + 10 percent.

Phased estimate (or “rolling wave” or“moving window”)

Allows the use of ROM or approximate estimates for somelater parts of the work, while work that must be done earlier inthe project life cycle is estimated at the definitive level. Accu-racy: ± 5 percent to ± 15 percent in the window closest topresent time; ± 35 percent farther in the future.

Analogous EstimatingDefinition:

Analogous estimating, or top-down estimating, is a method of cost estimating in whichmanagers use their experience, historical information from similar projects, and expertjudgment to determine the total project cost or time estimate. The resulting total is thenapportioned across the major categories of project work. Estimates are generated forthe top levels of the WBS and then apportioned downward through the levels of theWBS.

Analogous cost estimating is used when:

• You have a limited amount of detailed information about the project.

• You have a similar project to use for comparison.

• Those preparing the estimates have the requisite expertise.

Example: Analogous Estimating for a Web-Design ProjectA project manager for a web-design firm might use analogous estimating to producecost and time estimates for new accounts. He would base their estimates on past expe-rience and expert judgment. If several other similar sites, each of which included fivepages and basic functionality, each took approximately 15 hours to develop, then hecould fairly estimate that a site with 10 pages would require 30 hours of developmenttime.

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Bottom-Up EstimatingDefinition:

Bottom-up estimating is a method of estimating the cost for each work package in theWBS. The estimates are then rolled up or aggregated for progressively higher levelswithin the WBS. The project manager reviews the estimate figures and adds therequired overhead estimates to compile the total project cost. Bottom-up estimating isthe most accurate method but it is also the most challenging, costly, and time consum-ing.

Use bottom-up estimating later in the project life cycle, when:

• More detail is available about the work packages.

• You need more accurate estimates.

• You have the time to invest in making the estimates.

You should also use bottom-up estimating for work packages with the highest level ofuncertainty associated with cost. Make sure you weigh the additional accuracy pro-vided by bottom-up estimating against the additional cost of making the estimates.

Example: Bottom-Up Estimating for a Complex ProjectBottom-up estimating is best used to reach a very accurate estimate on a complexproject, such as a caterer submitting a bid to a client for a large corporate event. Thecaterer would be able to use the bottom-up estimating technique based on a detailedWBS, which would include dinner (decomposed by the cost of food and drink, rentalcosts for the conference room, table and chairs, linens and glassware) and so on. Theestimate for each work package would be rolled up until the caterer reached one accu-rate cost estimate for the event.

Parametric EstimatingDefinition:

Parametric estimating is a technique used to predict total project costs by using theproject’s characteristics in a mathematical model. It requires the project manager to doa statistical analysis using historical information about scope, cost, budget, and dura-tion. The accuracy of a parametric estimate will only be as good as the accuracy of thedata used in it.

Example: Parametric Estimating Technique

Figure 5-3: A sample of parametric estimating.

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Estimating Techniques Advantages andDisadvantagesThere are benefits and drawbacks to using different estimating techniques.

Technique Advantages and DisadvantagesAnalogous estimating Can ensure no work is inadvertently omitted from work estimates. Can

sometimes be difficult for lower-level managers to apportion cost esti-mates.

Bottom-up estimating Is very accurate and gives lower-level managers more responsibility. Maybe very time consuming and can be used only after the WBS has beenwell-defined.

Parametric estimating Is not time consuming. May be inaccurate, depending on the integrity ofthe historical information used.

How to Estimate Project CostsAccurately estimating project costs will avoid overruns and unforeseen expenditures. Makinggood cost estimates will help you to create a strong cost baseline, which will ultimately beused for measuring project cost performance.

Guidelines:To develop accurate cost estimates, follow these guidelines:

• Involve the work package owners.

— When possible, the cost figures that go into the cost estimates for individualwork packages should be provided by those who will actually provide theresources. As always, it is the people who will do the work, provide the ser-vice, or supply the material that can best estimate what the associated costswill be. It is the project manager’s responsibility to compile these cost fig-ures into realistic estimates.

— For some projects, though, the project manager will be solely responsible forgenerating the cost estimates. This may be the case for:

• Small projects in which the project manager is very familiar with theactivities required.

• Projects with very well-defined resource requirements.

• Projects that are very similar to past projects for which the costs arewell documented.

— Even in such cases, the project manager may want to do a quick realitycheck with the resource supplier to make sure no incorrect assumptions havebeen made.

• Gather any relevant input information that may help you prepare the estimates,such as estimating publications and resource rates.

• Determine which estimating technique to use.

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— Use analogous estimating when you have a limited amount of detailed infor-mation about the project, you have a similar project to use for comparison,and the work package owners preparing the estimates have the requisiteexpertise.

— Use parametric estimating to estimate work packages when you have reliableparametric models and the work conforms closely to those models.

— Use bottom-up estimating later in the project life cycle, when more detail isavailable about the work packages, you need more accurate estimates, andyou have the time to invest in making the estimates. Also use bottom-up esti-mating for work packages with the highest level of uncertainty or riskassociated with cost. Make sure you weigh the additional accuracy providedby bottom-up estimating against the additional cost of making the estimates.

— Use a combination of estimating techniques when you have a combination ofcircumstances for different deliverables on the WBS.

• Look for alternative costing options. Some options you might explore couldinclude:

— Using stock components versus custom-made.

— Stretching the duration of an activity to eliminate overtime charges.

— Leasing versus purchasing of capital equipment.

— Outsourcing as opposed to handling the work in-house.

• Determine the units of measure that will be used.

— Estimates should all be in the same unit of measure (usually monetary).

— Units must be clearly defined and easily interpreted.

• Consider possible risks that may impact cost.

• Ensure that all cost estimates are assigned to the appropriate account, according tothe chart of accounts.

• Make sure your cost estimates include the following key elements:

— Estimated costs for all resources that will be charged to the project. Use theWBS and resource requirements document to develop the estimates.

— The level of estimate (degree of certainty).

— A list of assumptions made when developing the estimates.

Example: Estimate Project Costs for a Website ProjectYou are estimating the costs of the company website project with a budget of$100,000. Although you have rough estimates from some of the work package owners,it is early in the project life cycle. Therefore, you decide to use analogous estimation.After researching outsourcing costs and consulting several financial references, youapportion the money across the major deliverables. Once you review the individualestimates to make sure they are assigned to the proper accounts, you submit your costestimate and a list of assumptions.

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DISCOVERY ACTIVITY 5-1Estimating Project Costs

Data Files:

• Public Meeting Estimate

Before You Begin:From the C:\085042Data\Developing Cost Estimates and Budgets folder, open the PublicMeeting Estimate document.

Scenario:You are an OGC project manager assigned to manage the launching of a new OGC store andrelated media campaign in Seattle, Washington. Earlier, you met with the senior executives andcore individuals of the Business Transformation group to discuss project cost estimates. Basedon their input, you allocated $63,000 of the $100 million total project budget to the MediaCampaign deliverable, which includes the Website, Public Meeting, and Information Packetswork packages. The $63,000 allocation was based on previous projects with a similar majordeliverable. Now that more information is known about the Media Campaign deliverable, youask the work package owners to provide detailed estimates. The estimates must include directlabor and overhead costs (burdened rate) for each in-house staff resource. The standard hourlyburdened rate for in-house staff is averaged to a flat $80.

The Website work package owner gave you an estimate that came to $15,000. The InformationPackets work package owner gave you an estimate of $18,000. The Public Meeting work pack-age owner summarizes her preliminary information for you in the Public Meeting Estimatedocument.

In the past, public meetings of this size have cost approximately $30,000.

1. Which estimating technique was used to come up with the $63,000 allocation to theMedia Campaign deliverable? Why?

2. How would you describe the level of accuracy for the $63,000 estimate?

3. What was the impact of involving the work package owners in preparing the cost esti-mates? Why?

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4. Which estimating technique was used when you asked the work package owners fortheir estimates?

5. What technique would you use to estimate the Conduct Planning Meetings activity?Why?

6. What are the benefits of the parametric modeling technique?

7. What is the estimated cost of the Conduct Planning Meetings activity?

8. Are there activities in the work package for which you will use more than one estimat-ing technique? Why?

9. Using the information in Public Meeting Estimate document, estimate the cost of eachof the activities.

10. What is your total cost estimate for the Public Meeting work package?

11. What is the level of your cost estimate now?

12. Do you need to take any action regarding your preliminary estimate of $63,000 for theMedia Campaign deliverable? If so, what action should you take?

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TOPIC BEstimate the Cost BaselineAfter estimating project costs, you need to consolidate the costs into a project budget and pre-pare the project cost baseline. In this topic, you will estimate the cost baseline.

Costs are one of the major constraints of any project, and your ability to manage the project’scosts will directly correlate to its success or defeat. You need to be able to employ soundmethodology when estimating costs and carefully monitor expenditures throughout the projectlife cycle. You need to be able to track project costs associated with each work package in theWBS at the points in the project life cycle when those costs will be incurred. By establishing acost baseline, you can track those project costs, set up the cash flow for the project, and mea-sure cost performance.

Cost BaselinesDefinition:

A cost baseline is a time-phased budget that will monitor and measure cost perfor-mance throughout the project life cycle. It is developed by adding the estimated costsof project components by period. The cost baseline typically includes a budget contin-gency to accommodate the risk of incurring unidentifiable, but normally occurringcosts, within the defined scope. Cost baselines will vary from project to project,depending on each project’s unique budget and schedule.

Once the baseline is established, the cost becomes a commitment from the project manager’s perspec-tive. The project manager should try to closely match the project’s committed funds to the baseline,from a timing perspective.

Example: Cost Performance BaselineMany project management software packages can create an S-curve of the costbaseline for you; a generic example of a cost baseline displayed in an S-curve isshown here. Cost is on the Y axis and time is on the X axis. Developed by totaling theestimated project costs by period, this cost performance baseline shows how the cumu-lative planned project costs are distributed across the project’s duration.

Figure 5-4: A generic cost baseline shown as an S-curve.

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The Determine Budget ProcessDetermine budget is the process of allocating the overall cost estimates to individual activitiesor work packages across the project life cycle. The purpose of cost budgeting is to establish abudget as well as a cost baseline for measuring the project’s cost performance.

Figure 5-5: The determine budget process.

Example: Cost Budgeting by Aggregated CostMost cost estimates are derived at the activity level. One example of cost budgetingrequires project managers to add up those estimated costs for activities to derive a costestimate at the work package level. This is also referred to as the aggregated cost.Those costs are aggregated until the entire work package has an estimated budget, andthen the process is repeated for each work package. Then, each work package costbudget is aggregated to the next highest level of the WBS. The process is iterated untilthe top of the WBS is reached and a single cost budget figure for the whole isobtained.

Determine Budget InputsThere are numerous inputs for accurate cost budgeting.

Input DescriptionActivity cost estimates Cost estimates for each activity are added together to create an overall

cost estimate for the work package.

Basis of estimates Supporting information required to justify the activity cost estimatesshould be specified. Assumptions made to the addition or exclusion ofindirect project costs made to the project budget are to be mentioned inthe basis of estimates.

Scope baseline The scope baseline includes the approved detailed project scope state-ment along with its associated WBS and WBS dictionary.

• Project scope statement: May contain relevant funding constraints.

• WBS: Identifies project elements to which costs will be allocated.

• WBS dictionary: Identifies deliverables and describes the work thatwill be required to produce them.

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Input DescriptionProject schedule Has the start and finish dates, which are necessary to assign costs of

project components to the time period when cost is expected to beincurred.

Resource calendars Provides information relating to the resources. Availability of resourcesmay affect budgeting.

Contracts Relevant purchase costs will be detailed in contracts.

Organizational process assets Policies, procedures, and guidelines related to formal and informal costbudgeting, cost budgeting tools, and reporting methods.

Determine Budget Tools and TechniquesThere are some common tools and techniques used in the determine budget process.

Tools and Techniques DescriptionCost aggregation Activity costs are combined into work package costs, which are

then aggregated up the WBS until a single project cost is pro-duced.

Reserve analysis Contingency reserves may be necessary additions to the budget,allowing for unforeseen costs and setbacks.

Expert judgment Expertise provided by a group or individual who possesses spe-cialized education, knowledge, experience, skill, or training incost budgeting, such as people from other departments withinthe organization, consultants, stakeholders including customers,professional and technical associations, and industry groups.

Historical relationships Involves relationships that result in parametric or analogous esti-mates, which use project parameters to develop simple orcomplex mathematical models to calculate project costs. Thecost and accuracy of the parametric and analogous estimates willvary widely. They can be relied upon when the historical infor-mation used is accurate, parameters used are quantifiable, andwhen the models are scalable to be used for big or smallprojects or even in phases of a project.

Funding limit reconciliation If there are existing funding limits set by the organization orcustomer, the budget must be mapped accordingly.

Determine Budget OutputsThere are several useful outputs of the determine budget process.

Output DescriptionCost performance baseline The primary output of the determine budget process. It will be

used to monitor and measure cost performance for the durationof the project.

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Output DescriptionProject funding requirements Created from the cost baseline, these are built-in cost increments

that will allow for overruns and/or rapid progress on the project.

Project document updates Project documents that may need to be updated; includes riskregister, project schedule, and cost estimates.

Funding Limit ReconciliationDefinition:

Funding limit reconciliation is a method of adjusting, spending, scheduling, andresource allocation in order to bring expenditures into alignment with budgetary con-straints. Most budgets are created on the premise of steady incoming and outgoingflows. Large, sporadic expenditures are usually incompatible with organizational opera-tions. Therefore, funding limits are often in place to regulate the outgoing capital flowand to protect against over-spending.

Budgets must be reconciled with such limits. This will affect the scheduling of projectwork and possibly reshuffle WBS work packages entirely. The schedule, in turn, canaffect the distribution or acquisition of resources.

Example: Set Funding Limits for ProjectsCustomers set funding limits for large projects based on internal considerations such aswhen their fiscal years begin and end, and how healthy their cash flows are. A cus-tomer who wants to spread the costs of a project over two quarters might authorize$250,000 in spending during Quarter 1 and $350,000 during Quarter 2. In response,the project manager would need to align the resources, schedules, and activities so thatthe project work does not exceed those limits on funding.

Contingency AllowancesContingency allowances are additional funds that are sometimes built into cost estimates toallow for unanticipated events. Planning for contingency allowances for a project ensures thatthe project manager is able to manage unforeseen costs and expenditures.

Guidelines:When considering adding a contingency allowance to your budget:

• Avoid contingency on contingency. Based on the WBS input, make sure that thework packages do not already have a contingency amount tacked onto the basicestimate.

• Inform the project team. Let them know that the project will be managed againsta point estimate without contingency.

• As project manager, you must release contingency funds only through a closelycontrolled and well-documented process, which is typically included in the costmanagement plan. A contingency allowance is not to be used as a slush fundwithout controls.

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Example: Contingency Allowances for the Jazz FestivalThe city of Montreal hosts the world’s largest jazz festival every year, with thousandsof performances and more than two million attendees. Contingency allowances for thisevent might include funds to cover an unexpected problem, such as a cancellation by aheadlining act. Such a cancellation would force the festival to issue ticket refundswhile incurring overhead costs, including theater rental and advertising. Contingencyallowances would not be used for general operating support; if ticket sales failed tomeet expectations, for example.

Cost Assignment MethodsConsider the way costs are assigned when establishing the baseline; this is important becausethe cost should be earned or tracked in the same way it is assigned.

Cost Assignment Method Description50/50 percent rule 50 percent credit is given when the activity begins and 50 percent

credit is given when the work is completed. For example, if anactivity is budgeted to cost $3,000, the activity will receive theother $1,500 when the work is complete. The basic assumptionwhen using this rule is that activities are approximately the samesize. This same method can vary in the percentage values. Youcould also use a 25/75 or 75/25 rule, for instance. Some of thevariants to the 50/50 percent rule include 20/80 and the 0/100 rule.

Percentage complete rule Completion percentages are estimated and assessed at specifiedreporting intervals. This is perhaps the most commonly used rule.

Weighted milestones The total work package value is divided up and assigned to mile-stone intervals within the work package. Each milestone carries abudgeted value. The value is earned when the milestone isachieved. This method works well for long work packages withmultiple activities.

There are certain activities that are not measurable; for example, research-based activities. It becomes difficult toaccount for earned values for such activities. So to avoid non-measurability in such cases, the 50/50 rule is used.The moment activity starts, 50% work completion credit is given to the activity. However, no further credit isgiven until the activity is complete.

How to Estimate the Cost BaselineProcedure Reference: Estimate the Cost Baseline

To estimate a cost baseline:

1. Gather the inputs you will need to establish the baseline, such as the WBS,project schedule, cost estimates, and risk management plan.

2. Use the project schedule to determine when activities will be taking place.

3. Using one of the methods for assigning costs, allocate funds for each activity orwork package for the time period in which it will be taking place.

4. Consider adding in a contingency amount to accommodate the risk of incurringextra expenses.

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5. Total the costs for each time period.

6. Plot the costs for each period on a chart to create an S-curve of the baseline.

7. Publish and distribute the cost baseline to the appropriate project stakeholders.

DISCOVERY ACTIVITY 5-2Establishing a Cost Baseline

Data Files:

• Media Campaign

• PM Cost Estimate

• Public Meeting Estimate

• OGC_WBS

Before You Begin:From the C:\085042Data\Developing Cost Estimates and Budgets folder, open the MediaCampaign, PM Cost Estimate, OGC_WBS, and Public Meeting Estimate documents.

Scenario:You are ready to move forward with the public meeting work package for the Media Cam-paign deliverable for the Seattle Store project. The director of finance is ready to allocateproject funds but is interested in your cash flow. Before creating the cash flow document, youreview your notes from a recent meeting:

• Staffing arrangements must be made.

• Contracts for the venue must be completed.

• Five weeks before the event, a promotional newspaper ad will be purchased. Sub-sequent ads will be placed in the final week before the meeting.

• Planning meetings will be scheduled over the 10 weeks. The first one will happenright away, another at week four. The remaining meetings will occur at two-weekintervals until the event.

• A food budget that covers lunch at the first meeting and the third meeting must beset.

• The project schedule is 10 weeks.

• The cost of the event is $3,000.

1. Do you have all the necessary inputs to establish a cost baseline?

2. During what time period will the Public Meeting activities take place?

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3. What cost assignment method will you choose to allocate funds? Why?

4. What are the weekly cost estimates for the activities in the Public Meeting work pack-age? Refer to the Cost Estimates Per Week chart given below to estimate costs perweek and round up to the nearest thousand.

5. Will you include a contingency amount?

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6. How would you plot the estimates to create an S-curve? Use the graph to plot yourresults. Cost is on the y-axis and time is on the x-axis.

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TOPIC CReconcile Funding and CostsOnce costs are estimated, you need to verify that there is no discrepancy between the fundingcommitted and the costs of the work to be done. You want to be able to reconcile the fundingwith the actual costs to make sure that your project stays on track. In this topic, you will iden-tify methods of reconciling funding with costs.

The sponsor has planned to spend a certain amount of funding on your project and is expect-ing you to deliver the desired results on time and on budget. It is your responsibility to makesure that the sponsor’s expectations are in alignment with the reality of the cost of completingthe work, or to find an acceptable solution to funding constraints by making necessary adjust-ments to the budget and the schedule. Your ability to reconcile funding and costs will becritical to meet real-world project challenges like this.

How to Reconcile Funding and CostsFrequently, it is only at this point in a project, after you have established a cost baseline, thatfunding deficiencies become apparent. It is your responsibility as a project manager to recon-cile the costs with the funding that has been approved by the sponsor.

Guidelines:To reconcile funding and costs, follow these guidelines:

• Gather the materials you will need, including:

— The project budget and schedule.

— The project scope statement, which may contain information regarding fund-ing constraints.

— The cost estimation and activity cost estimates, so that you can monitorexpenditures against estimates.

— The WBS, so that you can monitor deliverables.

— Contracts, so that you can monitor the commitments and requirements thatmust be met.

• Map the project budget, scope statement, and schedule to the funding available.

— Make sure that the promised work and the promised funding are in align-ment.

— Review the project scope statement, making sure that the budget accounts forthe funding constraints.

— If there is already a clear disconnect between the work that has been prom-ised and the funding that has been allocated, you must alert the sponsor now.

— Identify alternatives. If funding deficiencies are apparent, look for sugges-tions of alternatives that the sponsor could agree to, which are typically areduction in scope, an increase in the budget, an extension of the schedule,or some combination of those.

• Involve the project sponsor.

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— Reconciliation requires good communication. Now is the time to discussfunding limitations, expectations, changes to the project scope, and optionsfor resource allocation and schedule revisions.

— Work with the sponsor on an ongoing basis from this point forward to adjustthe project’s scope and/or schedule and/or cost to be in line with the fundingthat the sponsor is willing to formally commit.

— Make sure that the sponsor is apprised of changes in resource allocation thatmay affect deliverables.

• Partner formally with the company’s financial decision makers.

— Discuss the initial project overall cost validation and mapping of financialtransactions for cash flow reasons.

— Discuss the on-going monitoring of the project’s financial performance toenhance the financial integrity of the project.

• Reconcile funding with costs on an iterative basis throughout the project. Manyproblems can be avoided through careful monitoring and adjusting resources inresponse to the changes that will arise.

• Actual costs may exceed the estimated costs during different time frames. Keepthe sponsor (and the external customer, if there is one) apprised of any additionalcosts that are incurred.

• Monitor spending.

— As work begins on the project, you will need to monitor expenditures both interms of cash and in terms of effort, or hours of labor.

— Monitor and document unexpected expenses as they arise, such as reworkthat may be required. Unexpected expenses will affect the budget and/orschedule, and must be discussed with the sponsor.

• Monitor the schedule. As work begins on the project, it will be your responsibilityto monitor the activities as they are completed or partially completed so that youcan identify and adjust for delays before they derail the project.

• Monitor the risks that have been identified for your project. Alert the sponsor ifthose risks become reality, so that appropriate changes can be made to the scopeor schedule. Make sure any risks that arise during reconciliation are reflected inan updated risk register.

Example: Reconcile Funding and Costs for Your CompanyA key decision maker at your company has an ambitious plan for a significant redesignof the company’s website. He wants the site to incorporate new functionality includingthe ability for customers to access your site and order products, view streaming videosabout your products, and access inventory. This is a dramatic change from the websiteyour company currently has. You collect the project budget, scope statement, andschedule, and compare those specifications to the funding that has been allocated.

Immediately, it becomes clear that the small amount of funding allocated is out of linewith the cost estimates received. The company has committed less than half theamount of funding that would be needed. You go directly to the project sponsor to dis-cuss the discrepancies and find alternative ways to reach the objectives of the project.Throughout the life cycle of the website redesign, you monitor spending closely, sinceit is clear that the sponsor’s ambitions threaten to overwhelm the available funding.

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DISCOVERY ACTIVITY 5-3Reconciling Funding and Costs

Scenario:As the project manager coordinating the launching of the new Seattle store, you have responsi-bility for the store’s grand opening and related advertisements. You have estimated the baselinecosts for the project, which are based in part on previous expenditures for other stores’ grandopenings in similar markets, and your estimate shows that the costs will exceed $2,500. Thefunding for this one project was set at $1,000 by the Finance Director. You are concerned thatthe senior executives’ expectations may not be in alignment with the reality of the cost ofcompleting all the work for this project.

1. The project scope statement specifies a specific number of ads to be placed in thenewspaper in the weeks leading up to the grand opening. You have researched thecost of ad space and you know that the sponsors’ requirements will exceed the fundingcommitment. How would you proceed?

2. Assume that you have no background in advertising or marketing. How could you goabout generating alternative ideas to suggest regarding less expensive advertisingoptions so that you can deliver the desired results within budget?

3. You need to partner formally with your company’s financial decision makers regardingthe costs of this project. Given the above scenario, what steps would you take to fur-ther this goal?

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4. The advertising agency that has been contracted to produce the ads for the Seattlestore’s grand opening has unexpectedly gone over budget. You receive an invoice thatexceeds their original estimate. How would you proceed?

Lesson 5 Follow-upIn this lesson, you identified methods of creating accurate cost estimates and the budgets thatwill guide all of the work done on your projects, so that you can effectively meet expectationsand deliver the desired results. Delivering projects on time and on budget is the cornerstone ofgood project management.

1. How do you think the ability to estimate costs effectively will improve your perfor-mance on the job?

2. How do you think incorporating good funding reconciliation practices helps completinga project within the allocated budget?

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Planning Project Quality,Staffing, andCommunications

In this lesson, you will plan project quality, staffing, and communications.

You will:

• Create a quality management plan.

• Document the project roles, responsibilities, and reporting relationships.

• Create a communications management plan.


LESSON 6

Lesson 6: Planning Project Quality, Staffing, and Communications 195


IntroductionYou developed project schedule and cost baselines and incorporated these essential planningdocuments into your project management plan. In this lesson, you will continue planning yourproject by focusing on the quality, human resource, and communications component processesin the planning process group. In this lesson, you will plan project quality, staffing, and com-munications.

As you continue your progressive elaboration of your project work, how you handle competingdemands for time, resources, and quality can have a significant impact on the success of yourproject. One of the ways that you can minimize potential resource conflicts, communicationissues, and misunderstood quality standards is to enlist the support of your project stakehold-ers, both internal and external, to help you create effective quality, staffing, andcommunications plans.

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TOPIC ACreate a Quality Management PlanYou developed project schedule and cost baselines, two of the three benchmarks for measuringproject success. In this topic, you’ll focus on quality, the third benchmark for measuringproject success. You will create a quality management plan.

What good is a project that is completed on time and within budget if the quality is inconsis-tent or even substandard? Clearly defining quality standards for project stakeholders ensures acommon understanding of how project quality will be measured and achieved.

QualityQuality is defined as the “totality of features and characteristics of a product or services thatbear on its ability to satisfy stated or implied needs.” In business, quality should be feasible,modifiable, and measurable.

This definition is provided by the International Organization for Standardization, ISO Standard 8402: Terms andDefinitions.

Quality Management PlansDefinition:

A quality management plan is a subsidiary of the project management plan. Itdescribes for project stakeholders the team’s approach to implementing the qualitypolicy; it explains how quality control and quality assurance will be performed. It maybe formal or informal, depending on the project’s requirements.

Example: Ensuring Quality in an Outsourced TaskA manufacturer of high-end clothing might seek to reduce costs by outsourcing someof its labor. The quality management plan would articulate exactly how quality controland assurance would be performed, to ensure that the new source of labor could meetthe company’s high standards. The quality management plan would identify whowould be responsible for quality control; how, when, and to what degree they wouldconduct inspections for quality; and how the team would respond to any quality issuesthat arose.

The Plan Quality ProcessPlan quality is the process of putting plans into place to ensure that a project will satisfy itsstated objectives or business needs. It must be performed regularly and concurrently with otherplanning processes to adjust for cost or time factors. It involves identifying the project’s qual-ity standard requirements, performing an analysis to determine how to satisfy those standards,and creating a quality management plan.

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Figure 6-2: The plan quality process.

Plan Quality InputsThere are several inputs for planning project quality.

Input DescriptionScope baseline Includes the scope statement, the WBS, and the WBS dictionary.

Stakeholder register Lists the stakeholders whose decisions can influence or impact vari-ous aspects of the project. It helps the project team to identify theinfluences of stakeholders on quality.

Cost performance baseline Describes the approved time phase that is used to measure andmonitor project cost performance.

Schedule baseline Describes the approved schedule performance measures with startand finish dates.

Risk register Documents information about opportunities and threats that mayinfluence the quality requirements.

Enterprise environmental factors Includes regulations, rules, standards, guidelines, and operating con-ditions that may affect the application area.

Organizational process assets Includes quality policies, procedures, guidelines, and historical infor-mation.

Plan Quality Tools and TechniquesVarious tools and techniques are used to plan project quality.

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Tools and Techniques DescriptionCost-benefit analysis Considers the tradeoffs and the benefit of meeting quality require-

ments of higher productivity and lower costs while increasingstakeholder satisfaction. The business case of each activity is used tocompare the cost of each step with its expected benefits.

Cost of Quality (COQ) Costs incurred by preventing non-conformance to requirements,appraising for conformance to requirements, and failing to meetrequirements (rework), internal or external.

Control charts Analyze the variability of a process or project activities over time.They can be used to monitor repetitive activities and help identify ifthe project management processes are under control.

Benchmarking Compares the quality of your project’s processes and systems tothose of other comparable groups, both internally and externally.

Design of Experiments (DOE) A statistical method of identifying the factors that may influencecertain product or process variables. During quality planning, DOEdetermines the number and type of tests to be used and their influ-ence on the cost of quality.

Statistical sampling Measures an entire population by studying a randomly selected partof the population.

Flowcharting Graphical representation of the relationships between process steps.It helps the project teams to identify potential problems and todevelop strategies for mitigating them.

Proprietary quality managementmethodologies

A set of available methodologies invented over a period of time. Forexample, Six Sigma, Lean Six Sigma, and Quality Function Deploy-ment are methodologies that may facilitate effective project qualityplanning.

Additional quality planning tools Additional quality planning tools include brainstorming, affinity dia-grams, matrix diagrams, prioritization matrices, flowcharts, andothers that help define and plan effective quality management activi-ties.

Plan Quality OutputsThere are several quality planning outputs that a project manager uses.

Output DescriptionQuality management plan Describes the project management team’s approach to implementing

the quality policy.

Quality metrics Specifically describes what something is and how the quality controlprocess measures it.

Quality checklists Job aids that prompt employees to perform activities according to aconsistent standard.

Process improvement plan Describes the project management team’s approach to identifyunnecessary activity, including process boundaries indicating allaspects of a process, process configuration flowcharting, processinterfaces, metrics for process control, and improvement guidelines.

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Output DescriptionProject document updates Documents that are updated during the process are the stakeholder

register, Responsibility Assignment Matrix (RAM), cost baseline,and the SOW, among others.

Process Improvement PlanningProcess improvement planning is the process of analyzing and identifying areas of improve-ment in project processes and enumerating an action plan based on the project goals andidentified issues. The process involves:

• Describing operational theories and project roles and responsibilities.

• Identifying long- and short-term goals.

• Describing process improvement objectives and activities.

• Identifying risks and resource requirements.

• Determining process improvement activities.

• Creating a process improvement plan.

• Receiving approval from stakeholders and senior managers.

• Executing the process improvement plan.

Process Improvement PlansDefinition:

The process improvement plan is a subsidiary plan of the project management plan thatdescribes the steps to analyze and determine areas of improvements in project process.The areas of process improvements include process boundaries, process configuration,process metrics, and targets for improved performance.

Example: Process Improvement Plan at a Software Development CompanySharon Parker is a project manager at a software development company. When manag-ing one of the high-priority projects, Sharon realized that the product testing processwas taking longer than required. She decided to review the existing process followedby her project. The process of testing software involves senior developer review at theend of each phase, unit testing, systems testing, user acceptance testing, SME review,and customer review.

Sharon discussed the issue with the process managers and other senior managers. Theyagreed with Sharon and appointed her as the project manager to handle the processimprovement plan initiative. She created a process improvement plan to reduce thetime taken to test the product. The plan included information on the long- and short-term goals, purpose of goal, actions to be taken, priority, time estimate, and who willperform which activity while improving the process.

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Figure 6-3: A record of changes included in the process improvement plan.

Total Quality Management (TQM)Definition:

Total Quality Management (TQM) is an approach to improve business results throughan emphasis on customer satisfaction, employee development, and processes ratherthan functions. TQM should be viewed as a long-term, ongoing process rather than aone-time event.

Example: Approaches to Total Quality ManagementTotal quality management has been implemented in varying ways by different qualitytheorists.

Theorist ApproachW. Edwards Deming Focuses on continuous process improvement in which quality

must be continuously improved in order to meet customerneeds.

Joseph Juran Breaks quality management into quality planning, control, andimprovement. Quality improvement leads to breakthroughimprovement, meaning improvement that raises the qualitybar to an unprecedented level.

Philip Crosby His approach is based on four absolutes:

— Quality is conformance to requirements rather than a mea-sure of how good it is.

— Quality is caused by prevention rather than inspection.

— Everyone in the company must work to a standard of zerodefects.

— Quality can be measured by determining the cost of qual-ity.

Genichi Taguchi Emphasizes that quality should be designed into the productso that factors that cause variation can be identified and con-trolled.

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Theorist ApproachBill Smith (Six Sigma) This approach to TQM for the manufacturing sector empha-

sizes responding to customer needs and improving processesby systematically removing defects. Originally developed by aMotorola, Inc. engineer named Bill Smith, Six Sigma is nowclosely associated with General Electric, Inc. and other majorindustrial companies such as Eastman Kodak.

Further ReadingAs part of your quest to further your project management skills, you should considerinvestigating some of the major motivational and leadership theories that are a key partof serious project management efforts today. Many organizations are increasingly usingproject-based continuous improvement approaches; the work of W. Edwards Demingprovided the foundation for this effort. Deming’s “14 Points for Management,”included in his book, The New Economics for Industry, Government, Education,provides a systematic and pragmatic approach to transforming a western style of man-agement in industry, education, or government to one of optimization. For furtherreading, see Out of the Crisis by W. Edwards Deming.

Standards and RegulationsDefinition:

Standards are voluntary guidelines or characteristics that have been approved by a rec-ognized body of experts such as the International Organization for Standardization(ISO). In some cases, the standards body will provide certification that suppliers con-form to the requirements of their standards. Often, the conformance to standards is acustomer requirement.

Regulations are compliance-mandatory characteristics for specific products, services, orprocesses. Standards often start out as accepted or de facto best practices describing apreferred approach, and may later become de jure regulations, such as using the criticalpath method in scheduling major construction projects.

There are also de facto standards that aren’t approved by a standards body. For example, TCP/IP is thede facto standard protocol for all modern computer networks. It is the approved standard for theInternet, but everyone uses it on private networks now as well.

Example: Standards and Regulations in Toy ManufacturingIn the U.S., consumer-safety legislation governs the manufacturing of products, includ-ing toys. In 2007, a recall of millions of toys produced with lead-based paint ledlawmakers to introduce stricter federal regulations, with criminal penalties for non-compliance. But major U.S. toy retailers, in response to public demand, went further;they forced their suppliers to meet even tougher standards for lead in surface paintthan the government had required.

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The ISO 9000 SeriesThe ISO 9000 Series is a quality system standard that is applicable to any product, service, orprocess in the world. It was developed by ISO, which is a consortium of approximately 100 ofthe world’s industrial nations. There are limits to the certification, which does not guaranteethat an organization will produce quality products or services; it simply confirms that appropri-ate systems are in place. Subsections of the standard address particular industries or products.

For more information about the ISO 9000 Series, you may visit the http://www.iso.org/iso/home.htm website.

Cost of QualityCost of quality refers to the total cost of effort needed to achieve an acceptable level of qualityin the project’s product or service. Those costs include all the work necessary to ensure con-formance and all the work performed as a result of non-conformance to requirements.Prevention costs, appraisal costs, and failure costs combine to form the cost of quality.

Types of CostThe four types of cost associated with quality are prevention costs, appraisal costs,internal failure costs, and external failure costs. Prevention and appraisal costs arecalled conformance costs—amount spent to avoid failures. Internal and external failurecosts are called nonconformance costs—amount spent to rectify errors.

Type of Cost Description ExamplePrevention costs The up-front costs of pro-

grams or processes needed tomeet customer requirements,or to design in quality.

• Design plans

• Quality plans

• Employee and customertraining

• Process evaluations andimprovements

• Vendor surveys

• Other related preventiveactivities

Appraisal costs The costs associated withevaluating whether the pro-grams or processes meetrequirements.

• Inspections

• Testing

• Design reviews

• Destructive testing loss

Internal failure costs The costs associated withmaking the product or serviceacceptable to the customerafter it fails internal testingand before it’s delivered tothe customer.

• Scrap or rejects

• Design flaws

• Rework or repair

• Defect evaluation

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Type of Cost Description ExampleExternal failure costs The costs resulting from

rejection of the product orservice by the customer.

• Product returns

• Liabilities

• Evaluation of customercomplaints

• Maintenance costs

• Corrective action

• Loss of contract

ChecklistsDefinition:

A checklist is a job aid that prompts employees to perform activities according to aconsistent quality standard. Items on checklists are phrased as either imperatives, suchas “Make sure you save this file correctly,” or questions, such as “Does this imagematch the description in the database?”

Checklists can be simple or complex and may range in detail depending on the experi-ence and skill level of the employees and the complexity of the situation.

Example: An Image Quality ChecklistA checklist for printing images is shown. Note that the checklist prompts the graphicartist to create images to a consistent quality standard. The items on the list arephrased as interrogatives. If the artist cannot answer all the questions in the affirmative,the image should not be handed off.

Obtain a printout of the image specifications from the graphics database. Use this checklist toensure that the images are ready to be handed off to the programmer.

# Item Y/N

1 Does the image match thedescription in the database?

2 Does the style meet the speci-fications set for the course orlesson?

3 Does the quality of the imagemeet the standards set for thecourse?

4 Is the image size correct?

5 Is the image named correctly?

6 Is the correct border on theimage?

7 Is the image in the correctpalette?

8 Is the opacity correct (trans-parent or opaque)?

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9 Is the bit-depth correct?

10 Is the resolution correct?

11 Does it have the correctextension?

12 Have all stray pixels beencleaned up?

FlowchartsDefinition:

A flowchart is a diagram that shows the relationships of various elements in a systemor process. The two most widely used flowcharting techniques are the cause-and-effectdiagram and the process or system flowchart. Flowcharting techniques can assist theteam’s efforts in identifying potential quality problems and the possible effects of thoseproblems.

Example: A Flowchart

Figure 6-4: A process flowchart.

Process FlowchartsThe process flowchart or system flowchart shows the sequence of events and flow ofinputs and outputs between elements in a process or system. There is a definite begin-ning and end along with decision points clearly called out with the actions to takebased on the result of each decision.

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Cause-and-Effect DiagramsA cause-and-effect diagram, also called the Ishikawa diagram or fishbone diagram, is atype of flowchart organized by category. The cause-and-effect diagram provides astructured method to identify and analyze potential causes of problems in a process orsystem. This method organizes potential causes of problems into defined categories.Using these defined categories promotes the identification of potential causes. Somecommon categories include, but are not limited to:

• Material

• Method

• Environment

• Personnel

• Measurement

• Energy

In the diagram below, each category shows potential snags that might lead to the rejec-tion of images.

Figure 6-5: A cause-and-effect diagram.

Control ChartsDefinition:

Control charts are graphs used to analyze and communicate the variability of a processor project activity over time. Control charts help to show the potential capability of theprocess and also suggest the range of variability in the process. This range of variabil-ity can assist a project manager in determining if the variance is caused by common orassignable sources. If the process variability fluctuates around the average, or statisticalmean, the process shows very little variability and is said to be stable.

The components of a control chart include the process mean, the upper control limit(UCL), and the lower control limit (LCL). The process mean is determined by takingsamples from the actual process and calculating the statistical mean. As additionalsamples are taken and tested, they are evaluated in terms of standard deviations fromthe process mean. For most organizations and projects, the UCL will be three standarddeviations above the mean, while the LCL will be three standard deviations below themean.

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Example: Control Charts Indicating Variance InstabilityThese control charts have measurements that indicate instability because they eachhave measurements that exceed the range between the UCL and LCL. Analysis of thefirst chart shows that there are more than seven consecutive points above the mean. Onthe second chart, more than seven consecutive points are below the mean. This seven-point variance is called the seven-run rule.

Figure 6-6: Variability above the upper control limit (UCL).

Figure 6-7: Variability below the lower control limit (LCL).

Seven-Run RulesRun rules are used to indicate situations that are out-of-statistical control. When sevenor more consecutive points lie on one side of the mean, it indicates that there shouldbe a shift in the mean.

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BenchmarkingDefinition:

Benchmarking addresses the evaluation of a group’s business or project practices incomparison to those of other groups. It is used to identify the best practices in order tomeet or exceed them. Benchmarking can be conducted between identical processes in avariety of ways: in similar industries, in dissimilar industries, and with internal or withexternal organizational areas.

Example: Benchmarking the Espresso-Based BeveragesTwenty percent of Americans drink espresso-based beverages every day, and the $12billion premium coffee market is expected to grow significantly in the next severalyears. Several leading fast-food retailers have benchmarked the performance of Seattle-based Starbucks Corp., the world’s largest chain of coffee houses. McDonald’s,Dunkin’ Donuts, and Tim Horton’s have expanded their menus of premium coffees tocompete in this arena and offer similar, high quality coffee products.

Benchmarking Purpose and ResultsBenchmarking is commonly used to determine:

• The products or services to offer and the features that should be included.

• The processes used by other groups to achieve customer satisfaction.

• The metrics or goals used to measure the processes or products that achieve cus-tomer satisfaction.

Design of Experiments (DOE)Definition:

Design of Experiments (DOE) is a technique to systematically identify varying levelsof independent variables. DOE can determine:

• Which variable has the greatest effect.

• What the relationship is between each variable and the customer-focused qualityspecifications.

• What the best value is for each variable, ensuring optimal quality or value.

When done properly, DOE can result in significant improvements to products and pro-cesses, including shorter development cycles, more robust products, and costreductions.

Example: Design of Experiments for Producing a New Style of JarA cannery was about to put a new style of jar into production. As development of thepackaging moved forward, questions arose regarding the ability of the in-line capper todeliver the precise amount of torque when rotating the lid onto the new jar. Early test-ing demonstrated that lid torque less than three inch pounds would result in a leakypackage. Torque greater than eight inch pounds would mar the finish on the screw-onlid.

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The project team given the task of determining the optimum torque requirement for thenew packaging used a DOE software program to generate statistical information abouthow torque was affected by other interconnected factors. Two of the factors testedwere spindle speed and conveyor speed. The results indicated that these speeds had thegreatest effect on lid torque.

Armed with this information, it was a simple exercise in determining adjustments tothese settings that would result in consistent optimum torque. The experimentemployed by the project team was successful because it was able to identify the vari-able that had the greatest effect and its relationship to the quality specification of lidtorque.

How to Create a Quality Management PlanCreating a quality management plan will ensure that the organizational structure, responsibili-ties, procedures, processes, and resources are in place to implement quality management.

Guidelines:To create an appropriate quality management plan, follow these guidelines:

• Review the organization’s quality policy and determine how your project teamwill implement the policy.

— How will your team identify potential quality problems and their potentialimpact on the quality of the project’s product, service, systems, or processes?Will you use particular flowcharting methods, benchmarking, design ofexperiments, or other techniques?

— Are there any standards and regulations that are applicable to your project?

— Are there any activities or components that require the development of opera-tional definitions to provide a common understanding of the project’s qualitystandards? If so, who is responsible for developing them?

— Does your organization have any standard checklists that can be modified, orused as is, to prompt employees to perform certain activities according to aspecific quality standard? If not, should checklists be developed? Who isresponsible for developing them? What are the conditions under which theyshould be developed?

• Review the product description to identify customer/stakeholder quality require-ments.

• Determine the cost of quality trade-offs.

— How will your team “design in” quality to avoid expensive rework to bringthe quality back into conformance?

— Are the proposed processes and systems worth the cost of implementingthem?

• Review the quality management plan and make sure it:

— Describes the project management team’s approach to implementing its qual-ity policy (quality assurance, quality control, and quality improvementapproaches).

— Describes the resources required to implement quality management.

— Includes quality management roles and responsibilities for the project.

— Is as detailed and formal as required, based on the quality needs of theproject.

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— Includes how customer satisfaction will be measured and managed.

Example: Quality Management PlanThe project team is given the task of creating a quality management plan. The teamdetermines that the company has an adequate quality policy. However, it does notaddress potential problems. The team assigns roles and responsibilities to the individu-als responsible for project quality and includes a project quality assurance coordinator.

The team reviews the baseline performance requirements and customer-requested qual-ity requirements. They determine a cost-effective quality trade-off would be to repeatthe design process and peer plan reviews. Finally, the organization’s quality manual isreferenced in regard to approved approaches to each relevant quality assurance andcontrol item, including specifications, change control, checking criteria, and controllogs.

DISCOVERY ACTIVITY 6-1Creating a Quality Management Plan

Scenario:As the project manager, you are responsible for formulating a quality management plan for thePM Training Roll-Out. You have listed the primary project objectives in order to develop aquality management plan.

The PMO authorized this project in order to enhance the project managers’ tracking and sched-uling capabilities during the business transformation program. The PMO identified that allproject managers should be able to:

• Develop a WBS that includes summary, milestones, and detailed activities.

• Allocate resources in their project using an OGC resource pool.

• Include activity costs and resource costs.

• Set activities as effort driven, fixed duration, or fixed units.

• List and document all project constraints.

• Identify the critical path.

• Set a baseline for their project.

• Set interim baselines when necessary.

• Track the completion of activities by resource work and/or by percent complete.

• Use existing software filters and create new filters to print reports: Project Status,Resource Allocation, Budget, and Cash Flow.

Other project objectives include:

• Confirming that all the project managers will use the project software during thebusiness transformation program.

• Developing an assessment by a training provider that addresses the PMO’s list oftracking and scheduling activities.

• All managers passing the post-assessment at 75% or above.

• The selected training vendor providing follow-up support after training.

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1. Based on the scenario, which documents would you have used to identify the primaryproject objectives for this project quality plan?

a) OGC quality policies and procedures

b) Project scope statement


d) Project management plan

2. True or False? The process improvement plan helps remove activities that do not con-tribute to producing products of required quality.

True

False

3. Which tool can be used to monitor repetitive activities and help identify if the projectmanagement processes are under control?

a) Benchmarking

b) Control charts

c) Flowcharting

d) Cost-benefit analysis

4. The PMO has identified a list of objectives for all project managers in the use of thesoftware. What would you include in your quality plan that will address the level ofquality achieved by each project manager?

5. The PMO has provided a complete list of activities as expected improvements aftertraining. What could your team use as a way to determine the degree of improvementafter training?

6. What are some ways that you could identify the level of quality of the vendor instruc-tor?

7. How will you measure the quality of support after training?

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TOPIC BDocument the Project Roles,Responsibilities, and ReportingRelationshipsNow that you have created a quality management plan for your project and put plans intoplace to ensure that standards for quality will be met and measured, you are ready to moveforward with the next element of good planning, which is documenting how people on yourproject will interact. In this topic, you will document the roles, responsibilities, and reportingrelationships for the people working on your project.

You want to take steps to make sure that everyone working on your project knows what theirroles and duties are and that those responsibilities are clearly articulated and documented. Bycarefully orchestrating the roles and responsibilities of everyone involved on your project, andmaking sure that those relationships are documented, you will effectively ensure that everyoneon the project has a clear understanding of their duties. This will help eliminate confusion andmisunderstandings throughout the life cycle of the project, and will help everyone feel thatthey are part of a smoothly running operation.

The Develop Human Resource Plan ProcessDevelop human resource plan is the process of identifying, documenting, and assigning projectroles, responsibilities, and reporting relationships. It is commonly performed during earlyproject phases.

The process involves:

• Creating a human resource plan that documents the human resource skills required tocomplete the project successfully.

• Identifying training requirements, team-building strategies, and planning recognition andrewards systems.

• Planning for the availability of resources with a rare blend of skills and of those workingon multiple projects.

The develop human resource plan process tries to make the most effective use of peopleinvolved in the project by first determining project interfaces, staffing requirements, and con-straints. Factors such as project costs, schedules, risks, and quality may also be affected whendeveloping the human resource plan, which should include these issues and a plan for provid-ing appropriate solutions.

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Figure 6-8: The develop human resource plan process.

Develop Human Resource Plan InputsSeveral inputs are required for planning human resources.

Input DescriptionActivity resource requirements List the required people and competencies necessary for each

activity, which will be progressively elaborated when developingthe human resource plan.

Enterprise environmental factors Include organizational structure and culture, marketplace scenario,and existing human resources.

Organizational process assets Items from previous projects such as organizational processes,policies, and structures; lessons learned; templates; and checklistshelp shorten planning time and ensure nothing is overlooked.

Develop Human Resource Plan Tools andTechniquesDevelop human resource plan tools and techniques include organization charts and positiondescriptions, networking, and organizational theory.

Tools and Techniques DescriptionOrganization charts and positiondescriptions

Document team members’ roles and responsibilities so each workpackage has a clear owner and each team member understands his orher role using hierarchical, matrix, and text-oriented formats. Subsid-iary project plans may list resource roles as well.

Networking Formal and informal interactions such as correspondence, meetings,and conversations are networking tools to understand how interper-sonal factors impact staffing options. Networking also enhances theprofessional project management practices of a project manager atdifferent phases of a project.

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Tools and Techniques DescriptionOrganizational theory Provides information on the organization of work processes through,

among other things, organizational structure, power, culture, andbehavior of people. The project manager must understand how dif-ferent organizational structures influence or impact human resourcesdifferently.

Develop Human Resource Plan OutputsThe human resource plan is the only output for the develop human resource plan process.

Output DescriptionHuman resource plan Describes how human resources working on the project must be identi-

fied, managed, controlled, and released after the end of the project. Thehuman resource plan should be reviewed throughout the project lifecycle to ensure applicability and validity. It includes:

• Roles and responsibilities: Determined for each element of theproject’s scope of work. Typically done with a ResponsibilityAssignment Matrix (RAM). Some of the factors that need to be ful-filled when determining roles and responsibilities include role,authority, responsibility, and competency.

• Project organization charts: Illustrate the project’s organizationalstructure.

• Staffing management plan: Describes the project managementteam’s approach to managing the increase and decrease of projectstaff across the project life cycle.

Organizational StructuresAn organizational structure dictates how the various groups and individuals within the organi-zation interrelate. The organizational structure also impacts how the project team is structured.The type of organizational structure often limits the availability of resources and the termsunder which those resources are available to the project.

Figure 6-9: A sample organizational structure.

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Organizational Structure TypesThere are four types of organizational structures: functional, projectized, matrix, and compos-ite.

Organizational Structure CharacteristicsFunctional organization • Each department is responsible for carrying out a specific, simi-

lar set of activities.

• Multiple people perform each type of activity.

• Reporting is hierarchical, with each individual reporting to asingle manager.

• The project manager’s authority is low, relative to the functionalmanager’s authority.

Projectized organization • The project manager and a core project team operate as a com-pletely separate organizational unit within the parentorganization.

• Core team members are typically responsible for the work ofextended team members in their functional area.

• Team members are often co-located.

• The project manager typically reports to a program manager andhas a significant amount of authority and independence.

• Some organizations may contain their own support systems,such as a separate procurement or personnel department, orshare support systems with the parent organization.

Matrix organization • A blend of functional and projectized structures in which indi-viduals still report upwards in the functional hierarchy, but theyalso report horizontally to one or more project managers.

• The matrixed reporting scheme may be a permanent one.

• May be characterized as weak, balanced, or strong, dependingon the relative authority of the project manager to the functionalmanager. An organization is said to have a strong matrix whenthe project manager’s authority is higher than that of the func-tional manager.

Composite organization Most modern organizations involve all the above structures at vari-ous levels. It is a combination of all the other types oforganizations.

Organization ChartsDefinition:

An organization chart is a visual representation of a project’s organizational structure.Its purpose is to show both the reporting relationships within the project and theproject’s relationship to the parent organization.

The complexity of the organization chart will vary with the complexity of the project.Finally, the organization chart must clearly assign project tasks to team members.

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A traditional functional organization chart is hierarchical and organized by department.In a projectized organization chart, the functional team members report directly to theproject managers rather than the functional managers. An organization chart for a com-pany using the matrix structure shows that the team members report vertically to afunctional manager and horizontally to a project manager.

Position DescriptionsTo effectively create an organization chart, each team member must have a positiondescription that clearly delineates what his or her responsibilities are. Templates andchecklists, often obtainable from human resources, are good tools for creating positiondescriptions.

Example: Different Organization Charts

Figure 6-10: A functional organization chart.

Figure 6-11: A projectized organization chart.

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Figure 6-12: A matrix organization chart.

Relative Authority in Organizational StructuresDefinition:

Relative authority refers to the project manager’s authority relative to the functionalmanager’s authority over the project and the project team. In a purely functional orga-nizational structure, the project manager’s authority is low relative to the functionalmanager. Conversely, in the projectized organizational structure, the opposite is true.

Example: Relative Authority in Different OrganizationsAn auto manufacturing company has a functional organizational structure, and its man-agement is hierarchical. A project manager coordinating the company’s participation ina trade show will have engineers, designers, and sales and marketing executivesassigned to the project, but he does not have functional authority over those resources;they all report to their functional managers in their own departments. His authority islow relative to the functional managers’ authority. Conversely, a web design companyhas a projectized organizational structure, with independent project teams workingindependently on their own projects. A project manager in this organization has muchmore autonomy and authority.

Project InterfacesProject interfaces are the various reporting relationships that occur within the project as wellas the boundaries of the project.

Interface DescriptionOrganizational Reporting relationships among different organizational units. They may be

internal or external to the parent organization and include interfaces betweenthe project team, upper management, other functional managers that may needto support the team, and even the organization’s customers.

Technical Reporting relationships among technical disciplines on the project that canoccur during a phase or during the transition between phases. They reflectinformal and formal relationships with people on the project team as well asoutside of the team.

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Interface DescriptionInterpersonal Formal and informal reporting relationships among individuals working on the

project, whether internally or externally.

Logistical Relationships between project team members who are distributed across differ-ent buildings, countries, and time zones.

Political Goals and expectations of internal and external project stakeholders and theirrelationships with the projects.

The Responsibility Assignment Matrix (RAM)Definition:

A Responsibility Assignment Matrix (RAM) is a chart that links key project stakehold-ers to specific project deliverables or activities by assigning responsibility to anindividual stakeholder for each element of work. Some of the questions the RAMattempts to answer include:

• Who is accountable for the completion of a specific deliverable or activity?

• Who has sign-off authority on the deliverable or activity?

• Who must be notified of the completion?

• Who makes the acceptance or rejection decision?

In a large or complex project, a matrix might be used to show the responsibilities for majordeliverables only. A lower-level matrix may be developed to show work package roles and responsibili-ties within each deliverable. Work package owners may develop a RAM that assigns responsibility toeach activity in the work package.

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Example: A Responsibility Assignment Matrix

Figure 6-13: A responsibility assignment matrix links key project stakeholdersto project deliverables.

Listing RAM ElementsOn a RAM, the deliverables or activities are typically listed vertically, with the keyproject stakeholder positions, titles, or names listed horizontally. Responsibility foreach deliverable or activity is assigned to one of the stakeholders.

RACI ChartA RACI chart is a type of RAM that helps detect the level of responsibility for eachproject team member. RACI stands for Responsible, Accountable, Consultive, andInformed. The RACI matrix helps identify who is responsible for making decisions andhow the people responsible are supported. RACI is generally used to provide clarity onthe roles and responsibilities assigned to each project team member. RACI chart is alsocalled a RASI chart, where “S” stands for “Supportive.”

Figure 6-14: A RACI chart.

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PARIS ChartsPARIS charts are similar to RACI charts, where “P” stands for Participant, “A” forAccountable, “R” for Responsible, “I” for Information, and “S” for Signature.

Staffing Management PlansDefinition:

A staffıng management plan forecasts what types of staff will work on the project,when they will be needed, how they will be recruited onto the project, and when theywill be released from the project. Depending upon the project requirements, the staffingmanagement plan may be formal or informal, exhaustive or brief. The plan is a subsid-iary plan to the human resource plan and is an important input to the develop humanresource plan process.

Example: Staffing Management Plans for Writing a BookTo coincide with a company’s 100th anniversary, the CEO might decide to have abook written to document the company’s growth and evolution. The staffing manage-ment plan for this project would stipulate external resources with expertise in writing,design, printing, and publishing, but it would also include internal resources with spe-cialized knowledge about the company history. The staffing management plan wouldidentify who would be needed to help with the book, when they would be needed,what they would be expected to contribute, and how long they would be expected toparticipate.

Staffing Management Plan ComponentsThere are several components of the staffing management plan that will continue to evolve asyou develop the project plan.

Item DescriptionStaff acquisition When planning resources, consider whether you will use team members

from within the organization or from external sources, the costs associ-ated with the level of expertise required for the project, physicallocation of resources, and the amount of assistance that can be providedby other departments for the project management team.

Resource calendars The staffing management plan details the time frame required for aproject and for each project team member. Optimizing the use of peopleon a project will help finish the project on time and within budget. Useof human resource charting tools such as resource histograms can helpillustrate the number of hours that a person, department, or entireproject team will be needed for each week or month over the course ofthe project.

Staff release plan Developing a plan for releasing resources helps control project costs byusing team members’ expertise or skills as and when they are needed.Planning for release also allows for a smooth transition to other projectsand mitigation of human resource risks that may occur during the finalphases of the project.

Training needs A training plan can be developed for team members who need toimprove their competency levels or who may need to obtain certifica-tions that will benefit the project.

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Item DescriptionRecognition and rewards Creating incentives for meeting milestones or other project deliverables

can have a positive effect on morale. An effective recognition planrewards team members for meeting goals that are under their control.

Compliance If the contract requires compliance with government regulation, con-tracts, or other standards, this should be stipulated in the staffingmanagement plan.

Safety Projects performed where specific safety precautions must be taken, i.e.,construction sites or nuclear power plants can have documented policiesand procedures for the protection of team members. These proceduresshould also be documented in the risk register.

How to Document the Project Roles,Responsibilities, and Reporting RelationshipsDocumenting roles, responsibilities, and reporting relationships will give project personnel aclear understanding of their duties.

Guidelines:To document roles, responsibilities, and reporting relationships, follow these guide-lines:

• Review the staffing requirements for your project, which were identified duringresource planning, as well as external relationship requirements with clients, con-sultants, and/or vendors.

• Make sure you have a good understanding of any constraints that may limit yourorganizational planning options.

• Address the organizational structure of the performing organization and how thisaffects the structure of the project team.

• If necessary, incorporate required roles and reporting relationships from any con-tractual agreements with unions or other employee groups.

• Consider the competencies of expected staff members and how they affect theproject’s reporting relationships or roles and responsibility assignments.

• Create an organization chart to document the reporting relationships among yourproject team.

• Ensure all key project stakeholders with reporting relationships are indicated in ahierarchical format on the chart.

• Analyze the formal and informal project interfaces that exist among the organiza-tional units, technical disciplines, and individuals working on the project for theirpossible impact on your organizational planning.

• Create a RAM to document the roles and responsibilities for key project stake-holders.

• Ensure the RAM is created as early as possible in the project and is updated asnecessary to reflect changes in personnel or project focus.

• Assign roles and responsibilities to stakeholders who are directly involved withthe project work rather than to senior managers or customers who have limitedand/or indirect involvement.

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• Make sure each element of the project’s scope is accounted for in the RAM andprovide a key to describe responsibility codes.

• Distribute the organization chart and RAM appropriately, to all project team mem-bers and other key project stakeholders.

Example: Project Roles, Responsibilities, and Reporting Relationships in a Con-struction Firm

Charles is working on a project team at a construction firm. He decided to documentthe roles and reporting relationships of the project team members. Charles began byreviewing the staffing requirements of the project, which state that a senior foremanmust oversee the primary labor force and should report directly to the assistant projectmanager.

He reviewed the project constraints and identified that the plumbing sub-contractorrequires employment of at least five full-time laborers for the duration of the project.The sub-contractor also must report to the union branch chief.

Charles identified all the key stakeholders on the project and created an organizationchart. Using this information, he then built a Responsibility Assignment Matrix(RAM).

After reviewing this document for omissions, he distributed it among the team mem-bers and stakeholders.

DISCOVERY ACTIVITY 6-2Documenting Reporting Relationships

Scenario:You want to ensure that everyone on the OGC Training Roll-Out project has a clear under-standing of their duties; therefore, you document the roles, responsibilities, and reportingrelationships for the PM Training Roll-Out project.

1. Which step would be the logical first step in documenting the roles, responsibilities,and reporting relationships of project team members?

a) Create a RAM to document the roles and responsibilities for key project stakeholders.

b) Create an organization chart to organize the team members into a hierarchy.

c) Consider the competencies of expected staff members and how they affect theproject’s reporting relationships or roles and responsibility assignments.

d) Examine the staffing requirements of the project.

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2. After examining the staffing requirements of the project, your next step is to list pos-sible constraints that would affect the organizational planning. Which options wouldyou include as constraints for this project?

a) The project includes resources from several different OGC buildings.

b) The project includes resources from outside the organization.

c) The project requires resources that are assigned to another project that may not bereleased.

d) The project includes some resources that are new hires.

3. Which item would you include in your documentation of the reporting relationships onthis project?

a) The training quality requirements.

b) The number of years of experience of each project manager.

c) The training instructor and manager will not only report to their management but willalso be responsible for several deliverables in your project.

d) The training and assessment costs.

4. You have reviewed the Staffing Management Plan; to your surprise, it appears thatthere are now staffing gaps due to resource reassignments. What could you do toaddress this problem?

5. At the conclusion of documenting project roles and reporting relationships, what keydocuments would you create and distribute to project team members?

a) The project charter and a RAM.

b) An organization chart and a RAM.

c) The company quality policy and a RAM.

d) A cost-benefit analysis and a RAM.

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TOPIC CCreate a CommunicationsManagement PlanYou determined the roles, responsibilities, and reporting relationships for your project. Nowyou need to define how you and your project team will communicate with each other. In thistopic, you’ll put strategies in place to ensure effective communication by creating a communi-cations management plan.

An effective communications management plan ensures that the right people receive the rightinformation at the right time. You don’t want your people expending unnecessary energyreporting on every little detail. Nor do you want to spend hours generating unnecessarily longreports. Mastering the tools and techniques to develop an effective communications manage-ment plan will ensure that you deliver the significant information to your stakeholders whenthey need it.

Communications Management PlansDefinition:

A communications management plan describes the project team’s approach to commu-nicating information about the project. It documents what information must becommunicated to whom, by whom, when, and in what manner. It also documents howinformation is collected, archived, and accessed.

Example: Communications Management Plan to Arrange for a Company’sAnnual Meeting

A project manager in charge of presenting the company’s annual meeting with share-holders would have many stakeholders from different departments and at differentlevels of company management. The communications management plan might includeregularly scheduled status meetings with the employees assigned to the project, withmeeting minutes to be distributed to upper management. It might also stipulate anemail distribution list with all stakeholders and resources included on all relevantproject communications.

The Plan Communications ProcessPlan communications is the process of ensuring timely and appropriate generation, collection,dissemination, storage, and ultimate disposition of project information. It involves identifyingcommunications requirements while accounting for the project scope, performing stakeholderanalysis, reviewing available technology, and finally, creating a communications managementplan. Creating the communications plan when developing the project management plan helpsallocate resources such as time and budget to communication activities. This plan must bereviewed and updated regularly to ensure that it continues to meet stakeholder needs.

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Figure 6-15: The plan communications process.

Plan Communications InputsThe plan communications process inputs include the stakeholder register, stakeholder manage-ment strategy, enterprise environmental factors, and organizational process assets.

Input DescriptionStakeholder register Provides information regarding the identified project stakeholders.

It includes identification information, assessment information, andstakeholder classification.

Stakeholder management strategy Defines a strategy to maximize the stakeholder support and miti-gate the negative impact of stakeholders on the project.

Enterprise environmental factors These factors help in understanding the communication needs ofthe existing organizations and stakeholders.

Organizational process assets Assets such as lessons learned from previous projects help to iden-tify communication needs and to plan project communicationactivities.

Plan Communications Tools and TechniquesVarious communications planning tools and techniques are available to project managers.

Tools and Techniques DescriptionCommunication requirements analysis Yields the communication needs of each stakeholder, allowing

the project manager to make informed decisions about commu-nications systems.The information used to identify communications requirementsof a project are:

• Organization charts.

• Project organizations.

• Disciplines and departments working on a project.

• Internal and external information requirements.

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Tools and Techniques DescriptionCommunication technology The particular communications systems available, such as

Internet access, email, and video/web conferencing, will impactthe technological choices a project manager can make.

Communication models Determine how information must flow from the sender to thereceiver. The major components of the communication modelinclude encoding, message and feedback-message, medium,noise, and decoding. The communication model must be consid-ered when planning for project communications. The project canbe negatively impacted if the communication between thesender and receiver fails.

Communication methods Used to share information among stakeholders in a project.Some of the communication methods include:

• Interactive communication: Involves communicationbetween multiple people performing multidirectional informa-tion exchange.

• Push communication: Involves sending information to areceiver. It ensures that the information has been distributedbut does not guarantee that it has reached the receiver.

• Pull communication: Involves receivers to access informa-tion whenever required.

Plan Communications OutputsThe two communications planning outputs are the communications management plan and theproject document updates.

Output DescriptionCommunications management plan Documents the project team’s approach to communicating project

information. It can include:

• Stakeholder communication requirements.

• Information to be communicated including language and levelof detail.

• Reason for distributing the information.

• Resources allotted for communication activities such as timeand budget.

• A glossary of common terminologies.

Project document updates Documents that are updated when planning for communicationsinclude project schedule, stakeholder register, stakeholder manage-ment strategy, and cost performance baseline.

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Communications RequirementsDefinition:

Communications requirements are the project stakeholders’ documented communica-tions needs. They include relevant information that contributes to the success of aproject, as well as an analysis of cost, time, and logistics. Not all stakeholders willrequire the same amount, level, or timeliness of communication. The variances must befactored into the communications requirements.

Example: Communications Requirements for Meeting Stakeholder NeedsCommunications requirements might include weekly meetings with a stakeholder tosummarize the progress of a project and the installation of a software program, such asMicrosoft® Outlook®, that facilitates the exchange of necessary information.

Communications Requirements AnalysisDefinition:

A communications requirements analysis is an investigation that leads to a clear articu-lation of the stakeholders’ communications needs and helps the project manager makeeffective choices regarding the technologies to be recommended in the communicationsmanagement plan.

This analysis should take the form of a grid, questionnaire, or survey that documentsthe communications and technology requirements for each stakeholder. It will alsoenable the project manager to obtain buy-in from stakeholders and to shape their per-ceptions by providing the right information at the right time.

Example: Conducting a Communications Requirements AnalysisA project manager conducting a communications requirements analysis might surveystakeholders regarding their communications needs by asking: How often would youlike to receive status reports? How would you prefer to receive information: by phone,by email, or in face-to-face meetings? What level of detail are you expecting to see?Issues of appropriateness, level of detail, timeliness, and cost should be considered inaddition to the preferences and technology capabilities of stakeholders.

Identifying Communication ChannelsProject managers need to identify the number of communication channels or paths,which will indicate the complexity of the project’s communications. The maximumnumber of channels that can be used is identified with the formula: (n(n – 1)) / 2,where “n” is the number of stakeholders. For example, when there are 12 key stake-holders for a project, the probable number of communication channels will be (12 x11) / 2 = 66. The project manager must plan and use the optimum number of commu-nication channels. This can be identified using tools such as organizational structures.

Communications TechnologiesDefinition:

Communications technology is any type of technology that is used for communicationsplanning, including websites, email, instant messaging, phones, and videoconferencing.

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Some technologies are instantaneous, while others take time; some are interactive,while others are one-way only. Some provide a historical record of what was commu-nicated, while others are transient.

Example: Different Communications Technologies

Figure 6-16: Communications technologies used for planning communications.

Selecting a Communications TechnologyQuestions to ask when determining a communications technology for each type ofcommunications are:

• How quickly must the information reach the audience?

• Is there likely to be feedback from the communication? How will it be collectedand integrated?

• Must there be a record of the communication? What type of record is required?

• What technologies are available for transmitting the given communication? Arethey appropriate to the type and value of the communication?

• What technology will the audience need to receive the communications? Is itlikely that the receiving technology is in place? If not, how expensive is it toacquire?

• Are there technical difficulties or learning curve issues with communicating viathe technology?

• Are there access issues, such as security-protected sites, which could limit thenumber of audience members who could receive the communications?

• What types of archival technology will be used to store the communications?Where will they be stored? Are there compatibility or access issues that must beaddressed?

• Is the particular mode of technology (transmittal, storage, or reception) likely tobecome outdated before the project is completed?

• What is the relative cost of each technology, taking into account the number ofcommunications and number of audience members who must receive them?

• Consider any relevant global communications issues that may affect your project;how might they influence your choice of the most appropriate technology?

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How to Create a Communications ManagementPlanEffective communications management plans ensure that all project team members are awareof the type and format of information shared with project stakeholders for the success of theproject.

Guidelines:To create an effective communications management plan, follow these guidelines:

• Gather and distribute contact information for all involved parties.

• Determine the communication needs of project stakeholders.

— Work from an organization chart to avoid omitting a key stakeholder.

— Ask for your project sponsor’s input.

— Ask open-ended questions.

• As a rule of thumb, project team members require more detail on a more frequentbasis. Senior management typically requires summary information on a less fre-quent basis.

• Analyze the value to the project of providing the information.

• Evaluate any constraints and assumptions to determine their possible impact oncommunication planning.

• Determine the appropriate communications technologies to use for communicatingproject information.

— Determine the immediacy of the need for information.

— Analyze the availability of technology systems.

— Evaluate the expected project staff to identify their knowledge of and accessto proposed technology.

— Conduct research to determine the likelihood that there will be changes to theproposed technology before the project is over.

• Make sure your communications management plan includes all key elements:

— A description of the types of information required for each project stake-holder.

— A collection and filing structure that describes the methods the project teamwill use to collect and file project information.

— A distribution structure describing to whom and by who project information,such as status reports, data schedules, and meeting minutes should be pro-vided.

— The methods that will be used to distribute the various types of information.

— Schedules for the production of each type of communication.

— Methods for accessing information between scheduled communications.

— A method for updating and refining the communications management planthroughout the project life cycle.

• Integrate the communications management plan into the overall project plan.

• Distribute the plan to project stakeholders.

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Example: Creating a Communications Management Plan for a New ProjectYou are working on a project for a multinational company. Communications for thisproject have been particularly difficult, with members missing the vast amount of infor-mation being generated or acting on misinformation. These errors have cost thousandsof dollars in lost work hours. You’ve discovered that the problem is due to the geo-graphic dispersal of team members and the irregular schedules of several stakeholders.

Based on these considerations, you have determined that the communications manage-ment plan will use a web-based template that allows deployed staff to submit theirinformation into a uniform database. To facilitate information collection and dissemina-tion, you determine that an online form will categorize the data while the onlineprogram organizes the data and automatically prepares reports in email format that aredelivered on a schedule based on the needs of all stakeholders.

You integrate all information into the communications management plan and providecopies to all project stakeholders.

DISCOVERY ACTIVITY 6-3Creating a Communications Management Plan

Scenario:You have assigned roles and responsibilities to your project team members and now you needto define in your communications management plan how you and your project team will com-municate with each other. While most of your team is local, several key members aregeographically dispersed across several states.

1. Which item should you use to determine the communications needs of your projectstakeholders?

a) Research material

b) Stakeholder analysis data

c) Project report deadlines

d) Executive board schedule

2. Given the scenario, what would be a good technology for enhancing team memberinteractions and building relationships through the life of the project?

a) Team building event at project kick-off.

b) Project team threaded discussion board.

c) Use email and databases to collect and store information.

d) High quality virtual teleconferencing on a semi weekly or weekly basis.

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3. Given the scenario, what would be a good primary communication technology forexchanging project information?

a) Phone exchange with email confirmation

b) Weekly face to face meetings

c) Voice mail

d) Video conferencing

4. After integrating the communications management plan into the overall project plan,what would be the next logical step?

a) Determining whether there will be changes to the proposed technology before theproject is over.

b) Creating a schedule for the production of each type of communication.

c) Distributing the plan to all the stakeholders.

d) Creating a description of stakeholder communication requirements.

Lesson 6 Follow-upIn this lesson, you identified quality standards and metrics for measuring quality performance.You also identified project team interactions and addressed the communications needs of theteam and stakeholders and created an effective communications plan. These tools provide youwith the necessary framework to effectively plan project quality, staffing, and communications.

1. What specific benefits would enlisting stakeholder support bring to your quality,resource, and communications planning efforts?

2. What are some factors you will consider when determining a structure for your organi-zation?

LESSON 6



Analyzing Risks andPlanning Risk Responses

In this lesson, you will analyze risks and plan risk responses.

You will:

• Examine a risk management plan.

• Identify project risks and triggers.

• Perform qualitative risk analysis.

• Perform quantitative risk analysis.

• Develop a risk response plan.


LESSON 7

Lesson 7: Analyzing Risks and Planning Risk Responses 233


IntroductionYou have gone to considerable effort to construct a sound project management plan, includingplans for managing cost, quality, and communications. In this lesson, you will develop a riskmanagement plan so that you can identify and mitigate the risks to your project.

Unexpected events can upset your work plan or bring your project to a screeching halt. Experi-enced project managers take steps to plan how they will manage potential risks to theirprojects. Risk analysis and planning allow you to be proactive, identifying and circumventingpotential issues, rather than scrambling to respond to problems. Your risk management planwill help to identify and neutralize risks before they can affect the project.

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TOPIC AExamine a Risk Management PlanAll projects carry risk, and as a project manager, it is your responsibility to conduct effectiverisk management planning to mitigate any potential issues. In this topic, you will plan andexecute risk management activities and examine a risk management plan.

The nature of project management carries with it inherent risk that things can go differentlythan you had hoped or planned. Deciding how to approach and plan for project risk early inthe planning phase can help you to maximize the opportunities in positive risks and minimizethe consequences of adverse risks that may occur during the life of your project.

RisksDefinition:

A risk is an uncertain event that may have either a positive or negative effect on theproject. Its primary components are a measure of probability that a risk will occur andthe impact of the risk on a project. Some common ways to classify risk are effect-based classification, source-based classification, and level of uncertainty. The level ofuncertainty describes how much is known about the risks, which are often described asknowns, known-unknowns, and unknown-unknowns.

Example: Weather RisksDue to its relative unpredictability, the weather is a risk common to business. An orga-nization planning an outdoor festival will likely choose a location and day with thehighest probability for agreeable weather. In this scenario, the threat of rain is a riskthat could seriously affect attendance and revenue. Because the weather is known to bea possible risk, but its impact is yet unknown, this risk would be classified as known-unknown.

Project Risk ManagementThe project risk management process is a high-level process that includes six main processes:plan risk management, identify risks, perform qualitative risk analysis, perform quantitativerisk analysis, plan risk responses, and monitor and control risks.

The design of this PMP® course is based on process groups. The first five processes of the project risk manage-ment process is covered in this lesson as part of the planning process group and the sixth process that comesin the monitoring and controlling process group has been dealt in detail in Lesson 14.

Figure 7-2: The project risk management process with the six main processes.

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Business Risk vs. Insurable RiskDefinition:

Risk can further be classified in two ways: as business risk or insurable risk. A busi-ness risk is one that is inherent in a business endeavor, such as when a companyassumes that it will spend money as well as make money, and that any project under-taken carries with it the potential for either success or failure, profit or loss. Insurablerisk is a risk that has only the potential for loss and no potential for profit or gain. Aninsurable risk is one for which insurance may be purchased to reduce or offset the pos-sible loss.

Example: Risks in a Retail StoreFor a retail store owner, the outlay of money to purchase inventory without a guaran-tee that it will sell is a business risk. A loss of inventory due to a fire is an insurablerisk.

Types of Business RisksProject managers should be aware of some of the common types of business risks.

Business Risk DescriptionCompetitive Risks such as the risk of increased competition in the marketplace and a

rival company developing a superior product.

Legislative Risks such as the risk of new laws or changes in regulations governing yourproducts, goods, or services requiring your company to spend more to main-tain compliance.

Monetary Risks such as the risk of increased prices for raw materials, increased taxes,increased operating costs, and losses due to nonpayment by customers.

Operational Risks such as the risk of fraud, theft, employee injury, workplace accidents,and damage to equipment.

Types of Insurable RisksThere are several types of insurable risks of which you should be aware.

Insurable Risk DescriptionDirect property risk Risk of property damage due to weather, fire, and so on.

Indirect property risk Risk of additional expenditures needed to recover from property loss.

Liability risk Risk of needing to make good after causing damage to another.

Personnel-related risk Liability risk for damage to employees.

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Risk Management PlanDefinition:

A risk management plan is a document that describes the team’s approach to identify-ing risks. It identifies the methodology, approaches, and tools that will be used,documents the roles and responsibilities of those involved, identifies the budgeting andthe scheduling for risk management activities, and identifies risk categories.

The risk management plan does not address responses to risks. These are addressed in the riskresponse plan.

Example: Risk Management Plan for a New ProjectEntrepreneurs seeking funding from venture capitalists for a new business wouldpresent a risk management plan to their potential investors. For a proposed amusementpark, the risk management plan would describe business risks, such as operational risksof potential losses due to employee theft, and insurable risks, including liabilities forinjuries sustained on the park rides.

The Plan Risk Management ProcessPlan risk management is the process of deciding how to plan and execute the risk managementactivities for a project. It involves identifying the project charter, current policies, roles, risktolerance, the project management plan, and any templates for risk management, and perform-ing an analysis on the inputs. The final output of this process is the risk management plan. Itis imperative that the plan risk management process is initiated at the early stages of projectplanning.

Figure 7-3: The plan risk management process.

Plan Risk Management InputsAccurate inputs are essential to forging an effective risk management plan.

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Input DescriptionProject scope statement Describes the deliverables and a common understanding among

the stakeholders. Project assumptions are found here. Uncer-tainty in project assumptions should be evaluated as potentialcauses of project risk.

Cost management plan Describes how risk budgets, contingencies, and managementreserves will be communicated and accessed.

Schedule management plan Describes how schedule contingencies will be communicatedand assessed.

Communications management plan Describes the interactions that happen on the project and deter-mine the right resource to share the available information onrisks and responses at a suitable time and location.

Enterprise environmental factors Factors that influence the risk management plan include attitudestowards risk and risk tolerance, and the individuals involved inthe project. These attitudes and tolerances may be expressed inpolicy statements or by personal action.

Organizational process assets Pre-defined approaches to risk management include risk catego-ries, common definition of concepts and terms, risk statementformats, standard templates, roles and responsibilities, authoritylevels for decision-making, lessons learned, and stakeholder reg-isters.

Management ReservesManagement reserves are budgets withheld by senior management to manageunplanned changes to project scope and cost. They are not part of the cost baseline butmay be included in a project’s total budget. Project managers must obtain approval tospend management reserves.

Plan Risk Management Tools and TechniquesOnly one tool and technique is used in risk management planning.

Tools and Techniques DescriptionPlanning meetings and analysis Planning meetings is the only tool for risk management planning.

Project teams conduct planning meetings to develop the risk man-agement plan. Generally, the project manager, project teamleaders, and anyone in the organization with responsibility tomanage risk planning and execute activities will attend risk man-agement planning meetings. The outcome of these meetings isdocumented in the risk management plan.

Plan Risk Management OutputThere is one output from the plan risk management process.

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Output DescriptionRisk management plan Made up of methodology, descriptions of roles and responsibilities, budget-

ing, timing, risk categories, definitions of risk probability and impact,probability and impact matrix, revised stakeholders’ tolerances, reportingformats, and tracking.

Risk Management Plan ComponentsA good risk management plan will include several components.

Component DescriptionMethodology Defines the tools, approaches, and data sources

that may be used to perform risk management onthe project.

Roles and responsibilities Defines the lead, support, and risk managementteam membership for each type of action in therisk management plan.

Definitions of risk probability and impact Scales of risk probabilities and impact are definedfor use in qualitative risk analysis using terms like“very unlikely” to “almost certain” with respectedvalues in numbers for these terms. For instance,“very unlikely” might have 0.05 probability value.

Probability and impact matrix Predefined matrix with risk priority areas ear-marked, which has product of impact value on xaxis and probability value on y axis.

Revised stakeholder tolerances Revised stakeholder tolerances may need to beupdated as a result of the plan risk managementprocess.

Budgeting A budget for project risk management should beestablished and included in the risk managementplan.

Timing Defines how often the risk management activitieswill be performed throughout the project life cycle.

Risk categories Documentation such as Risk Breakdown Structure(RBS) or categories from previous projects willhelp identify and organize risks.

Reporting formats Defines how outputs of this process will be docu-mented, analyzed, and communicated.

Tracking Documents how risk activities will be recordedand audited.

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Risk Breakdown Structures (RBS)Definition:

A Risk Breakdown Structure (RBS) is a hierarchical arrangement of identified risks thathelps project managers to organize potential sources of risk to the project. Functioningmuch like a work breakdown structure, an RBS arranges categories into a hierarchy.This approach allows the project team to define risk at very detailed levels.

Example: RBS

Figure 7-4: A risk breakdown structure.

Effect-Based Risk ClassificationDefinition:

Effect-based risk classification is a way of analyzing the major risks that are inherentto a project that could have an impact on its success. These major risks include time,cost, quality, and scope. All these risks are interrelated such that changes to one willaffect all of the others.

Example: Effect-Based Risk Classification for a ProjectA project manager might choose to use effect-based risk classification for a complexproject in which many of the risk factors are interrelated, such as a large-scale corpo-rate production in which many departments, teams, and external resources areparticipating. Any one department’s failure to produce its work on time or on budgetwill affect the schedule, cost, quality, and scope of the project, so the project managerwould need to classify all of the risks as well as their potential impact on the rest ofthe project.

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Source-Based Risk ClassificationDefinition:

Source-based risk classification is a method of analyzing risk in terms of its origins.Sources may be internal or external to the project, as well as technical, non-technical,industry-specific, or generic.

Example: Source-Based Risk Classification for a ProjectFor a project requiring internal and external resources, such as an advertising cam-paign, a project manager might classify the risks in terms of where they originate. Onesource of risk could be the potential rise in the price of advertising time on networktelevision, which could affect cost and scope. Another source of risk could be the fail-ure of an external advertising agency to meet its deadlines, which would affectschedule and scope.

Probability ScalesDefinition:

A probability scale is a graph showing the assignment of value to the likelihood of arisk occurring. Probability scales are designed using a variety of values, such as linear,non-linear, or an ordinal scale using relative probability values ranging from veryunlikely to almost certain. A risk’s probability score can range in value from 0.0 (noprobability) to 1.0 (certainty).

Example: A Probability Scale

Figure 7-5: A probability scale with values showing the likelihood of a riskoccurring.

Impact ScalesDefinition:

An impact scale is a rating system showing the assignment of a value that reflects themagnitude of the impact of a risk event on project objectives. They can be ordinalscales using values of very low, low, moderate, high, and very high. They can also beordinal scales using linear or non-linear numeric values. Often, impact scales use bothmethods. To improve the integrity and quality of the data and make the processes con-sistent and repeatable, organizations typically develop definitions for each value to helpthe risk management team assign each risk’s impact score consistently.

Example: Impact Rating ScaleThe following table shows an organization’s impact scale.

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Impact Rat-ing Impact Level Definition

1 Very low If this risk occurs, the impact on the project’s objectives wouldbe minor and not noticeable outside the project.

3 Low If this risk occurs, the impact on the project’s objectives wouldbe minor but noticeable to the customer or sponsor.

5 Moderate If this risk occurs, the impact to the project’s objectives wouldbe significant and would create customer or sponsor dissatis-faction with the project.

7 High If this risk occurs, the impact on the project would be signifi-cant and would create major customer or sponsordissatisfaction. The project would be in jeopardy.

9 Very high If this risk occurs, the impact would be catastrophic. Theproject would be canceled.

Levels of UncertaintyLevels of uncertainty describe the risks of a project based on how much is known about thesource and effect of the risk.

Level of Uncertainty Description and ExampleKnown Items that you know could affect you, and for which you can

roughly predict the nature and extent of the effect.Example: Staff turnover.

Known-unknown Items that you know could affect you, although you are not able topredict how or how much they will affect you.Example: Competition in the marketplace.

Unknown-unknown Items that are beyond your ability to foresee, predict, or prepare for.Example: Unexpected budget cuts.

Risk AnalysisDefinition:

Risk analysis is the evaluation of the probability and impact of the occurrence of arisk. Risk analysis is typically conducted through either qualitative or quantitative tech-niques. The level of risk to the project is the product of the probability of the riskoccurring and the predicted impact that the risk will have on the project’s success.

Example: Risk Analysis for a New VentureA manufacturing company would conduct various kinds of risk analyses before launch-ing a new line of products. They would evaluate the probability and impact of the risksthat would be associated with this new venture, which might include the costs ofresearch and design, the potential for future sales and revenue from a new product line,fluctuating consumer demand, competition from rivals, and pending consumer-safetylegislation, which might govern the manufacturing of the new products.

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Risk ToleranceDefinition:

Risk tolerance refers to the level of risk acceptable to a project manager or key stake-holder when the investment is compared to the potential payoff.

Example: Risk Tolerance Between StakeholdersTwo stakeholders might perceive risk differently. One stakeholder might be interestedin only conservative, low-risk projects that are similar in nature and scope to manypast successes. Another stakeholder might seek out high-risk ventures in uncharted ter-ritory; they might be willing to risk a great amount of capital on a speculative projectwith the potential for large returns.

Levels of Risk ToleranceRisk tolerance can be classified by three levels.

Risk Tolerance Classi-fication DescriptionRisk-averter Not likely to take a risk that is considered a high risk.

Risk-seeker Accepts an uncertain outcome and may be willing to take a high risk regard-less of the consequences.

Risk-neutral Tolerance to risk is proportional to the amount of money at stake.

How to Create a Risk Management PlanCreating an effective risk management plan provides the project team with a secure approachto identifying, analyzing, responding to, monitoring, and controlling project risk.

Guidelines:To create an effective risk management plan, follow these guidelines:

• Determine how you will organize your project’s risk management team.

— Consider assigning a risk officer to coordinate all risk management activities.While not all organizations typically have risk officers, it may be a helpfuloption to consider.

— Define the roles and responsibilities for each person on the risk managementteam.

— The sponsor may be able to assist in some risk management activities, suchas developing response strategies for all risks classified as high risks.

• Conduct risk planning meetings to develop the risk management plan.

• Establish a budget for risk management.

• Consult your organization’s risk management policy and make sure your riskplanning complies with the policy. If your organization has a risk managementplan template, use it and make modifications to meet the specific needs of yourproject.

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• Describe the approaches, tools, and data sources that may be used to perform riskmanagement activities for this project.

— How will the risks be identified? Will you conduct brainstorming sessions?Will you use the Delphi technique? Will you use subject matter experts?

— How will the identified risks be scored and analyzed so that effectiveresponse strategies can be developed? Is there organizational policy mandat-ing a specific scoring and prioritization method?

• Determine and describe the schedule for performing risk management activities.

• Determine and describe how your team will document risk response efforts.

— What tools will your team use to store risk information and track responses?

— How will the risk response efforts be communicated to the project stakehold-ers?

• Determine and describe how the lessons learned from your risk managementactivities will be documented for the benefit of future projects.

• If an organization, sponsor, or customer has specific guidelines or requirementsregarding risk thresholds, this information should be included in your risk man-agement plan.

Example: Drafting a Risk Management PlanYou have been asked to draft a risk management plan for the Arithmetic on a Stickproject. You are provided with the organization’s risk management policy, which con-tains information concerning the organization’s risk threshold and scoring andinterpretation methods. While organizing the risk management team, you assign a riskofficer to set up a risk database for the plan.

You arrange for the team to have planning meetings. The team determines a budgetand decides that weekly brainstorming meetings will be used to identify risks. Theorganization has a policy outlining scoring. It turns out that all scoring must be donetwice by independent parties and the results averaged together. To accommodate thisstipulation, you add a scoring controller to the team. Finally, you decide that all infor-mation will be entered into the risk database for documentation and future projectpurposes.

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DISCOVERY ACTIVITY 7-1Examining a Risk Management Plan

Data Files:

• OGC Risk Management Plan

Before You Begin:From the C:\085042Data\Analyzing Risks and Planning Risk Responses folder, open the OGCRisk Management Plan document.

Scenario:You have constructed your project management plan for the OGC PM Training Roll-Out,which includes plans for managing costs, quality, and communications. The risk managementplan for the project has been developed and you would like to review its content before youshare it with the project team. You know that your risk management plan needs to address allrisks associated with the internal training as well as the external training provider.

1. During your project review, you determine that a risk officer is needed to handle riskmanagement activities. Which activities would you assign to this person?

a) Develop response strategies.

b) Confirm and articulate the risks’ probability and impact to the business strategy.

c) Coordinate risk identification and analysis activities.

d) Assign roles and responsibilities to each team member.

2. With your planning meetings started and budget decided, your team begins the task ofdetermining how to identify risks. Which is the first place to look for risk planning?

a) Other project risk management policies

b) The organization’s risk management policy

c) The project scope statement

d) The organization’s quality policy

3. The risk management plan for your OGC PM Training Roll-Out project uses a probabilityscale to define the probability of occurrence of a risk listed in the risk register. Whichis the probability scale defined for the project?

a) 1, 3, 5, 7, 9, 11

b) 0.1, 0.3, 0.5, 0.7, 0.9

c) 2, 4, 6, 8, 10, 12

d) 1.1, 1.3, 1.5, 1.7, 1.9

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4. Which additional factor should you consider when developing your risk managementplan?

a) Job descriptions

b) Geography of the project team

c) Thresholds

d) Communication technology

5. You have integrated specific risk related activities and deliverables into the project’sschedule and documented how to track risk response efforts in your risk managementplan. Which task should you perform to complete the risk management plan?

a) Determine how to document lessons learned for future projects.

b) Determine the necessary budget.

c) Make sure that roles and responsibilities are clearly understood by the team andother stakeholders.

d) Create a payoff matrix.

6. Which section of the risk management plan highlights the risk priority areas for theproject?

a) Methodology

b) Probability and Impact Matrix

c) Roles and Responsibilities

d) Frequency of Updating Risk Registers

7. True or False? As per the OGC Risk Management Plan, the OGC PM Training Roll-Outproject requires a quantitative risk analysis to be performed to assess the risk expo-sure events of your project.

True

False

LESSON 7



TOPIC BIdentify Project Risks and TriggersYou created a risk management plan. Using the approach outlined in the plan, you can beginthe process of identifying the potential risks that may affect your project. In this topic, you willdelve into the risk identification component process and identify project risks and triggers.

Identifying risks and triggers helps you determine the most effective action to take for eachrisk. Mastering the tools and techniques to identify project risks and triggers ensures that youare prepared to take the appropriate action.

TriggersDefinition:

Triggers are the early warning signs or indications that a risk to your project is aboutto occur. Triggers could be external factors that influence your project, such as changesin relevant legislation. They could also be internal factors that influence your project,such as changes in staffing, governance, or funding within your organization. Triggersmust be examined during regularly scheduled risk review sessions held during the lifeof the project.

Example: Trigger IndicatorsFor a project involving the production of an independent documentary for television,news of an impending television writers’ strike would be a trigger. If the writing onthe documentary had not yet been completed, the trigger could indicate the negativerisk that critical external resources would not be available during the strike. If the writ-ing on the documentary had been completed, the trigger could indicate the positive riskthat the networks’ demand for the product could increase in the absence of other newprogramming.

The Identify Risks ProcessIdentify risks is an iterative process of identifying the risks and triggers facing a project. Itrequires an understanding of the project’s schedule, its costs, and its quality management plan.Project managers can design data-related triggers for their projects; when the data falls outsidea defined acceptable variance range, the project manager is alerted to imminent risk.

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Figure 7-6: The identify risks process.

Identify Risks InputsThere are several inputs to the identify risks process.

Input DescriptionRisk management plan Describes the team’s approach to identifying risks.

Activity cost estimates Provide a quantitative assessment of the costs involved in complet-ing each scheduled activity, with range of estimates indicating riskrange. They also provide an indication whether the cost estimatesare sufficient or insufficient to complete the activities.

Activity duration estimates Indicate the time allotted for each activity or for the whole project.They are reviewed periodically for identifying the risk involved inthe estimated durations.

Scope baseline Contains the project scope statement that includes project assump-tions and their uncertainties, and the detailed WBS of potentialrisks.

Stakeholder register Contains information on stakeholders that is useful in seeking opin-ions to identify risks.

Cost management plan A subsidiary of the project management plan, it contains a costmanagement approach specific to the project that helps to generateor mitigate risks.

Schedule management plan Includes guidelines for handling changes to the schedule, updatedrisks, and associated response plans.

Quality management plan Describes the project management team’s approach to implement-ing the quality policy. It is reviewed to identify risks related toquality and those might be generated by the quality managementplan.

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Input DescriptionProject documents Includes an assumptions log, work performance reports, earned

value reports, network diagrams, baselines, and other project infor-mation that helps to identify risks.

Enterprise environmental factors External sources of risk information may include commercial data-bases, academic studies, published checklists, industry studies, riskattitudes, or benchmarking.

Organizational process assets Historical information includes files from previous projects, lessonslearned, risk statement templates, and commercially available pub-lished information such as benchmarking or best practices data.Historical information can provide important data about potentialfuture risks that could affect a current project.

Identify Risks Tools and TechniquesThere are a number of tools and techniques available to the project manager to aid in riskidentification.

Tools and Techniques DescriptionDocumentation reviews Structured reviews of project plans and related documents at both

the total project and detailed scope levels.

Information-gathering techniques Data collection methods such as brainstorming, the Delphi tech-nique, interviewing, and root cause analysis that the project teamcan use to assist in identifying risks.

Checklist analysis Developed based on historical information as a standardized wayto identify risks. Be careful to look for items that do not appearon the existing checklist, as each project is unique.

Assumptions analysis Technique used to explore the validity of project assumptions.

Diagramming techniques Cause-and-effect diagrams, process flowcharts, and influence dia-grams are used to identify risk causes.

SWOT analysis Analysis that examines the project from the perspective ofstrengths, weaknesses, opportunities, and threats.

Expert judgment Input from subject matter experts or team members with relevantexperience and expertise on similar projects or business areaswho can suggest possible risks based on previous experience.

Identify Risks OutputThe risk register is the only output from the risk identification process.

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Output DescriptionRisk register The risk register contains the list of identified risks and the potential responses.

When complete, the risk register will ultimately contain the outcomes of theother risk management processes, including the results of the qualitative riskanalysis, quantitative risk analysis, and risk response planning.

Information-Gathering TechniquesInformation-gathering techniques are methods used to collect data that will assist the projectteam in identifying risks to the project.

Technique DescriptionBrainstorming Used to identify overall project risks or may focus in on the risks within

a particular project segment or work package.

Delphi technique Generates a consensus among project risk experts who anonymouslysubmit their risk list to a facilitator. Because it relies on achieving con-sensus, the Delphi technique may be difficult to implement in manyorganizations.

Interviewing Used to get information from people with a wide experience acrossmany projects, such as stakeholders, team members, project managersfrom previous projects, and functional management peers to quantify theprobability and consequences of risk on project objectives. The output isa statistical interpretation of the data from which a range of probabilitycan be expressed against a level of confidence that the risk will or willnot occur, such as optimistic/low and pessimistic/high.

Root cause analysis Used to identify problems, discover the root cause, and develop correc-tive actions.

Types of Interviewing MethodsThere are two interviewing methods used for generating risk probabilities.

Interviewing Methods DescriptionDirect Asks an expert to assign subjective probabilities to a given range of

values, providing a lowest possible value, most likely value, and high-est possible value.

Diagrammatic Uses diagrams for an expert to assign subjective probabilities to agiven range of values, providing a lowest possible value, most likelyvalue, and highest possible value.

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Risk RegistersDefinition:

The risk register is a document that identifies and categorizes risks, potential riskresponses, and their triggers, or warning signs. If risk categories are changed, the riskregister must be updated. Any possible risk responses included in the risk register areforwarded for use in the risk response planning process. The risk register will beupdated with the results of other risk management processes and provided to anyproject team members involved in project risk management.

The risk register will ultimately contain the outcomes of the other risk management processes, includ-ing the results of the qualitative risk analysis, quantitative risk analysis, and risk response planning. Inits initial stage, the risk register does not necessarily contain information regarding planned responsesto mitigate the effects of risk.

Example: A Risk Register

Figure 7-7: A risk register that identifies and categorizes risks.

Risk CategoriesRisk categories divide project risks into areas reflecting common sources of the risk.

Risk Category ExamplesTechnical, quality, or performancerisks

• Technical changes.

• Changes to industry standards during the project.

• Reliance on unproven or complex technology.

• Unrealistic performance goals.

Project management risks • Inadequate time and resource allocation.

• Ineffective project plan development.

• Poor cost estimates.

Organizational risks • Resource conflicts with other projects.

• Inadequate project funding.

• Inconsistent management support.

External risks • Union issues.

• Change of management in customer’s organization.

• Regional security issues.

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How to Identify Project Risks and TriggersIt is important to identify and document the characteristics of risks that might affect the projectso that the project team can determine the most effective action to take for each risk.

Guidelines:The project risks and triggers identified will determine the type of risk analysis to beperformed. To identify project risks and triggers, follow these guidelines:

• Perform a structured review of appropriate documentation from other planningprocesses with key project stakeholders to ensure an understanding of each. Thesedocuments are a valuable source for risk identification and they may include:

— Project charter

— WBS

— Product description

— Schedule and cost estimates

— Resource plan

— Procurement plan

— List of constraints and assumptions

• Use one or more risk identification techniques to identify risks and their possibletriggers. Techniques may include:

— Information-gathering techniques, such as brainstorming, interviewing, theDelphi technique, and SWOT analysis, among others.

— Risk identification checklists (make every effort to itemize all types of pos-sible risks to the project on the checklist).

— Assumptions analysis.

— Diagramming techniques such as cause-and-effect diagrams and system flowcharts. You can also use influence diagrams, which provide a graphical repre-sentation of a problem showing causal influences, time ordering of events,and other relationships among variables and outcomes.

• Be consistent. Whatever method you adopt, apply it systematically across yourproject. Before the project begins, identify risks in every project segment andwork package. At the start of each project segment, re-examine the risks for thatsegment. Update your list of risks at the close of each project segment.

• Think outside the box. Apply your method consistently, but be on the lookout forspecial circumstances that might arise in any project segment. Those checklistsand templates are in place to help get the risk identification process going, butthey are far from complete. As the project progresses, circumstances change. Beon the lookout for changed assumptions, new risks, or additional impacts frompreviously identified risks.

• Consult relevant historical information, such as risk response plans and finalreports from previous, similar projects that may include lessons learned describingproblems and their resolutions. Another source of historical information for riskidentification is published information, such as commercial databases, academicstudies, and benchmarking results.

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• Once risks have been identified, group them into categories that reflect commonsources of risk for your industry or application area. Examine each identified riskto determine what triggers will indicate that a risk has occurred or is about tooccur.

• Use the results of your analysis to initiate the risk register.

— Consider implementing any risk-register software that may be in commonusage at your company. You can also create a risk register without special-ized software by using a spreadsheet or table.

— Include the project’s name, sponsor, key stakeholders, and objectives.

— Identify the risks inherent in your project with a description of each.

Example: Identify Project Risks and TriggersA car manufacturer conducted an internal study and concluded that passengers had dif-ficulty buckling the company’s standard seat belt. A team was commissioned toredesign the belt buckle. The project manager directed the risk management team toreview the project documentation and results of the study. The risk management teambrainstormed a list of potential risks and their triggers for the new buckles. Two risksidentified were that the buckles would fail to provide proper slack during regular useand that the buckles might accidentally release during a collision.

The project team examined old test results for similar buckle designs and commercialsafety studies concerning seat belts. After reviewing the information, these risks werecategorized as technical. The project manager called for tests that would specificallycheck the probability of these risks occurring. Because public safety was at risk, theteam agreed that even one failed test would trigger an immediate risk response plan.The team noted all of their results in the initial project risk register for later analysis.

DISCOVERY ACTIVITY 7-2Identifying Project Risks and Triggers

Scenario:With a completed risk management plan, your project team moves into the risk identificationphase. You are meeting with your team and you provided each team member with a copy ofthe project charter and technical documentation for the risk identification process.

1. To identify risks for this project, you and your project team will meet as a group toidentify and examine as many of the strengths and weaknesses within OGC that canpotentially impact the project as you can, as well as any opportunities or threats thatmay be imposed by the external training provider. Which information-gathering tech-niques will you use?

a) Brainstorming

b) Interviewing

c) Delphi technique

d) SWOT analysis

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2. There is a new upgrade to the project management software with enhancements tothe project tracking and communications features. This upgrade is mandatory in anetworked environment and therefore, when available, will be required by OGC. Inwhat risk category should your team place this risk?

a) Technical, quality, or performance risks

b) Project management

c) Organizational

d) External

3. What is the trigger for the software upgrade risk that has been identified?

a) The enhancements to the project tracking and communications software.

b) The IT department scheduling the software upgrade.

c) The impact the upgrade will have on the PM Training Roll-Out project by narrowingthe RFPs sent to external training providers.

d) The potential increase to the total costs of training that the upgrade will cause.

TOPIC CPerform Qualitative Risk AnalysisYou identified which risks might affect your project and documented their characteristics. Nowyou must assess the impact and likelihood of these identified risks. In this topic, you willexplore the perform qualitative risk analysis process, where you will rank and prioritize projectrisks according to their potential effect on project objectives.

Identifying risks is only one part of an effective strategy to minimize work activity disruptionsthat could cause your project to go over budget or exceed its promised deadline. It’s importantto rank their importance so that precious time isn’t wasted trying to mitigate risks with a lowpriority. Qualitative risk analysis lays the foundation for effectively quantifying high priorityrisks to your project.

Qualitative Risk AnalysisDefinition:

Qualitative risk analysis is a technique used to determine the probability of occurrenceand the impact of identified risk. This is then used to determine the risk exposure ofthe project by multiplying the probability and impact. The qualitative risk analysis pro-cess ultimately provides the list of prioritized risks for further actions.

Example: Performing Qualitative Risk Analysis for a Music ConcertAn event management company is planning to organize a jazz concert in a coastal city.An initial marketing survey undertaken by the company indicates that the response forthe concert would be good, since the general population of that city likes jazz music.Also the historical data show that the response towards similar musical concerts heldin this city has been very encouraging.

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However, a recent weather bureau announcement has indicated that there is a slightpossibility that the low-pressure area that has developed beside the coastal city cancause heavy rains on the day of the concert. The organizing committee officials decideto have a discussion about the weather risk with all the stakeholders involved to evalu-ate the impact of risk on the project objectives, on the basis of a scale of low, medium,and high.

The members discuss the issue, list different areas of concern, and rate them. Themembers find that in the worst case scenario, the low-pressure area over the coast maydevelop into a tropical storm, accompanied by very heavy rains and wind. But thechances of that are remote, since the weather bulletin does not project a tropical stormand indicates that there is only a slight possibility of heavy rains.

Secondly, some of the members were concerned that heavy rains might force people tostay indoors and reduce the incremental revenue from ticket sales at the box office onthe day of the event, as well as from sales of souvenirs and concessions at the event.But on the contrary, others felt that since the concert is to be held inside an audito-rium, the chance of rain having a big impact on the audience turnout is remote. Also,even a seat occupancy rate of 50% would ensure that the expenditure involved withthis event can be reclaimed.

Based on the deliberations, the organizing committee finally concludes that the riskexposure is low or at the worst, is moderate in nature. The event managing companydocuments the information in the risk register.

The Perform Qualitative Risk Analysis ProcessPerform qualitative risk analysis is the process of assessing, ranking, and prioritizing risks forsubsequent analysis. It takes into account the probability of different risks occurring and theirlikely impact. Qualitative analysis provides the foundation for assessing risk. To be effective,qualitative analysis should be conducted early in the project life cycle so that potential prob-lems can surface early enough to develop an effective response plan. When qualitative analysisis repeated, trends can be evaluated and corrective action may be taken early enough to avoidor lessen a negative consequence.

Figure 7-8: The perform qualitative risk analysis process.

Perform Qualitative Risk Analysis InputsSeveral elements go into the perform qualitative risk analysis process.

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Input DescriptionRisk register Contains the list of identified risks.

Risk management plan Contains important information about roles and assignments in riskmanagement, schedule activities for risk management, risk catego-ries, the probability and impact matrix, and revised stakeholders’risk tolerances.

Project scope statement A project scope that is very complex or unfamiliar to the organiza-tion will carry much more risk than project scopes that are morecommon. The risks inherent in familiar project scopes are alreadydocumented and more easily anticipated.

Organizational process assets Includes information on completed projects of similar scope, studiesof risk specialists, and risk databases.

Perform Qualitative Risk Analysis Tools andTechniquesThere are several qualitative risk analysis tools and techniques that you can employ.

Tools and Techniques DescriptionRisk probability and impactassessment

Probability is the likelihood that a risk event will occur or provetrue. In risk analysis, each risk is assigned a value to represent itsprobability or degree of uncertainty. Impact is the likely effect onproject objectives if the risk event occurs. In risk analysis, eachrisk is assigned a value representing the likely consequences of therisk event occurring. These factors are often described in terms ofbeing very high, high, moderate, low, and very low.

Probability and impact matrix Illustrates a risk rating assignment for identified risks. The matrixspecifies the probability and impact of the risks identified and ratesthem as high, medium, or low priority.

Risk data quality assessment Techniques to evaluate if the obtained data is unbiased, accurate,and of high quality.

Risk categorization Categorizes risks to identify the areas of the project most exposedto the effects of uncertainty.

Risk urgency assessment Indicates priority and can include specific information on timingfor response.

Expert judgment Information provided by a group or individual with expertise basedon relevant experience on similar projects, and through risk facilita-tion interviews or workshops. Helps assess the impact andprobability of each risk.

Perform Qualitative Risk Analysis OutputRisk register updates constitute the only output of qualitative risk analysis.

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Output DescriptionRisk register updates The risk register contains the list of identified risks; it should be updated

with the results of the qualitative analysis.

Risk Data Quality AssessmentDefinition:

Risk data quality assessment is the evaluation of the usefulness of the available dataconcerning the risk. It includes examining the data obtained about a particular risk forthe amount of data available, the quality of data available, the extent to which thesource of the information understands the risk, and the legitimacy and dependability ofthe data.

Example: Risk Assessment for a Restaurant ChainAs project manager for a restaurant chain, Barry is responsible for new site develop-ment. The company is interested in expanding to a location in the northern section ofthe city, and Barry has conducted a risk assessment to determine whether or not itwould be financially sound to purchase property in a large shopping plaza there. Therisk assessment includes the average cost per square foot of real estate within thatneighborhood; this figure indicates that real estate is selling at a very reasonable price.Upon detailed examination of the risk data, however, Barry discovers that the informa-tion used to calculate the average cost per square foot is five years old. Barry’s qualityassessment indicates that the data is too out-of-date to be useful in the risk analysis,and purchasing property based on this information would be a poor idea.

Probability and Impact Risk Rating MatrixDefinition:

A probability and impact risk rating matrix is a graph showing the assignment of arisk rating to risks or conditions. The matrix combines the probability and impactscales to prioritize risks and identify risks that are likely to require further analysis.The risk rating is calculated by multiplying the risk’s impact score by its probabilityscore. It may indicate risk thresholds by applying shading, color, or line variations. Theprobability and impact risk rating matrix will guide the response plans.

Example: A Probability and Impact Risk Rating MatrixThe sample probability and impact risk rating matrix shown here is a simplifiedexample; the shadings of color indicate the levels of probability and impact. A realprobability and impact risk rating matrix would be used to assess very complicatedrisks with many factors and data points.

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Figure 7-9: A simplified probability and impact risk rating matrix.

Components of Risk RegistersThere are several components of risk registers that project managers identify at the qualitativerisk analysis stage.

Component DescriptionRelative ranking or priority list of project risks The overall risk ranking for a project can be deter-

mined by adding the individual risk factor scoresand dividing by the number of risks.

Risks grouped by categories Placing risks in categories may reveal areas of riskconcentration. It may also highlight commoncauses of risk, allowing you to improve risk antici-pation and response.

Causes of risk or project areas requiring particularattention

Identifying specific frequently occurring causes inrisk occurrence enables better risk response plan-ning.

Lists of risks requiring response in the near term Some risks may require action in the near term.These can be grouped separately from the risksthat will be addressed at a later date.

List of risks for additional analysis and response Risks that may require additional analysis andmanagement typically include risks classified ashigh or moderate. For example, a schedule riskthat threatens to delay the project end date beyondacceptable limits will require quantitative analysis.

Watchlist of low-priority risks Risks that are not urgent and do not require near-term action can be documented on a watchlist formonitoring.

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Component DescriptionTrends in qualitative risk analysis results As qualitative risk analysis is repeated, a trend

may result that can make risk response or furtheranalysis more or less urgent.

The Ongoing Risk Assessment ProcessThe ongoing risk assessment process is an iterative process of identifying, analyzing, anddocumenting the risks facing your project; it is conducted throughout the project life cycle.This is primarily an organizational issue that requires the project manager (or the PMO) tohave project managers outside the project, shadow the project manager and provide oversightand fresh perspective during risk management reviews.

Figure 7-10: The ongoing risk assessment process.

How to Perform Qualitative Risk AnalysisPerforming qualitative risk analysis provides a method by which you can rank and prioritizerisks. Effective qualitative risk analysis can assist an organization with the decision-makingprocess when selecting which project to do and what resources are assigned.

Guidelines:To perform qualitative risk analysis, follow these guidelines:

• Examine the list of identified risks.

— Are all the risks identified?

— Are all the risks completely documented?

• Analyze the data available for each risk to assign a data precision ranking score.

— Does the source of the data fully understand the risk?

— Is the source reliable and trustworthy?

— Is the amount of data sufficient to adequately analyze the risk?

— What is the accuracy and quality of the data?

— Are there risks that require further monitoring? Should they be placed in therisk register for watching?

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• Determine the organization’s risk threshold for this project.

• Analyze the assumptions identified during risk identification as potential risksagainst the validity of the assumption and the impact on the project if false.

• Analyze the probability and impact of each identified risk using well-definedprobability and impact scales.

• Determine the risk factor scores using a probability and impact risk matrix.

• Prioritize the risks according to the risk management plan. Identify risks thatrequire further analysis. Determine the overall risk for the project and comparewith the organization risk threshold.

• Document all changes to the risk register.

Example: Qualitative Risk Analysis for a Fast Food CompanyA fast food company wanted to reduce its long lines and increase its hourly sales. Thecompany discovered that by reducing the cooking time of hamburgers by 30 seconds,they could average 10 more customers served per hour. The shift managers decided toperform qualitative risk analysis to identify potential problems with this plan. Most ofthe risks they identified centered on food safety and were based on existing health andsafety standards for the cooking of meat products. These regulations forced the restau-rant chain’s risk threshold to be very low.

A probability and impact matrix was created and each identified risk was scored on thematrix. Highest in the ranking was the cook’s inability to guarantee consistency ofinternal food temperature based on a formula of cooking times.

DISCOVERY ACTIVITY 7-3Performing Qualitative Risk Analysis

Data Files:

• Risk Register

Before You Begin:From the C:\085042Data\Analyzing Risks and Planning Risk Responses folder, open the RiskRegister document.

Scenario:After brainstorming the potential risks for the OGC PM Training Roll-Out, it is now time toanalyze the risks qualitatively and document them in the Risk Register document. You andyour team have created a risk summary outlining all identified risks and have assigned a riskprobability factor to each risk. There are a total of 25 activities in the project; however, at thistime you are reviewing the risks associated with the Obtain External Training Provider.

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1. Based on the OGC Risk Event Impact Scale, which of the risks should receive the high-est priority for this project?

a) IT might not approve project management software upgrade.

b) Temporary loss of a team member.

c) Change in organizational requirements to use external training.

d) RFPs do not meet OGC specifications for training, i.e., dates and costs.

2. Based on OGC’s risk event impact scale, the risk event impact is 2.5. How is the riskimpact for this project best described?

a) Between Very Low to Low

b) Between Low to Moderate

c) Between Moderate to High

d) Between High to Very High

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3. You need to enter the risk factors into the risk register for the work activity, ObtainExternal Training Provider. In the Risk Register document, list the risk probability rat-ing for each task.

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4. For each risk that is identified, provide an impact rating for the work activity, ObtainExternal Training Provider. In the Risk Register document, list the risk impact ratingfor each task.

TOPIC DPerform Quantitative Risk AnalysisYou performed a qualitative risk analysis for your project. Now you can determine the extentof the risk exposure to your entire project. In this topic, you will examine the perform quanti-tative risk analysis process and perform a quantitative risk analysis.

Taking advantage of opportunities can often mean turning a negative outcome into a positiveone. By performing a quantitative risk analysis, you can take steps to maximize the positiveconsequences of the opportunities facing your project.

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Quantitative Risk AnalysisDefinition:

Quantitative risk analysis is a technique used to assess the risk exposure events tooverall project objectives and determine the confidence levels of achieving the projectobjectives. Quantifying risk can help you to identify time and cost contingencies of aproject. It further refines and enhances the prioritization and scoring of risks producedduring qualitative analysis.

Example: Quantitative Risk Analysis for the Supply-Chain Management SoftwareProject

The project team on the Supply-Chain Management Software project identifies processdata for a statistical analysis using a Monte Carlo simulation to determine the confi-dence level that the project will be completed on time and within the budget. The teamidentifies critical project parameters, which affect project schedule. The team furtherdetermines project success rate, and makes decisions about viable project alternativestaking into account the risks within the project.

Everyday PracticalitiesIn most everyday project management scenarios, conducting a qualitative risk analysisis adequate to meet the project manager’s purposes; only in very sophisticated, matureproject management environments is there much additional value added by conductingfurther quantitative risk analysis.

The Perform Quantitative Risk Analysis ProcessPerform quantitative risk analysis is the process of numerically assessing the probability andimpact of each risk and determining the extent of the overall project risk. It involves gatheringdocuments indicating risk planning and project scope, as well as the risk register; analyzingeach risk using such tools as interviewing, expert judgment, probability distributions, sensitiv-ity analysis, expected monetary value analysis, decision tree analysis, and simulation; andfinally entering any alterations into the risk register.

Figure 7-11: The perform quantitative risk analysis process.

Perform Quantitative Risk Analysis InputsThere are several inputs to the perform quantitative risk analysis process.

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Input DescriptionRisk register List of identified risks and relative ranking and categories.

Risk management plan Contains roles and responsibilities, budgets and schedule for riskmanagement activities, RBS, risk categories, the probability andimpact matrix, and risk tolerances.

Cost management plan Sets the criteria for planning, estimating, budgeting, and controllingproject costs.

Schedule management plan Sets the criteria for developing and controlling the project schedule.

Organizational process assets Contains information on completed projects, studies from risk spe-cialists, and risk databases.

Perform Quantitative Risk Analysis Tools andTechniquesThere are some tools and techniques used in the perform quantitative risk analysis process.

Tools and Techniques DescriptionData gathering and representationtechniques

There are two techniques used in data gathering and representa-tion:

• Interviewing: Taking subjective probability and representingthat data objectively.

• Probability distributions: Visually represent risk probability.

Quantitative risk analysis and model-ing techniques

There are three techniques used in risk analysis and modeling:

• Sensitivity analysis: Examines how the uncertainty of aproject element affects the objective in question if the otheruncertain elements remain unchanged.

• Expected monetary value analysis: Calculates the averageoutcome under uncertainty.

• Modeling and simulation: Includes cost risk analysis, whichis most commonly performed using the Monte Carlo method.

Expert judgment Utilizes subject matter expertise to analyze potential cost, iden-tify schedule impacts, and validate risks. Also, utilized forinterpretation of data and to identify the strength and weaknessof the tools used.

Perform Quantitative Risk Analysis OutputRisk register updates constitute the only output of the perform quantitative risk analysis pro-cess.

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Output DescriptionRisk register updates Include probabilistic analysis of the project, the probability of achieving

the cost and time objectives, a newly prioritized list of quantified risks,and trends in quantitative risk analysis results.

Quantitative Risk Analysis Update ComponentsThere are several quantitative risk analysis update components.

Component DescriptionProbabilistic analysis of the project Once risks are qualitatively and quantitatively analyzed, the

project team should be able to forecast the possible completiondates and costs and provide a level of confidence for each.

Probability of achieving the cost andtime objectives

Using quantitative risk analysis, the project team can estimatethe likelihood of achieving the project objectives under thecurrent plan and with the current knowledge of the projectrisks.

Prioritized list of quantified risks Identified risks are prioritized according to the threat they poseor the opportunity they present to the project. This prioritizedlist includes a measure of the impact of each identified risk.

Trends in quantitative risk analysisresults

Repeating the quantitative risk analysis allows the project’srisk management team to analyze the trends and make adjust-ments as necessary. Information on project schedule, cost,quality, and performance gained through the perform quantita-tive risk analysis process will help the team to prepare aquantitative risk analysis report.

Project Risk RankingDefinition:

Project risk ranking is the overall risk ranking for producing the final deliverable ofthe product or service of the project. It allows for comparisons among other projects,assisting in project initiation, budget and resource allocation, and other decisions.

Example: Risk Ranking for a ProjectThe risk management team for a project created a probability and impact matrix thatillustrates the relative position of threats as identified in the qualitative risk analysis.The team now calculates the percent exposure of the top four risks.

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The qualitative risk analysis has already suggested the descending order of risks. Thefollowing table displays the total exposure of all the risks for the project as 3.22% andthe exposure of the top four risks as 2.37%. Considering the top four risks, the teamdetermines the exposure to these risks as 73.6%.

Basics of ProbabilityWhen you perform probabilistic analysis, you will need to apply some of the basic principlesof probability.

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Principle of Probability DescriptionSum of probabilities The sum of the probabilities of all possible events must equal 1

(100%).

Probability of single event The probability of any single event must be greater than orequal to 0 and less than or equal to 1.

Dependent joint events The probability of joint events is the product of the probabilitythat one event occurs and the probability that another eventoccurs, given that the first event has occurred. Under these cir-cumstances, the events are considered to be dependent(connected in some way with each other).

Independent joint events When the probability of joint events occurring is the product ofthe probabilities of each, the events are considered to be inde-pendent (the two events have nothing in common and may occursimultaneously).

Mean The sum of the events divided by the number of occurrences.

Median The number that separates the higher half of a probability distri-bution from the lower half. It is not the same as the average,although the two terms are often confused.

Average The number that typifies the data in a set. It is calculated byadding the values of a group of numbers and dividing that totalby the number of objects included.

Standard deviation This is the measure of the spread of the data, or the statisticaldispersion of the values in your data set.

Probability DistributionDefinition:

Probability distribution is the scattering of values assigned to likelihood in a samplepopulation. It can be visually depicted in the form of a Probability Density Function(PDF). In a PDF, the vertical axis refers to the probability of the risk event and thehorizontal axis refers to the impact that the risk event will have on the project objec-tives.

Example: A Probability Distribution Graph

Figure 7-12: A probability distribution graph displaying the probability andimpact of a risk event.

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Subjective vs. Objective ProbabilityProbability can be assigned subjectively or objectively. Subjective probability is basedon people’s opinions, which may be shaped by information, experience, and attitude.Even if they are given the same set of facts, they may make very different determina-tions of the probability of an event. Objective probability is deduced mathematically.

Uniform Distribution PDFDefinition:

A uniform distribution PDF results when all outcomes are equally likely to occur, sothe data is shown in a straight line.

Example: A Uniform Distribution PDF Graph

Figure 7-13: A visual depiction of a uniform distribution PDF.

Normal Distribution PDFDefinition:

A normal distribution PDF results when there is a symmetrical range or variation inthe probabilities of each outcome. Visually, the data is distributed symmetrically in theshape of a bell with a single peak, resulting in the common term “bell curve.” Thepeak represents the mean; the symmetry indicates that there is an equal number ofoccurrences above and below the mean.

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Example: A Bell Curve

Figure 7-14: A normal distribution PDF graph.

Triangular Distribution PDFDefinition:

A triangular distribution PDF results when there is an asymmetrical distribution ofprobabilities. Visually, the data is skewed to one side, indicating that an activity or ele-ment presents relatively little risk to project objectives. Note that if either theprobability of occurrence is low or the impact is low, then this necessarily indicatesthere is little risk.

Example: A Triangular Distribution PDF Graph

Figure 7-15: A triangular distribution PDF graph displaying asymmetrical dis-tribution of probabilities.

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Decision Making Under RiskDefinition:

Decision making under risk refers to assigning probabilities to the possibility of eachstate of nature occurring. The best choice of strategy is the strategy with the largestexpected value where the expected value is the sum of the payoffs multiplied by theprobability of occurrence for each state of nature.

When assigning probabilities, it is important that they are based on valid information and are notassigned erroneously.

Example: Decision Making Under Risk by a Ski ResortA ski resort sought to weigh the probabilities of different weather patterns against thecost of two different snow-making machines. The project managers knew from pasthistory that without any new machine, the resort could make up to $100,000, but hadthe potential to make more with the addition of a snow-making machine. The Snow-maker Lite costs $10,000, and the Deluxe model costs $25,000. The following tableindicates how much profit could be made in three different weather conditions afterpaying for power and materials to make the snow.

Strategy Lots of Snow Little Snow Dry and ColdStrategy 1: Snow-makerLite

$90,000 $55,000 $35,000

Strategy 2: Snow-makerDeluxe

$75,000 $70,000 $65,000

To analyze each strategy under risk, probabilities must be assigned to the possibility ofeach state of nature occurring. Based on weather history in their area, the probabilityof lots of snow is considered to be 45%, of little snow 35%, and of a dry but cold sea-son as 20%.

Strategy CalculationSnow-maker Lite (80)(.45) + (45)(.35) + (25)(.20) = 56.75

Snow-maker Deluxe (50)(.45) + (45)(.35) + (40)(.20) = 46.25

We should consider the cost of machines in this calculation. $10,000 should be subtracted from theprofit value of Snow-maker Lite and $25,000 should be subtracted from the profit value of Snow-makerDeluxe.

The best choice of strategy is the strategy with the largest expected value (Snow-makerLite strategy) where the expected value is the sum of the payoffs multiplied by theprobability of occurrence for each state of nature.

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Quantitative Analysis MethodsQuantitative analysis methods allow project managers to consistently determine the probabilityand impact of each risk.

Method DescriptionSensitivity analysis Places a value on the effect of changing a single variable within a

project by analyzing that effect on the project plan.

Expected Monetary Value (EMV)analysis

Assesses the average outcome of both known and unknown sce-narios.

Decision tree analysis Factors both probability and impact for each variable, indicatingthe decision providing the greatest expected value when all uncer-tain implications and subsequent decisions are quantified.

Modeling and simulation Uses models that calculate potential impact of events on theproject, based on random input values.

EMV and decision tree analysis are commonly used together to come to a final decision.

Sensitivity AnalysisSensitivity analysis is a method of assessing the relative impact of changing a variablein the project to gain insight into possible outcomes of one or more potential coursesof action. Sensitivity analysis places a value on the effect of changing a single variablewithin a project by analyzing that effect on the project plan.

Sensitivity analysis is probably the simplest method of analyzing the impact of apotential risk and its results are easy for project stakeholders to understand. However,it does not lend itself well to assessing combinations of risks and how they mightaffect a project. Furthermore, the sensitivity diagram does not provide an indication ofanticipated probability of occurrence of the risk event.

Often, sensitivity analysis is performed independently on a number of variables. Whendisplayed on a single graph or sensitivity diagram, the results allow you to comparewhich variables have the highest likely impact on project performance. Typically, it isonly performed for variables that are likely to have a major impact on project perfor-mance in terms of cost, time, or economic return.

Decision Tree AnalysisDecision tree analysis is an assessment of the data obtained using the decision treemethod to evaluate various possible outcomes. Decision trees allow decision-makers tofactor in both probability and impact for each branch of every decision under consider-ation, making it a useful tool for risk analysis. Solving the decision tree indicates thedecision that will provide the greatest expected value when all the uncertain implica-tions, costs, rewards, and subsequent decisions are quantified.

Expected Monetary Value (EMV) AnalysisExpected Monetary Value (EMV) analysis is a method of calculating the average out-come when the future is uncertain. Opportunities will have positive values and riskswill have negative values.

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EMV is found by multiplying the monetary value of a possible outcome by the prob-ability it will occur. This is done for all possible outcomes and their figures are addedtogether. The sum is the EMV for that scenario.

This technique is used in decision tree analysis; EMV must be calculated in order forthe analysis to find the best outcome. The best outcome is the lowest combination ofcost and EMV.

Modeling and SimulationsSimulations involve calculating multiple project durations with different sets of activityassumptions. A project simulation uses a model that translates project uncertainties intotheir potential impact on project objectives. The project model is created many timeswith different variables to calculate a probability distribution.

SimulationsDefinition:

Simulation is a technique that uses computer models and estimates of risk to translateuncertainties at a detailed level into their potential impact on project objectives. Forschedule development, simulation involves calculating multiple project durations withvarying sets of assumptions regarding project activities.

Example: SimulationsYou are planning a multimedia campaign for a client. Your team is divided as to whichprinting contractor to use. Printer A has handled similar projects for you in the past.However, they are poorly staffed and turnaround time can be slow. Printer B is a largecompany with modern equipment and fast turnaround time. However, their remotelocation will add at least a day for each shipment of the product.

Your team simulates two project activity durations using each of the printers. Yoursimulations take into account factors such as previous turnaround times for similarprojects, realistic shipping times, and maximum production capabilities. Based on yoursimulation results, you decide to stick with Printer A.

Monte Carlo AnalysisDefinition:

Monte Carlo analysis is a technique used by project managers to make predictionsabout the optimistic, most likely, and pessimistic estimates for variables in the modeland simulates various outcomes of the project schedule to provide a statistical distribu-tion of the calculated results. In addition to the what-if scenario analysis method, thisis the other most common simulation type. A Monte Carlo analysis does not produce asingle result, but calculates a range of possible results.

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In more general business terms, “Monte Carlo” refers to not one single analysismethod but to a wide class of techniques, mostly making use of sophisticated comput-ers and inputs of random numbers, probabilities, and algorithms. It has a wide range ofapplications in many fields, including finance and engineering; since it works effec-tively with large inputs of numbers, it is well suited to complex project managementproblems in which more than a few inputs like costs, activity, and durations areunknown.

Example: Monte Carlo Analysis for a ProjectStakeholders have asked a project manager to estimate how long it will likely take toproduce a project involving three tasks and an inexperienced team. The first task isscheduled to take 30 days, the second task is scheduled to take 60 days, and the thirdtask is scheduled to take 90 days, but with inexperienced resources these activity dura-tions are optimistic and could take more time. Using a software application, the projectmanager would run a Monte Carlo simulation analysis using these inputs as well as theprobability that each task will be completed early, on time, and late. After running theMonte Carlo analysis repeatedly to generate a range of results, he estimates that thisproject has a 40% probability of being completed within 170 days, a 60% probabilityof being completed within 180 days, and an 80% probability of being completedwithin 200 days.

How to Perform Quantitative Risk AnalysisPerforming quantitative risk analysis enables the project team to prioritize risks according tothe threat they pose or the opportunity they present to the project. The prioritized list can beused to develop an effective response plan for each risk.

Guidelines:To effectively perform quantitative risk analysis, follow these guidelines:

• Begin with your original estimate of time or cost. Break out the various compo-nents of the estimate into manageable chunks. Determine the variable that youwish to investigate and identify its likely range of variation.

• Calculate and assess the impact of changing the range of results on the overallproject estimate for each value in the range.

• Consult historical information, such as similar completed projects, studies of simi-lar projects by risk specialists, and risk databases for information that may beuseful for quantitative risk analysis on your project.

• Use the appropriate interviewing technique and obtain probability distributionsfrom stakeholders and subject matter experts.

— If expertise resides with more than one or two people and the problem doesnot lend itself to precise analytical techniques but can benefit from subjectivejudgments on a collective basis, consider using the Delphi technique.

— Consider using the direct method when time or resource constraints do notallow for more complex, resource-intensive methods and questions can bephrased clearly and concisely.

— If your expert has a solid understanding of probability concepts and is famil-iar with PDFs, consider using the diagrammatic method.

• Depict the distributions in a PDF.

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• Perform a sensitivity analysis to determine which risks have the most potentialimpact on the project by examining the extent to which the uncertainty of eachelement affects the objective being examined if all other uncertain elements areheld at their baseline values. Use the decision tree analysis technique to examinethe implications of choosing one or two or more alternatives by incorporating theprobabilities of risks and the costs or rewards of each logical path of events andfuture decisions.

• Conduct a project simulation using a model to translate uncertainties at a detailedlevel into their potential impact on project objectives at the total project level.Prioritize the quantified risks according to the threat they pose or the opportunitythey present to the project objectives. Include a measure of each risk’s impact.Document all changes to the risk register.

Example: Performing Quantitative Risk Analysis for a Presidential CampaignThe campaign staff of a candidate for president was given the project of deciding ifmoney spent on campaign ads in a western state was likely to garner the votes neededto win in a general election. One method was to analyze the state’s voter history ineach of the past 11 elections.

Based on this information, the project team set out to determine the likelihood that acandidate from Party A could win the state. Using 100 percent of the vote as BestCase and 0 percent of the vote as Worst Case, the Most Likely Case was derived froman average of the historical voting record. The data was plotted in a probability distri-bution resulting in the expected normal distribution of data about the mean. Alsoexpected was the reasonably small standard deviation, indicating that the plotted datawas tightly distributed about the mean.

The deviation indicated a range of possibility about the mean from about 40 percent toslightly more than 54 percent. Although initial reaction to this news was positive,everyone agreed that more analysis was required. So the team set out to analyze justthe data from the last three elections, knowing that voter sentiment goes with thetimes. The difference was disconcerting. It seems that the Party A electorate repre-sented on average 37 percent of the vote over the last three elections. The data wasjust as stable and in fact the standard deviation shrank to just 4.59 percent, resulting ina probability range between 32.5 and 41.5 percent.

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DISCOVERY ACTIVITY 7-4Performing Quantitative Risk Analysis

Data Files:

• Analyzing Project Risk

Before You Begin:From the C:\085042Data\Analyzing Risks and Planning Risk Responses folder, open theAnalyzing Project Risk image.

Scenario:Your project requires an external training provider. Your team has assessed each training pro-vider’s rate of success in delivering the project management software training within therequired time-frame and within budget and you have graphed the results.

1. Which analysis technique was used in the Analyzing Project Risk image to determinethe most cost-effective choice of a training provider?

a) Delphi

b) Diagrammatic

c) Simulation

d) Decision tree

2. What is the probability that Vendor 1 will complete the project on time?

a) 70 percent

b) 60 percent

c) 50 percent

d) 40 percent

3. What is the probability that Vendor 2 will run over the allotted time for the project?

a) 40 percent

b) 50 percent

c) 60 percent

d) 70 percent

4. What is Vendor 3’s expected monetary value?

a) $0

b) $200

c) $1,700

d) $10,300

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5. Your team combines the EMV at the end of each vendor’s network end-points to arriveat a net proceed for each vendor. You want to choose the vendor bid with the mosteconomic advantage for OGC. Based on this number, which vendor should your teamchoose?

a) Vendor 1

b) Vendor 2

c) Vendor 3

d) Vendor 1 and Vendor 3

TOPIC EDevelop a Risk Response PlanYou performed a quantitative risk analysis for your project. Now you need to decide how youare going to address these project risks. In this topic, you will perform risk response planning,the final risk planning component process, by developing a risk response plan.

Whether you realize it or not, each planned response stems from an identified risk. Developinga risk response plan provides insurance for your project, because you are taking steps to ensurethat each possible scenario has an action plan.

The Plan Risk Responses ProcessPlan risk responses is the process of examining each risk and corresponding response alterna-tives, determining which response will improve the likelihood of a positive outcome. First, youreview the risk management plan and risk register, which were updated with previous riskmanagement planning outputs. Then, you employ an appropriate technique for each risk, suchas avoidance, mitigation, or exploitation. Finally, you enter any alterations into the risk regis-ter, risk response plan, or other necessary project documentation.

Figure 7-16: The plan risk responses process.

Initial risk response planning on a project-wide basis should happen early in the project in order to be proactivein addressing risk issues. Additional risk response planning initiatives should be undertaken at the start of eachproject segment and work package.

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Plan Risk Responses InputsThere are several important risk response planning elements contained in the risk managementplan and the risk register.

Input DescriptionRisk register Contains prioritized lists of project risks, root causes of risk, list

of potential responses, risk ranking, lists of near- and long-termrisks, trends in qualitative risk analysis, categorized risks, and awatchlist of low priority risks.

Risk management plan Contains the guidelines, methodology, templates, and formatsnecessary to perform all risk management processes, includingplan risk responses.

Plan Risk Responses Tools and TechniquesEach risk may require that you employ one of several different strategies, depending on thepotential effectiveness of the different techniques.

Tools and Techniques DescriptionStrategies for negative risks or threats The common strategies for threats are:

• Avoid

• Transfer

• Mitigate

• Accept

Strategies for positive risks or oppor-tunities

The common strategies for opportunities are:

• Exploit

• Share

• Enhance

• Accept

Contingent response strategy A contingency plan is created in advance so that if a risk isabout to happen, the contingency plan can be invoked.

Expert judgment Expertise provided by a group or individual with relevant expe-rience and skill to take action on identified risks and establishrisk responses.

Plan Risk Responses OutputsThere are four outputs to the plan risk responses process.

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Output DescriptionRisk register updates Updated information in the risk register may include identified

risks, team members responsible for specific risks, response strat-egies, warning signs of particular risks, contingency plans andtheir trigger condition, and contingency reserves.

Risk-related contract decisions Decisions to transfer risk that include insurance agreements, ser-vice agreements, or any risk sharing agreements.

Project management plan updates Subsidiary management plans and their various requirementsneeded for the plan risk responses process. Elements that need tobe updated include:

• Schedule management plan

• Cost management plan

• Quality management plan

• Procurement management plan

• Human resource management plan

• Work breakdown structure

• Schedule baseline

• Cost performance baseline

Project document updates Contains assumptions log updates and technical documentationupdates.

Negative Risk Strategies (Threats)Negative risk strategies address how to deal with risk scenarios that have a possible negativeimpact on the project.

Strategy DescriptionRisk avoidance Involves changing the project plan to prevent a potentially detrimental

risk condition or event from happening. One way to eliminate a risk is toreduce or change the scope of the project in an attempt to avoid high-riskactivities. The scope change could involve the requirements or specifica-tions, or it can mean changing the approach to meeting the requirementsor specifications.

Risk transference Involves shifting the impact of a risk event and ownership of the riskresponse to a third party. This strategy typically is used in connectionwith financial risk exposure and most often involves payment of a riskpremium to the party assuming the risk.

Risk mitigation Attempts to reduce the probability or impact of a potential risk event toan acceptable level. Mitigation may involve implementing a new courseof action in an effort to reduce the problem or changing the current con-ditions so that the probability of the risk occurring is reduced.Sometimes, when reducing the probability is not possible, the focus mustbe on reducing the consequences of the risk event.

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Strategy DescriptionRisk acceptance Involves accepting that a risk exists. The acceptance may be passive or

active. Active acceptance indicates that the plan is ready for execution ifthe risk occurs. Passive acceptance indicates that no action is planned ifthe risk occurs and whatever action is suitable will be executed on anextempore basis.

Positive Risk Strategies (Opportunities)Positive risk strategies address how to deal with risk scenarios that have a possible positiveimpact on the project.

Strategy DescriptionRisk exploitation Often used when a project team wants to make sure that a positive risk is

fully realized. This is often done by hiring the best experts in a field orensuring the most technologically advanced resources are available to theproject team.

Risk sharing Entails partnering up with another party in an effort to give your team thebest chance of seizing the opportunity. Joint ventures are a commonexample of risk sharing.

Risk enhancement Attempts to increase the probability that an opportunity will occur. This isdone by focusing on the trigger conditions of the opportunity and trying tooptimize their chances for occurrence.

Risk acceptance Involves accepting the risk and actively responding to it as it comes, butnot through pursuit.

Contingency PlansDefinition:

A contingency plan is a risk response strategy developed in advance, before things gowrong; it is meant to be used if and when identified risks become reality. An effectivecontingency plan allows a project manager to react quickly and appropriately to therisk event, mitigating its negative impact or increasing its potential benefits. A contin-gency plan may include a fallback plan for risks with high impact. The fallback plan isimplemented if the initial contingency plan is ineffective in responding to the riskevent.

Example: Contingency Plan for an Outdoor EventA rain date is a classic example of a contingency plan. For an outdoor event that couldbe spoiled by inclement weather, such as a company picnic, the project manager couldannounce in advance the contingency plan: in case of rain, the picnic will be post-poned by one week.

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Contingency ReservesDefinition:

A contingency reserve is a predetermined amount of additional time, money, orresources set aside in advance to be used to further the project’s objectives in the eventthat unknown risks or accepted known risks become reality. Contingency reservescover risk events that are not accounted for in the project’s baseline duration and costestimates. The amount of the reserve is determined by the potential impact of the risk,but should include enough to implement any contingency plans as well as a buffer fordealing with unidentified risks.

Example: Contingency Reserve for a Trade ShowA project manager in charge of company participation at a trade show might solicithelp in the form of employees willing to participate. His contingency reserve wouldtake the form of human resources; he could solicit more volunteers than he expects hewill need. In the event that some employees are not able to participate at the lastminute, he will have a reserve of other employees to call upon.

How to Develop a Risk Response PlanAn effective risk response plan describes the response strategies for each identified risk. Theselected response strategies should take advantage of opportunities and reduce the probabilityand/or impact of threats to project objectives.

Guidelines:To develop an effective risk response plan, follow these guidelines:

• Examine each identified risk to determine its causes and how it may affect projectobjectives. Brainstorm possible strategies for each risk.

— Identify which project stakeholders can be assigned responsibility of a risk.Involve those people in your risk response planning.

— Write down every idea mentioned regardless of feasibility or cost.

• Choose the response strategy that is most likely to be effective for each identifiedrisk. Ensure that the chosen risk response strategies are:

— Enough to bring the risk threshold below the organization’s limit.

— Appropriate to the severity of the risk.

— Cost effective.

— Timely enough to be successful.

— Realistic within the context of the project.

— Agreed to by all parties involved.

— Owned by a responsible person.

• If you are unable to bring a risk’s rating below the organization’s risk threshold,ask your sponsor for help. Develop specific actions for implementing the chosenstrategy.

• Identify backup strategies for risks with high risk factor scores.

• Determine the amount of contingency reserves necessary to deal with acceptedrisks.

— How much will your contingency plans cost?

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— How much time will your contingency plans add to the schedule?

• Determine how much of a contingency reserve you should set aside for unknownrisks (ones that have not been identified).

• Consult the risk management plan for the description of the content and format ofthe risk response plan. Include the following elements in your risk response plan:

— A description of the identified risks along with the area of the projectaffected (that is, the WBS element).

— Risk owners and assigned responsibilities.

— Qualitative and/or quantitative risk analysis results.

— Response strategies selected and the specific actions for implementing thestrategies.

— Level of residual risk expected to remain after the response strategies areimplemented.

— Budget and schedule for responses.

— Contingency plans and fallback plans for all accepted risks with high impact.

• Incorporate the risk response plan into the overall project plan so the strategiescan be implemented and monitored. As the project progresses through the lifecycle, examine trends in qualitative and quantitative analysis results that mayguide your response strategies.

Example: Risk Response Plan for a New ProductYou and your team have been asked to create a new line of exercise equipment. Yourproject team reviews all documentation for risks. From these documents, they identifythree risks that need risk response planning. As the first risk deals with the negativeloss time due to possible worker injuries, the team decides to employ risk transference,paying a premium for insurance.

The second risk involves a scenario in which the new products could be first to mar-ket. To address this opportunity, the team settles on risk exploitation by hiring morestaff to ensure the positive outcome. After a lengthy review, the team is unable todetermine a course of action for the final risk, which is the possibility that a key patentmay not be approved in time for production.

In response, the team develops a contingency plan and documents all changes to therisk register, risk management plan, and project plan.

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DISCOVERY ACTIVITY 7-5Developing a Risk Response Plan

Scenario:You and your team have identified risks in the PM Training Roll-Out project.

• A potential project software upgrade. IT approval may occur during the projectlife cycle.

• Change in organizational requirements. Vicky Morris, the PMO Director, hasresigned.

• Instructor illness.

Now it is time to consider your risk response planning.

1. The first risk has possible positive outcomes. Which risk response strategy should youemploy?

a) Risk avoidance

b) Risk enhancement

c) Risk mitigation

d) Risk sharing

2. What response do you have regarding the risk of a potential project software upgradeduring the project life cycle?

3. The change in organizational requirements due to the resignation of Vicky Morris haspossible negative outcomes to the project, but you have determined there is no way toavoid the scenario completely. Which risk response strategy should you employ?

a) Risk avoidance

b) Risk enhancement

c) Risk mitigation

d) Risk exploitation

4. You determine that instructor illness cannot be avoided. Which risk response strategyshould you employ?

a) Risk enhancement

b) Risk exploitation

c) Risk acceptance with a contingency plan

d) Risk acceptance without a contingency plan

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5. What are some ways you would respond to the potential risk of instructor illness dur-ing the training?

Lesson 7 Follow-upIn this lesson, you analyzed risks and planned for risk responses. You created a risk manage-ment plan that describes how project risk management activities are structured and performedthroughout the project. By taking a proactive approach during risk planning, you arm yourselfwith the necessary information to manage potential risks to your projects and ensure the bestpossible environment for success.

1. How could your organization benefit from comprehensive risk planning?

2. What tools and techniques will you use to effectively perform qualitative risk analysisfor future projects you manage?

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NOTES


Planning ProjectProcurements

In this lesson, you will plan project procurements.

You will:

• Create a procurement management plan.

• Prepare a procurement statement of work.

• Prepare a procurement document.


LESSON 8

Lesson 8: Planning Project Procurements 287


IntroductionYou have planned for project risk and you are almost ready to transition your project into theexecuting process group. But before you can do that, you need to identify ways of securingexternal resources when necessary. In this lesson, you will plan project procurements and cre-ate a procurement management plan.

Competitive pressure and increased time-to-market are forcing many companies to look outsidetheir organizations to fill resource gaps and gain a competitive advantage. By clearly definingyour expectations and requirements, you enhance your chances of finding qualified, responsivesuppliers who can help you achieve a successful outcome for your project.

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LESSON 8



TOPIC APlan Project ProcurementsBefore you transition your project to the executing process group, you need to plan for theproject procurements based on the resource requirements that you have identified. In this topic,you will plan project procurements.

Before you commence with the execution of a project, the project purchasing requirements anddecisions are to be identified and documented. This requires the identification of resources thatneed to be procured from outside the project organization and an approach to identify potentialsellers for the project. A good procurement plan ensures that the risks and changes to theproject schedule are minimal.

The Plan Procurements ProcessThe plan procurements process allows project managers to document project purchasing deci-sions, specify the approach to be followed for project procurements, and identify potentialsellers to meet the purchase requirements of the project. It also determines whether the projectneeds will be met internally by the project team, or whether the required products, services, orresults need to be acquired from outside the project organization.

When the project needs are to be procured from outside the project organization, the projectmanagement team needs to determine what to acquire, how to acquire, how much to acquire,and when to acquire the project resources. The buyer’s involvement in the procurement processshould also be considered when planning procurements. The process includes consideration ofthe risks inherent in making decisions in the planning phase of the project. In mitigating therisks, the project managers would consider the type of contract to be used for the procurementand may involve transference of the risks to the seller.

Figure 8-2: The plan procurements process.

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Plan Procurements InputsProject managers would require several inputs during the plan procurements process.

Input DescriptionScope baseline Includes the detailed project scope statement, the WBS, and the

WBS dictionary.

Requirements documentation Includes information about project requirements along with detailsof any contractual or legal implications that may apply to therequirements.

Teaming agreements The legal contractual agreements between the organization and oneor more external entities to form a partnership, joint venture, orother arrangement between the parties. Teaming agreementspredefine the buyer-seller roles of parties involved in the project.

Risk register Includes identified project risks, risk owners, and risk responsesthat may influence project procurements.

Risk-related contract decisions Includes details of the agreements that are prepared to specifyeach party’s responsibility for specific risks in the project.

Activity resource requirements Includes information on the specific activity resource needs of theproject, namely people, equipment, or location.

Project schedule Contains information on the required timelines or the mandateddeliverable dates.

Activity cost estimates Includes cost estimates developed for the procuring activity withinthe project that are used to evaluate bids or proposals receivedfrom the sellers.

Cost performance baseline Provides details on the planned budget over the timelines of theproject.

Enterprise environmental factors The enterprise environmental factors that can influence the planprocurements process include:

• Conditions of the marketplace.

• Availability/unavailability of products, services, or results in themarketplace.

• Suppliers past performance and reputation.

• Terms and conditions applicable for products, services, orresults.

• Terms and conditions for the project specific industry.

• Local requirements that may be unique.

Organizational process assets The organizational process assets that influence the plan procure-ments process include:

• Policies, procedures, and guidelines for formal procurements.

• Management systems used by the organization in developingthe procurement management plan and in selecting the contracttypes to be used to facilitate procurement.

• The established multi-tier supplier system of pre-qualified sup-pliers based on prior project experience.

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Plan Procurements Tools and TechniquesProject managers use several tools and techniques in conducting the plan procurements pro-cess.

Tools and Techniques DescriptionMake-or-buy analysis Assesses the cost-effectiveness of using in-house resources as

opposed to outside sellers.

Expert judgment Expert judgment is available from sources such as the organization’sfinance department, legal consultants, risk professionals or technicalassociations, and so on.

Contract types Contracts have different benefits and risks, depending on the type ofagreement.

Plan Procurements OutputsSeveral outputs are created by the plan procurements process.

Output DescriptionProcurement management plan Describes how the procurement processes will be handled. It includes

the information on contract types to be used, standard procurementdocuments, procurement metrics, constraints and assumptions, andprocurement related risk management issues.

Procurement statements of work Detailed, written description of a product or service being procuredunder contract.

Make-or-buy decisions Decisions about which resources, services, or products will be createdor purchased by the organization.

Procurement documents The documents that are submitted to prospective sellers and serviceproviders to solicit their proposals for the work needed. These caninclude Request for Information (RFI), Invitation for Bid (IFB),Request for Proposal (RFP), and Request for Quotation (RFQ).

Source selection criteria The metrics that are used to evaluate each seller’s proposal and makecomparisons among different proposals. The criteria can be objectiveor subjective and are used to rate or score seller proposals.

Change requests May apply to the subsidiary management plans in the project man-agement plan, especially in light of new products or services beingacquired.

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Procurement Management PlansDefinition:

The procurement management plan is a document that outlines the specifications forprocuring work from outside sources; it specifies the types of contracts that will beused, describes the process for obtaining and evaluating bids, mandates the standard-ized procurement documents that must be used, and describes how multiple providerswill be managed. The plan also states how procurement activities will be coordinatedwith other project management activities, such as scheduling and performance report-ing. Depending on the needs of the project, the procurement management plan may beformal or informal; brief or highly detailed.

Example: Planning Procurement Management for an Advertising AgencyA small advertising agency would procure contracts from external sources for some ofthe work considered necessary but beyond its core capabilities, such as specializedprinting and professional photography services. The procurement management planwould outline the company’s processes for soliciting and evaluating bids from compet-ing service providers and would specify how management would schedule the contractwork, schedule payments to providers for the work done, and evaluate the quality.

Teaming AgreementsDefinition:

A teaming agreement is a legal contractual agreement between two or more parties toform a joint venture or other arrangement as defined by the parties to meet the require-ments of a business opportunity. The parties can be internal or external to theorganization executing the project. When a teaming agreement is created for a project,it significantly impacts the planning processes for the project, and predefines issuessuch as scope of work and competition requirements.

Example: OGC Corporation’s Agreement with Janrex Inc.OGC Corporation and Janrex Inc. have been associated partners for the last four years.The agreement insists that OGC Corporation will have to procure the hardware fromJanrex Inc. for any implementation-related and/or turn-key projects executed by OGCin the North American region. However, this arrangement is not obligatory when theimplementation is done in any other area but North America.

Risk-Related Contract DecisionsRisk-related contract decisions are made when:

• Planning risk responses for the project.

• Sharing or transferring part or all of the risk (opportunity or threat, respectively).

• Enhancing or mitigating part or all of the opportunity or threat, respectively, faced by anorganization.

Some of the risk-related contract decisions include agreements for insurance, bonding, services,Letter of Credit (LoC), bank guarantee, and other items as appropriate for the project.

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How to Create a Procurement Management PlanEffective planning of project procurements documents the project purchasing decisions, speci-fies the approach to be used in project procurements, and identifies potential sellers for theproject and documents these in the procurement management plan.

Guidelines:To generate an effective procurement management plan, follow these guidelines:

• Identify the project needs that can be fulfilled by acquiring products, services, orresults. Determine:

— What is to be acquired.

— How to acquire.

— How much to acquire.

— When to acquire.

• Study the various plan procurement input documents to determine informationrelated to the procurement requirements. The input documents could include:

— Project scope baseline.

— Requirements documentation.

— Existing teaming agreements.

— Project risk registers.

— Risk-related contract decisions.

— Activity resource requirements.

— The project schedule.

— Activity cost estimates.

— The cost performance baseline.

— Appropriate enterprise environmental factors.

— Existing organizational process assets.

• Consult technical experts to define specifications for the project needs clearly,concisely, and completely.

• Perform a make-or-buy analysis to determine whether particular work can beaccomplished by the project team or must be procured from outside the organiza-tion.

• Determine the contract types to be used for the specific procurement needs of theproject.

• Document the plan procurement information you have identified so far in the pro-curement management plan.

• After the procurement management plan is created, you will also generate otherrelevant plan procurement outputs, including:

— Procurement statements of work.

— Make-or-buy decisions.

— Procurement documents.

— Source selection criteria.

— Change requests.Some of the information developed in generating these out-puts will be used to finalize the procurement management plan.

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Example: Creating a Procurement Management Plan for a Warehouse Manage-ment Software Project

Mark Anderson, the project manager of OGC’s Warehouse Management Softwareproject, is creating the procurement management plan for the project. Mark discusseswith stakeholders the various project requirements that include the warehouse manage-ment software, related computer hardware, networking, database, and project staffing.He studies the project scope baseline to determine the scope of the warehouse manage-ment software implementation within OGC. He goes through the requirementsdocumentation for each of the project requirements.

Mark involves Brian Wells, the IT Consultant of OGC, to draw up the technical speci-fications of the project requirements. Further, discussions with Brian indicate that thewarehouse management software and other requirements of this project have to be pro-cured from outside the organization as the current infrastructure at OGC does notsupport the requirements of this project.

Based on the procurement information collected, Mark prepares the procurement man-agement plan for OGC’s Warehouse Management Software project.

DISCOVERY ACTIVITY 8-1Examining a Procurement Management Plan

Data Files:

• OGC Procurement Management Plan

Before You Begin:From the C:\085042Data\Planning Project Procurements folder, open the OGC ProcurementManagement Plan document.

Scenario:During the development of the OGC PM Training Roll-Out project charter and project scopestatements, it had been determined that an outside seller would deliver the project managementsoftware training due to time and logistical constraints within the organization. You haveupdated the OGC procurement management plan that describes how the procurement processeswill be managed from developing procurement documents through contract closure. Before youmeet David Anderson, OGC’s procurement manager, to discuss the procurement requirements,you want to ensure that the procurement management plan includes suitable guidance for suc-cessful project procurement.

1. In the OGC Procurement Management Plan, who is authorized by OGC to enter a pre-scribed contract with the external training provider?

a) Project sponsor

b) Project manager

c) Procurement manager

d) Operations manager

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2. In the OGC Procurement Management Plan, which of these job tasks are defined forthe solicitation process of the project?

a) Characteristics of project requirements are to be documented in a procurementstatement of work.

b) A Request for Proposal (RFP) will be sent to prospective sellers.

c) Provide necessary electronic and paper documentation and source files.

d) Evaluation criteria are to be determined to evaluate proposals from sellers.

3. Which of OGC’s plan procurements inputs contains information about the time framefor each project deliverable?


b) Scope baseline

c) Project schedule

d) Activity resource requirements

4. Match the plan procurement inputs with their descriptions.

Risk-related contract deci-sions

a. Factors that can influence the planprocurements process such as marketconditions and supplier information.

Teaming agreements b. Factors that can influence the planprocurements process such as poli-cies, procedures, guidelines, andmanagement systems.

Activity resource require-ments

c. Contracts between the organizationand one or more external entities towork together.


d. Include details of the agreements thatare prepared to specify each party’sresponsibility for specific risks in theproject.


e. Include information on the specificactivity resource needs of the project.

5. Which section in the OGC Procurement Management Plan refers to the parameters tochoose sellers?

a) Contract Type

b) Procurement Description

c) Procurement Responsibility

d) Source Selection

LESSON 8



TOPIC BPrepare a Procurement Statement ofWorkAs a project manager, you have a responsibility to acquire project resources from outside yourorganization at a fair and reasonable cost and in an efficient and dependable manner. In thistopic, you’ll focus on preparing a procurement statement of work.

You’re the project manager for a new brand of organic pasta sauce. In order to meet the prod-uct launch deadline, you purchase tomatoes from a wholesale distributor in South America.Unfortunately, the tomatoes that arrive are small, green, and hard. In a panic, you call yourseller to let him know that you wanted large, red, juicy tomatoes to meet the recipe require-ments. Your seller says, “You ordered tomatoes and we sent you tomatoes.” Clearly describingthe exact type and specifications of the product you want to buy from the supplier in a pro-curement statement of work ensures you will avoid costly outsourcing errors.

Procurement Statements of WorkDefinition:

A procurement SOW is a detailed narrative description of the resources, goods, or ser-vices that are being sought from external sources to fulfill a project’s requirements. Itis distributed to potential sellers, who will use it to evaluate their capability to performthe work or provide the services. In addition, the SOW will serve as a basis for devel-oping the procurement documents during the solicitation process. Information in theproject scope baseline is used to create the procurement SOW. The procurement SOWgoes through multiple rounds of reviews and fixes until the contract award is signed.

Though a procurement SOW is created for each procurement item, multiple products or services canbe grouped and specified in one procurement SOW.

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Example: A Procurement Statement of Work

Figure 8-3: A procurement statement of work for the OGC PM Training Roll-Out project.

SpecificationsDefinition:

Specifications are descriptions of the work to be done or the service or product to beprovided; they define the requirements that must be met in exacting detail. Thesedescriptions can be in the form of words, pictures, or diagrams. Specifications mayrelate to a product’s design, performance, or functionality.

Example: Performance Specifications for a Children’s ToyPerformance specifications identify measurable capabilities that the end product mustachieve in terms of operational characteristics. The performance specifications for achildren’s toy, for example, might specify that the lighted elements of the product musthave a mean time between failures rating of 1,000 hours.

OutsourcingDefinition:

Outsourcing refers to moving beyond the organization to secure services and expertisefrom an outside source on a contract or short-term basis; it is done for core work thathas traditionally been done within the organization. It is becoming more common as itallows businesses to focus more on their core competencies. On the other hand, manybusinesses are emphasizing that work should be kept in-house whenever possible, in aneffort to maintain stricter quality controls. As a project manager, you’ll need to workwithin the expectations and constraints that result from either situation.

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Example: Outsourcing by a Clothing ManufacturerA New York clothing manufacturer that has been producing its own buttons fordecades might find that it is more cost-effective to move this part of its operations toan outside source. By outsourcing the button production to a company in Mexico, thecompany might realize significant cost savings while focusing on its core operations.

Make-or-Buy AnalysisDefinition:

A make-or-buy analysis is a technique used to determine whether it would be morecost-effective to produce a product or service in-house or to procure it from an outsideseller. Make-or-buy decisions can significantly impact project time, cost, and quality. Inthe case of a buy decision, you must also consider if the product needs to be pur-chased, leased, or rented.

Example: Make-or-Buy Analysis for Developing Training MaterialsA multimedia company was required to deliver several days of training to a client onthe operation of its flagship product. The company’s project team had to decidewhether to increase staff in order to develop the training materials in-house or tooutsource the work to a seller. The company’s budget constraints and relative inexperi-ence made it cost-effective to contract with an experienced outside firm.

Factors in Make-or-Buy DecisionsWhen considering a make-or-buy decision, it is important to consider several factors.

Factor ConsiderationImpact Consider the impact on cost, time, or quality. For instance, if current per-

sonnel must be retrained for services requiring a new skill set, it may beless expensive to outsource those services.

Ongoing need If the organization will continue to need a specific skill set—even forfuture, unrelated projects—it may be a worthwhile investment to train cur-rent personnel to perform that service.

Learning curve While it may make financial sense to develop an in-house solution, theremay not be enough time to train personnel and/or implement the necessarypolicies and equipment to produce that solution.

Cost-effectiveness If the required resources are readily available internally, organizations willusually use them. However, if the project involves technology, skills,materials, or resources that are beyond the organization’s capabilities, itmay be cost-effective to hire outside help.

Lease, Rent, or Buy DecisionsDefinition:

A lease, rent, or buy decision refers to a business analysis that determines the mostcost-effective way to procure the necessary equipment for a project. Such a decision isprimarily based on financial analysis.

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Example: Lease, Rent, or Buy Decisions for Acquiring a High-speed CopierA project requires a high-speed copier with collating capabilities. If it is a small, one-time project and the equipment is very expensive and prone to breaking, it might bemost cost-effective to lease the equipment and take advantage of a service agreement.But if the project will be ongoing over a period of months and service needs are notanticipated, it might be more cost-effective to rent a copier for the duration of theproject. For a long-term project requiring extensive copying resources, it might bemost cost-effective to purchase the equipment.

How to Prepare a Procurement Statement of WorkAn effective procurement statement of work describes the work being procured in sufficientdetail so that potential sellers can evaluate their capability to perform this work. In addition,the procurement SOW will serve as a basis for developing the procurement documents duringthe solicitation process.

Guidelines:To prepare an effective procurement statement of work, follow these guidelines:

• Review the product description to ensure that you fully understand the scope ofthe work being procured.

• Consult technical experts to define specifications clearly, concisely, and com-pletely.

• If your organization has a preferred or mandated procurement SOW format, besure to use it and comply with any standards and policies regarding content. Ifthere is no standard procurement SOW format for your organization, you may beable to modify a procurement SOW from a previous, similar project.

• Present the information in a logical sequence.

• Use consistent terminology and level of detail throughout the procurement SOW.

• Determine whether any collateral services will be required of the seller as a partof the contract:

— What are the seller’s performance reporting requirements?

— Will the seller be required to provide any post project operational support?

• Determine the acceptable criteria for the product or service.

• Make sure your procurement SOW includes the following key elements:

— Clear identification of the project name and deliverable name or identificationnumber.

— A clear description of the deliverable.

— When, where, and how delivery is required.

— Specifications to which the deliverable must be produced and methods forensuring that the specifications have been met.

— Acceptance standards for the deliverable.

— Documentation requirements the seller must complete as part of the biddingprocess (that is, references, compliance documents, confidentiality agree-ments, proof of insurance, contractor’s license number, and so on).

— Description of any required collateral services that would support the mainwork activities provided for in the contract.

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— Any additional instructions the prospective seller will need to bid on theitem.

• Have the procurement SOW reviewed by a knowledgeable third party to ensurethat it is complete, correct, and understandable.

• Document your make-or-buy decisions.

Example: Preparing a Procurement Statement of Work to Hold a Public CarnivalThe City of Butterfield Visitors’ Association has decided to hold a public carnival toincrease tourism to Butterfield. To create a procurement SOW for this project, Rachel,the project manager enlisted the help of her organization’s chief negotiator and a law-yer. She also hired a consultant to define the specifications of the various carnival ridesand attractions that would be utilized.

The organization had no existing preferred SOW format, so the project teamresearched SOWs used by other companies for similar events. The SOW is laid out ina logical sequence and uses consistent terminology throughout.

The statement also defines acceptable service criteria and includes key elements suchas a schedule and acceptance standards. Before sending this SOW to prospective bid-ders, the project team had the document reviewed and validated by an independentlegal firm.

Skills Necessary to Prepare a Procurement SOWTo prepare a procurement SOW, you will need to identify procurement resources withthe necessary expertise. If there is not a formal contracting group or department withinyour organization to support you in your procurement efforts, you’ll need to obtainthose resources and expertise from within your project team. Some of the skills andexpertise required for a full-blown procurement effort include:

• Supplier base and supplier qualification.

• Contracting expertise.

• Negotiating.

• Legal services.

• Knowledge of company policies and forms.

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DISCOVERY ACTIVITY 8-2Preparing a Procurement Statement of Work

Data Files:

• OGC Procurement SOW

Before You Begin:From the C:\085042Data\Planning Project Procurements folder, open the OGC ProcurementSOW document.

Scenario:During the development of the OGC PM Training Roll-Out project charter and project scopestatements, it had been determined that an outside training seller would deliver the projectmanagement software training due to time constraints and logistical constraints within theorganization. You have updated the procurement statement of work that will serve as a basisfor the procurement team to develop the OGC procurement documents during the solicitationprocess. You are meeting with key members of your team to make sure that it includes all ofthe work for this portion of the project.

1. In the OGC Procurement SOW document, which components define the specifics of thework being procured?

2. Were there any inconsistencies used in the document that might be confusing?

3. Does the OGC Procurement SOW include any collateral services to be provided by theclient?

4. Does the OGC Procurement SOW describe when, where, and how delivery is required?

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5. Does the OGC Procurement SOW provide specifications on how the assessment must beproduced and methods for ensuring that the specifications have been met?

TOPIC CPrepare a Procurement DocumentYou created a procurement SOW for your project. Now you need to incorporate the SOW intoa procurement document to facilitate acquiring responses from prospective sellers. In this topic,you will prepare a procurement document.

Congratulations! You’re the project manager for an urban redevelopment project that’s receiv-ing a lot of positive press coverage. There are numerous sellers eager to provide you with theoutsourcing services the project requires. But these sellers will send you different documents ifyou don’t specify what information you need and the format for receiving bids. Mastering thetools and techniques to prepare effective procurement documents ensures that sellers and ser-vice providers can respond completely and accurately to your project’s contract needs.

Procurement DocumentsDefinition:

Procurement documents are the documents that are submitted to prospective sellers andservice providers to solicit their proposals for the work needed. There are differenttypes of procurement documents. The type of document used will depend on the typeof project and the product or service being procured.

Example: An RFPA request for proposal is a specific type of procurement document. A company seekinga new advertising agency for a marketing campaign would send out RFPs to severalagencies. The RFP would describe the company’s marketing needs and ask for propos-als that describe the agencies’ qualifications and past campaigns, the key employees’work history, and their approach to creating a campaign. The RFP would request aquote for services provided and an outline of a marketing strategy.

Types of Procurement DocumentsMany organizations use procurement document terms interchangeably. It is important to besure that you understand the terms and definitions used by your organization.

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Term DescriptionRequest for Bid (RFB) Commonly used when deliverables are commodities for which

there are clear specifications, and when price will be the pri-mary determining factor. Submitted to selected sellers for aformal bidding process. Some negotiation may be anticipated.

Request for Quotation (RFQ) Like an RFB, commonly used when deliverables are commodi-ties for which there are clear specifications, and when price willbe the primary determining factor. Unlike an RFB, this solicitedprice quote is used for comparison purposes and is not a formalbid for work. This may allow for some negotiation of price.

Request for Proposal (RFP) Commonly used when deliverables are not well-defined or whenother selection criteria will be used in addition to price. Sellersare often encouraged to offer suggestions and alternativeapproaches to meet the project goals. Preparing the RFP is timeconsuming and costly for the seller. Negotiation is expected.Since it is time-consuming and expensive to create a proposal inresponse to an RFP, it is typical that not all the sellers solicitedwill respond.

Invitation for Bid (IFB) Sometimes used interchangeably with RFP, an IFB is most com-monly used when deliverables are commodities for which thereare clear specifications and when the quantities are very large.The invitation is usually advertised and any seller may submit abid. Negotiation is typically not anticipated.

Request for Information (RFI) Commonly used to develop lists of qualified sellers and to gainmore input for resource availability.

ContractsDefinition:

Contracts are mutually binding agreements that detail the obligations of both parties;in terms of procuring work, they relate to both the buyer and the seller. While con-tracts are customized for each agreement, they tend to fall into a number of standardpatterns, such as fixed price, cost-reimbursable, or Time and Material (T&M) contracts.

Example: A Fixed-Price ContractA project team is procuring the manufacturing unit for its new line of footwear. Afterseeking the advice of subject matter experts and reviewing historical records of similarprojects, the team estimates the manufacturing cost at $25,000. Including the manufac-turer’s fee of $10,000, the entire contract will be worth $35,000. Additionally, thecontract states that the manufacturer will receive $5,000 if they complete at least threeof the four project milestones on time.

This is an example of a fixed-price contract because it establishes a definitive deter-mined total price for a product or service. In addition, this contract has an incentive forthe seller to meet or exceed schedule objectives.

Components of ContractsIn general, any contract must include these elements, at a minimum:

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• Description of the project, its deliverables, and scope.

• Delivery date or other schedule information.

• Identification of authority, where appropriate.

• Responsibilities of both parties.

• Management of technical and business aspects.

• Price and payment terms.

• Provisions for termination.

• Applicable guarantees and warranties.

• Limits of liabilities or damages.

• Indemnity or compensation paid for losses incurred.

• Insurance requirements.

• Non-disclosure, patent indemnification, non-compete, or other applicable legal statements.

• Other applicable terms and legal requirements.

Types of ContractsThree common types of contracts are used in the procurement of goods and services.

Contract Type DescriptionFixed price Also called a lump sum contract, it establishes a total price for a prod-

uct or service. The seller agrees to perform the work at the negotiatedcontract value. This value is based on anticipated costs and profit, aswell as a premium to cover unforeseen problems. The contract mayinclude incentives for meeting requirements such as schedule mile-stones. Fixed-price contracts provide maximum protection to the buyerbut require a long time for preparation and bid evaluation. Since thistype of contract is tied to a fixed cost, it is most suited to projects witha high degree of certainty about their parameters.Types of fixed-price contracts include:

• Firm Fixed Price Contracts (FFP): This is a commonly used con-tract type favored by most buying organizations because the price forproducts or services is set at the outset and not subject to changeunless the scope of work changes.

• Fixed Price Incentive Fee Contracts (FPIF): This fixed-price con-tract is flexible in that it allows for deviation from performance.Financial incentives are tied to achieving metrics that are agreed toearlier.

• Fixed Price with Economic Price Adjustment Contracts (FP-EPA): This is a fixed-price contract type with special provision toallow pre-defined final adjustments to the contract price due tochanged conditions, such as inflation changes, or cost increases ordecreases for specific commodities such as fuel, and for currencyfluctuations. An FP-EPA contract protects both buyer and seller fromexternal conditions beyond their control. It is used whenever the sell-er’s performance period spans a considerable period. The EconomicPrice Adjustment (EPA) clause must relate to a reliable financialindex, which is used to precisely adjust the final price.

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Contract Type DescriptionCost-reimbursable This contract provides sellers a refund of the expenses incurred while

providing a service, plus a fee representing seller profit. Incurred costsare generally classified as direct costs (those incurred for the project),or indirect costs (costs allocated to the project by the organization as acost of doing business). These contracts sometimes include incentivesfor meeting certain objectives, such as costs, schedule, or technical per-formance targets. This approach is tied to the actual cost to perform thecontract, and therefore is most suitable if project parameters are uncer-tain.The cost-reimbursable contracts include:

• Cost Plus Fixed Fee Contracts (CPFF): This contract ensures thatthe seller is reimbursed for all allowable costs for performing thecontract work. The seller receives a fixed fee payment calculatedbased on the initial estimated project costs. This fixed fee does notchange due to seller performance.

• Cost Plus Incentive Fee Contracts (CPIF): This contract ensuresthat the seller is reimbursed for all allowable costs for performingthe contract work. The seller also receives a predetermined targetfee. In addition to this, there is a provision of an incentive fee pay-able to the seller, which is based on achieving certain performanceobjectives as set forth in the contract. In case the final costs arelesser or greater than the original estimated costs, then both thebuyer and seller share the costs from the difference based on the pre-negotiated cost sharing formula; for example, an 80/20 split over orunder target costs based on actual performance of the seller.

• Cost Plus Award Fee Contracts (CPAF): This contract ensures thatthe seller is reimbursed for all legitimate costs. The majority of thefee is earned based on the satisfaction of certain broad subjectiveperformance criteria defined and incorporated into the contract. Thedetermination of the fee is based on the buyer’s subjective determi-nation of seller performance and is generally not subject to appeals.

Time and Material (T&M) This type of contract includes aspects of both fixed-price and cost-reimbursable contracts. The buyer pays the seller a negotiated hourlyrate and full reimbursement for materials used to complete the project.This contract is used for staff augmentation, acquisition of experts, andany outside support when a precise statement of work cannot bequickly prescribed.Many organizations include not-to-exceed values and time limits inT&M contracts to prevent unlimited cost growth.

Point of Total Assumption (PTA)The Point of Total Assumption (PTA) is a price determined by a Fixed Price IncentiveFee contract (FPIF) above which the seller bears all the loss of a cost overrun. It isalso known as the ″most pessimistic cost″ because it represents the highest pointbeyond which costs are not expected to rise, given reasonable issues. If costs gobeyond the PTA, they are assumed to be due to mis-management rather than a worst-case set of difficulties. The seller bears all of the cost risk at PTA and beyond.

Any FPIF contract specifies a target cost, a target profit, a target price, a ceiling price,and one or more share ratios. The PTA is the difference between the ceiling and targetprices, divided by the buyer’s portion of the share ratio for that price range, plus thetarget cost. PTA = ((Ceiling Price - Target Price)/Buyer’s Share Ratio) + Target Cost.

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For example:

Target Cost: $60,000

Target profit: $6,000

Target Price: $63,000

Ceiling Price: $65,000

Share Ratio: 70% buyer and 30% seller

PTA = (($65,000 - $63,000) / 0.7) + $60,000 = $62,857

Source Selection CriteriaDefinition:

Source selection criteria are the standards used to rate or score proposals, quotes, orbids and form a part of the procurement solicitation documents. Some criteria areobjective and can be readily demonstrated and measured. Other criteria are subjectiveand open to different interpretations. Objective criteria tend to be much more specificthan subjective criteria.

Example: CriteriaThis table shows examples of objective and subjective criteria.

Objective Criteria Subjective CriteriaPh.D. chemist with at least fiveyears experience in chromato-graphic research.

Experienced laboratory chemist with strong analyticalskills.

80,000–90,000 square-foot storagearea within three miles of theDallas-Fort Worth Airport.

Ample square foot storage area near Dallas-Fort WorthAirport.

The subjective criteria statements leave room for interpretation as to what is meant by“experienced” and “strong.” Conversely, the requirement of a Ph.D. with five yearsexperience is very specific and not open to interpretation, making it an objective crite-rion.

Sample Source Selection CriteriaSample source selection criteria include:

Source Selection Criteria DescriptionUnderstanding of need Does the seller’s proposal effectively address the procure-

ment statement of work while demonstrating the clearunderstanding of the needs?

Overall or life-cycle cost Does the selected seller produce the lowest total cost ofownership, which includes the purchase cost plus operatingcost?

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Source Selection Criteria DescriptionTechnical capability Does the seller have or is the seller expected to acquire the

technical skills and knowledge needed for the project?

Management approach Does the seller have or can the seller reasonably developthe management processes and procedures to ensure a suc-cessful project?

Technical approach Do the seller’s proposed technical methodologies, tech-niques, solutions, and services meet the projectrequirements?

Warranty Does the seller provide warranty for the final product andfor what duration?

Financial capacity Does the seller have or is the seller expected to obtain thenecessary financial production capacity and interestresources?

Production capacity and interest Does the seller have the capacity and interest to meet theproject requirements?

Business size and type Does the seller’s company meet a specific category of busi-ness defined by the buyer, or established by a governmentalagency, and included as a condition in the contract? Catego-ries could include small, women-owned, or disadvantagedsmall businesses.

Past performance of sellers Does the company have past experience with selected sell-ers?

References Does the seller provide references from previous customersverifying the seller’s work experience and compliance withcontractual requirements?

Intellectual property rights Are intellectual property rights established by the seller inwork processes or services to be used for the project?

Proprietary rights Are proprietary rights ensured by the seller in the work pro-cesses or services to be used for the project?

How to Prepare a Procurement DocumentAn effective procurement document provides all the necessary information so that prospectivesellers can respond completely and accurately to your solicitation. A well-crafted procurementdocument will elicit consistent and comparable responses and allow sellers to suggest otherways to satisfy the requirements of the product or service.

Guidelines:To create a thorough procurement document, follow these guidelines:

• Examine the procurement need and determine which procurement document touse.

• Use standard procurement forms or templates if available.

• Develop a strong set of source selection criteria based on the real needs of yourproject.

— Objective criteria will probably be required when requesting bids for mostgoods and facilities.

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— However, you may find that using objective criteria alone will be too restric-tive when it comes to selecting resources such as a video producer, graphicartist, or central office site.

• Leave yourself some room to select from a range of capabilities and experience toget the best fit possible.

• Determine how you want the prospective sellers to respond:

— Must the response be provided on a specific form?

— Is there a specific format that must be followed?

— What is the deadline for proposal submissions?

— Is there any additional documentation that must be provided?

— Where and to whom should the proposals be sent?

• Examine the relevant SOW and make any necessary modifications that may havebeen identified during plan contracting.

• Ensure that the procurement document is structured to facilitate consistent, com-parable responses from sellers. It should include, at the minimum, the followingkey elements:

— Reference to (or inclusion of) the relevant SOW. You may also include otherrelevant project documents, such as the WBS or network diagram, as appro-priate.

— Clear instructions for how the prospective seller should respond.

— Any required contractual provisions, such as confidentiality agreements andcertifications.

— Criteria by which proposals will be evaluated.

• In addition, your procurement document may include:

— Listing of qualified sellers expected to bid (to drive down costs).

— Bidders’ conferences.

— Supplier payment plan.

— How change requests will be managed.

• Take into account any regulations that may define the required structure of pro-curement documents for government contracts.

Example: Prepare a Procurement DocumentThe Arithmetic on a Stick project team is preparing a procurement document for themanufacturing of their product. After reviewing the project schedule and the scopestatement, the team examines the manufacturing needs to determine which type of pro-curement document to use.

Since the product has well-defined specifications and a tight production schedule, andprospective sellers will primarily be evaluated on price, the team agrees that theyshould use a Request for Quotation (RFQ). They use their organization’s standard RFQform to prepare the RFQ for this procurement project.

Before including the SOW in the procurement document, the team reviews it to ensurethat it accurately reflects the procurement needs and makes minor modifications thatthey identified as necessary during solicitation planning. The team also develops a setof objective and subjective evaluation criteria that will be used to score and rank thequotations they receive. High on the list of criteria is a competitive price.

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The RFQ includes all of the key elements listed in the guidelines, as well as a descrip-tion of how change requests will be managed. In an effort to drive down costs, theRFQ also includes a list of sellers expected to bid on the solicitation.

DISCOVERY ACTIVITY 8-3Preparing a Procurement Document

Data Files:

• OGC Procurement SOW and Procurement Document

Scenario:It is OGC’s policy that all project managers must get approval from the procurement depart-ment for all external procurements. You are meeting with the OGC procurement manager todiscuss the procurement documents that will be created based on the statement of work thatyou had previously prepared. The manager has asked you to come to the meeting preparedwith an outline of the SOW that is to be included in the procurement documents. You are nowready to begin the preparation of the procurement documents with the procurement manager.

1. Based on the scenario, what would be a logical first step in creating the procurementdocument?

a) Determine how you want training sellers to respond.

b) Define the training specifications.

c) Determine the most appropriate procurement document to use.

d) Examine the project SOW and make any necessary changes.

2. The assessment development, the project software training needs, delivery of thetraining, and costs will be the determining factors in your choice of training providers.What type of procurement document would be most appropriate to use in this situa-tion?

a) Request for quotation

b) Request for proposal

c) Request for bid

d) Invitation for bid

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3. From the C:\085042Data\Planning Project Procurements folder, open the OGC Pro-curement SOW and Procurement document. Which criterion for evaluating trainingsellers is subjective?

a) Seller must provide an instructor with a minimum 3 years of project managementsoftware training.

b) Seller must be creative and flexible about changes made to the design of the assess-ment documents, even in late production phases.

c) Seller must have a minimum 20 years of collective training experience on staff.

d) Seller must have produced at least three projects of similar scope in the last 10years.

Lesson 8 Follow-upIn this lesson, you planned for procuring products or services from external sources. You cre-ated a procurement management plan and specified how project procurements should behandled. You also prepared a procurement SOW that clearly and concisely describes the prod-uct or service you intend to acquire, and you incorporated the procurement SOW into aprocurement document. The effective planning and documentation of all project procurementsup-front ensures the successful outcome of your project.

1. How could your organization benefit from more effective procurement planning?

2. In the future, what do you plan to use to prepare better SOWs and procurement docu-ments?

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NOTES


Executing Project Work

In this lesson, you will execute project work.

You will:

• Describe the direct and manage project execution process.

• Execute a quality assurance plan.

• Acquire the project team.

• Develop the project team.

• Manage project teams.

• Distribute project information.

• Manage stakeholders’ relationships and expectations.


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Lesson 9: Executing Project Work 313


IntroductionYou finished your project planning and integrated the outputs from each of the planning pro-cesses into a comprehensive project management plan. Now your project transitions fromplanning to executing. Project execution is the third of five project management process groupsthat you will perform on most projects you manage. In this lesson, you will execute projectwork.

Coordinating the people and other resources you need to carry out your project managementplan is essential to your project’s success. The project team members need a coach to guidethem as they undertake the work defined in the scope statement. Executing project workensures that your team is on the same page and that your project finishes on time, on budget,and with the required quality.

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TOPIC AIdentify the Direct and ManageProject Execution ProcessYour project has officially advanced from planning to executing. Now it is finally time to startleveraging the plan. In this topic, you will identify the components and purpose of the directand manage project execution phase of the project.

Coordinating people and other resources to carry out the project plan is like conducting musi-cians in an orchestra. Effectively directing and managing project execution ensures that theproject team starts and finishes the project work according to the project management plan.

The Direct and Manage Project Execution ProcessThe direct and manage project execution process involves carrying out the project managementplan to produce a product or provide a service so as to meet the project objectives. It requiresthe project team to build on the foundation laid during project plan development as they coor-dinate and direct the technical and organizational project interfaces. This is not just onecoherent task, but is a lengthy and complex iterative process.

Figure 9-2: The direct and manage project execution process.

Direct and Manage Project Execution InputsThere are several inputs to direct and manage project execution.

Input DescriptionProject management plan Describes each step of the project including the way it is executed,

monitored, controlled, and closed.

Approved change requests Include approved changes, which are ready for implementation by theproject team. These change requests are recorded and can eitherincrease or decrease the project scope. They may also be used forrevising policies, project management plans, procedures, costs andbudgets, and adjusting schedules.

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Input DescriptionEnterprise environmental fac-tors

Include factors such as organizational culture and structure, infrastruc-ture, personnel administration, stakeholder tolerances, and PMIS thatcan influence the direct and manage project execution process.

Organizational process assets Include existing documents and databases such as standard guidelines,communication requirements, defect management processes, and pro-cess measurement databases that can influence the direct and manageproject execution process.

Direct and Manage Project Execution Tools andTechniquesThere are two tools and techniques used in the direct and manage project execution process.

Tools and Techniques DescriptionExpert judgment Used to provide direction to effectively execute the project manage-

ment plan. The expertise provided by the project manager, projectmanagement team, consultants, other departments in the organiza-tion, or other stakeholders will be applied to both technical andmanagement details.

Project Management InformationSystem (PMIS)

An automated or manual system, which is a part of the enterpriseenvironmental factors, helps with directing and managing projectexecution. PMIS includes systems such as scheduling software andconfiguration management system.

Direct and Manage Project Execution OutputsThere are several outputs from the direct and manage project execution process.

Output DescriptionDeliverables A product, result, or capability produced as a result of project

execution.

Work performance information Periodically collected information about project activities beingperformed to accomplish the project work, including deliverablestatus and costs incurred.

Change requests Changes requested by the stakeholders that may impact theproject scope, policies, procedures, cost, and budgets, or lead toreworking of project schedules. Changes may be categorized aspreventive and corrective actions, defect repairs, and updates.

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Output DescriptionProject management plan updates Project management plan components that may be updated

when directing and managing project execution include:

• Requirements management plan

• Schedule management plan

• Cost management plan

• Quality management plan

• Human resource management plan

• Communications management plan

• Risk management plan

• Procurement management plan

• Project baselines

Project document updates Project documents that may be updated include the requirementsdocument, project logs, risk register, and stakeholder register.

Project Management Information Systems (PMIS)Definition:

A Project Management Information System (PMIS) is an automated or manual systemused by a project team to gather, analyze, communicate, and store project information.The PMIS collects information on the work that has and has not been accomplished ineach work package, and how that work result compares to the planned schedule, cost,quality, and scope. A PMIS can utilize sophisticated software tools, either those pur-chased off-the-shelf or custom built by an internal IT group, to manage some of itscomponents. There is some overlap between a communication plan and a PMIS; thePMIS has a calendar associated with it and includes a lot of communication betweenthe project manager and the team.

A common pitfall associated with using a PMIS is creating a system in which the various pieces ofdata are incompatible with one another. For example, the financial data may be created in one applica-tion and the reporting in a different application and there is no way to get these two systems to talk toeach other.

Example: PMISOne example of a project management information system available for purchase isMicrosoft® Project®.

Common PMIS ProblemsSeveral common PMIS problems arise when directing and managing project execution.

Problem DescriptionReacting to lagging indicators PMIS reports show problems after-the-fact. Good project manage-

ment requires proactive problem prevention.

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Problem DescriptionManaging symptoms rather thanproblems

While the PMIS reports exceptions and overruns, it can’t explainthe reason for the problem. It is important to focus on finding thecause and solving the problem, rather than making the exceptionor overrun go away.

Over-reliance on PMIS communica-tion

Project managers need to communicate frequently with teammembers and other stakeholders. Sending PMIS reports is impor-tant, but shouldn’t take the place of other types ofcommunication.

Invalid data in the PMIS PMIS reports can be wrong, either making problems look greateror smaller than they are. Some very real problems may not showup in the PMIS at all. The project manager must look beyond thePMIS to verify information about the problems, and then concen-trate on getting the problems solved.

Too much information Too much information is counterproductive, forcing people tocope by ignoring some of the messages. It is important to makesure that the right people get the information they need at theright time, but it is equally important not to swamp people withirrelevant or untimely information. Someone has to control thescope of the information in the PMIS, or it will overload theteam and the project manager.

Work Authorization SystemsDefinition:

A work authorization system is a tool used to communicate official permission to beginworking on an activity or work package. It is a function, or component, of the PMIS.Its purpose is to ensure that work is done at the appropriate time, by the appropriateindividual or group, by a specific time, and in the proper sequence. Work authorizationsystems include the necessary processes, documents, tracking systems, and approvallevels required to provide work authorizations. Depending on the project, your workauthorization mechanism may be a simple email or a formal, written notice to beginwork. Smaller projects may only require verbal authorization. The work authorizationsystem is integrated with the communications plan.

Example: A Work Authorization System

Figure 9-3: A contract work authorization system.

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Work Performance InformationWork performance information consists of periodically collected information about projectactivities that are performed to accomplish the project work. This data would reside in yourPMIS, if you have one.

This information includes:

• Schedule progress with status information.

• Deliverables that have been completed and not completed.

• All schedule activities and their start and finish dates.

• The degree to which quality standards are being accomplished.

• Expenses authorized and incurred.

• Estimates to complete the schedule activities already in progress.

• Percent of completed schedule activities that have been started.

• Lessons learned that are posted to the lessons learned knowledge base.

• Details on resource utilization.

• Status for implementation of change requests.

• Details on corrective and preventive actions and defect repairs.

Project Execution Direction and ManagementTechniquesThroughout the entire execution of a project, the project manager can employ various tech-niques to coordinate and direct the various technical and organizational aspects of a project.Tools, such as the PMIS and the work authorization system, are powerful work aids that anorganization can use to ensure project success.

Selecting and implementing a PMIS is outside the scope of this class, but the guidelines presented here aresome considerations that you may want to be aware of as you move forward in your pursuit of advanced projectmanagement skills.

Guidelines:To effectively execute the project plan, follow these guidelines:

• Comply with any organizational policies and procedures that the organization hasin place regarding project execution to ensure predictable and consistent results.Make sure that all contractors are familiar with and comply with the procedures.

• Evaluate and select the work authorization system you will use to formally sanc-tion work to begin on an activity or deliverable. The value of the control yoursystem provides should be balanced with the cost (money and time) of designing,implementing, and using the system.

• In line with good project management practice, use the artifacts necessary to getthe job done. Use the organization’s project management infrastructure. If it is notthere already, then invent it.

• If necessary, work with a systems analyst to create a PMIS that is workable foryour project. Make sure the systems analyst understands the following:

— Who needs to use the information?

— What types of information will be needed by each user?

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— When and in what sequence will the information be used?

— Who will generate the initial information to be incorporated into the system?

• Once the system is in place, determine who will be responsible for its day-to-dayoperation, whether it will be you or someone else. Specifically, you need to deter-mine who will be responsible for:

— Data entry of initial information. This includes assigning people to do thedata entry, and setting up specifications for what data must be entered, how itwill be entered, and when it will be entered.

— Analysis of information. Analysis means summarizing the information, draw-ing conclusions from it, and creating graphical depictions of what theinformation is saying. Your task here is to assign people to do the analysis,and provide specifications for how the data is to be analyzed, how it is to bereported, and what reporting formats will be used.

— Storage, archiving, and retrieval. This includes assigning individuals tohandle day-to-day storage and retrieval, as well as setting specifications forbacking up data and for archiving it.

— Systems documentation. Whatever system you choose, it must be docu-mented. Remember that you will be straining your PMIS during projectexecution. You may need to adjust it, or even repair it, to improve its perfor-mance during this phase of the project. Good documentation will allowsupport staff to make the adjustments and repairs efficiently, without losingdata or backing up the project schedule.

• Evaluate the effectiveness of the PMIS for your project.

— Don’t rely too much on the PMIS. Be proactive in managing problems ratherthan waiting for the PMIS to report a problem before addressing it.

— Avoid the temptation to manage the PMIS instead of the project.

Example: Execution of a Project Plan at a Municipal Fire StationThe project team for a municipal fire station has completed their project plan and iswell into execution. Using the services of a systems analyst, they designed and imple-mented a PMIS that includes manual and computerized methods.

The team analyzed the needs of the project and balanced cost and benefit to develop awork authorization system. The system requires an email to be sent to notify theappropriate people that work can begin on the next component.

Each Monday morning the team has a status review meeting. Before the meeting, theproject manager sends out the most recent open task report. During the meeting, theperson responsible for a task reports on its progress. If problems or barriers are identi-fied, the administrative assistant logs them in the issues log and the issue is assigned toan individual.

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ACTIVITY 9-1Identifying the Responsibilities for Directing andManaging Project Execution

Scenario:In preparation for the business transformation, the PMO will implement a PMIS that all projectteams will use to gather, analyze, communicate, and store project information. The PM Train-ing Roll-Out project team will be the first team within the organization to use the system. Youhave completed your project planning and the project is ready to begin. You now have to coor-dinate and direct both the technical and organizational aspects of the project.

1. You need to assist the systems analyst in the creation of a PMIS that is workable foryour project. In order to design an effective PMIS, what are the inputs that a systemsanalyst should know about the project that the PMIS will manage?

a) What people will have access to the information?

b) When will the information be needed?

c) Who will incorporate the information into the system?

d) Who is the customer?

2. As the project manager, you have made sure all organizational policies and procedureswere followed, and the contract training vendor is familiar with their responsibilities.What would you do next?

a) Call a meeting with the project sponsor so she can commence work.

b) Issue work authorization.

c) Work with a systems analyst to create a PMIS.

d) Collect work performance information.

3. An activity did not start on its scheduled date. The responsible team, Team 1, claimedthat they could not start the activity because its predecessor activity did not show acompletion date in the latest status report. Team 2 claimed that they had completedthe activity on time and had followed the appropriate procedure for updating itscompletion status. What are some things you would do to investigate why the statusreport was not up to date?

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TOPIC BExecute a Quality Assurance PlanNow that you know what is involved in creating a quality assurance plan, you are ready tomove forward with this key element of ensuring that your project meets its stated goals. Thisis the action phase of your work, in which you will measure, verify, and quantify the progressachieved. In this topic, you’ll execute quality assurance.

You can set quality goals for your project, but how do you know if they are being met on anongoing basis? Performing quality assurance ensures the project will meet the identified qualitystandards and that stakeholders are confident in the quality of the work being produced.

Quality Assurance PlansDefinition:

A quality assurance plan is a document that specifies a project’s parameters and stan-dards for quality, identifies how testing will be carried out, and describes how, when,in what manner, and to what degree the project will be reviewed and evaluated againstquality criteria. It includes recommendations for the appropriate actions to be taken toimprove quality, and it lists the quality assurance team members who are responsiblefor carrying out the quality reviews.

Example: Quality Assurance Planning for a Software Design ProjectA team of software engineers designing a new product would be guided by a qualityassurance plan to monitor quality throughout the project life cycle. The quality assur-ance plan would document the criteria for functional and technical requirements,outline the testing and evaluation process, and ensure that all steps of the project aremonitored. It would document signoff procedures for various milestones and identifyspecific procedures for testing, correction, re-testing, and review sessions. The qualityassurance plan would also document how issues should be logged and addressed, andwho would be responsible for oversight and approval.

The Perform Quality Assurance ProcessThe perform quality assurance process is a method of evaluating overall project performancethrough planned, systematic activities; it creates confidence that the project will employ theappropriate processes and satisfy standards for quality. It also ensures that the appropriate qual-ity standards are used by analyzing the project’s quality requirements and results of the qualitycontrol measurements. It is part of a continuum of quality activities that started with the devel-opment of the quality management plan that begins in the initiating and planning processes andcontinues throughout the project. The actual quality assurance process varies with the needs ofeach project. Quality assurance is iterative and it may be adapted based on the identificationand resolution of quality problems over the project’s life cycle.

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Figure 9-4: The perform quality assurance process.

Example: Performing Quality Assurance for a Website Design ProjectThe quality assurance team for a website project would monitor its progress throughoutthe development process, checking its overall performance to make sure it meets qual-ity standards. Criteria to be reviewed and evaluated would include functionality,aesthetic quality, and usability.

Quality Assurance (QA) and Quality Control (QC)The differences between quality assurance and quality control are listed in the follow-ing table.

Quality Assurance Quality ControlFocuses on process. Focuses on product.

Are we following the right processes in rightmanner? This is the question that QA asks.However QA needs data from QC to analyzethe trend.

Is this product/deliverable correct?

Concerned with the future. Concerned about the current/past performanceof the deliverables.

Perform Quality Assurance InputsThere are several inputs to the perform quality assurance process.

Input DescriptionProject management plan Contains the quality management and process improvement plans

to ensure project quality.

• Quality management plan: Details how project quality assur-ance should be conducted.

• Process improvement plan: Provides detailed steps for ana-lyzing processes and identifying ways to enhance the value ofthe processes.

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Input DescriptionQuality metrics Describes what specific elements of the project are going to be

measured, how they will be measured, and how they are factoredinto the project.

Work performance information Periodically collected information about project activities beingperformed to accomplish the project work. Some of the perfor-mance results that might support the audit process are thetechnical performance measures, status of project deliverables,progress of the project schedule, and cost incurred.

Quality control measurements Used to assess the organization’s quality standards and processes.These measurements are the results of the control project qualityprocess and are developed during the quality control processes.They are assessed and analyzed for determining the process reli-ability.

Perform Quality Assurance Tools and TechniquesThere are several perform quality assurance tools and techniques.

Tools and Techniques DescriptionPlan quality and perform quality con-trol tools and techniques

All tools and techniques used for the plan quality and performquality control processes such as the cause-and-effect diagrams,control charts, flowcharting, histogram, Pareto diagram, runchart, scatter diagram, statistical sampling, inspection, approvedchange requests review, cost-benefit analysis, cost of quality,control charts, benchmarking, design of experiments, proprietaryquality management methodologies, and additional quality plan-ning tools are used to perform the quality assurance process.

Quality audits A quality audit is a review to determine if the activities complywith policies, processes, and procedures in an attempt to identifyinefficient or ineffective procedures in use, resulting in lowercost of quality and higher percentage of output acceptance.Quality audits may be carried out by internal or external auditorsat regular intervals or at random. It confirms that the approvedchanges have been implemented.

Process analysis Used for identifying organizational and technical improvementsto processes. Includes root cause analysis to determine underly-ing causes and develop corrective actions.

Quality Audit ObjectivesThere are various objectives for performing quality audits. Some of them are:

• Identify the best practices that have been implemented.

• Identify the flaws or deficiencies in the project processes.

• Use the best practices followed in similar projects performed earlier.

• Help increase team productivity by providing assistance for process implementa-tion improvements.

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• Highlight the contributions of each quality audit in the organization’s lessonslearned library.

Perform Quality Assurance OutputsThere are several outputs to the perform quality assurance process.

Output DescriptionOrganizational process assetsupdates

Include updates to components such as project quality standards.

Change requests Actions suggested to improve quality, effectiveness, and efficiencyof policies, processes, and procedures in the organization. Thisresults in enhanced stakeholder benefits. Change requests are used toanalyze recommended improvements and take appropriate correctiveor preventive actions.

Project management plan updates Include updates in the project management plan elements such asquality, schedule, and cost management plans.

Project document updates Include documents such as quality audits, training plans, and processdocumentations.

Quality AuditsDefinition:

A quality audit is an independent evaluation, inspection, or review of a project’s qual-ity assurance system to improve quality performance of a project. The audits can takeplace at scheduled or random intervals. The auditor may be a trained individual fromwithin the performing organization or a qualified representative of a third-party organi-zation. During a quality audit, the quality management plan is analyzed to make surethat it is still reflective of what has been learned in the project and to make sure theoperational definitions are still adequate and valid. The results of a quality audit areimportant for the current project, as well as for later projects or other parts of the orga-nization.

Example: Quality Audits at a Manufacturing CompanyAn auditor for a manufacturing company performs quality audits regularly. Every sixmonths he walks into the factory and reviews the company’s quality management plan,cost of quality, and quality process design to make sure these processes are up-to-date,being used correctly, and still valid.

Topics of Quality AuditsSeveral topics can be included in a quality audit.

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Topic DescriptionQuality management policy May be evaluated to determine how well management uses quality data

and how well others in the organization understand how the data isbeing used. The evaluation might include an analysis of managementpolicies for collection, analysis, and use of data in decision-making orstrategic planning.

Collection and use of informa-tion

May be evaluated to determine how well the project team is collecting,distributing, and using quality data. Items for analysis in this categorymight include consistency of data collection processes, speed of infor-mation distribution, and use of quality data in decision-making.

Analytical methods May be evaluated to determine if the best analytical methods are beingused consistently and how well their results are being used. Items foraudit might include how analysis topics and analysis methods areselected, what technology is used, and how results are fed back to oth-ers in the process.

Cost of quality May be evaluated to determine the most effective proportion betweenprevention, inspection, and costs of repair or rework.

Quality process design May be evaluated to determine how process design, process analysis,and statistical process control should be used to establish and improvethe capability of a process.

How to Execute a Quality Assurance PlanEffective quality assurance provides confidence that the project’s product or service will satisfyrelevant quality requirements and standards.

Guidelines:To execute a quality assurance plan, follow these guidelines:

• Ensure that random and/or scheduled quality audits are conducted by qualifiedauditors to evaluate the quality management plan, quality testing procedures, andmeasurement criteria.

— Are the quality parameters set forth in the quality assurance plan valid?

— Are the operational definitions and checklists adequate and appropriate toachieving the desired final results?

— Are the testing methods being implemented correctly?

— Are the data being interpreted, recorded, and fed back into the system prop-erly?

• Use one or more of the quality assurance tools and techniques to determine thecauses of quality problems of the project’s product, service, systems, or processes.

• Identify and implement the appropriate actions to take to increase the effective-ness and efficiency of the project team’s work results to improve quality in theproduct or service.

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Example: Execution of Quality Assurance Plan by a Coffee Brewing EquipmentManufacturer

A leading coffee brewing equipment manufacturer is beginning to produce a new prod-uct line, and John Smith has been assigned as the project manager for the project. Johnhas been given the task of maintaining a satisfactory level of quality while maintainingthe fiscal goals for the project.

A quality audit was commissioned to determine if in-process monitoring produced theexpected improvements to cost and quality. Following an examination of the testingprocedure outlined in the quality management plan, the audit team analyzed the col-lected data from the latest series of testing seven days per week.

The analyzed data was compared to projected quality data based on the in-processmonitoring system and showed that the projections matched the actual data. Armedwith this information, the audit team recommended modifications to the quality man-agement plan requiring testing only twice each week. At a cost of $100 per test, thecompany is now spending $200 per week instead of $700 and therefore saving $500per week on testing. Through careful review of the quality management plan, analysisof the use and distribution of collected data, and monitoring the cost of quality, thecompany achieved marked improvements in quality while realizing an improvedbottom-line.

DISCOVERY ACTIVITY 9-2Executing Quality Assurance

Scenario:For the Seattle OGC store, the construction phase is getting started. Materials have beenordered and delivered and excavation has begun. Olson and Sons Construction has a standardquality management plan that you adapted slightly for your project. The plan contains specificoperational definitions for measuring the quality of the construction work. In addition, it statesthat scheduled and random quality inspections will occur. These inspections will be done by aninternal quality assurance engineer and will be in addition to the inspections conducted by thecity. Your company is ISO certified, so relevant ISO standards and regulations must be adheredto as well. You have selected a good team of workers for the construction and you are confi-dent in their ability to meet the quality standards.

1. The manager of quality assurance has asked you about your quality management plan.Which feature might he find problematic?

a) Scheduled and random quality inspections will take place, which will be conductedby an internal quality assurance engineer, as well as by the city.

b) Any corrective actions that a project manager feels will improve the effectiveness orefficiency.

c) Operational definitions were defined for measuring the quality of the constructionwork.

d) Occurrence of scheduled and random quality inspections during the course of theproject.

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2. As construction gets underway, random inspection results of completed constructionelements are unexpectedly negative. What sort of quality activities should be takingplace?

3. The stakeholders are questioning the amount of resources dedicated to quality assur-ance. How can you demonstrate to them that the benefits of quality assuranceoutweigh the cost?

a) Perform benchmarking to compare project practices to other projects to generateideas for improvement.

b) Conduct an array of experiments to identify which factors may be influencing specificvariables.

c) Use flowcharts to see how systems relate and how various factors might be linked toproblems or effects.

d) Document the identified corrective actions so that their effect on project quality,cost, and schedule can be monitored during quality control.

TOPIC CAcquire the Project TeamDuring project planning, you paved the way for effectively documenting the roles, responsibili-ties, and reporting relationships for your project. Now you’re ready to begin appointing theindividuals you need to fulfill these positions. In this topic, you will acquire your project team.

People make projects happen. You may be well-versed in many aspects of project manage-ment, but you’re not going to succeed if you can’t put the right players on your team.Naturally, you want the best people in the organization to work on your project, but they maynot all be available all of the time. Mandated team members, projects with higher priorities,and functional managers with their own agendas can squash your chances of putting togetheryour “dream team.” Your chances for success will be much greater if you can negotiate for thebest people possible for your project.

The Acquire Project Team ProcessThe acquire project team process involves making the identified resources available to theproject.

Resource selection may be driven by different factors such as collective bargaining agreements,or other internal or external reporting relationships. In such cases, the project managementteam may not be directly involved in the team member selection processes.

Resources may be dictated by senior management, in which case a project manager has noroom to negotiate. In this case, the project manager needs to build a cohesive team, ensureeffective communication, and clearly define people’s roles and responsibilities.

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Figure 9-5: The acquire project team process.

Planning for Acquiring a Project TeamFactors to be considered when planning for acquiring the project team include:

• Project managers must effectively negotiate with the appropriate people for theneeded project resources.

• Failure to acquire the appropriate resources may impact project performance andmay ultimately result in the termination of the project.

• If human resources with the required skills and capabilities are not available at theappropriate time, alternate resources with lower competencies may be assignedwithout violating legal, regulatory, or other criteria.

Documenting Resource ConstraintsThe project team or the project management team must ensure that all project docu-ments such as the project schedule, budget, risks, quality, training plans, and theproject and project management plan components reflect the possible resource con-straints and other problems in acquiring the required resources.

Acquire Project Team InputsThere are several inputs to the acquire project team process.

Input DescriptionProject management plan Contains the human resources plan that provides information

about how to identify, acquire, assign, manage, control, andlater release the human resources. It also specifies:

• The roles and responsibilities, the positions, skills, and com-petencies required for each project.

• The project organization chart indicating the number ofhuman resources required to work on the project.

• The staffing management plan that provides informationabout acquiring the project team and the duration for whicheach team member will work on the project.

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Input DescriptionEnterprise environmental factors Factors the project management team needs to take into consid-

eration when acquiring their team include:

• Information about human resources such as which resourcesare free during the required time frame, their experience, andtheir cost rate.

• Personnel administration policies.

• Organizational structure.

• Location(s) of the resources.

Organizational process assets Any kind of policies, guidelines, or procedures that organiza-tions follow when delegating staff assignments and selectingresources for the project.

Acquire Project Team Tools and TechniquesSeveral tools and techniques are used in acquiring a project team.

Tools and Techniques DescriptionPre-assignment When project team members know in advance what their assignment

is before the project has its official kick-off.

Negotiation Staff assignments can be negotiated with functional managers, vendors,or external organizations. This helps ensure that the appropriate staff isassigned within the time frame, when there is a need for scarce or spe-cialized resources.

Acquisition When there isn’t enough staff to complete the project, outside sourcessuch as consultants or contractors can be hired.

Virtual teams Groups of people, hired for the same project, who never or rarelyspeak face to face. Using currently available communications technol-ogy, such as collaborative software, aids in communication. Virtualteams make it possible for people to:

• Form teams where people live in widespread geographic areas, butwork for the same company.

• Add expertise to projects from people who are not in the same geo-graphical area.

• Include employees who work from home.

• Include employees who work different shifts.

• Include employees with disabilities.

• Avoid travel expenses.

Planning for effective communication among the virtual team membersis an important consideration that needs to be considered when settingup a virtual team.

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Acquire Project Team OutputsOutputs from acquiring a project team include project staff assignments, resource calendars,and project management plan updates.

Output DescriptionProject staff assignments The assignment of the people who will work on the project,

whether full-time, part-time, or as needed. This includes mem-bers of the project office as well as all other members of theproject team and usually includes a team directory, memosto/from team members, and project organization charts andschedules.

Resource calendars Provides information on the schedule and availability of theproject resources. It also prevents resource scheduling conflictsand factors in details such as vacation time and other projectcommitments.

Project management plan updates As people are assigned to project roles and responsibilities,changes may need to be made to the human resources manage-ment plan due to promotions, retirements, illnesses, performanceissues, workloads, and expertise.

Virtual TeamsDefinition:

A virtual team is a team that is distributed across multiple locations. Some virtualteams have occasional physical meetings, while others may never meet face-to-face.Virtual team building is more difficult, for a number of reasons.

• Bonding and team identity can be hard to create when team members are geo-graphically dispersed, because finding ways to provide a sense of team spirit andcooperation may be difficult.

• Communication and information sharing need to rely on various forms of technol-ogy because teams cannot meet face-to-face. However, managing electroniccollaboration so that everyone on the team can reliably transmit and access infor-mation from one another can be challenging.

• Because roles, reporting, and performance can be harder to track on a dispersedteam, individual contributions may be overlooked.

Example: Virtual Team for the Apollo 13 MissionThe Apollo 13 spacecraft was launched from the Kennedy Space Center in April, 1970,but an accidental explosion in an oxygen tank aborted its mission to the moon. Thevirtual team responsible for Apollo 13’s launch and its subsequent safe return includedthe three crew members on board as well as the staff of mission control in Houston,Texas. Telecommunications included voice and television communications betweenastronauts and Earth.

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How to Acquire the Project TeamAcquiring well-formed project teams will result in meeting the resource needs of the project tofulfill project requirements.

Guidelines:To acquire a project team, follow these guidelines:

• Form good relationships with functional managers.

• Know when you need specific resources.

• Negotiate with the appropriate organizations or parties for critical resources timedwith project need.

• Look for synergy and diversity among team members.

• Look outside to competent suppliers where in-house resources are not available.

• Make sure that roles and responsibilities are clearly understood by the team andother stakeholders.

• Publish an organization chart to all stakeholders.

Example: Acquiring the Project Team for a Fundraising EventGreg has been assigned to organize a fundraiser for a children’s hospital. First, Gregmeets with his functional managers, Kim and Rob, to determine what kinds of peopleshould be running each activity, if they need to hire any extra help, and how muchresources will cost. They employ about 40 people, and 20 have been pre-assigned byKim and Rob to work on activities based on previous experience with the fundraiser.Some activities have already been decided including a hoop-shooting contest, balloonvolleyball, and a karaoke contest.

Greg receives a list of everyone who has been assigned to work with him, and calls ameeting to develop his team and assign responsibilities. Some team members need tohave good organizational skills, some need to have creative skills; however, all need tobe good with kids. Based on skills and abilities Greg selects his team, including a highschool basketball coach to be in charge of the hoop-shooting contest, and an art majorto run arts and crafts. Greg finds a local college that agrees to rent its gymnasium tothe event for only $100.

The next day, Greg goes over roles and responsibilities one final time with his team tomake sure all is understood. An organization chart is made and given to the collegeand Kim and Rob so they know exactly how the gym will be used and who will beinvolved in each activity. Now, organization and setup can begin for the event.

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DISCOVERY ACTIVITY 9-3Acquiring a Project Team

Scenario:During project planning, you have documented the roles, responsibilities, and reporting rela-tionships for your project. Now you’re ready to determine the individuals you will need tofulfill these positions.

1. Three members of your project team have to be allocated to you on a part-time, 50percent basis from the IT department. What would be your first step in acquiring theseresources for the project team?

2. The functional manager of the IT department informs you that, based on the timeframe for your project, two of the resources that are available are new hires who havenot worked earlier in a project on their own at this point. What should you do?

3. During the first meeting of the new project team, some confusion arises between twoteam members about their roles and responsibilities. Since this conversation is notappropriate in this forum, how might you respond?

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TOPIC DDevelop the Project TeamNow that you have acquired your project team, you need to help them achieve peak perfor-mance. Team building ensures that you build an atmosphere of trust and open communication.In this topic, you will develop the project team.

Project teams comprise individuals, drawn from different disciplines, who must learn to worktogether to achieve a common goal in a short period of time. The individuals working on yourteam, all of whom have their own communication styles, work habits, motivations, and careeragendas, have to come to trust one another and work together rather than compete against oneanother for resources and time. Team building ensures that you build an atmosphere of trust,collaboration, and open communication.

The Develop Project Team ProcessThe develop project team process is an on-going effort to build a cohesive team that benefitsfrom good communication and a foundation of trust. Its goal is to enhance the team’s collec-tive performance and improve their skills so that you increase the likelihood of meeting projectobjectives. It includes good general management practices including providing training andcoaching to the team, building trust, encouraging good communication and the sharing ofresources, and recognizing and rewarding desirable behavior. Project managers use the developproject team process to enhance the performance of the project and the project team in aneffort to increase the likelihood of meeting project objectives.

Figure 9-6: The develop project team process.

Foster Team BuildingTo foster team building within a project team, a project manager might ask each of theveteran employees on the team to partner with a less experienced team member, offer-ing coaching as needed and sharing knowledge, information, and expertise. Workingcollaboratively towards a shared goal is a great way for team members to help eachother reach a higher level of performance.

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Effective Project TeamsThe team members should work in a collaborative way to ensure project success. It isthe responsibility of the project manager to build an effective project team and fosterteamwork. Managers should give opportunities that challenge the team members’ abili-ties, provide support and timely feedback, and recognize and reward goodperformance. To achieve highest team performance, managers should use effectivecommunication methods, develop trust among team members, manage conflicts, andpromote collaborative decision making and problem solving.

Project managers should seek support from the management or the appropriate stake-holders to effectively build project teams. This will help improve people skills,advance technical competencies, build good team environment, and increase projectperformance.

Develop Project Team InputsThere are several inputs for developing the project team.

Input DescriptionProject staff assignments The assignment of the people who will work on the project,

whether full-time, part-time, or as needed. This includes membersof the project office as well as all other members of the projectteam.

Project management plan Contains the human resource plan that identifies training strategiesand plans for developing the project team through rewards, feed-back, and disciplinary actions.

Resource calendars Helps identify the schedules of team members and the time whenthey can participate in team development tasks.

Develop Project Team Tools and TechniquesYou can use several tools and techniques to develop the project team.

Tools and Techniques DescriptionInterpersonal skills Interpersonal skills, often referred to as “soft skills,” can help a

project manager prevent or resolve team issues that hinder successfulcompletion of the project. Leadership, influencing, communicating,delegating, and empowerment skills are particularly relevant to teamdevelopment.

Training Project team members can acquire new or enhanced management ortechnical skills, knowledge, or attitudes through training. Trainingmay be provided to teams, small groups, or individuals through avariety of methods such as classroom, online, computer-based, andon-the-job training, mentoring, and coaching.

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Tools and Techniques DescriptionTeam-building activities Exercises that help the team develop into a mature, productive team.

Effective project teams can be realized through factors such as:

• Gaining support from top management.

• Obtaining commitment from team members.

• Encouraging team members through awards and recognition.

• Creating a team identity.

• Managing conflicts effectively.

• Building trust among team members.

• Promoting effective communication methods.

• Providing good team leadership.

Ground rules Rules setting clear expectations as to the expected code of conductfrom team members so as to increase productivity and decrease mis-understandings.

Co-location The establishment of a common physical location for a project teamto enhance overall team performance. Co-location can be done on atemporary or permanent basis for a given project.

Recognition and rewards A formal method used to reinforce behaviors or performance, whichwill make individuals feel that they are valued in the organization.

Develop Project Team OutputsThere are two outputs to project team development.

Output DescriptionTeam performance assessment Formal or informal evaluations of the team’s performance

are done periodically in order to help improve interactionbetween team members, solve issues, and deal with con-flicts. A team’s technical success is measured on the basisof meeting the project objectives, and finishing the projecton time and within the decided budget. An effective teamwill show improvements in skills, competencies, and teamcohesiveness.

Enterprise environmental factors updates Includes updates on employee training records and skillsassessments.

Team Development StagesThe development of the project team generally proceeds in five stages.

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Stage DescriptionForming Team members are wondering whether the decision to join the team was a

wise one. They are making initial judgments about the skills and personalqualities of their teammates, as well as worrying about how they personallywill be viewed by the rest of the team. During this stage, conversations tendto be polite and noncommittal, as people hesitate to reveal too much abouttheir personal views. In addition, team meetings tend to be confusing, as theteam tries to figure out who is in charge.

Storming Team members begin to assert themselves and control issues as they emerge.Personality differences begin to arise. Conflicts result as team members differon the way they want to do the project work, or the way they want to makedecisions.

Norming The team begins to work productively, without worrying about personalacceptance or control issues. There are still conflicts; however, they tend tobe focused on process issues rather than personality differences. The teambegins to operate off mutual dependence and trust.

Performing The team is working at optimum productivity. It is collaborating easily, com-municating freely, and solving its own conflict problems. Team members feelsafe in reporting problems, trusting their fellow team members to help themcreate the best solution for the team as a whole.

Adjourning The team members complete their assigned work and shift to the nextproject or assigned task. This phase is sometimes known as “mourning.”

Lock StepThe process of forming, storming, norming, and performing is not done in a “lockstep” fashion by the team. Team members keep coming in and going out of the team.Whenever a new member joins, forming takes place; even if the rest of the team hasalready crossed the forming stage. So, these stages are not followed one after the otherbut are rather situational.

TrainingDefinition:

Training is an activity in which team members acquire new or enhanced skills, knowl-edge, or attitudes. Training may be provided to teams, small groups, or individuals andcan cover management, technical, or administrative topics. It can range from a multi-day, formal workshop in a classroom to a five-minute, informal on-the-job trainingdemonstration at the employee’s desk. It may be formulated to provide generic skillsor customized to provide a specific skill set that is unique to the project. Trainingshould be made available to team members as soon as the need becomes apparent.

Example: Training on a Software ProgramMark is the programmer assigned to the company website project. Recently, Mark wasinformed that he would have to create the entire site using a website development soft-ware program with which he was unfamiliar because the entire organization was usingthe program and maintenance would be easier if the tool was standardized.

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Since Mark was the only programmer available to work on the project, Carrie, theproject manager, arranged for Mark to take a training course to learn the technical pro-gram. Not only would Mark’s training help the project achieve its objectives and abideby organizational policy, but it would also enhance Mark’s skills and help position himto advance within the organization.

Team-Building ActivitiesDefinition:

Team-building activities are the specific functions or actions taken to help the team todevelop into a mature, productive team. They can be formal or informal, brief orextended, and facilitated by the project manager or a group facilitator.

Example: Team-Building ActivityRobin, a new project manager for a line of youth-oriented sportswear, decided that agood way to get to know her team was to plan an outdoor team-building activity. Twoof the designers were located on the east coast and would be working very closelywith the manufacturing team at the company’s San Diego facility. Robin arranged tofly the two designers to San Diego to participate in the all day, off-site ropes course.Robin participated in the rope climbing exercise as well, and an experienced team-building coach facilitated the activity.

Co-locationDefinition:

Co-location refers to positioning most or all key team members in the same physicallocation to make communication easier and enhance team performance and team spirit.Although most commonly used on large projects, smaller project teams may also ben-efit from co-location. There are different degrees of co-location. On some projects,some of the team may be co-located, while others are not.

Example: Co-location for a National CampaignA political candidate announcing a run for the presidency of the United States wouldestablish a national campaign headquarters office, at which the key members of thecampaign’s project team would be co-located. The headquarters would serve as a basefor national operations and centralize the efforts of the candidate’s political machine.The co-location of the project team would only last for the duration of the campaign.

Reward and Recognition SystemsDefinition:

A reward and recognition system is a formal system used to reinforce performance orbehavior. The purpose is to motivate the team to perform well. Rewards could includemonetary gifts, additional vacation time or other perks, company plaques or trophies,or small gifts. Reward and recognition systems are generally standardized throughoutan organization and approved through corporate channels.

Rewarding or recognizing a team member for working overtime due to poor planning or in an effort toreceive extra pay is not an effective reward and recognition system because it does nothing to motivatethe team to perform well or to improve team morale.

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Example: Rewards and RecognitionTim is an art director assigned to the company website. Often, Tim helps new teammembers and provides coaching and mentoring. Carrie, the project manager, recog-nized Tim’s extra efforts at the weekly project team meeting. She presented Tim with agift certificate to a new restaurant as a reward and incentive for his outstanding perfor-mance.

Rewarding Individual PerformanceDefinition:

In traditional U.S. organizations, rewarding individual performance refers to giving payincreases or promotions to individuals based on merit. In a team environment, it is dif-ficult to tie merit increases to individual performance because of the mutualinterdependence of the team members.

Recognizing individual team member performance is considered culturally unacceptable in many coun-tries, particularly China and Japan.

Example: RecognitionIn an effort to reward individual performance, the managers of a real estate companydecided to offer a 10% salary increase to the sales representatives who exceeded theirsales quota by more than 25% for the year.

How to Develop the Project TeamEffective team development results in improved individual and team performance, whichincreases the team’s ability to achieve project objectives.

Guidelines:To effectively develop your project team, follow these guidelines:

• Recognize the project team’s current stage of development and be proactive inhelping the team be as productive as possible.

— During the forming stage, conduct activities that will help the team get toknow one another and develop a sense of mutual respect. The following is alist of activities for the forming stage:

• A kick-off meeting that includes time for introductions.

• Creation of a team handbook documenting the team’s goal, the majortasks required to achieve the goal, and any constraints under which theteam must operate.

• Publication of a team directory.

• Development of a team charter that sets forth guidelines on how teammembers will behave toward one another, how they will communicate,when they will meet, how they will make decisions, and how they willescalate problems.

• Selection of a team name or emblem.

• Initial social events to allow time to get to know one another on a per-sonal level.

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— During the storming stage, use conflict management approaches to help theteam work through problems.

— In the norming stage, concentrate on issues of project performance.

• Focus on the team’s productivity towards meeting the project goals.

• If the team is bogged down on certain problems, help to create cross-functional sub-teams to work on the problems.

• Eliminate barriers that may be hampering team performance.

• Provide opportunities for recognition for the team’s performance frommanagement, customers, or peers.

— In the performing stage, provide recognition for team performance, but stayout of the way as the team manages its own problems. However, if projectprogress is sluggish, this is a good stage in which to challenge the team withmore stringent performance goals.

— In the adjourning stage, team members complete project work and shift tothe next project or assigned task.

• This phase indicates the transformational phase of achievement throughsynergy.

• In this phase, ensure formal closure and completion of the tasks happen.Also, facilitate the smooth transition of the project team members to thenext project.

• Develop and implement a formal reward and recognition system.

• Consider co-location to enhance the team’s ability to perform as a team andimprove communication. When co-location is not feasible, it becomes especiallyimportant to encourage and enhance interaction among team members.

• Provide appropriate training and coaching to help team members acquire new orenhanced skills, knowledge, or behaviors.

Example: Developing the Beautification Project TeamA city council passed a proposal for a beautification project, including a new publicpark. The new park design fell to a board comprising citizens and government officials.The Director of Parks and Recreation, Elizabeth Fry, served as the project manager.

Elizabeth scheduled a kick-off meeting that included introductions and an exchange ofinformation for creating a team directory.

As the project moved through execution, the team performed well for the most part.One team member owned an Internet hosting service and made arrangements for theteam to use web-collaboration software, making team communication much easier. Toreward team members’ efforts, Elizabeth offered small gifts of appreciation, whichwere donated by local merchants. She also made sure she recognized the extra effortsof her team during city council meetings.

Elizabeth arranged for local landscape architects and gardeners to offer special trainingseminars to interested team members, which proved to be extremely motivating. Whenconflicts arose, like a disagreement over what to use as surfacing materials in the play-ground, Elizabeth monitored the situations but usually let the team work them out forthemselves.

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DISCOVERY ACTIVITY 9-4Developing Your Project Team

Scenario:As your project team continues executing the project plan, you are learning more about theteam members and their interpersonal skills and relationships.

1. Match each team development stage to its appropriate description.

Forming a. Team members complete theirassigned project work and shift to thenext project or task.

Storming b. Team members begin to assert them-selves and conflict managementapproaches are used to help the teamwork through problems.

Norming c. Team members make initial judg-ments about the skills and personalqualities of their teammates, as wellas worry about how they personallywill be viewed by the rest of theteam.

Performing d. Team members begin to work produc-tively, without worrying aboutpersonal acceptance or control issues.

Adjourning e. Team members collaborate easily,communicate freely, work at optimumproductivity, and solve their own con-flict problems.

2. You notice that Rachel, a team member, has consistently met her deliverable dead-lines and is always on time with her status reports. She actively participates inbrainstorming sessions and makes valuable contributions to the discussions. Whenrequired, she has gone beyond her responsibilities and has helped her project managerfacilitate brainstorming meetings and discussion sessions. How should you respond?

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3. One of your junior team members, who is assigned to gather information from manag-ers through an interview process, has confided in you that he is not comfortable duringthe interviews. He feels that the managers seem impatient with the questions he isasking. The other junior team members assigned to interviews have not had any prob-lems. What are some things you would do to address this issue?

TOPIC EManage the Project TeamYour staffing management plan describes when and how you will meet your project teamrequirements. Now that your project is well underway, you need to monitor individual andteam performance and provide relevant feedback and appraisals. In this topic, you will manageyour project team.

Virtual teams and matrix organizations make managing project teams more complicated forproject managers. However, when team members are accountable to a functional manager anda project manager, this dual reporting relationship becomes a critical component for projectsuccess. Effective project managers monitor and track team member performance throughoutthe project’s life cycle.

The Manage Project Team ProcessThe manage project team process monitors individual performance, gives feedback, solvesissues, and organizes changes to improve project performance. This results in updates to thehuman resource plan, submission of change requests, resolved issues, input given for perfor-mance appraisals, and documentation of lessons learned. Efficiently managing a project teamrequires a combination of project management and interpersonal skills to foster teamwork andenhance the team performance.

Figure 9-7: The manage project team process.

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Dual ReportingManaging the project team can become more complicated when team members arerequired to report to both a functional manager and a project manager. Coordination ofthis dual reporting relationship can be very important for the success of the project; itis the project manager’s responsibility to make sure that team members are reportingappropriately.

Manage Project Team InputsThere are several inputs to successfully managing a project team.

Input DescriptionProject staff assignments Documentation on the list of project team members, project organiza-

tion charts, and schedules.

Project management plan Contains the human resource plan that includes the roles and responsi-bilities of project team members and the staffing management plan.

Team performance assessments During the project, the project management team makes formal andinformal judgments on team performance. Continual assessment canresult in resolving issues, improving communication, recognizing con-flict, and improving team interaction.

Performance reports Give documented performance information on the status of the projectwith regards to the forecasts made. Performance areas that are docu-mented include schedule control, cost control, quality control, andscope verification. This information can be helpful when determiningcorrections or updates required in future human resource requirements,awards and recognition, and modifications to the staffing managementplan.

Organizational process assets Inputs that can influence the manage project team process include cer-tificates of appreciation, websites, newsletters, bonus structures,corporate apparel, and organizational prerequisites.

360-degree Feedback360-degree feedback is the collection of performance data from several key sources,including peers, managers, and subordinates. Confidentiality is crucial to employing360-degree feedback as it is implemented in most organizations. Many project prac-tices do not have the sophistication and/or resources to manage employee relations in amanner that makes implementation of 360-degree feedback practical. Thus, eventhough 360-degree is mentioned in the PMBOK® Guide, there is consensus within thehuman resources field that 360-degree feedback is best used only for developmentalpurposes, and not for performance management.

Manage Project Team Tools and TechniquesA project manager has several tools and techniques available to manage the team.

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Tools and Techniques DescriptionObservation and conversation Used to stay in constant communication with the work and atti-

tudes of the team. Measurements include progress towarddeliverables, interpersonal issues, and accomplishments resultingin pride for team members.

Project performance appraisals The need for formal or informal appraisals often relies on projectlength, project complexity, organizational policy, labor contractrequirements, and amount and quality of communication. Evalua-tion can come from supervisors and people who interact with theteam. Some of the main objectives to conduct performanceappraisals are to clarify the roles and responsibilities of projectteam members, provide constructive feedback, identify unknownor unresolved issues, develop individual training plans, and estab-lish futuristic goals.

Conflict management Proper conflict management will result in improved productivityand good relationships. To reduce the amount of conflict, estab-lish team rules, group norms, and stable project managementpractices. If the team is managed properly, disagreements will behealthy and can lead to increased productivity and good decisionmaking. Care should be taken that conflicts are handled early andin private using a direct, collaborative approach.

Issue log An issue log is used to document individuals responsible forresolving certain issues by a specific date, whereas issue resolu-tion addresses obstacles that hinder the team from achieving itsgoals.

Interpersonal skills Skills that capitalize on the strengths of team members includeleadership, influencing, and effective decision making.

Manage Project Team OutputsSeveral outputs result from managing a project team.

Output DescriptionEnterprise environmental factorsupdates

Updates include inputs to organizational performance appraisalsand on personnel skills.

Organizational process assets updates Updates include historical information, lessons learned docu-ments, templates, and organizational standard processes.

Change requests Staffing changes can affect the project plan. This results in arequest to be processed through the perform integrated changecontrol process. These changes include moving people to dif-ferent tasks, outsourcing work, and replacing team membersduring absence or when they leave the company. Preventivemethods can be adopted to avoid such situations.

Project management plan updates Any approved change requests and corrective actions shouldresult in updates to the staffing management plan, a subset ofthe project management plan.

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Causes of ConflictConflict arises in most groups and working situations. Causes of conflict include:

• Competition.

• Differences in objectives, values, and perceptions.

• Disagreements about role requirements, work activities, and individual approaches.

• Communication breakdowns.

Characteristics of ConflictsProject managers should be aware of certain characteristics of conflict that will helpthem effectively handle conflicts when they arise. Conflict is natural and forces theneed for exploring alternatives. It is a team aspect and openness about the situation oropinions can resolve conflicts. While resolving conflicts, focus should be on the issuesand not on individuals; on the present situation and not the past.

Conflict ManagementDefinition:

Conflict management is the application of one or more strategies for dealing with dis-agreements that may be detrimental to team performance. Effective conflictmanagement can lead to improved understanding, performance, and productivity. Con-versely, ineffective or nonexistent conflict management can lead to destructivebehavior, animosity, poor performance, and reduced productivity—all of which threatensuccessful completion of the project’s deliverables. There are certain conflict resolutionmethods and the need to follow a particular method includes the intensity and impor-tance of conflict, the time given to resolve the conflict, the positions of the conflictingparties, and the motivation to resolve conflicts on a short-term or long-term basis.

Example: Conflict Management Between Two SalespeopleTwo salespeople accustomed to working independently, on commission, might beasked to partner together on a project to bring in a major new account. If the twobecome embroiled in conflicts regarding their commission splits and their differingsales styles, and they cannot agree to work together amicably for the sake of theproject, the business will suffer. Conflict management strategies would be used to helpthe team members work through their differences.

Conflict Management ApproachesThere are six basic approaches for handling conflicts; each is effective in different circum-stances.

Approach DescriptionConfronting/Problem solving Focuses on identifying the underlying problem and working out

alternatives or solutions for it in a way that allows the involved par-ties to work through their disagreements.

Compromising Involves working out a middle ground that satisfies all parties tosome degree.

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Approach DescriptionSmoothing/Accommodating Focuses on de-emphasizing the differences between points of view

and focuses on commonalities.

Forcing Requires others to yield to the point of view of one side or another.It may increase conflict and end in a win-lose situation.

Collaborating Incorporates insights and viewpoints from different perspectives,which can lead to commitment between the conflicting parties.

Withdrawing/Avoiding Involves avoiding or retreating from the conflict or potential conflictand allowing the involved parties to work out the conflict on theirown.

Different problem-solving business philosophies interpret and categorize ″compromise″ and ″confrontation″ dif-ferently, in terms of their effectiveness and desirability; additionally, different companies may have their own wayof interpreting and implementing these approaches. Also, there cannot be “one effective” way to resolve a conflictas they are mostly situational.

Tasks of Performance AppraisalsYou can use the performance appraisal to accomplish a number of tasks, including:

• Comparing performance to goals.

• Reclarifying roles and responsibilities.

• Delivering positive as well as negative feedback.

• Discovering unknown or unresolved issues.

• Creating and monitoring individual training plans.

• Establishing future goals.

How to Manage the Project TeamUsing good management skills to manage your project team results in a solid staffing manage-ment plan, updated and submitted change requests, resolution of issues, and good lessonslearned documentation, as well as productive team members.

Guidelines:To effectively manage a project team, follow these guidelines:

• Establish good communication among team members, internally and externally.

— On virtual teams, communication can become a major issue and challenge—especially when team members are in different time zones and in differentcountries.

— In the era of electronic mail, use proper etiquette. For example, typing withall capital letters is synonymous to shouting. Avoid conducting argumentswith people through email. Know when to use the phone or a personal visitto discuss issues.

— Cultural-sensitivity training is essential to ensure that communications arewell-maintained with global project teams. Remember that on some projectteams, English may be a second language. Keep communications simple and

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to the point. Eliminate slang, sports terms, or jokes. Many jokes do not trans-late well in other cultures or may even result in people being offended orinsulted.

• Monitor performance of team members on an ongoing basis.

— Monitor progress of team members by speaking with them on a one-to-onebasis. Don’t wait for the emails or monthly reports. Get out there and see foryourself what progress is being made by the team, and what intangibles(such as morale, engagement, or cynicism) are at play.

— Develop a set of metrics for each project to measure team performance.Establish tolerances for each so that corrective actions can be taken whenneeded. Use a management by exception approach to avoid micromanagingthe team.

— Provide constructive feedback to team members on a frequent basis. Teammembers need to know they are either on track or need to take steps to getback on track. Performance reviews can be formal or informal. If disciplinaryactions are taken, these must be in writing to avoid any misunderstanding.

— Consider additional training for those team members who need to improvetheir performance.

• Consider having a quality audit to get another perspective on whether the team isheaded in the right direction to meet the project’s quality requirements. The qual-ity audit team needs to be independent from the project team to be effective.

• Manage conflict using the appropriate approach based on the circumstances andthe individuals involved. Regardless of the approach, apply the following prin-ciples.

— Allow people to have their say. Make sure you give both sides a chance tostate their case. Demonstrating respect and acknowledging people’s differentpositions are necessary to address conflicts effectively.

— Listen hard to what people are telling you. Paraphrase or ask questions to besure everyone understands what is being said.

— Find those areas at issue where both sides are in agreement.

— Encourage both sides to find a win-win resolution to the problem. Restate theresolution and get agreement from both parties.

— Focus on the reasons that the group has come together: to find a resolution tothe problem.

— To help avoid unnecessary conflict, set expected ground rules in the begin-ning for the team to operate with based on the communications managementplan.

— During the project life cycle, follow established project management prac-tices. Refer to your communications management plan for guidance.

— When conflict occurs among team members or between the team and otherorganizational entities, it may be effective to implement the conflict manage-ment approach of confrontation—focusing on the problem. It may beadvantageous to try to defuse conflicts early to avoid escalation.

• As results are being obtained during the implementation phase, establish an issueslog to track and assign project issues. This log is useful for regular follow-up withthe project team. Hold specific team members accountable for resolution of issues.

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Example: Managing the Project Team in an Advertising CompanyAn advertising company has plans to develop a campaign for a customer over the nextfour months, and David is acting as the project manager.

David wanted to make sure that everything got off to a good start, so he called a kick-off meeting. Before the meeting, he developed a set of metrics to measure teamperformance, and planned to monitor the progress of his team by meeting with themindividually once a week.

During the kick-off meeting, David asked the team to make weekly status reports usingemail and to use instant messaging software to keep in close contact with one another.He also let the team know how their performances would be monitored, and he set upa meeting schedule. However, as might be expected, there was some conflict on theteam. Two team members disagreed on the direction for their campaign. One wanted touse a very contemporary, almost edgy approach, while the other wanted to appeal totraditional, more conservative values. After a series of meetings with the customer’sproduct analyst, the team was able to find a middle ground that satisfied both teammembers and pleased the customer.

From the earliest days of the project, David instituted the practice of using an issueslog to track all changes in the project. This became extremely valuable as the projectgot to the final stages and prepared for hand off to the customer. Everyone was clearon exactly what they had committed to, and the customer received the expecteddeliverables.

DISCOVERY ACTIVITY 9-5Managing a Project Team

Scenario:Work on the new OGC store continues to move along. All deadlines are being met. However,one of the masonry supervisors, Joe, sends you an email detailing a recent argument betweenthe plumbing contractor and the tile contractor assigned to the project. He is concerned thattheir possible inability to get along may jeopardize the project.

1. Given the masonry supervisor’s email about the conflict between the plumbing and tilecontractors, what should you do?

a) Confirm their inability to get along and its probable impact on the team. Respondingto alleged interpersonal conflict from second hand sources is almost always a mis-take.

b) Wait for results of the weekly masonry work progress report.

c) Provide constructive feedback to the contractors.

d) Consider offering an online conflict resolution course for the contractors.

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2. In speaking with the contractors, you discover that the tile contractor feels that theplumber is spending too much time at lunch and on breaks, which causes him to workpast 6:00 each day. The plumber responds that he takes a normal lunch break. Whatcan you to do resolve this situation?

3. The roofing team has been working effectively, meeting all deadlines and experiencingno personnel problems. What approach should you take when monitoring this team?

TOPIC FDistribute Project InformationDuring project planning, you developed a communications management plan describing theteam’s approach to project communications. Now that work results are being accomplished,you need to let project stakeholders know how the project is progressing. In this topic, youwill identify the process involved in distributing project information.

In a project, information provides the critical links for successfully meeting the project’s objec-tives. Distributing project information efficiently and effectively ensures meaningful andappropriate information is available to project stakeholders. This in turn assists stakeholders inmaking appropriate decisions by giving a clear view of the project progress.

The Distribute Information ProcessThe distribute information process involves getting the right information to the right people,both internally and externally, at the right time. During information distribution, the projectteam implements the communications management plan. This plan documents what informa-tion will be communicated, to whom, by whom, when, and in what manner, as well as howinformation is collected, archived, and accessed.

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Figure 9-8: The distribute information process.

Effective Information Distribution TechniquesDifferent techniques can be used to distribute information effectively.

Techniques DescriptionSender-receiver models Includes setting up appropriate feedback loop and avoid-

ing communication barriers.

Choice of media Includes specifying when to communicate in writing or inoral form and which communication media should beused such as verbal, written, email, and phone.

Writing style Includes choosing the right tone and word choice.

Meeting management techniques Includes identifying the meeting agenda and managingconflicts.

Presentation techniques Includes using appropriate design of visual aids and bodylanguage.

Facilitation techniques Includes building harmony within the team.

Distribute Information InputsThere are a few inputs to the distribute information process.

Input DescriptionProject management plan Contains the communications management plan, which

describes the details for distributing information to various con-cerned parties in the form of how to distribute the info, such aswhom to, when to, and what to.

Performance reports Describes the current performance status of a project. Thesereports are distributed to the relevant stakeholders prior toproject meetings. Based on the performance reports, the man-agement and the stakeholders assess the project progress andcan forecast future course of action, if any.

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Input DescriptionOrganizational process assets Factors that can have an impact on the distribute information

process could include:

• Past lessons learned and historical project information.

• Guidelines, policies, and procedures regarding informationdistribution.

• Templates.

Distribute Information Tools and TechniquesTwo tools and techniques are used to distribute information.

Tools and Techniques DescriptionCommunications methods The communication methods could include video and audio confer-

ences, computer chats, individual group meetings, and other remotecommunication methods.

Information distribution tools The tools that can be used to provide project information to stake-holders. The tools could include electronic mail, hard-copydocuments, presentations, video conferencing, meetings, and phonecalls.

Distribute Information OutputsThere is one output from the distribute information process.

Output DescriptionOrganizational pro-cess assets updates

Organizational process assets that may need to be updated include:

• Lessons learned documentation

• Project records

• Project reports

• Project presentations

• Feedback from stakeholders

• Stakeholder notifications

How to Distribute Project InformationEffective information distribution ensures that project information is appropriately dispensed toproject stakeholders. Getting the necessary information in a timely manner enables the stake-holders to make decisions regarding the project in time to make a difference.

Guidelines:To distribute project information effectively, follow these guidelines:

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• Create and distribute requests for project information, such as project records,reports, and presentations, in accordance with the communications managementplan.

• Use effective communication skills to exchange information.

• Use an information retrieval system to provide stakeholders access to projectinformation. Everyone should have access to the information needed. Whethermanual, computerized, or a combination of both, make sure your system complieswith the following standards:

— The system has sufficient storage capacity to hold the necessary project infor-mation.

— The system follows any security protection protocols established in the com-munications management plan so that sensitive information can be accessedonly by appropriate stakeholders.

— The system provides a method of version control to protect data and toensure that everyone is working off the same, most recent document.

— The system is organized to meet the needs of the project and the stakehold-ers.

• Select the appropriate information distribution method for distributing projectinformation.

— Sending an email announcing that a report is posted on the intranet site.

— Making a telephone call to schedule a one-on-one meeting.

— Taking notes of phone calls to provide a written record of the communica-tion.

— Making a presentation to highlight the important points in a report.

• Monitor the communications system for feedback to make sure that messages aregetting through as planned. If individuals, locations, or organizations are not ableto send or receive messages adequately, identify the problem and adjust the com-munications management plan, information distribution method, or retrievalsystem accordingly.

• When unexpected requests for information surface, determine their effect on otheraspects of managing the execution and control of the project, such as risk moni-toring and schedule control. Take appropriate action to make changes to the planas necessary.

Example: Information Distribution to StakeholdersAs the company website project continues through the executing process, a hugeamount of project information is generated and collected. Carrie, the project manager,is diligent in providing the stakeholders with the information they need to make sounddecisions. First, she and her team review the communications management plan tomake sure they implement an information retrieval system.

The executive stakeholders present a challenge regarding project communications. Onthe one hand, they need to make decisions about the project and require enough infor-mation to support their decision-making, but they are impatient with lengthypresentations. So Carrie prepares a clear, concise summary of key information as wellas a more detailed report with charts and status updates for those who are interested.

Carrie invites the stakeholders to ask questions or provide other feedback. She moni-tors the communications system to make sure that messages are getting through asplanned and that the recipients fully understand the content.

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DISCOVERY ACTIVITY 9-6Distributing Project Information

Scenario:A primary PMO goal for all projects during the Business Transformation program is consistentand timely reporting of project information. This was in large part the justification for the PMTraining Roll-Out project and the implementation of the PMIS at OGC. However, the projectmanagers at OGC are now concerned that they will be spending more time creating reports forsenior management than actually managing their projects. You are meeting with Sharon Will-iams, the new PMO Director, to discuss these concerns.

1. An automated information retrieval system will provide stakeholders with access toproject information via the intranet. What, if any, concerns do you have with relyingon this type of distribution of project information to stakeholders?

2. As people strive to meet their deadlines, reporting the status of activities can becomea low priority. This is a problem when you are trying to distribute up-to-date informa-tion on the status of the project. What are some things that you could do to make surethat people report accurate and timely information to you?

3. You are asked by your manager to provide the senior executives your project’sprogress to date. Which information distribution methods would be most appropriatein this situation?

a) Send an email announcing that a report is posted on the intranet site.

b) Make a telephone call to schedule one-on-one meetings with each executive.

c) Send an email based on status notes that you took over the phone while communicat-ing with team members.

d) Make a presentation to the senior executives and highlight the important points inthe report.

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TOPIC GManage Stakeholder Relationshipsand ExpectationsYou’ve informed project stakeholders about how project resources are being used to achieveproject objectives. As project issues arise, you need to address and resolve them with theappropriate project stakeholders. In this topic, you will identify the process involved in activelymanaging stakeholder relationships and work within their expectations.

Managing communications to satisfy the requirements of and resolve issues with project stake-holders can make or break a project. Actively managing relationships with your project’sstakeholders and working with their expectations increases the chances that your project willremain on track and that issues are resolved right away to avoid disruptions at a later stage inthe project life cycle.

The Manage Stakeholder Expectations ProcessThe manage stakeholder expectations process aims at managing communications to meet theneeds and expectations of the stakeholders. The project manager is responsible for managingstakeholders expectations. Actively managing stakeholder expectations:

• Increases the chances of project acceptance.

• Addresses emerging issues and concerns before they manifest into a serious impediment.This includes clarifying and resolving issues that have already been identified.

Figure 9-9: The manage stakeholder expectations process.

Manage Stakeholder Expectations InputsThere are a few inputs associated with the manage stakeholder expectations process.

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Input DescriptionStakeholder register A list that contains all relevant stakeholders in a project and

ensures that all the relevant stakeholders in a project are includedin the project communications.

Stakeholder management strategy Contains the procedure for understanding the stakeholder goals andobjectives, in order to manage their expectations.

Project management plan Includes the communications management plan, which describesthe objectives and expectations of each stakeholder in a project. Italso documents the level of communication required by a stake-holder.

Issue log Used to track and assign project issues. It is useful for regularfollow-up with the project team. These issues are usually veryminor, but nevertheless are addressed to maintain a good workingrelationship with stakeholders. Any unresolved issues can result inconflict among team members and stakeholders and delays in theproject.

Change log A record of the changes that occur during project execution. Appro-priate stakeholders are told of these changes in order to gain theirconsent.

Organizational process assets Organizational process assets include:

• Change control procedures

• Past project information

• Issue management procedures

• Organizational communication

Manage Stakeholder Expectations Tools andTechniquesProject managers have a few tools and techniques at their disposal when managing stakeholderexpectations.

Tools and Techniques DescriptionCommunications methods Each stakeholder’s method of communication is documented in

the communications management plan and applied during stake-holder management. Face-to-face meetings are the best way tocommunicate with stakeholders. When face-to-face meetingsare not possible, phone calls, email, and other electronic toolsare acceptable for exchanging information.

Interpersonal skills A project manager should apply appropriate interpersonal skillsto manage stakeholder expectations. These could include skillssuch as conflict resolution, building trust, active listening, andovercoming resistance to change.

Management skills A project manager should apply his management skills ofdirecting and controlling the team members, thus channelingtheir efforts towards achieving the project objectives. Theseskills could include presentation, writing, and negotiation skills.

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Manage Stakeholder Expectations OutputsSeveral outputs result from managing stakeholder expectations.


Updates to the organizational process assets could include rea-sons for issues, and the motives behind why certain correctiveactions are chosen. The updates could also include lessonslearned from managing stakeholder expectations. Lessons learnedare documented to be part of the historical database for the cur-rent project and future projects in the organization.

Change requests There may be changes that might take place to the product orproject during the process of managing stakeholder expectations.These could also include preventive and corrective actions.

Project management plan updates The project management plan is updated due to a change in thestakeholder communication management. This may occur as aresult of the identification of a new communication requirementor method. The project management plan can also be updated incase a communication method is deemed redundant.

Project document updates Documents that may be updated include stakeholder managementstrategy, stakeholder register, and issue log.

How to Manage Stakeholder Relationships andExpectationsActively managing stakeholders ensures that your stakeholders understand the progress yourproject is making. Managing stakeholder expectations will support your team’s project sched-ule, enhance team performance, and decrease project interruption.

Guidelines:To effectively manage stakeholders, follow these guidelines:

• During the planning phase of the project, the communication plan for each stake-holder is developed. In managing stakeholders, the project manager needs tofollow that plan and periodically obtain stakeholder feedback to make anyrequired adjustments to the plan.

• Face-to-face meetings with stakeholders are most effective. Assessing body lan-guage provides the project manager with an opportunity to determine if thestakeholder is pleased or not with the project’s progress. For example, if during aproject update the stakeholder is frowning, has arms folded, and is looking at hisshoes, it is essential that the project manager determine the stakeholder’s con-cerns. By managing stakeholder expectations, the project will continue to havetheir buy-in.

• When face-to-face meetings are not practical, as in global projects, video/webconferencing, webinars, desktop sharing, net meeting, and video chat can be use-ful substitutes if available to the project team.

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• Be flexible in communications for the project sponsor or other members of seniormanagement. Be prepared to provide a summary of project status in five minutesor less if the need arises.

Flexible communication is the ability to meet the specific communication require-ments of each stakeholder. For example, one might prefer extensive numericaldata while some others might just prefer a synopsis.

• Use an issue log to assign, track, and resolve open issues that are of interest tostakeholders. Issues that remain unresolved can lead to project delays.

• Change requests need to be processed to update the communication plan reflectingchanges in project staffing.

• Take corrective action as needed to bring project performance in line with cus-tomer expectations.

• Document lessons learned to reflect the causes of issues and changes made to rec-tify them.

Example: Managing Stakeholders at an Insurance CompanyAlex is a project manager at an insurance company. His team has been developing anew type of insurance plan for car owners. When the project kicked off, Alex created acommunications plan and handed it off to the project stakeholders for their review. Hemet with them and got their feedback, so now a communication plan is in place thatseems to be working well.

The communication plan set up a regular status meeting. Before each meeting, Alexprepares a summary of the project status. The stakeholders appreciate this brief sum-mary. Alex also always gives the stakeholders an opportunity to bring up concerns. Atthe most recent meeting, the stakeholders had an issue with the discount the new insur-ance plan offers to people with clean driving records. While the stakeholders think thisis a good offer, they would like to extend this offer to single car owners with noco-ownership.

Alex agreed that this change is manageable, and immediately logged this change inrequirements into the database for it to be analyzed and processed through the inte-grated change control system.

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DISCOVERY ACTIVITY 9-7Managing Stakeholders

Scenario:The OGC’s Seattle New Store project has faced several challenges, including staffing changesand construction problems. Although you have consistently informed stakeholders of allchanges using the protocols outlined in the communications plan, several stakeholders havebeen expressing concern that the project has gotten off track.

1. Stakeholders are worried about the current state of the project. How should youhandle their concerns?

a) Follow processes outlined in the communications plan.

b) Take corrective action.

c) Conduct a face-to-face meeting with a clear agenda targeting their specific concerns.

d) Document lessons learned.

2. Two stakeholders are out of town on a business trip and are available sporadically.Another has an extremely busy schedule and can’t squeeze another lengthy meetinginto his day. You know it is important to have face-to-face interaction with each stake-holder. How can you accommodate their needs? Check all that apply.

a) Use video conferencing.

b) Send a memo via email.

c) Use an instant messaging service.

d) Hold a brief summarization meeting.

3. During the face-to-face meeting with project stakeholders, you offer a recap of somecontractor changes that occurred. It became necessary to add another electrical con-tractor to the team, which resulted in changes to the project cost baseline. While youare talking about this issue, you notice that one of the project stakeholders continuallylooks down at the floor and rapidly taps her pen against the table. What does herbehavior indicate?

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Lesson 9 Follow-upIn this lesson, you managed project execution. Executing project work according to yourproject management plan ensures that your project team is on the same page and that yourproject finishes on time, on budget, and with the required quality.

1. What aspects of executing the project plan have you found to be the most challenging?Why?

2. What tools and techniques will you use to more effectively execute projects in thefuture?

LESSON 9



Managing ProjectProcurement

In this lesson, you will manage project procurement.

You will:

• Identify the components of the conduct procurements process.

• Obtain responses from sellers.

• Determine project sellers.


LESSON 10

Lesson 10: Managing Project Procurement 361


IntroductionEarlier in the process, you planned project procurement. Now it is time to execute your pro-curement plan, and so you are ready to manage this phase of work by soliciting bids fromprospective sellers and making effective choices among the bids received. You will do this bydetermining which proposal best meets your project’s time, cost, and quality commitments. Inthis lesson, you will manage project procurement by requesting seller responses and selecting aseller.

As the project manager, it is your responsibility to make sure that your project’s work will bedone well, on time, and at a reasonable cost. Obtaining proposals or bids from sellers providesyou with the confidence that work products will meet your project objectives for a fair andreasonable cost. And once you have those bids in hand, you need to be able to follow estab-lished techniques for evaluating them accurately and choosing among them.

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LESSON 10



TOPIC AExamine the Conduct ProcurementsProcessYour project is now in the executing process group and you need to procure the externalresources that are required by your project. In this topic, you will conduct project procure-ments.

Procuring products and services from external suppliers requires identifying suppliers, obtain-ing bids or proposals from them, and awarding contracts based on their evaluation. Allprocurements for the project must be done within the specified parameters of time, cost, andquality so as to ensure that the project meets the stakeholder’s requirements.

The Conduct Procurements ProcessIn the conduct procurements process, project managers will obtain seller responses, select aseller, and award contracts to the identified seller for the procurement of the required product,service, or result from the seller. In this process, the project management team will receivebids or proposals from sellers, apply predefined selection criteria to select sellers who arequalified to perform the work, rank all proposals using weighted evaluation scores and conductnegotiations with the selected sellers, and finally select a single seller who is required to sign astandard contract that will meet the procurement requirements of the project.

Figure 10-2: The conduct procurements process.

Conduct Procurements InputsThere are several inputs for the conduct procurements process.

Input DescriptionProject management plan Describes every management step of the procurement process

starting with development and ending with closing the contract.

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Input DescriptionProcurement documents Contain information that you provide to prospective sellers so that

they can completely and accurately respond to your request.

Source selection criteria Can include examples of existing products from the supplier, ser-vices, the supplier’s history with the organization and otherorganizations, or results from the evaluation of the supplier’scapabilities and quality of their products.

Qualified seller list Contains the names of prospective sellers who are pre-approvedby the organization based on past experience.

Seller proposals A response submitted by a potential seller that is prepared inaccordance with the requirements stated in the procurement docu-ments. The proposal should demonstrate an understanding of theprocurement need, describe the sellers’ ability to provide the ser-vice or product, and detail the price for delivering the desiredgoods and/or services.

Project documents Project documents used in conducting the project procurementinclude the risk register and the risk-related contract decisionsdocument.

Make-or-buy decisions Decisions about which resources, services, or products will beprocured in-house or purchased by the organization.

Teaming agreements The legal contractual agreements between the organization andone or more external entities to form a partnership, joint venture,or other arrangement between the parties. Teaming agreementsdefine the buyer-seller roles of parties involved in the project.

Organizational process assets A list of sellers (or sometimes called bidders) who can be asked tobid, quote, or propose work. These lists give information aboutsellers’ past experience. These may be previously qualified sellersor a preferred sellers list.

Conduct Procurements Tools and TechniquesProject managers can use several tools and techniques to conduct project procurements.

Tools and Techniques DescriptionBidder conferences These conferences are conducted by the buyer prior to submissions

of a bid or proposal by the sellers. The buyer explains the require-ments, proposed terms, and conditions. Sellers clarify their queriesduring this meeting. The buyer facilitates the conference to ensurethat all prospective sellers have a clear and common understandingof the technical and contractual requirements of the procurement.Bidder conferences are also called vendor conferences, pre-bid con-ferences, or contractor conferences.

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Tools and Techniques DescriptionProposal evaluation techniques A set of methods to evaluate, shortlist, and then select the seller.

The fundamental part of any evaluation technique is the setoffevaluation criterion. The evaluation techniques may suggest subjec-tive or objective criteria or a combination of both. Though aweighting system is the most commonly used evaluation technique,short-listing (screening) or independent estimating are also used incombination.

Independent estimates Usually, you’ll have at least a general idea of what you expect theprice to be. If a proposal comes in at an unexpectedly high or lowprice, you may want to obtain an independent estimate to verifythat the proposed price is reasonable and responsible. The Purchas-ing Department is a good source for independent estimates. Forlarge projects, they will usually prepare an independent estimatebefore the procurement documents go out, so they will have soundcurrent data against which to evaluate the proposals received.

Expert judgment Used by a multi-discipline review team to evaluate seller proposals.The review team has expertise in the topics covered in the procure-ment documents and the proposed contract.

Advertising Companies regularly post advertisements in newspapers, magazines,business journals, television, and other media, requesting sellers forbids and proposals. Advertising is a mass method for seekingresponses from prospective sellers.

Internet search The Internet is used to quickly search for information on the avail-ability and prices of commodities, components, and off-the-shelfitems that meet the project procurement requirements.

Procurement negotiations Procurement negotiation is the process of bargaining to come to amutual agreement regarding the terms and conditions of a contract.

Conduct Procurements OutputsSeveral outputs are created by the conduct procurements process.

Output DescriptionSelected sellers Sellers who have been judged based on the outcome of the pro-

posal or bid evaluation. These sellers include those who havenegotiated an outline of a contract, which will turn into theactual contract when the deal is made.

Procurement contract award A mutually binding agreement that details the obligations of thebuyer and seller. One is given to each selected seller.

Resource calendars The quantity and availability of resources and documented dateson when each resource can be active or idle.

Change requests Certain changes to the project management plan, its sub-plans,and other components may result from the conduct procure-ments process. Any requested changes are sent for review anddisposition in the integrated change control process.

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Output DescriptionProject management plan updates Elements of the plan updates include the cost baseline, scope

baseline, schedule baseline, and the procurement managementplan.

Project document updates Various documents that require updates include the requirementsdocumentation, the requirements traceability documentation, andthe risk register.

Components of the Procurement Contract AwardMajor components of the contract document include:

• Statement of work or deliverables

• Schedule baselines

• Period of performance

• Performance reporting

• Roles and responsibilities

• Seller’s place of performance

• Place of delivery

• Pricing

• Payment terms

• Inspection and acceptance criteria

• Warranty

• Product support

• Limitation of liability

• Fees and retainage

• Penalties

• Incentives

• Insurance and performance bonds

• Subordinate subcontractor approvals

• Change request handling

• Termination and Alternative Dispute Resolution (ADR) mechanisms

Qualified SellersDefinition:

Qualified sellers are sellers who are approved to deliver the products, services, orresults based on the procurement requirements identified for a project. The list ofqualified sellers can be obtained from historical information about different sellers whodelivered the resources required for prior projects executed in your organization.

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If the resources you require are new to the organization, you may need to do someresearch in collaboration with your Purchasing Department to identify qualified sellersfor each resource. This research will generate a list of possible sellers, and you wouldneed to interview the prospective sellers, visit their work sites, review work samples,interview their references, check with certification boards, or use other approaches tovalidate whether they qualify as sellers for the procurement requirements.

In case further information is required about the prospective sellers, you can send a Request for Infor-mation (RFI) to each of them to gather information about their capabilities.

Example: Qualified Sellers Selection by OGC CorporationOGC Corporation invites bids from sellers for setting up a Wi-Fi network for their newcorporate office in New York. The Wi-Fi network needs to meet all specifications ofthe newly announced governmental regulations. On reviewing the list of their old sup-pliers, OGC found that none of the suppliers could provide them with a Wi-Fi networkthat could enable them to meet the governmental regulations.

An advertisement requesting the submission of information about prospective sellerswas announced in all the national dailies and business journals. There was an over-whelming response from a large group of sellers. Based on the sellers’ information,OGC Corporation was able to generate a list of 10 prospective qualified sellers. Thequalified sellers were then called in for a conference, where each seller was asked todemonstrate their capability in delivering the required product. At the end of the pre-sentation, Rudison Technologies Ltd. and Janrex Inc. were selected as the qualifiedsellers for the Wi-Fi network installation, as they met most of the requirements andstandards prescribed by OGC corporation. OGC later on sent the RFP to these twoorganizations and continued the process of seller selection.

Figure 10-3: A qualified sellers list for the Computer Network Upgradeproject.

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Request for Information (RFI)A Request for Information (RFI) is a buyer generated document to solicit informationabout prospective sellers. The RFI helps gather information from the seller on variousparameters such as the seller organization’s history, balance sheets, type of business(family owned, private, or publicly listed, and so on), family background, directors’ /owner’s background, succession plans, past 3 years’ bank statements, plant capacity,and other factors that may assist in determining the seller’s qualifications.

ACTIVITY 10-1Examining the Conduct Project Procurements Process

Scenario:As the project manager for OGC, you are in the process of outsourcing a major softwareeffort, the OGC Warehouse Management Software project, and the associated testing by thesubcontractors, which will take place prior to the corporate internal testing to verify contentand operational aspects. Included in this contract should be the “usability” of the resultingproduct. The schedule maintenance is as important to you as is the quality of the deliverables.The details of the product to be delivered are as firm as they can be at the present time, butare subject to change requests under contract change control. Before you conduct your projectprocurements, you would like to check your understanding of the conduct procurements pro-cess.

1. You have a list of 10 potential sellers and have to narrow the list down to a more man-ageable number of candidates. What will be the process to create a “short list” ofsellers that you will consider?

LESSON 10



2. You now have a short list of sellers. Name some of the selection criteria you might usein finalizing the selection of the seller.

3. Included in the contract should be performance criteria, on both schedule and costs,expected of the subcontractor. What is some of the information that you would wantto see in the way of performance reporting by the subcontractor?

4. Why might you hold a bidder conference in this situation?

LESSON 10



TOPIC BObtain Responses from SellersDuring project planning, you prepared a procurement document. Now you are ready to obtainbids from prospective sellers to meet project purchasing requirements. In this topic, you willobtain responses from sellers.

Obtaining proposals or bids from sellers provides project stakeholders with the confidence thatwork products will meet project objectives for a fair and reasonable cost. Mastering the toolsand techniques for requesting seller responses ensures you obtain relevant, accurate, and appro-priate responses from prospective sellers.

How to Obtain Responses from SellersA well crafted seller response request, sent to carefully selected sellers, ensures that you obtainrelevant, accurate, and appropriate responses from prospective sellers.

Guidelines:To obtain responses from sellers, follow these guidelines:

• Gather and review all of your procurement documents for accuracy and complete-ness.

• If necessary, obtain or develop a qualified sellers list.

— If your organization has a centralized Purchasing Department, there will oftenbe lists of qualified or approved sellers available, or at least some historicalinformation about different sellers. If the resources are similar to ones pro-cured by your organization in the past, you may be able to tap into someexpert judgment and historical information about different sellers and theirtrack records. Try talking with sales and marketing people in your company;they may have contacts or know other sources to try.

— You may also consider talking to the people in your company who will beusing the resource being sought to find out more information about theirneeds.

— If the resource you require is new to your organization, you may need to dosome research in collaboration with your Purchasing Department to identifyqualified sellers for that resource. You could try to search in locations thatinclude Internet searches, telephone and business directories, library services,and trade and professional organizations.

This research may only generate lists of possible sellers. You will then needto go into more depth to learn if these sellers are actually qualified to deliverwhat you need. The additional qualification step could involve interviewingthe prospective sellers, visiting their work sites, reviewing work samples,interviewing their references, checking with any available certificationboards, or other approaches to ensure that they are indeed qualified candi-dates.

• Determine how and from whom you will request seller responses.

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— If your list of qualified sellers is sufficient for the work being procured, youmay decide to send your procurement documents to just those prospectivesellers.

— If your list is insufficient, you may want to advertise to expand the list ofpotential sellers. If your project is a sub-contract to a large governmentproject, you may be obliged to advertise the request. Check with your legalconsultants or Purchasing Department experts on wording for the advertise-ment. Most government projects over a specified dollar value require thatbids be publicly advertised to ensure that no supplier has unfair advantageover others. Such notification may be in formats that include local newspa-pers, government publications, professional journals, and other appropriatevenues.

• If necessary, hold a bidder conference to allow prospective sellers to ask questionsand get clarification about the deliverables and the requirements for preparingtheir responses.

— The questions raised at a bidder conference should be of great interest to theteam who prepared the original procurement documents. If there are commonmisinterpretations of wording, or if important information is found to bemissing, try to capture this so you will do a better job in the future. You mayneed to go back to the standard documents to include a cue to cover thatinformation.

— If the bidder conference points out serious problems that could cause theresulting proposals to be in error, you may need to amend the original pro-curement documents and send the amended versions to all the sellersoriginally provided with the documents. If this is done, the sections amendedmust be clearly identified, and the areas of difference annotated clearly.

• Send the request for seller responses to the identified prospective sellers. The typeof request sent to prospective sellers is dependent on the procurement criteria setfor the project. The types of request sent to obtain responses include:

— Request for Bid (RFB)

— Request for Proposal (RFP)

Example: Obtaining Sellers Responses for the Wi-Fi Network ProjectMark Anderson, the project manager for the OGC Corporate Office Wi-Fi Networkproject, reviews procurement documents for the project to ensure that the requirementspecifications are specified in suitable and sufficient detail. Based on the qualified sell-ers lists obtained from the Purchasing Department, Mark is able to identify prospectivesellers from the existing list. Knowing that there might be other sellers in the marketwho fulfill the project procurement requirements, Mark seeks to expand his seller listby advertising in local newspapers and professional journals.

A number of sellers of the Wi-Fi technology respond to these advertisements and addto Mark’s list of sellers. From the list, Mark now proceeds to shortlist and identify 15prospective sellers who meet the project’s procurement criteria.

Mark holds a bidder conference, which is attended by all the prospective sellers. Dur-ing the bidder conference, a number of clarifications are sought by the sellersregarding the procurement specifications, and these are addressed by the project team.The updated procurement documents are now sent along with an RFP to each prospec-tive seller. Sellers submit their bids in response to the RFP sent to them.

LESSON 10



DISCOVERY ACTIVITY 10-2Obtaining Responses from Sellers

Scenario:Working with David Anderson, OGC’s Procurement Manager, you have planned the OGC PMTraining Roll-Out project’s external training provider procurement and you are ready to man-age this phase of work by soliciting proposals from prospective sellers. An RFP has beencreated and the procurement manager has approved it for release to potential training provid-ers. The next step is to send the RFP to prospective training providers.

1. What do you think would be the most appropriate method of finding qualified trainingproviders for the OGC PM Training Roll-Out project?

2. There are only two local training providers in a 20 mile radius of OGC. You decide toexpand your seller list outside of your local area. What methods would you use to dothis?

3. Based on the scenario, would you conduct a bidder conference? Why or why not?

LESSON 10



TOPIC CDetermine Project SellersAs a result of requesting seller responses, you now have proposals, quotes, or bids from pro-spective sellers. Now you can determine which seller best meets your project’s time, cost, andquality commitments. In this topic, you will determine project sellers.

You received bids from three web designers who would like to work with you on yourwebsite. You have worked with two of them in the past. The third person was recommended toyou by a senior level executive in your company. All three bids are within your price range.Because rolling out your new website is a high profile project for the business as a whole, youcan’t afford to make a mistake by selecting the wrong seller. Using best practices to select thebest seller helps you avoid making critical errors in judgment before signing a contract to pur-chase products or services.

Weighting SystemsDefinition:

A weighting system is a method for quantifying qualitative data to minimize the influ-ence of personal bias on source selection. By assigning numerical weights toevaluation criteria, you can objectively prioritize the criteria that best meet the needsof your project.

Example: Weighted ScorecardA weighted scorecard is one type of weighting system. In a weighted scorecard, evalu-ation criteria are grouped in general categories and each category is given a numericalweight. The seller is rated on a scale of zero to five for each of the technical criteria.These numbers are totaled and then multiplied by the weighting factor to determine theweighted score for that category.

In this example, the company received scores of four, three, and five in the three tech-nical criteria for a total score for the technical category of 12 out of a possible 15.When multiplied by the weighting factor, the weighted technical score is 240 out of apossible 300. The weighted score for each of the other categories is calculated in asimilar manner. Then all the weighted scores are totaled to obtain a grand total score.

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Figure 10-4: A sample weighted scorecard.

Procurement NegotiationsProcurement negotiation is the process of bargaining to come to a mutual agreement regardingthe terms and conditions of a contract. Before a contract is signed by both parties, a number ofstages of procurement negotiation are conducted between the concerned parties to arrive at aconsensus on the terms and conditions of the contract.

There are five different stages for contract negotiation.

Stage DescriptionIntroduction All parties become acquainted and the overall attitude of the negotiation is

established; this tone is largely set by the buyer’s team leader—normally, theperson with authority to sign the contract will lead the contract negotiationteam.

Probing Each side attempts to learn more about the other’s real position.

Bargaining Give-and-take discussions take place to arrive at the best possible agreementfor all.

Closure The tentative agreement is revised and everyone has an opportunity to tweakthe results.

Agreement The team tries to ensure that all parties clearly understand and agree to allterms and conditions of the contract.

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Term vs. Completion ContractsDefinition:

A term contract engages the seller to deliver a set amount of service—measured instaff-hours or a similar unit—over a set period of time. A completion contract stipu-lates that the work will not be considered complete until the seller delivers the productto the buyer and the buyer accepts the product.

Example: Types of ContractsSalt Lake City, Utah, hosted the 2002 Winter Olympics and needed many contracts forsellers and service providers. Term contracts would have been appropriate for the inde-pendent security firms that were contracted to provide professional security services forthe duration of the Olympic events. Completion contracts would have been appropriatefor the construction companies hired to improve interstate roads and build a new lightrail system to handle the increased area traffic.

How to Determine Project SellersProcedure Reference: Determine Project Sellers

To determine a project seller:

1. Assign a numerical weighting factor to each evaluation criterion or category ofcriteria based on its relative importance to the success of the project.

2. Develop or obtain a rating scale for scoring the criteria.

3. Score each prospective seller on each criterion using the rating scale.

4. Multiply the seller’s score by the weighting factor for each criterion or sum of thecriteria in a category.

5. Add the final scores.

6. Select the seller with the highest score.

7. If necessary, negotiate with the seller on the terms and conditions of the contract.

8. It is a good idea to identify the seller who would be your second choice in casenegotiations fall through with your first choice.

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DISCOVERY ACTIVITY 10-3Determining a Project Seller

Data Files:

• Blank OGC Seller Scoring Sheet

• OGC Seller Proposal Notes

Scenario:You are the project manager for the OGC PM Training Roll-Out project. You have receivedthe proposals from prospective training providers and now it is time to determine which pro-vider has met the criteria outlined in the RFP:

• Seller must provide an instructor with a minimum 3 years of project managementsoftware training.

• Seller must be creative and flexible about assessment design changes, even in lateproduction phases.

• Seller must have a minimum 20 years of collective training experience on staff.

• Seller must have produced at least three projects of similar scope in the last 10years.

Based on discussions that you have had with the procurement manager, you expect the costswill not exceed $35,000.

1. To find a qualified seller you decide to use a weighted system. What would be yourfirst step?

a) Assign a numerical weighting factor to each evaluation criterion.

b) Score each prospective seller based on the rating scale for criteria.

c) Select the seller with the highest score.

d) Develop a rating scale for scoring the criteria.

2. For each evaluation criterion, you have specified a rating scale. What should you donext?

a) Add the scores of the scale.

b) Select the highest rated score.

c) Score each prospective seller on each criterion using the rating scale.

d) Multiply the seller’s score by the weighting factor for each criterion or sum of the cri-teria in a category.

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3. You have selected a seller. You and the procurement manager are meeting with theseller to negotiate the contract. The procurement manager asks the seller if they willuse an in-house instructor or outside contractor for the project software training.Which part of the negotiating phase are they engaged in?

a) The introduction stage

b) The probing stage

c) The bargaining stage

d) The agreement stage

4. From the C:085042Data\Managing Project Procurement folder, open the OGC SellerProposal Notes and Blank OGC Seller Scoring Sheet documents. Based on the scenarioand the seller notes provided, complete the seller scoring sheet.

5. Compare your Blank OGC Seller Scoring Sheet document with the Completed OGCSeller Scoring Sheet document in the C:\085042Data\Managing Project Procurement\Solutions folder.

6. Based on your quantitative evaluation of the seller proposals, which seller would youchoose for your project?

Lesson 10 Follow-upIn this lesson, you managed project procurement by requesting seller responses and selecting aseller. You identified sellers who can provide the best quality of work for your project, selectedsellers after conducting procurement negotiations on the contract, and finally awarded the pro-curement contract to the selected seller at a fair and competitive price. By effectivelyconducting project procurements, you ensured that the procurement requirements of yourproject were suitably met within the scope of your project’s time, cost, and quality commit-ments.

LESSON 10



1. How will you make sure that you are specifying adequate detail when requesting sellerresponses?

2. How do you think it will help you to assign a numerical weighting factor to the evalua-tion criteria when you are trying to make critical choices about selecting sellers?

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NOTES


Monitoring and ControllingProject Work

In this lesson, you will monitor and control project work.

You will:

• Identify best practices for the monitor and control project work process.

• Develop an integrated change control system.

• Utilize the integrated change control system.

• Review deliverables and work results.

• Control the project scope.


LESSON 11

Lesson 11: Monitoring and Controlling Project Work 381


IntroductionYou have begun executing your project. As the project work accelerates, your focus willadvance from execution to monitoring and controlling project work, which is a key element inyour overall goal of controlling the project cost and schedule. In this lesson, you will focus onthe monitoring and controlling process group, the fourth of five project management processgroups.

Effective project monitoring and controlling is essential to successful project completion. Itallows you to monitor trends that may affect process improvements and it positions you toensure that the project will meet expectations. It is also critical to monitor work results so thatyou can effectively communicate both good and bad information to project stakeholders.

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LESSON 11



TOPIC AIdentify the Monitor and ControlProject Work ProcessWith your project execution well on its way, you need to control changes to the project’s per-formance baseline so that you can best ensure that it meets expectations for schedule and cost.Change control and several other tasks are part of the monitor and control project work pro-cess. In this topic, you will identify best practices for the monitor and control project workprocess.

As a project manager, it is your responsibility to deliver your project on time, on budget, andto the required specifications. By monitoring and controlling the project work, you will be bet-ter positioned to ensure that your project meets stakeholders’ expectations for time, cost, andquality performance and maintain an efficient and effective flow of work throughout the projectlife cycle.

The Monitor and Control Project Work ProcessThe monitor and control project work process involves tracking, reviewing, and regulating theproject processes to meet the project’s performance objectives. Monitoring includes collecting,measuring, and distributing performance information, as well as reviewing trends to make pro-cess improvements. Controlling involves identifying corrective or preventive actions orreplanning and tracking the execution of action plans. When executed regularly, the monitorand control project work process gives the project management team a closer look at thestrengths of the project and identifies weaknesses. Monitoring and controlling occurs through-out the project from inception to closeout.

Figure 11-2: The monitor and control project work process.

The monitor and control project work process is not one specific task; it is an overarching process that is ongo-ing, cyclical, interactive, and interlocking. It involves ongoing work throughout the life cycle of the project.

Change CategoriesProject changes can be classified into three broad categories.

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Category DescriptionCorrective action Documented direction on actions that must be carried out to

help bring the future project performance requirements back ontrack and conform with the current project management plan.

Preventive action Documented direction on actions that must be implemented todiminish the effects of any negative risks.

Defect repair Formally documented measures that must be undertaken toaddress the defects in the project components, which are recom-mended either to be repaired or replaced.

Monitor and Control Project Work InputsMonitoring and controlling project work uses several inputs.

Input DescriptionProject management plan Contains all subsidiary management plans and baselines that must be

considered when performing the monitor and control project work pro-cess and describes each step of the project, including the way it isexecuted, monitored, and closed.

Performance reports Provide key information such as current project status, significantaccomplishments for the given period, scheduled activities (activitiescompleted vs. those that should have been completed), issues, and fore-casts.


Include governmental or industry standards, stakeholder risk tolerances,and project management information systems.

Organizational process assets Include organizational communication requirements, financial controlprocedures such as reporting time and accounting codes, and lessonslearned databases.

Monitor and Control Project Work Tools andTechniquesExpert judgment is the only tool and technique a project manager can use to monitor and con-trol project work.

Tools and Techniques DescriptionExpert judgment Used by the project management team to understand the data obtained

from the monitor and control processes. Based on the interpretation,the project manager and the project team identify the necessary actionsto make sure that the project performance is aligned with the projectexpectations.

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Monitor and Control Project Work OutputsMonitoring and controlling project work results in several outputs.

Output DescriptionChange requests Issued as a result of comparison between actual and planned

results. Change request may result in modifying project scope,policies, procedures, cost and budgets, or a rework of projectschedules. Documents such as the project management plan andproduct deliverables may also be impacted by change requests.

Project management plan updates Include the project management plan components such as theschedule management plan, cost management plan, quality man-agement plan, and scope, schedule, and cost performancebaselines.

Project document updates Include forecasts, performance reports, and issue log.

Monitor and Control Project Work Process BestPracticesDuring the monitor and control project work process, the project manager tracks, reviews, andregulates the project processes to meet the project’s performance objectives. Effective monitor-ing ensures that necessary preventative actions are taken in order to control projectperformance.

Guidelines:To effectively monitor and control project work, follow these guidelines:

• Compare and evaluate project performance with the project plan. If necessary,recommend actions.

• Analyze, track, and monitor risks to make sure they are being recognized andreported, and that response plans are being executed.

• Maintain accurate information about the project as it unfolds.

• Maintain the integrity of baselines ensuring that only approved changes are incor-porated.

• Provide information to support status reporting, progress, and forecasting.

• Provide forecasts to update recent cost and schedule information.

• Monitor the execution of approved changes when they occur.

Example: Monitoring and Controlling Project Work in a Software DevelopmentProject

Mike is the project manager for the tax preparation software development project. Theproject is multi-phased and is in its second phase. Mike’s programmers have beenmeeting schedule deadlines and showing good time management skills. However, thedocumentation department that creates user manuals and help systems works veryslowly and is making mistakes. Assessment of reviewer feedback confirmed theseobservations.

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Mike realizes this is a risk for the project. If the deliverables are wrong, he will losehis customer. He decides the documentation department needs a bit more monitoring.In the company’s procedures for documentation, it clearly states that the preliminarysoftware documentation must be created within three days of development of eachdeliverable from the software department. Mike has created a database where thedeliverable turnaround time is recorded. After looking through information on past per-formance, Mike sees that the accuracy of deliverables was 10 percent better than whatit is now. Mike believes that with this newly implemented database, the performanceand quality will continue to improve.

ACTIVITY 11-1Monitoring and Controlling Project Work

Scenario:The OGC PM Training Roll-Out project has been running smoothly, thanks in large part to theefforts of the instructional designer, Sarah. She has been instrumental in getting all teams towork together to meet their tight deadlines. During a crucial phase in the project, Sarah fallsill. A less experienced designer, Kevin, is brought in to replace her. For this project, it is moreimportant to maintain the schedule than to maintain the cost baseline.

1. What can you do, as the project manager, to mitigate the negative effects of a staffingchange?

a) Put the project on hold until Sarah returns from sick leave.

b) Rebuild the schedule to include additional time for Kevin to complete his tasks.

c) Closely monitor Kevin’s work to assess any possible risk.

d) Discuss with the team the impending change and that the team can expect to gothrough the team development stages again.

2. Kevin missed an important deadline. What action can you take to help Kevin get backon schedule?

3. After he has been given extra help, Kevin manages to meet his next important dead-line. What should be your next action as project manager?

a) Keep a private log for your own reference, detailing changes that have been made tothe project.

b) Update recent cost and schedule changes that have resulted from recent changes.

c) Ask Kevin to closely monitor changes to the project’s cost and schedule.

d) Ask Kevin to let you know if he has any further problems as the project progresses.

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TOPIC BDevelop an Integrated ChangeControl SystemNow that you have identified the best practices for monitoring and controlling project work,you understand the important steps you must take towards making sure that your project isconducted with the appropriate internal integrity and oversight. You will further this goal bydeveloping an integrated change control system, which formally governs significant changes tothe project work, schedule baseline, and budget. In this topic, you will develop an integratedchange control system.

You want to make sure that none of the customers, stakeholders, or members of the projectmanagement team are surprised by delays to your schedule or significant cost overruns. Bydeveloping an integrated change control system for your project, documenting its parameters,and adhering to its guidelines, you can reduce the risk to your project and maintain its positiveforward movement.

Integrated Change ControlIntegrated change control is the process of identifying, documenting, approving or rejecting,and controlling any changes to the project baselines. Integrated change control reduces risk toyour project by governing the execution of proposed changes that will affect schedule and costor any other objectives of the project. It allows project managers to record the changes that arerequested, make sure that changes are implemented in a standardized and approved manner,minimize their disruptive effect, and monitor their progression from initial request throughcompletion.

Change Control SystemsDefinition:

A change control system is a collection of formal, documented procedures for changingofficial project documents; it specifies how project deliverables will be controlled,changed, and approved. An effective change control system includes the forms, track-ing methods, processes, and approval levels required for authorizing or rejectingrequested changes. Change control systems often specify that a Change Control Board(CCB) will address the issues that affect cost, time, and product quality.

Example: Change Control System for an Internal ProjectA project manager for an internal project documented the project change control sys-tem. It required that any changes affecting the original scope, cost, or schedulebaselines be submitted with a standardized change request form, including a descrip-tion of the change being requested, its relative priority, and the reason behind it. Theinternal Change Control Board (CCB) would evaluate each proposed change requestfor potential risks and benefits and make a decision whether to approve or reject thechange.

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Change Control Boards (CCB)A Change Control Board (CCB) is an internal unit or department charged with notonly monitoring, controlling, coordinating, and implementing changes to all elementsof project work, but also with accepting or rejecting changes that have been requestedby customers. Normally, the CCB operates closely with the project’s sponsor, custom-ers, and other key stakeholders. The responsibilities of the CCB will have beendelineated, documented, and agreed to by the stakeholders, customers, and projectteam. Decisions made during the change control board meetings are documented andcommunicated to the required stakeholders. Stakeholders can use this information tofollow-up on the necessary actions.

Causes of Project ChangesPerformance variation is an inevitable component of project work, and can be caused by anyof several common factors.

Cause DescriptionInaccurate initial estimates There are many reasons why initial time and cost estimates for com-

pleting the project work prove to be inaccurate. These reasons mayrange from lack of experience, lack of information, or precedence toinaccurate data, excessive optimism, technological difficulties, andunreliable resources. Getting those original estimates to be as realisticand accurate as possible makes the control process more manageable.

Specification changes Project work can open up new avenues of development and design thatwere not considered during the initial planning of the project work andscope. As new options for a product or service become apparent, cus-tomers, sponsors, or the project manager may broaden the project’sscope to include new specifications and deliverables.

New regulations As project work is progressing, new governmental or industry-specificregulations may be enacted. This can be especially true for verylengthy projects. If the new regulations are related to the ongoingprojects, project change becomes necessary. Accommodating new regu-lations or legislation can also mean revisiting the planning process todetermine the effect the new regulations will have on resource needs,schedule durations, and quality specifications.

Missed requirements Many times the requirements are understood by reviewing the docu-mentation, and interviewing the end users and policy makers. However,there are times when complete and comprehensive understanding maynot be possible.The interviewer feels that he/she has understood the point. And theinterviewee feels that he has expressed all that matters. Although aRequirements Traceability Matrix (RTM) is prepared, the same confu-sion might arise in a written document. Prototyping is used where ademonstration of functional and/or technical requirements is done.Although all these techniques reduce the chances of missing anyrequirements, it cannot guarantee that every requirement is captured.There are always some slippages that surface at different phases in theproject.

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Configuration ManagementDefinition:

Configuration management is a tool used to manage changes to a product or servicebeing produced. These can include changes of a technical nature, and changes inadministrative direction. Configuration management is used to:

• Control product iterations.

• Ensure that product specifications are current.

• Control the steps for reviewing and approving product prototypes, testing stan-dards, and drawings or blueprints.

When dealing with government contracts or other large systems, a configuration management systemis often required.

Example: Implementing Configuration Management to Control ChangeRequests

An art director implemented a configuration management system specifically for con-trolling change requests to the images and animations in customers’ advertisements.She created a database to track the project images. When a customer identified a needfor an image or animation, the team created a new entry in the database; each entryincluded the name and size of the image along with a detailed description of the ad.Using this configuration management system, the art director could easily check thedatabase for new entries, assign the change requests to team members, and track themthrough the approval process.

Configuration Management SystemsA configuration management system is a tool that contains procedures that help pro-vide technical and administrative guidance for identifying and recording thecharacteristics of a product or service; controlling changes made to the characteristics;documenting the changes and the status of implementation; and verifying the product’sconformance to the requirements. One of the subsystems of the configuration manage-ment system is the change control system.

Configuration management systems, when combined with the integrated change con-trol, provide standardized and effective ways of managing approved changes andbaselines within a project. Configuration control involves specifying the deliverablesand processes, while change control involves identifying, recording, and supervisingchanges to project baselines.

Process Control StructuresDefinition:

A process control structure is the formal organization of the modifications made todeliverables that are controlled by configuration management. The process controlstructure defines how modifications will be reviewed, documented, delivered, commu-nicated, and revised. The process control structure establishes standardization withinthe project team, as it forces everyone working on modifications to adhere to the sameconformance standards.

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Example: Process Control Structure for Modifying Software DesignA team of software engineers working on a new product would all conform to thesame process control structure when implementing modifications to the softwaredesign. They would have a formalized system in place for reviewing proposed modifi-cations to the product, controlling product iterations, and carrying out testing andreview cycles. Without a process control structure, the software engineers would beslowed down by the confusion and unnecessary rework of trying to keep track of vari-ous modifications and revisions made to the product.

How to Develop an Integrated Change ControlSystemYour goal in developing an integrated change control process should be, in part, to ensure thatthe project management team and the stakeholders are not surprised by schedule delays or costoverruns. By developing a change control process, documenting its parameters, and adhering toits guidelines, you can reduce the risk to your project and maintain its momentum.

Guidelines:To develop an integrated change control process, follow these guidelines:

• There may already be an approved integrated change control process in commonusage within your organization, in which case it is your responsibility to imple-ment it for your project in accordance with all relevant company procedures andrequirements.

• If there is not an integrated change control process in use at your organization, itis your responsibility to develop one for your project. Gather any relevant histori-cal data within the organization that relates to the process of identifying,documenting, approving or rejecting, and controlling changes to the projectbaselines.

• Identify what will be considered a change that is significant enough to requiremanagement approval. For the sake of maintaining forward momentum on projectwork, project managers will not bring minor changes to schedule and to cost esti-mates to upper management for approval. Make sure that the organizationalexpectations regarding change control have been clearly defined and documented.How much latitude does the team have in making autonomous decisions aboutchanges? At what point should you bring a change request to the project manage-ment team?

• In conversation with stakeholders and the project management team, identify theseresponsible parties:

— The people who are able to initiate change requests. These may includestakeholders, project management team members, and customers, among oth-ers.

— The parties who are authorized to give or withhold business approval to arequest for a change. Who will make the decision about whether or not achange is necessary and appropriate?

— Who has the authority to approve additional funding, overtime costs, andpurchase orders?

— The parties who will be responsible for executing the work necessary to sat-isfy the requested change, as well as evaluating the work for qualityassurance.

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— The person(s) who will be responsible for managing changes. In some orga-nizations, this may be the project manager, but in other organizations, it maybe one or more functional managers.

— The parties who are responsible for prioritizing changes and making qualita-tive decisions about them. Is this change imperative to the success of theproject, or merely nice to have if time and resources allow?

• Identify how change requests must be approved. Some organizations might requirewritten approval from customers before changes to the scope, schedule baseline,and budget can be implemented.

Example: Developing an Integrated Change Control System in an IndependentCompany

A project manager at a small, independent company will be responsible for followingthe organization’s guidelines regarding change control. He will first need to determineif there is a formal change control process in place; if there is not, he will take on theresponsibility of developing one for his project. He will begin by gathering all relevantinformation and documentation, and will identify the changes that require managementapproval.

He will proceed to identify who the key players are within the management team whoneed to approve or initiate change requests. This will be very important when it comesto asking for additional funding for the project or deadlines extensions. He will iden-tify who will manage changes and give authorization for expenditures. He will alsoneed to document who needs to give consent to change requests, and whether the con-sent of customers is required.

DISCOVERY ACTIVITY 11-2Developing an Integrated Change Control System

Scenario:The OGC’s PM Training Roll-Out project has a very tight deadline, as well as a strict budget.You are concerned that any possible changes could negatively affect project performancebaselines. You need to ensure that there is a standardized method for handling changes toproject work.

1. Who will you involve in the change control process for the PM Training Roll-Out projectand what is their role in the change control process?

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2. The IT department informs you that the project software upgrade will have a signifi-cant delay in delivery. In the risk register, you accounted for a delay due to thesoftware upgrade, but this delay is much longer than originally anticipated. Whataction should you take first?

a) Coordinate changes across knowledge areas.

b) Document the change request in a change control system.

c) Update the project plan to reflect changes.

d) Bring the information to the stakeholders for evaluation and approval.

e) Identify corrective action to take to resolve the problem.

3. The procurement manager contacted the software vendor and was able to secure abeta version of the project software. The beta version may have some minor bugs, butit will be available in time for the training. Based on your change control process, whatfurther action, if any, should you take?

TOPIC CUtilize the Integrated Change ControlSystemBy managing changes to performance baselines, you will be able to ensure that your projectstays on course. This is a key element in the overarching process of monitoring and controllingproject work. In this topic, you will manage changes through the integrated change controlsystem.

A great project manager is an effective manager of change, able to anticipate, respond to, anddeal with the changes that will inevitably arise on any project. As you further your develop-ment as a professional project manager, you want to be able to master this key area of yourpractice by utilizing the change control process. This is the best way to take control of changesthat arise and minimize their disruptive effect on your project’s bottom line.

The Perform Integrated Change Control ProcessThe perform integrated change control process is the formal method of governing and organiz-ing the manner in which changes will be requested, reviewed, approved or rejected,implemented, controlled, and coordinated. Its goal is to make sure that changes to the project’sbaselines are managed with the least amount of disruption to important project parameters suchas cost, time, and quality.

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All change requests must be recorded in the change management or configuration managementsystem. Change requests follow the processes specified in the configuration management sys-tem. These processes may need information about the estimated time and cost impacts forimplementing the changes. The change control process also ensures that the appropriate partiessuch as stakeholders, project team members, and/or customers are aware of and approve ofchanges to the project that will affect time, cost, and quality.

Figure 11-3: The perform integrated change control process

Example: Performing Integrated Change Control on a Website Redesign ProjectA project manager is assigned to work on a website redesign project. The site has beendeveloped and the project team has presented the draft site to the company’s manage-ment team for feedback and approval. One team member suggests that the site’sfunctionality should be extended to include tools for the sales team. In accordance withthe company’s integrated change control process, the project manager completes thedocumentation for the change control board, including the cost, impact to currentschedule, and change in the scope. After reviewing his documentation, the change con-trol board agrees that added functionality would be valuable. The customers and otherstakeholders are notified about this change and it is recorded in the change manage-ment system.

Perform Integrated Change Control InputsThe perform integrated change control process requires several inputs.

Input DescriptionProject management plan Describes each step of the project including the way it is

executed, monitored, and closed.

Work performance information Periodically collected information about project activities beingperformed to accomplish the project work.

Change requests Include corrective actions, preventive actions, and defect repairs.This may result in modifying project scope, policies, procedures,cost, and budgets, or a rework of project schedules. Correctiveand preventive actions do not generally affect the projectbaselines, but the performance against baselines.

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Input DescriptionEnterprise environmental factors Include project management information systems that can influ-

ence the integrated change control process. The PMIS includesautomated tools such as scheduling software tools or informationcollection and distribution system.

Organizational process assets Include process assets such as:

• Change control procedures, which will also include steps usedto modify official company standards, policies, and plans andto approve, validate, and implement changes.

• Procedures used to approve and issue change authorizations.

• Process measurement databases used to collect and createmeasurement data on products and processes.

• Project files such as scope, cost, schedule, and performancemeasurement baselines.

• A configuration management knowledge base that containsthe versions of all documents such as the official standardsand procedures of the company.

Perform Integrated Change Control Tools andTechniquesThere are two tools and techniques a project manager can use to integrate change control.

Tools and Techniques DescriptionExpert judgment People with skills to manage and support the technical and manage-

ment details of all requested changes in the project can be asked to siton the change control board. People who can provide expert judgmentinclude consultants, customers, sponsors, subject matter experts, PMO,and industry groups.

Change control meetings Meetings held by the change control board to review and approvechanges. All decisions made during the change control board meetingsare communicated to the stakeholders.

Perform Integrated Change Control OutputsThe perform integrated change control outputs are the change request status updates, projectmanagement plan updates, and project document updates.

Output DescriptionChange request status updates Status of all change requests (approved or unapproved) should

be updated in the change request log when updating the processdocuments.

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Output DescriptionProject management plan updates Any actions needed to define, integrate, and coordinate all sub

plans into a project management plan. Documents that may beupdated during the process include subsidiary management plansand baselines that have been changed as a result of the changecontrol process. Changes made to the baselines should not affectthe past performance data.

Project document updates Documents such as change request logs and other documentsthat are affected by the change control process may be updatedduring the perform integrated change control process.

Change Management AdvantagesEffective change management presents several advantages to project managers, including:

• Faster response time.

• Maximum traceability of changes.

• Increased team awareness of change needs.

• Increased engagement of team and stakeholders, internally and externally.

• Fuller team support for change requirements.

• An organizational framework for moving forward effectively.

Formal Acceptance of Project WorkFormal acceptance of project work is the process for securing approval for completing theremainder of the project work. It requires change requests to be documented and analyzed fortheir impact on other aspects of project work including time, cost, quality, and risk. It includesa receipt, or documented acknowledgment, that the terms of the contract have been satisfied. Italso validates that the acceptance criteria will still be satisfied as a consequence of this change.

How to Utilize the Integrated Change ControlSystemManaging changes to performance baselines ensures that the original project scope and theintegrity of performance baselines are maintained. Ensuring that changes are agreed upon andcontinuously managing changes as they occur minimizes the impact changes may have onproject time, cost, and quality concerns.

Guidelines:To effectively utilize the change control process for managing changes in the projectperformance baselines, follow these guidelines:

• Make sure your change control system is cost-effective. It should not cost moremoney to implement than it saves through controlling.

• Establish or make use of an existing CCB composed of project stakeholders toevaluate change requests.

• Document the effect the changes have on the project performance baseline.

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• Obtain approval from the appropriate parties for all change requests before imple-menting the change.

• Use configuration management to document and control changes to original prod-uct characteristics.

• Coordinate changes across knowledge areas as appropriate. For example, does aproposed schedule change affect cost, risk, quality, and/or staffing?

• Use performance reports to measure project performance and assess whether planvariances require corrective action. Make sure performance reports are timely andaccurate to increase the effectiveness of control decisions.

• Identify corrective action necessary to bring expected performance in line with theproject plan.

— Determine the source and severity of the problem.

— Review the project plan and objectives.

— Consider factors inside and outside the project that may influence correctiveaction decisions.

— Identify alternative options available.

— Choose from among the alternatives by evaluating the impact of each alterna-tive on cost, schedule, and quality.

• Update the project plan to reflect changes made that affect performance baselines.

• Document the causes of variances, the steps taken to correct performance prob-lems, and the rationale behind the decision-making process to avoid similarproblems on future projects.

Example: Change Control Process for an Elementary School-Age ReadingProject

As the project team for an elementary school-age reading program moves through theexecution phase, Ben, the project manager, monitors progress by reviewing perfor-mance reports and evaluating any variances to the original scope definition andperformance baselines. When variances are identified, the project management teamexamines the causes and determines the corrective action necessary to bring future per-formance in line with the project plan. They diligently document the lessons learnedfor the benefit of future projects.

As change requests are generated, both Ben and the project’s CCB review and evaluatetheir impact on performance baselines as outlined in the change control system. Whenchanges are made that affect performance baselines, Ben updates the project plan toreflect the changes. Using configuration management methods such as the image track-ing database, all changes to the original characteristics of the course are controlled andtracked. The project team’s efforts enable them to effectively maintain the original per-formance baselines and scope definition and keep the project on track.

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DISCOVERY ACTIVITY 11-3Utilizing the Change Control Process

Scenario:Working with the senior executives at OGC and with the PMO, a formal change control pro-cess has been put in place for all OGC Business Transformation projects as well as a changecontrol board, which includes the Business Transformation program manager, the PMO direc-tor, and the CCB administrator. You are reviewing the formalized CCB process andsummarizing the following for your team:

When a change in the project appears to be necessary or desirable, the initiator of a changecompletes a Change Request form, attaches any supporting material, and submits it to the per-son responsible for change management in the project (it could be the program/projectmanager) for review and concurrence. The program/project manager (or whoever responsible)reviews or ensures that the change request is reviewed by the people/bodies responsible forreviewing the request for validity, completeness, and accuracy, and forwards the request to thedirector. The director reviews and disposes of the request in one of the following ways:

• Reject: Indicates disagreement with the proposed change on the request form; it isrejected and returned to the program manager.

• Concur: Indicates agreement with the proposed change on the request form; it isreturned to the program manager for submission to the CCB administrator to setup a meeting.

• Approve: Recommends approval without a meeting of the CCB. Notes the reasonfor, and any conditions of, approval on the decision page of the Change Requestform and forwards it to the CCB administrator.

The PMO, upon receipt of change request decisions, records the information in a database totrack all change request patterns.

1. The internal team responsible for assembling documentation for the training vendorcannot meet their contracted deliverable of March 25. What actions should you take?

a) Identify required corrective action to resolve the problem.

b) Update the project plan to reflect these changes.

c) Recommend corrective actions to the CCB.

d) Use configuration management to document and control changes to the original ven-dor contract.

2. What are the tasks that you should consider when determining appropriate correctiveactions?

a) Record how corrective actions should be tracked.

b) Identify alternative options available.

c) Determine the source of the problem and its severity.

d) Review the project plan and objectives.

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3. OGC’s change control process states, “The PMO, upon receipt of change request deci-sions, records the information in a database to track all change request patterns.”What benefits do you see in tracking change request patterns?

TOPIC DReview Deliverables and WorkResultsYour project team has produced deliverables and work results. Before you can gain formalacceptance of deliverables from your stakeholders, you need to verify that they meet projectrequirements and stakeholders’ expectations. In this topic, you’ll review deliverables and workresults.

As the project manager, it is your responsibility to prove to stakeholders that you are deliver-ing what you agreed to deliver. While this may sound simple, it is often overlooked byinexperienced project managers. The last thing that you would want to happen on your projectis your stakeholders finding errors or omissions that you should have found and corrected byreviewing the deliverables and work results. Therefore, it is important for you to provide aproper review to ensure quality project results, as well as stakeholder satisfaction.

The Verify Scope ProcessVerify scope is the process of demonstrating to stakeholders that they have received what theyhave been promised in a given deliverable and formalizing their acceptance. The verify scopeprocess usually involves reviewing the deliverables with the project customer or sponsor toensure that they are satisfied with the final deliverable and securing their formal acceptance forthe completeness of the deliverable. Scope verification is generally done after quality control toensure that only the correct deliverables are validated for completeness based on criteria asdescribed in the official project plans and product documentation.

Figure 11-4: The verify scope process.

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Verify Scope InputsSeveral inputs are used for scope verification.

Input DescriptionProject management plan Contains the project scope baseline of all planning processes. The

scope baseline components include the project scope statement, WBS,and WBS dictionary.

Requirements documentation Lists the project, product, technical, and other project requirementsand their acceptance criteria.

Requirements traceability matrix Links the identified requirements with their source and helps trackthem throughout the project. This also helps ensure that all approvedrequirements are delivered at the end of the project.

Validated deliverables Deliverables that are completed and validated for correctness by theperform quality control process.

Verify Scope Tools and TechniquesOnly one tool and technique is used to verify project scope.

Tools and Techniques DescriptionInspection Used for scope verification. Inspection refers to measuring, examining, and

verifying to be sure that work and deliverables meet requirements and accep-tance criteria. It is sometimes referred to as reviews, product reviews, audits,or walkthroughs. These terms have specific meanings in some applicationareas.

Verify Scope OutputsThere are several outputs from scope verification.

Output DescriptionAccepted deliverables The verify scope process keeps track of all deliverables that are

completed, accepted, and formally signed-off. The deliverables thathave been formally signed-off or acknowledged by the sponsors orcustomers are moved to the close phase or project process.

Change requests Any deliverable that has not been accepted formally is documentedalong with the reasons for rejection. These deliverables may undergochange requests for defect repairs. Change requests can be developedfor review through the perform integrated change control process.

Project document updates Documents that define the product or report status on projectcompletion may need to be updated as a result of project scope veri-fication.

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InspectionsDefinition:

An inspection is an official examination of work results to verify that requirements aremet. It is sometimes referred to as a review, product review, audit, or walkthrough. Theinspection may be conducted by an internal or external inspection team. During scopeverification, an inspection typically involves:

• Comparing the baseline specifications and any approved changes to the actualproject results.

• Determining the likelihood that remaining deliverables will be completed as prom-ised.

• Identifying actions that may be needed to ensure that the work results will meetspecifications, scope, or schedule and budget goals.

Example: Inspecting an Educational ToyAn inspector was asked to examine a new children’s educational toy to determinewhether its design requirements had been met. His inspection revealed that the instruc-tion booklets accompanying the toy had not been adequately translated into alllanguages; some children and their parents were not able to decipher the instructions.The inspector recommended that the instruction booklets needed to be improved beforethe work requirements could be considered fulfilled.

InspectorsIn some cases, your team will be asked to conduct the inspection. In other cases,stakeholders may decide to ask an outside entity to either conduct the inspection, or toparticipate with you in conducting it.

Inspection Report ComponentsInspection reports are necessary and contain several components.

Component DescriptionProject baseline and statuscomparison

This is the comparison of the baseline specifications, schedules, andbudgets to the actual project results for the project phase or deliver-able.

Overall project status This is a discussion of whether the project as a whole is on track, orwhether it is likely to deviate in some way from the project plans.

Change recommendations Based on the inspection result, you may want to recommend changesthat will be needed in order to meet specifications, scope, or scheduleand budget goals.

Scope and methodology of theinspection

This section should explain what the audit attempted to prove, how itwent about proving it, what measurements were used to determineconformance to requirements, and what assumptions or limitationsinfluenced the way that data was collected.

Some application areas and organizations have specific expectations for scope verification inspections and willprobably have documented guidelines and procedures for preparing and conducting them.

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How to Review Deliverables and Work ResultsProcedure Reference: Review Deliverables and Work Results

To ensure that deliverables are complete:

1. Prepare for a scope verification inspection.

a. Establish the scope and boundaries of the inspection.

b. Establish and/or approve measurements to be used in the inspection.

c. Establish and/or approve the methodology of the inspection, including amethodology for double-checking data or measurements.

d. Gather all relevant scope documentation (for example, WBS, scope state-ment, and requirements documentation).

e. Communicate with all team members in advance so they can prepare for theinspection in a timely fashion.

2. Conduct an inspection to review deliverables and work results to ensure satisfac-tory completeness.

3. Prepare an inspection report.

4. Provide the inspection report to key stakeholders to obtain complete or conditionalformal acceptance of the deliverables and work results.

5. Distribute formal acceptance documentation to project stakeholders according tothe communications management plan. If the project is terminated early, documentthe level and extent of deliverables completed and distribute the documentation toproject stakeholders.

DISCOVERY ACTIVITY 11-4Reviewing Deliverables and Work Results

Scenario:You have just received the draft assessments from the training provider. You need to verify thatthey meet project requirements and stakeholders’ expectations.

1. Your team has been designing a plan that calls for testing and verification of theassessment questions. The team has determined the criteria for acceptability for eachassessment question. What should be your next step in the inspection process?

a) Establish the scope of the review.

b) Determine the methodology of the review.

c) Conduct the review.

d) Prepare a review report for stakeholders.

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2. Your team has decided to use a checklist and job aid in combination for the assess-ment review. Before beginning the actual review, what else would you consider doing?

3. The draft assessments have passed the inspection. What should be included in yourreview report, and why?

4. You receive formal approval for the assessments. How will you inform stakeholders?

TOPIC EControl the Project ScopeYou defined your project’s scope and developed a WBS as part of your project planning effort.Now that the project work is moving forward, you need to control changes to project scopeusing the control scope inputs and tools. In this topic, you’ll examine the control scope processand control the scope of the project.

Because it is the nature of business to get the most products for the lowest price, customerswill sometimes push the edge of the project scope beyond its limits. Since changes to projectscope almost always impact performance baselines, you want to be able to control the projectscope. Controlling project scope changes helps you minimize the impact to project time, cost,and quality commitments.

The Control Scope ProcessControl scope is the process of monitoring project scope and holding changes to the projectscope baseline in check by:

• Evaluating change requests to determine the need and impact of the change to projectobjectives.

• Making sure changes are agreed upon.

• Managing the actual changes to ensure that they are implemented correctly and that theyare effective.

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Scope change control must be integrated with the other controlling processes to prevent unau-thorized changes that result in scope creep.

Figure 11-5: The control scope process.

Control Scope InputsSeveral inputs are used to control project scope.

Input DescriptionProject management plan Includes several components such as:

• Scope baseline: Used in determining if a change or if a correc-tive or preventive action is required by comparing the scopebaseline with the actual results.

• Scope management plan: Includes guidelines for managing andcontrolling the project scope. The project management team fol-lows these guidelines when controlling the project scope.

• Change management plan: Details the process of change man-agement.

• Configuration management plan: Provides information on ele-ments that can be configured, those that need to undergo formalchange control, and the process of controlling such changes.

• Requirements management plan: Provides information abouthow requirements activities should be planned, tracked, andreported and how changes to the product requirements must beinitiated.

Work performance information Periodically collected information about project activities that arebeing performed to accomplish the project work.

Requirements documentation Documents how each project requirement meets the overall busi-ness need of the project. Requirements documentation componentsinclude the project’s business needs, functional requirements suchas business processes and information, and non-functional require-ments such as performance, safety, and supportability.

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Input DescriptionRequirements traceability matrix Links project requirements to the business and project objectives

and ensures that the requirements add business value to the project.It also helps track requirements throughout the project life cycleand ensures that the approved requirements are delivered when theproject ends.

Organizational process assets Includes existing formal and informal policies, procedures, andguidelines that are related to scope control and the necessary moni-toring and reporting methods.

Control Scope Tools and TechniquesThere is only one tool and technique used for controlling project scope.

Tools and Techniques DescriptionVariance analysis The analysis of variance from the original scope baseline or the quan-

tification of departure from expected results. Scope control includesdetermining the cause of variance relative to the baseline, and decid-ing if corrective or preventive action is necessary.

Control Scope OutputsSeveral outputs result from scope control.

Output DescriptionWork performance measurements Include measuring the variance between the planned and

actual, technical or other scope performance measurements.The results are documented and communicated to theproject stakeholders.

Organizational process assets updates Any causes of variances, reasons for corrective actions, andany other types of lessons learned from project scope con-trol are documented in the organizational process assetsdatabase.

Change requests Project scope performance analysis may cause changes suchas defect repairs or preventive or corrective actions, whichare then processed for review and disposition in compliancewith the integrated change control process.

Project management plan updates If any change requests impact the project scope or projectbaselines, then the project scope, the scope statement, theWBS, the WBS dictionary, and any corresponding costbaseline and schedule baselines of the project managementplan need to be updated and reissued to accommodate theapproved changes.

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Output DescriptionProject document updates Project documents such as requirements documentation and

the requirements traceability matrix may need to be updatedwhen controlling project scope.

How to Control the Project ScopeContinually monitoring and controlling changes to the project scope enables you to maintainthe original project scope definition. In addition, controlling project scope changes ensures thatcost, schedule, and quality performance baselines are maintained.

Guidelines:To effectively control project scope, follow these guidelines:

• Develop and implement a scope change control system. Make sure that your sys-tem:

— Is integrated with the project’s integrated change control system.

— Includes the paperwork, tracking systems, and approval levels necessary forauthorizing scope changes.

— Complies with any relevant contractual provisions when the project is doneunder contract.

— Complies with the guidelines specified in the scope management plan.

• Evaluate change requests by asking questions:

— What is the magnitude of the change when compared to the scope statementand WBS?

— What is the impact of the change on project cost, schedule, and qualityobjectives?

— What are the potential risks and benefits of the change?

• Identify and document corrective action to take to bring expected future projectperformance in line with planned performance.

• Make sure that formal agreements are reached and new specifications detailedwhen project scope is expanded to include either additional work that is clearlyoutside the original scope, or else additional work that is required as a result ofscope boundary clarifications.

• Depending upon the nature of the change, you may need to revise the cost, sched-ule, or quality performance baselines to reflect the changes and to form a newbaseline against which future performance can be measured. Notify project stake-holders of any changes made to project baselines.

• Use performance measurement techniques to monitor the changes.

— Are the changes being properly implemented?

— Do the changes bring about the desired results?

— Are new risks being introduced as a result of implementing the changes? Itwould be very unusual for additional risks to not appear or for the nature ofexisting risks to not change significantly. Structuring a risk review after anychange in scope is considered prudent practice.

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• Document lessons learned during scope change control for use on future projects.The documentation should include:

— Causes of variances.

— Performance baselines affected by the changes.

— Rationale behind the recommended corrective action.

— Any other lessons learned during scope change control.

Example: Controlling the Project Scope in a Website Designing ProjectTwo months into the production of a website designed to increase Americanpreschoolers’ readiness for kindergarten, the project team received a formal changerequest submitted through the change control system by one of the team members, anexpert in early childhood education. The change request proposed making changes tothe site’s functionality that were categorized as a high priority. Before approving thechange request, the CCB asked the team to analyze the change to the schedule, budget,and resources as well as the potential risks and benefits.

The multimedia lead explained that the requested change would require an interfacedesign modification; he estimated that it could be done with current resources and nosignificant impact on the schedule. The technical lead agreed the change could beimplemented easily and would not require additional resources since the heavy pro-gramming for the course would not start for another month. Both leads felt that therisk to the project was extremely minimal when compared to the potential benefitsdescribed in the change request.

Given this information, the CCB approved the change request and documented thedecision. The project manager updated the scope statement and the WBS. In addition,the project manager documented the decision and monitored the implementation of thechange carefully to ensure that it was properly implemented and that no new riskswere introduced.

DISCOVERY ACTIVITY 11-5Controlling Project Scope

Scenario:The OGC’s new PMO director has spent several weeks reviewing the business transformationproject. Due to the complexity of such a large company-wide initiative, the director hasreceived authorization for all project managers to attend a one week comprehensive projectmanagement workshop. This workshop is to be incorporated into the PM Training Roll-Outproject. While the departure of Vicky Morris and possible organizational changes wereincluded in the risk management plan, no cost or schedule contingency was allocated for sucha change to the project scope.

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1. You have various inputs available to manage a scope change, such as the one in thescenario. Match the input with its description.

Configuration manage-ment plan

a. Periodically collected informationabout project activities that are beingperformed to accomplish the projectwork.

Work performance infor-mation

b. Provides information on elements thatcan be configured, those that undergoformal change control, and the pro-cess of controlling such changes.

Requirements documenta-tion

c. Links project requirements to thebusiness and project objectives andensures that the requirements addbusiness value to the project.

Requirements traceabilitymatrix

d. Documents how each project require-ment meets the overall business needof the project.

2. A scope change request recommending additional test documentation has been submit-ted to the CCB for analysis. This change might impact the project finish date. Whatshould be done first with this request?

a) Evaluate the request.

b) Ensure that new specifications are detailed.

c) Monitor changes.

d) Identify corrective action to take.

3. The CCB informs you that the additional costs for the workshop will be adjusted in theproject budget. However, the project finish date must remain the same. As the projectmanager, what could you do to ensure that the project finishes on time?

Lesson 11 Follow-upIn this lesson, you monitored and controlled project work. Monitoring and controlling theproject is the only way that you can ensure that your project will meet stakeholders’ expecta-tions for time, cost, and quality performance.

1. When preparing for a scope verification inspection, what do you think are the stepsrequired to make your project successful?

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2. How can you make the change management processes followed in your organizationmore effective?

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NOTES


Monitoring and ControllingProject Schedule and Costs

In this lesson, you will monitor and control project schedule and costs.

You will:

• Control the project schedule.

• Control project costs.


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Lesson 12: Monitoring and Controlling Project Schedule and Costs 411


IntroductionMonitoring and controlling project work is only a part of the monitoring and controlling pro-cess. As the project progresses, changes are likely to delay the project leading to superfluouscost increases. So tracking project performance and focusing on schedules and budgets are cru-cial for any project manager. In this lesson, you will monitor and control project schedules andcosts.

Monitoring and controlling project schedules and costs helps your organization maintain itscompetitive advantage in the marketplace. Without it, your project may exceed its promiseddeadline and go over budget. By making the necessary changes along the way, through effec-tive schedule and budget monitoring and control, you can increase your chances of leadingyour project to a successful conclusion.

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TOPIC AControl the Project ScheduleWhen you planned your project, you developed a schedule to serve as a baseline duringproject execution, monitoring, and controlling. Now you need to determine how much varianceexists between the actual work completed and the work scheduled. In this topic, you willexamine the control schedule process and control the project schedule.

“When was the work scheduled to be completed?” “Can we change the project end date?”“Are we going to finish the project on time?” Answering questions like these is what the con-trol schedule process is all about. Effective control over the project schedule ensures that youcomplete your project on time according to the project schedule.

The Control Schedule ProcessControl schedule is a process of monitoring schedule performance and controlling changes tothe schedule baseline. During this process, the project manager continually monitors scheduleperformance by comparing actual work completed to the amount of work that was planned tobe completed. In addition, the project manager, along with a CCB, monitors, coordinates, andimplements changes to the project schedule and evaluates the impact of those changes on otherperformance baselines and the original scope definition.

Figure 12-2: The control schedule process.

Control Schedule InputsThere are several inputs used in the control schedule process.

Input DescriptionProject management plan Contains the schedule management plan, which sets up guidelines

on how the project schedule will be administered and directed. Italso contains the schedule baseline that is used for comparingactual results and determining the type of corrective action that isneeded.

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Input DescriptionProject schedule Contains the up-to-date version of the project schedule with details

on completed activities and activities that are yet to commence,with their respective start and end dates.

Work performance information Provides information on project progression, such as activities thatare started, in progress, or finished.

Organizational process assets Include schedule control related policies, procedures, and guide-lines, schedule control tools, and monitoring and reporting methodsthat are to be followed.

Control Schedule Tools and TechniquesThere are several tools and techniques a project manager can use to control schedules.

Tools and Techniques DescriptionPerformance reviews Reviews to measure, analyze, and compare schedule perfor-

mance. This includes comparing the actual start and finish dates,percent complete, and the time needed to complete the work inprogress.

Variance analysis Determines the cause and degree of variance compared to theschedule baseline and helps you decide whether corrective orpreventive action is required.

Project management software Provides ways of tracking planned dates vs. actual dates, and toforecast effects of changes to the project schedule.

Resource leveling Assists in making scheduling decisions when there are resourcemanagement concerns and enables optimum distribution of workamong the available resources.

What-if scenario analysis Analysis that involves the review of multiple scenarios and thencalculating various possibilities of project durations, activitysequences, and resource loading to bring schedule in alignmentwith the plan.

Adjusting leads and lags Brings the project activities, which are behind or ahead of sched-ule, in alignment with the plan. Working out possibilities ofaccelerating (adding leads to) or decelerating (adding lags to) theschedule to meet the demands of the plan.

Schedule compression Shortens the schedule so as to align the project activities to theproject plan without affecting the project scope.

Scheduling tool Uses updated schedule data and the scheduling tool with theproject management software or other methods to perform sched-ule network analysis and generate an updated project schedule.

Control Schedule OutputsThere are several outputs from the control schedule process.

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Output DescriptionWork performance measurements Schedule Variance (SV) and Schedule Performance Index (SPI)

values calculated for WBS components are documented andcommunicated to the respective stakeholders.

Organizational process assets updates Items documented in the organizational process assets includelessons learned about the causes of variance, the reason whycorrective actions are chosen, as well as other types of lessonslearned from schedule control.

Change requests Any changes requested to the project schedule baseline canoriginate from schedule variance analysis, review of progressreports, results of performance measures, and modifications tothe project schedule.

Project management plan updates Contains updated components such as the schedule baseline,schedule management plan, and cost baseline to reflect changescaused by the schedule adjustments.

Project document updates Contains updated project documents such as schedule data andproject schedule.

Earned Value Management (EVM)Earned Value Management (EVM) is a method of measuring project progress by comparingactual schedule and cost performance against planned performance as laid out in the scheduleand cost baselines. Assessing the value of work requires first determining what work has actu-ally been performed and therefore what value it has contributed to the project.

Cost variances occur when the actual cost of the project (AC) and its flexible budget differ.The benefit of using EVM as opposed to just a flexible budget is the time dimension associ-ated with earned value.

During planning, project work is broken down into work packages and activities. Each workpackage is assigned a budget and a schedule. Since each increment of work is time-phased, aSchedule Variance (SV) results when work is not completed when it was scheduled to be com-pleted. It is always better to understand the monetary value of work contribution, whether it isless or more to the project. Therefore, the SV is often expressed in terms of monetary value.

Developed primarily by the Department of Defense, earned value is a metric for achieving meaningful compari-sons between planned and completed work.

Cost and Schedule PerformanceThe EVM approach to monitoring cost and schedule performance provides metrics thatshow variances from the baselines. Armed with this information, the project managercan identify appropriate corrective actions. When cost and schedule variance analysis isconducted at the appropriate time intervals and levels, it can be effective in controllingagainst further cost and schedule problems.

EVM VariablesEVM involves calculating three independent variables to assess and monitor project cost andschedule performance progress. The variables include:

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• Planned Value (PV).

• Earned Value (EV).

• Actual Cost (AC).

These three variables are used to provide measures of whether or not work is being accom-plished as planned and to forecast project cost at completion.

Planned Value (PV)Definition:

Planned Value (PV) is the budgeted portion of the approved cost estimate to be spentduring a particular time period to complete the scheduled project work. This amount isspecified in the project’s cost baseline. In simpler terms, PV indicates the value ofwork to be done during a particular time period.

Planned value was formerly referred to as the Budgeted Cost of Work Scheduled (BCWS).

Example: Evaluating Planned ValueA project to build a shed was proposed. It involved three tasks to be done: flooring,drywalling, and roofing. Flooring was budgeted for $200 and will take two days tocomplete. The task of drywalling was budgeted for $800 and will take four days tocomplete. Roofing was budgeted for $600 and will take three days to complete. Thetotal budget for building the shed came to $1,600. The total budget calculated for thefirst six days of work, involving two days of flooring and four days of drywalling, willbe $200 + $800 = $1,000. Therefore, the PV of this project for six days is $1,000.

Earned Value (EV)Definition:

Earned Value (EV) is a composite measurement of both cost and time performance inrelation to scheduled or planned cost and time performance. EV is calculated by multi-plying the percentage of work completed by the budgeted cost for the activity as laidout in the cost baseline.

In order to determine the EV of the project work to date, you will have to look back atthe cost baseline to determine how costs were assigned originally. If the PV was deter-mined by the percentage completed to date method, you would apply the same methodof assessing the EV. In other words, EV indicates the value of work actually performedduring a particular time period.

EV was formerly referred to as the Budgeted Cost of Work Performed (BCWP).

Example: Evaluating Earned ValueThe manager of the shed building project receives a project report at the end of daysix, which says that the flooring task ($200) is 100% complete and the drywalling task($800) is 75% complete. To calculate the earned value for the completed work:

EV = (100% x Flooring budget) + (75% x Drywalling budget)

EV = (100% x 200) + (75% x 800)

EV = 200 + 600

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EV = $800

Therefore, the calculated EV for the project at the end of day six is $800.

Actual Cost (AC)Definition:

Actual Cost (AC) refers to the total amount of costs incurred while accomplishingwork performed, either during completion of a schedule activity or during the comple-tion of a work breakdown structure component. Actual cost is calculated anddocumented once the work is complete. In other words, AC indicates the actual moneythat has been spent for work that has been completed.

Example: Evaluating Actual CostThe shed building project report also states that the actual money spent on flooring is$180 and on drywalling is $700. So, the actual cost for the project as of day six is$880.

EVM MeasuresThe most commonly used EVM measures are:

• Schedule Variance (SV = EV - PV).

• Schedule Performance Index (SPI = EV / PV).

• Cost Variance (CV = EV - AC).

• Cost Performance Index (CPI = EV / AC).

Content related to schedule and costs has been dealt with as separate topics in this course. For detailed informa-tion on Cost Variance (CV) and Cost Performance Index (CPI), refer to the “Control Project Costs” topic.

Schedule Performance MeasurementDefinition:

Schedule performance measurement is any technique used to determine how theproject is performing in terms of time as compared to its planned performance. Sched-ule performance measurement tells the project manager how much variance existsbetween the actual work completed and the work scheduled.

Performance measurement techniques such as Schedule Variance (SV), Schedule Per-formance Index (SPI), trend analysis, and variance analysis are used to help determineif the schedule variance is potentially detrimental to the project and if correctiveactions are needed to ensure on-time deliverables.

Using the approved schedule baseline as the standard for measuring progress, theproject manager collects reporting information for each activity and uses a Gantt chartto summarize the data.

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Example: Schedule PerformanceConsider an example of a software development project. The estimated duration of theentire project is four months. Dan, the project manager, decides early in the project lifecycle that there will be eight reporting periods and that work package owners will sup-ply schedule performance reports every two weeks.

Figure 12-3: Software development Gantt chart.

On the fifth reporting period, Dan receives the schedule reports and plots the results ona Gantt chart, shown in the software development Gantt chart.

The Gantt chart shows that:

• Activities A, B, and C are finished.

• Activity B finished behind schedule.

• Activity C finished early.

• Activity D started a week late.

• Activity E is behind schedule.

• Activity F has not started yet.

The Gantt chart is an effective tool for providing up-to-date summary information andcan be extremely helpful for analyzing the project’s overall time performance. TheGantt chart also shows when milestones are scheduled and if those critical dates arestill on track.

Schedule Control ChartAnother tool you can use to illustrate schedule performance is the schedule controlchart. This chart can be used to show trends in schedule performance. The followinggraphic is an example of a typical schedule control chart.

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This chart plots the variance in the schedule for a project. It shows that the projectstarted behind schedule and that corrective action was probably taken to bring theproject back in line with planned schedule estimates.

Schedule Variance (SV)Definition:

Schedule Variance (SV) is the measured difference between the actual completion of anactivity and the planned or scheduled completion of an activity. To calculate the SV,subtract the planned value from the earned value. A negative SV indicates that theproject is behind schedule. A positive SV indicates that the project is ahead of sched-ule. When the SV is zero, it indicates that a project is on schedule. The formula forschedule variance is (SV = EV - PV).

Example: Calculating Schedule Variance for a Construction ProjectA project manager for a construction project plans to calculate the schedule variance atthe end of every month to measure schedule performance. The project is scheduled tolast eight months and has a budget of $800,000. According to the cost baseline, by thefourth reporting period, he planned to spend $500,000 accomplishing project work.This is the PV through this reporting period. By collecting reporting data through thefourth period, he determines that only $425,000 worth of the work has actually beenaccomplished. This is the EV through the fourth reporting period. He subtracts$500,000 (the PV) from $425,000 (the EV) to determine that the project currently hasan SV of -$75,000, which indicates that the project is behind schedule.

Schedule Performance Index (SPI)Another measurement of schedule performance efficiency is the Schedule Performance Index(SPI). The SPI is the ratio of work performed to work scheduled. To calculate the SPI, dividethe EV by the PV. An SPI of 1.0 or 100 percent means the project is right on schedule. If theSPI is greater than 1.0 or 100 percent, the project is ahead of schedule. If the SPI is less than1.0 or 100 percent, the project is behind schedule. The formula for schedule performance indexis (SPI = EV / PV).

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SPI Trend AnalysisPerformance indices can be plotted on a graph to show a trend. An SPI curve for a projectwith normal variance would show some fluctuations on the graph but tends to remain withinthe range of SPI 1.0.

Figure 12-4: A normal SPI curve.

If no corrective action is taken to make up for any schedule overrun, the trend could be unfa-vorable and the SPI graph could potentially show a trend where it starts to fall below SPI 1.0.

Figure 12-5: A potential SPI curve for a schedule overrun.

Working with EVMTo calculate EVM:

1. Determine the AC incurred for the work completed for each activity to calculate the CV.

2. Analyze the data to determine whether the actual cost to perform the work is more or lessthan its Earned Value (EV).

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3. Determine if the EV is more or less than the Planned Value (PV), which indicates aSchedule Variance (SV).

EVMThe project manager analyzes the information in the table and graph and determinesthat the Actual Cost (AC) to perform the work is more than its Earned Value (EV).This indicates a negative cost variance and a budget overrun. In addition, the EV isless than the Planned Value (PV), which indicates a negative schedule variance.

Figure 12-6: Calculating EVM.

Activity% Com-

plete PV AC EV SV CV SPI CPIA 100% $6,000 $10,000 $6,000 $0.00 -$4,000 1.00 0.60

B 50% $50,000 $44,000 $25,000 -$25,000 -$19,000 0.50 0.57

C 50% $12,000 $5,000 $6,000 -$6,000 $1,000 0.50 1.20

D 25% $16,000 $6,000 $4,000 -$12,000 -$2,000 0.25 0.67

E 0% 0 0 0 0 0 -

F 0% 0 0 0 0 0 -

TOTAL $84,000 $65,000 $41,000 -$43,000 -$24,000 0.49 0.63

The combination of both a negative SV and negative CV indicates that the project isperforming over budget and producing less work than scheduled. The project manageruses this information to find out the causes of the variances and determine the appro-priate corrective action necessary to bring the cost and schedule performance back inline with the baselines. He repeats the analysis at regular intervals to monitor theresults.

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Content related to schedule and costs has been dealt with separately as topics in this course. Fordetailed information on Cost Variance (CV) and Cost Performance Index (CPI), refer to the “ControlProject Costs” topic.

How to Control the Project ScheduleContinually monitoring schedule performance and controlling changes to the approved projectschedule enables you to maintain the schedule baseline.

Guidelines:To control the project schedule, follow these guidelines.

• Develop and implement a schedule change control system. Make sure your sys-tem:


— Includes the paperwork, tracking systems, and approval levels necessary forauthorizing schedule changes.


— Complies with the guidelines specified in the schedule management plan.

• Evaluate change requests by asking these questions:

— What is the magnitude of the change when compared to the schedulebaseline?

— What is the impact of the change on project cost and quality objectives?


• Use performance measurement techniques to compare actual schedule perfor-mance to planned performance.

— Use schedule reports to monitor schedule performance.

— Calculate SV and SPI to determine whether the project is ahead of or behindschedule.

• Analyze the results of your performance measurements by asking these questions:

— What is the cause of the variance?

— What is the magnitude of the variance? Is the activity that is causing thevariance on the schedule’s critical path? If so, this will indicate that yourproject finish date will be pushed out.

— Is it likely that the variance can be made up in the near future without cor-rective action or is corrective action necessary to bring the scheduleperformance back in line with the baseline?

• Identify and document corrective action to take to bring expected future projectperformance in line with planned performance. Depending on the priorities ofyour project, consider one or more of the following alternatives:

— Fast-tracking

— Crashing

— Outsourcing

— Resource leveling

— Reducing project scope

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• Depending upon the nature of the change, you may need to revise the cost, sched-ule, or quality performance baselines to reflect the changes and to form a newbaseline against which to measure future performance. Notify project stakeholdersof any changes made to project baselines.

• Use performance measurement techniques, including trend analysis, to monitor thechanges.



— Are new risks being introduced as a result of implementing the changes?

• Document lessons learned during schedule control for use on future projects. Thedocumentation should include:




— Any other lessons learned during schedule control.

Determining Schedule Performance EfficiencyThe following table provides calculations to determine schedule performance effi-ciency:

Performance Measurement Technique CalculationEarned Value (EV) EV = % complete x total budget of

work

Schedule Variance (SV) SV = EV - PV

Cost Variance (CV) CV = EV - AC

Cost Performance Index (CPI) CPI = EV / AC

Schedule Performance Index (SPI) SPI = EV / PV

Example: Controlling the Project Schedule for an Elementary Reading CourseProject

The project team producing an elementary reading course is four months into produc-tion. The performance reports indicate schedule performance problems. To get a betterpicture, the project manager compares the actual work completed to the schedulebaseline and calculates the SPI as .80. This figure confirms the concern that the projectis behind schedule.

The project manager calls a core team meeting to determine the cause of the schedulevariance and to determine the magnitude of the variance. According to the multimediaand technical leads, the major rework in the text-to-speech option in the glossary istaking more time to implement than expected. It is taking valuable resources awayfrom other activities on the critical path.

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The team agrees that corrective action is necessary to bring the project back in linewith the original schedule baseline. Realizing that they still have to implement thechange to the text-to-speech and that the project’s end date cannot be extended, theteam brainstorms other corrective action alternatives. They decide to recommend add-ing one graphic artist and one programmer to work on the text-to-speech issues for twomonths at a total cost of $15,000.

After discussing their recommendation with the project sponsor, the core team submitsa change request to the CCB. The CCB approves the change request and the projectmanager informs project stakeholders of the decision. The project manager carefullymonitors the situation and recalculates the SV after one month and two months. Trendanalysis shows that the corrective action was effective in bringing the schedule back inline with the baseline.

The project manager documents the problem, the causes of the variance, the alterna-tives considered, the corrective action chosen, and the reason for the decision. Inaddition, the project manager documents the results of the corrective action and filesthe documentation in the project archives as lessons learned.

DISCOVERY ACTIVITY 12-1Controlling the Project Schedule

Scenario:The OGC Cincinnati office is undergoing minor renovations. It is eight weeks into the projectand your manager asks you whether or not the project is on schedule. The entire project isscheduled to take 16 weeks at a total cost of $25,000.

1. Match the EVM measure with its formula.

Schedule variance a. EV / PVSchedule performanceindex

b. EV - PV

Cost variance c. EV / ACCost performance index d. EV - AC

2. According to your cost baseline for the project, you planned to spend $15,000 by theend of the eighth week. You collect reporting data for the eighth week and determinethat $12,000 worth of work has actually been completed. What actions should youtake with this information?

a) Bring it to the attention of the CCB with some possible solutions.

b) Use it to identify corrective action to take.

c) Use it to compare actual schedule performance to planned performance.

d) Bring it to the attention of project stakeholders.

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3. The SV for the eighth week of your project is -$3,000. The SPI for this reporting periodis .80. What is your analysis of this data and the project’s schedule performance todate?

4. Using performance measurement techniques, you have determined that the project isbehind schedule. What should you do with this information?

TOPIC BControl Project CostsYou established a cost baseline for your project. Now that work results are being produced,you need to monitor project costs as your project progresses. In this topic, you will focus onthe control cost process and use the cost baseline to control project costs.

Controlling cost performance is a lot like watching for smoke from a fire tower. The earlieryou see the smoke, the easier it will be to put out the fire. Effective cost control will allow youto spot the warning signs early, measure the cost variance, and make the necessary adjustmentsbefore cost overruns cause the project to go up in flames.

The Control Costs ProcessControl costs is the process of monitoring cost performance and controlling changes to the costbaseline, while influencing the causes of changes. During this process, the project manager(along with a CCB) monitors, coordinates, and implements changes to the project’s costbaseline and evaluates the impact of those changes on other performance baselines and theoriginal scope definition. Effective cost control is to analyze the relationship between the utili-zation of project funds to the actual expenditures made to the work that has been completed.

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Figure 12-7: The control costs process.

Control Costs InputsThere are several inputs to successfully controlling costs.

Input DescriptionProject management plan Contains project documents such as the cost performance

baseline and cost management plan, which provide cost controlinformation.

Project funding requirements All funding requirements are obtained from the cost baseline.Any funding occurs in increments. The total amount of fundsincludes the cost baseline plus the management contingencyreserve.

Work performance information Information collected dealing with the status and cost of projectactivities being performed. This information includesdeliverables completed and not completed, authorized andincurred costs, and approximate estimates to complete projectwork.

Organizational process assets Includes cost control related policies, procedures, and guide-lines, cost control tools, and monitoring and reporting methodsthat are to be followed.

Control Costs Tools and TechniquesThere are several tools and techniques that a manager can use relating to cost control.

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Tools and Techniques DescriptionEarned value management A technique that integrates scope, cost, and schedule to measure

performance of the project and its progress. The three parametersthat EVM considers for monitoring are Planned Value (PV),Earned Value (EV), and Actual Cost (AC). Variances such asschedule and cost variance and indices such as the schedule per-formance index and cost performance index from the approvedbaseline will also be monitored.

Forecasting An estimate or prediction of the project’s future, based on pastand present knowledge. As the project progresses, forecasts getgenerated, updated, and reissued based on work performance.Work performance information is based on past performance andanything that could affect the project’s future.

To-Complete Performance Index(TCPI)

Calculates the efficiency of cost performance on the project toachieve the Budget at Completion (BAC) or the Estimate atCompletion (EAC). If it is not possible to complete the projectwithin the BAC, then an EAC (forecast of the total cost required)is determined by the project manager.

Performance reviews A comparison of cost performance over time, schedule activitiesor work packages exceeding or going under budget, and the esti-mated project funds required to complete work in progress.

Variance analysis Determines the cause and degree of variance comparative to thecost baseline and decides on the corrective action that is required.Variance decreases as project work nears completion.

Project management software Used to examine the three parameters of EVM (Planned Value[PV], Earned Value [EV], and Actual Cost [AC]), demonstrategraphical trends, and forecast possible project results.

Further Reading on EVTThere is an increasing emphasis on the Earned Value Technique (EVT) within the fieldof project management. For further reading, you may want to investigate ProjectManagement: The Common Sense Approach by Lee R. Lambert and Erin Lambert.

Control Costs OutputsCost control results in several outputs.

Output DescriptionWork performance measurements The calculated CV, SV, CPI, and SPI values for certain WBS

components including work packages and control accounts aredocumented and communicated.

Budget forecasts A calculated or organization-reported EAC value or a bottom-upEAC value are documented and communicated to stakeholders.

Organizational process assets updates Items that may need to be updated include causes of variances,reasons as to why certain corrective actions are chosen, as wellas lessons learned from cost control.

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Output DescriptionChange requests Requested changes can occur from an analysis of project perfor-

mance. Any changes identified may result in an increase ordecrease to the budget.

Project management plan updates Elements of the project management plan that provide updateson cost performance baseline and cost management plan.

Project document updates Includes updated project documents such as the cost estimatesand basis of estimates.

Cost Variance (CV)Definition:

Cost Variance (CV) is any difference between the earned value and the actual costincurred to complete that work. To calculate the CV, subtract the Actual Cost (AC)from the EV. Actual costs are the costs incurred to accomplish the work to date. Anegative CV indicates that the project is performing over budget. A positive CV indi-cates that the project is performing below budget. When the CV is zero, it indicatesthat the project is running as per the budget.

Example: Cost Variance for a ProjectSuppose a project has an earned value of $200,000 for the fourth reporting period.However, the project manager assesses the actual cost for the work by the fourthperiod to be $240,000. The project manager calculates the CV by subtracting $240,000(the AC) from $200,000 (the EV). The result is -$40,000.

The negative value suggests that the project has overrun the baseline budget by$40,000. This graph shows these figures plotted to provide a visual representation ofthe cost variance.

Figure 12-8: An illustration of Cost Variance (CV).

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The Cost Performance Index (CPI)Definition:

Cost Performance Index (CPI) is a measurement of cost performance used to deter-mine whether the project is over or under budget. To calculate CPI, divide the EarnedValue (EV) by the Actual Cost (AC); the formula is (CPI = EV / AC). A CPI of 1.0means the project is right on budget. If the CPI is greater than 1.0, the project is per-forming under budget. If the CPI is less than 1.0, the project is over budget.

It’s important to remember that the CV and CPI values do not take time performance into consider-ation. Therefore, they do not provide a complete picture of overall project performance.

Example: CPI for a ProjectTo calculate the CPI for the project in the previous example, divide $200,000 (the EV)by $240,000 (the AC). The result is 0.83 or 83 percent. A performance index curve forthis project might look like this.

Figure 12-9: An illustration of the Cost Performance Index (CPI).

Performance Measurement Analysis TechniquesThe cause of variance, magnitude of variance, and corrective action for a variance are allimportant factors in cost control. Cost baseline, used in EVM, reviews the progress of aproject and impact of variations.

Several standard values for schedule activity, work package, and control account are involvedin the earned value technique, including:

• Planned Value (PV)

• Earned Value (EV)

• Actual Cost (AC)

• Estimate to Complete (ETC) and Estimate at Completion (EAC)

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• Cost Variance (CV)

• Schedule Variance (SV)

• Cost Performance Index (CPI)

• Schedule Performance Index (SPI)

• Budget at Completion (BAC)

Performance Reporting TechniquesPerformance reviews are meetings held to review schedule activity, work package, or costaccount status and progress, usually in concurrence with one or more performance reportingtechniques.

Performance Reporting Technique DescriptionVariance analysis Comparing actual project performance to projected performance.

For the most part, cost and schedule variances are analyzed.However, variances from project scope, resource, quality, and riskare taken into consideration.

Trend analysis Inspecting project performance over a period of time to determineif performance is increasing or decreasing.

Earned value performance Compares baseline plan to actual performance.

Budget at Completion (BAC) CalculationsThe Budget at Completion (BAC) is the total budgeted cost of the project at completion.Projects seldom run as per the plan and they are continuously updated. It is necessary to fore-cast the expected cost at completion. BAC is used as a base value factored with CPI tocalculate Estimate to Complete (ETC) and Estimate at Completion (EAC). The formula is:BAC = total PV at completion.

Estimate to Complete (ETC) CalculationsThe Estimate to Complete (ETC) forecasting technique, based on an updated, mid-project esti-mate that is more accurate and comprehensive, is independent for all outstanding work. It alsotakes into consideration the performance and production of current resources.

ETC for all authorized work can also be calculated with respect to project schedule (time).

You can calculate ETC for cost using earned value with one of two formulas.

Formula DescriptionETC = (BAC - EV) ETC is used when variances are determined to be

atypical and forecasts that similar variances willnot occur in the future.

ETC = (BAC - EV) / CPI ETC is used when variances are determined to betypical or expected.

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AccuracyOne downfall for using ETC and EAC is that they are not accurate in determining theremainder of work to be done in a project. The accuracy depends on accuracy of dataof work completed.

Estimate at Completion (EAC) CalculationsEstimate at Completion (EAC) is a forecast of total costs needed to complete the project; it isused to predict and control cost problems.

EAC for all authorized work can be calculated with respect to project schedule (time).

EAC Method DescriptionEAC = AC + ETC EAC using a new estimate. This method requires

making a new ETC for all remaining project workand adding that estimate to the ACs incurred todate. Should be used when original estimatingassumptions are flawed and conditions havechanged.

EAC = AC + BAC - EV EAC using remaining budget. This method usesthe sum of the ACs and the BAC minus the EV.Should be used when current cost variances areatypical of future variances.

EAC = AC + [ (BAC - EV) / CPI ]orEAC = BAC / CPI

EAC using CPI. This method involves adding theAC to the difference of the BAC and the EVdivided by the CPI. Should be used when currentvariances are typical of future variances.

To-Complete Performance Index (TCPI)The To-Complete Performance Index (TCPI) is an indicator of the usage of resources for theremainder of the project. The TCPI value can be derived by dividing the budgeted cost ofremaining work by the remaining project budget to achieve either the Budget at Completion(BAC) or the Estimate at Completion (EAC). If management decides that the BAC is notachievable, a new EAC is created by the project manager.

TCPI based on BAC can be calculated using the equation: (BAC - EV) / (BAC - AC). TheTCPI based on EAC can be calculated using the equation: (BAC - EV) / (EAC - AC).

The TCPI value can be either greater or less than 1 when it is compared with the Cost Perfor-mance Index (CPI). If the TCPI value is greater than 1, then the project team should beutilized carefully for the remainder of the project. But if the TCPI value is less than 1, then theproject team can be utilized more freely.

To-Schedule Performance Index (TSPI)The To-Schedule Performance Index (TSPI) is an indicator of efficiency at which theremaining time that is allocated for the project should be utilized by the project team.The equation to evaluate TSPI is: (BAC - EV) / (BAC - PV).

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The TSPI value can either be greater or less than 1. If the value is less than 1, then itindicates the required efficiency is less than 100% and therefore the project team canwork at a measured pace in utilizing the remaining project time. But if the TSPI valuehappens to be greater than 1, then it indicates the required efficiency is more than100% and therefore the project team should be careful in utilizing the remainingproject time and will have to work more efficiently.

How to Control Project CostsContinually monitoring cost performance and controlling changes to the project’s budgetenables you to maintain the cost baseline. Controlling project costs also helps avoid budgetproblems that may jeopardize the successful completion of a project.

Guidelines:To control cost performance, follow these guidelines:

• Develop and implement a cost change control system. Make sure your system:


— Includes the paperwork, tracking systems, and approval levels necessary forauthorizing changes to the cost baseline.


— Complies with the guidelines specified in the cost management plan.

• Evaluate change requests by asking these questions:

— What is the magnitude of the change when compared to the cost baseline?

— What is the impact of the change on project schedule and quality objectives?


• Use performance measurement techniques to compare actual cost performance toplanned performance.

— Use performance reports to monitor cost performance.

— Calculate CV and CPI to determine whether the project is performing over orunder budget.

— Use earned value analysis and management to continually measure cost andschedule performance and to assess the value of work performed to date.

• Analyze the results of your performance measurements by asking these questions:

— What is the cause of the variance?

— What is the magnitude of the variance? Is the activity causing the varianceon the critical path?

— Is it likely that the variance can be made up in the near future without cor-rective action, or is corrective action necessary to bring the cost performanceback in line with the baseline?

• Identify and document corrective action to take to bring expected future cost per-formance in line with planned performance. Depending on the priorities of yourproject, consider one or more of the following alternatives:

— Re-check cost estimates to determine whether they are still valid. Avoid thetemptation to reduce estimates simply to make the cost performance lookbetter.

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— Identify alternate, cheaper sources for materials. For example, consider usinga lower-grade building material to keep the project costs on target.

— Brainstorm ways to improve productivity. Consider using an efficiency expertto identify areas where productivity could be bolstered with training or guid-ance.

— Change the schedule baseline. When a schedule change is contemplated,make sure it is done in communication with customers and other key stake-holders to determine the schedule flexibility. If finishing on time is not asimportant as finishing on budget, cost overruns can be corrected throughschedule changes.

— Reduce project scope. One way to reduce scope is to prioritize the remainingwork and eliminate work with the lowest priority. Another option is to planfor a Phase 2 project to cover unfinished scope items. Reducing the projectscope must be done according to the integrated change control system andwith approval of the customer and the sponsoring organization.

• Depending upon the nature of the change, you may need to revise the cost, sched-ule, or quality performance baselines to reflect the changes and to form a newbaseline against which to measure future performance.

— Review the cost management plan as you begin to monitor cost performance.Follow the systematic procedures outlined in the cost management plan asyou identify the need for corrective action and baseline adjustments.

— Notify project stakeholders of any changes made to project baselines.

• Use performance measurement techniques, including trend analysis and EAC, tomonitor the changes.



— Are new risks being introduced as a result of implementing the changes?

• Document lessons learned during cost control for use on future projects. Thedocumentation should include:




— Any other lessons learned during cost control.

Determining Cost PerformanceThe following table provides calculations to determine cost performance efficiency.

Cost Formulas CalculationCost Variance (CV) CV = EV - AC

Cost Performance Index (CPI) CPI = EV / AC

Estimate to Complete (ETC) ETC = BAC - EV or (BAC - EV) / CPI

Estimate at Completion (EAC)using new estimate

EAC = AC + ETC

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Cost Formulas CalculationEstimate at Completion (EAC)using remaining budget

EAC = AC + BAC - EV

Estimate at Completion (EAC)using CPI

EAC = AC + ( (BAC - EV) / CPI) or EAC = BAC / CPI

To-Complete Performance Index(TCPI) based on BAC

TCPI = (BAC - EV) / (BAC - AC)

To-Complete Performance Index(TCPI) based on EAC

TCPI = (BAC - EV) / (EAC - AC)

To-Schedule Performance Index(TSPI)

(BAC - EV) / (BAC - PV)

Example: Cost Control for a ProjectThe project team for the preschoolers’ educational website has implemented the changeto the cost baseline required to bring the schedule back in line with the schedulebaseline after adding the added functionality. Ben, the project manager, continuallymonitors the revised cost baseline by calculating the CV and CPI at regular reportingintervals. Using EVM, Ben analyzes any variances to determine their cause and magni-tude.

As of the eighth reporting period, only minor variances in cost performance occur.These variances might be corrected by renegotiating contracts and by verifying theestimates of work still to be done, resulting in lower estimates.

Trend analysis conducted at the sixth, seventh, and eighth reporting periods indicatethat the corrective actions were effective in maintaining the cost baseline. The projectmanager documents the cost variances, their causes, corrective action, and the resultsof the corrective action as lessons learned for future projects.

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DISCOVERY ACTIVITY 12-2Controlling Project Costs

Data Files:

• PM_CostPerfRpt

• Cost_Baseline

Before You Begin:From the C:\085042Data\Monitoring and Controlling Project Schedule and Costs folder, openthe PM_CostPerfRpt and Cost_Baseline documents.

Scenario:As the media campaign for the Seattle New Store project progresses, you ask each of the workpackage owners to give you a cost performance report for the sixth reporting period. The firstreport you receive is the PM_CostPerfRpt document from the Public Meeting work packageowner. You compare the information received in the report against the original cost baselinefor the work package (Cost_Baseline document) to measure its cost performance to date. Youwill work with the work package owners to calculate the EV, PV, CV, SPI, and SV for thereport.

1. Review the PM_CostPerfRpt document. What is the actual cost for the Public MeetingWork Package in the 6th week reporting period?

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2. What is the total EV for the Public Meeting Work package in the 6th week reportingperiod?

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3. According to the cost baseline, the PV up through the sixth reporting period is$22,000. What is the CV for this work package?

4. Which formula will allow you to calculate the Estimate at Completion (EAC) for thework package?

a) EV / AC

b) EV – AC

c) AC + [(BAC – EV)/CPI]

d) EV – PV

5. Based on the formula EV/AC, you determine that the CPI for this work package is 1.11.When you take the CPI and CV into consideration, how is this work package perform-ing?

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6. What is the SV for this work package?

7. What is the SPI for this work package?

8. Based on your analysis of the product costs, what courses of action might you take?

a) Find the cause of the variance.

b) Determine the appropriate corrective action to take.

c) Alert project stakeholders that the project is in crisis.


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Lesson 12 Follow-upIn this lesson, you monitored and controlled the project schedule and costs. Without controllingschedule and costs, your project may exceed its promised deadline and go over budget. Moni-toring and controlling project schedules and costs helps your organization maintain itscompetitive advantage in the marketplace.

1. What performance measurement techniques will you use in the future to measureschedule performance?

2. How could using earned value management help you to control project costs on futureprojects?

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Monitoring and ControllingProject Performance andQuality

In this lesson, you will monitor and control project performance and quality.

You will:

• Perform quality control.

• Report project performance.


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Lesson 13: Monitoring and Controlling Project Performance and Quality 441


IntroductionAs your project work continues, you’ve monitored the schedule and budget baselines. Otherimportant aspects of projects that need to be tracked and controlled are project performanceand quality. In this lesson, you’ll continue tracking project performance and control projectquality.

Meeting customers’ quality expectations requires a dedication to continuous improvement andparticipation by all project team members. Likewise, tracking project performance requirescommitment from the project manager for a successful project outcome.

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TOPIC APerform Quality ControlYour quality management plan describes how your project team will move forward. Now thatyour project is well underway, you need to monitor the work results to ensure that they meetthe quality standards you defined in your quality management plan. In this topic, you willfocus on the perform quality control process and control project quality.

Companies face fierce competition to minimize development time and bring products to marketbefore the competition. At the same time, organizations are faced with the challenge of stayingcompetitive by keeping customers’ costs low. As a result, quality is a component that perme-ates all aspects of project work. Effective quality control can streamline project work, savingtime and money while continuing to maintain customer and stakeholder satisfaction. Control-ling quality ensures that your project meets or exceeds your customers’ quality requirements.

The Perform Quality Control ProcessThe perform quality control process involves monitoring project performance to determine if itcomplies with relevant quality standards and identifying ways to eliminate causes of unaccept-able performance. Quality control involves continually measuring, adjusting, and monitoring.Its goal is to improve the work process and produce results that meet customer and stakeholderspecifications and expectations. Quality control is normally performed by the quality controldepartment or a similar unit.

Figure 13-2: The perform quality control process.

Perform Quality Control InputsQuality control requires several inputs.

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Input DescriptionProject management plan Contains the quality management plan, which describes the

project management team’s approach to implementing its qual-ity policy. The quality management plan must include QualityControl (QC), Quality Assurance (QA), and documentation onprocess improvements.

Quality metrics An actual value that describes the measurements for the qualitycontrol process. Examples of quality metrics include defectdensity, reliability, rate of failure, and test coverage.

Quality checklists Job aids that prompt employees to perform activities accordingto a consistent standard.

Work performance measurements Measurements used to create the project activity metrics, whichmaintain actual progress vs. planned progress. Some of themetrics used are:

• Planned vs. actual technical performance.

• Defects found and defects originated.

• Deliverables in progress and those completed.

• Planned vs. actual schedule performance.

• Planned vs. actual cost performance.

Approved change requests In quality control, approved change requests can include modi-fications to work methods and the schedule. All approvedchanges need to be verified.

Deliverables A distinctive product, result, or capability used to perform aservice that must be produced to complete a project, phase, orprocess.

Organizational process assets Represent formal and informal policies, procedures, plans,guidelines, and knowledge from previous projects that caninfluence the perform quality control process.

Perform Quality Control Tools and TechniquesThere are several tools and techniques for quality control.

Tools and Techniques DescriptionCause-and-effect diagrams Illustrate how various factors might be associated with possible

problems. Possible causes can be identified by asking “why” and“how” for each problem identified. Cause-and-effect diagrams arealso known as Ishikawa or fishbone diagrams.

Control charts Graphical display of the results or status of a process over time andagainst established control limits. It helps track the behavior of qual-ity control processes over time and determine if the variances in theprocess are within acceptable limits.

Flowcharting Flowcharting can assist the project team’s effort to identify potentialquality problems, their associated effects on overall project qualitytargets, improvement areas, and the possible improvement measures.

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Tools and Techniques DescriptionHistogram A bar chart of variables. Each column symbolizes an element of a

problem. The height of each column represents how frequently theelement occurs. By using the shape and width of the distribution,causes of problems are identified.

Pareto chart A histogram that shows the causes of problems in the order of theirseverity.

Run chart A line graph showing plotted data points in chronological order. Itcould show trends in a process over time or improvements overtime. Trend analysis uses run charts. Trend analysis is a tool youcan use to communicate forecasting information based on theproject’s current performance. It is also used to monitor technicaland cost and schedule performance.

Scatter diagram A diagram showing a relationship between two variables. The dia-gram plots dependent versus independent variables. The moreclosely the points form a diagonal line, the more closely they arerelated.

Statistical sampling Measures an entire population based on actual measurement of arepresentative sample of that population.

Inspection An official examination of work results to verify that they meetrequirements. The inspection may be conducted by an internal orexternal inspection team.

Approved change requests review Ensures that all change requests are reviewed and implemented asapproved during the perform integrated change control process.

Perform Quality Control OutputsThere are several outputs from quality control.

Output DescriptionQuality control measurements The results of quality control activities that are documented in the for-

mat determined when planning for project quality. The results are fedback to the QA process for use in re-evaluating and analyzing qualitystandards and processes.

Validated changes Reinspected, repaired items to be formally accepted or rejected.

Validated deliverables QC needs to verify the accuracy of deliverables through quality controlprocesses.

Organizational process assetsupdates

These include completed checklists and lessons learned documentation.If checklists are used, they become part of the project’s records, andany lessons learned from QC should be documented and put in a data-base for the current project and for the entire organization to refer to.

Change requests If any actions require a change in the process, a change request shouldbe submitted in compliance with the perform integrated change controlprocess.

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Output DescriptionProject management planupdates

Any changes in the quality management plan through QC processes aredocumented in the project management plan. Any requested changes tothe project management plan and its subplans are reviewed through theintegrated change control process. Plans that may be subject to changesin this process include the quality management plan and processimprovement plan.

Project document updates Documents that may need to be updated include the quality standards,quality management plan, quality baseline, and quality metrics.

VarianceDefinition:

Variance is the quantifiable deviance, or amount of departure, from the expected resultsfor any component of product and service being developed, including quality as wellas schedule, and cost. Variance can be extreme or almost undetectable; it may resultfrom many causes, such as problems with resource availability or from the skills ofpersonnel assigned to the project. Variance may be obvious the moment a product isproduced or may become obvious over time through use and exposure to environmen-tal conditions. To control quality, you must recognize the difference between qualityvariance within a normal range and variance that indicates a quality error.

Example: Schedule Variance in a Daily FlightA daily flight from Chicago to New York City may typically arrive 10 to 20 minuteslate. Those minor fluctuations in arrival time are schedule variances that may resultfrom different issues: mechanical breakdowns, human error, or weather-related delays.Addressing the different variances for one flight can be difficult without evaluating theentire system.

Causes of VarianceDefinition:

Causes of variance in a process or item are the sources or reasons for deviations fromthe expected standard. There are two main types: random causes and special causes.

Random or common, causes are those everyday occurrences that are always present inproject work; as such, they may be unavoidable. They may be either insignificant andhave little impact on the overall quality performance or they may have a dramaticeffect on quality. The corrective actions taken in response to random causes of varianceare typically long-term and generally involve overall changes to the process.

Special, or assignable, causes are unusual, sporadic occurrences; they are the result ofsome unexpected circumstance and are typically not caused by a flaw in the overallproduction process. Like random causes, special causes of variance can also have adramatic effect on performance. By analyzing instances of the occurrences of specialvariances, you may be able to isolate the cause and take corrective action to avoid thenegative effects on quality performance. The corrective actions taken in response tospecial causes of variance are typically short-term and do not involve overall changesto the process. Special causes do not occur frequently but it can sometimes be decidednot to act upon them as the cost of action may be much more than the benefit.

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Example: Causes of Variance in the Metropolitan Bus SchedulesA metropolitan bus company is trying to improve customer satisfaction in one keyarea: the buses consistently run late. Random causes of the schedule variances includethe weather and traffic conditions: these are unavoidable, everyday occurrences thatwill have an impact on how closely the buses can meet their schedules. A specialcause of schedule variance is a minor traffic accident. This is an isolated, unexpectedissue that may have a dramatic effect on the bus’s schedule that day, but it does notindicate a process flaw.

Example: Random and Special Causes in an E-Learning ProjectA language quality controller for an e-learning project identified a considerable numberof structural and grammatical errors in one of the lessons in the course. Generally, theerrors identified during a review are minor, which occur due to fatigue or other distur-bances to the writer that are caused by emails and phone calls. These causes are calledrandom causes. But because the number of errors in this lesson were significantly high,the company decided to analyze the cause for this problem. Two major causes wereidentified during the analysis: the keyboard of the computer was not functioning prop-erly and the auto spelling correction option in the software was turned off. These arecalled special causes.

Example: A Random Cause Generating Regular Defects in a Sheet Metal Devel-oping Company

A sheet metal development company, which creates very thin sheets of aluminum,observed that two sheets produced every 15 minutes had wave-form patterns on thesurface. After having analyzed the reasons, it was found that the factory was directlyabove a subway line, and the train passed over the line every 15 minutes.

The Analyzing Variances TaskThe analyzing variances task involves taking data concerning work results and measuring thatdata against the specifications and operational definitions included in the project plan. Anyvariances must be analyzed to determine whether they are acceptable or if they merit correc-tive action to keep the performance within specifications.

TolerancesDefinition:

Tolerances are the measurement values that determine if a product or service is accept-able or unacceptable. They are the standards against which data collected will beanalyzed. Tolerances are typically expressed in ranges. If the result of the test fallswithin the range specified by the tolerance, it is acceptable. If not, it is consideredunacceptable. Tolerances are specified in the quality management plan.

Example: Tolerance Level for a Product’s WeightThe tolerance for a product’s weight may be 5.8 grams ± 0.2 grams. If a productweighs more than 6.0 grams, or less than 5.6 grams, it is considered unacceptablebecause it exceeds the tolerance and does not meet specification.

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The 6-Sigma LimitProject managers use control charts to measure for instability because processes always havesome fluctuation and variability. When measuring deviations, if there are six standard devia-tions between the process mean and the nearest specification limit defined in the control chart,then no item will fail to meet the specification. This is termed as the 6-Sigma limit. In terms ofcontrolling processes, the 6-Sigma limit is significant because it provides a generally acceptedguideline for monitoring quality and adjusting when necessary.

The 6-Sigma Process6-Sigma has also evolved into a business management strategy that seeks to improvethe quality of process outputs by identifying and removing the causes of defects andvariability in processes. To achieve 6-Sigma, a process must not produce more than 3.4defects per million opportunities.

The 3-Sigma RuleThe 3-Sigma rule, an empirical rule, states that for normal distribution almost all val-ues lie within 3 standard deviations of mean.

The values in the normal distribution will exhibit deviation as follows:

• About 68% of the values lie within 1 standard deviation of the mean.

• About 95% of the values lie within 2 standard deviations of the mean.

• About 99.7% of the values lie within 3 standard deviations of the mean.

Variability IndicationsMeasurements that exceed the range between the upper and lower control limits are consideredto be an indication of instability. The variability expressed is atypical for the process and maybe an indication of a special source of variance.

It is important to remember that, while control charts can effectively show variability, theycannot indicate the source of the variability or show performance in relation to an expectedperformance. The control chart shows only the capability of the process to produce similarproducts. It does not show the conformity of that process to a customer’s specifications.

Pareto DiagramsDefinition:

A Pareto diagram is a histogram that is used to rank causes of problems in a hierar-chical format. The goal is to narrow down the primary causes of variance on a project,and focus the energy and efforts into tackling the most significant sources of variance.The variables in the diagram are ordered by frequency of occurrence.

Example: An Example of a Pareto DiagramA typical Pareto diagram is used to represent the data, which is first organized in thedescending order of occurrence and then plotting the cumulative curve. The bars repre-sent the number of failures for each of the causes (A through E). In this example,approximately 72 percent of the total number of failures are due to causes A and B(320 out of 440). The project team can easily see that they should focus most of theircorrective action efforts on those two causes.

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Figure 13-3: A Pareto diagram.

Pareto AnalysisThe analysis used to develop Pareto diagrams is referred to as a Pareto analysis, afterVilfredo Pareto, an Italian economist of the late 19th and early 20th century. In hisanalysis, Vilfredo Pareto found that 80 percent of the country’s wealth was concen-trated in the hands of 20% of the population.

During a Pareto analysis, data is collected in various forms, such as reports, inspec-tions, and surveys. This data is then analyzed to isolate the major causes of projectvariance and is assigned a frequency or percentage value. The resulting diagram is ahistogram that identifies specific sources of variance and ranks them according to theireffect on the quality performance. Pareto diagrams can be very useful tools throughoutthe entire project for prioritizing and focusing corrective actions. Comparative analysisof Pareto diagrams at different points in the project can be an effective tool for deter-mining and communicating the effect corrective actions have had on curtailing oreliminating variability.

The 80/20 RulePareto diagrams are based on Pareto’s law, also known as the 80/20 rule. The 80/20 rule is ageneral guideline with many applications; in terms of controlling processes, it contends that arelatively large number of problems or defects, typically 80 percent, are commonly due to arelatively small number of causes, typically 20 percent.

Statistical SamplingDefinition:

Statistical sampling is a technique used to determine characteristics of an entire popu-lation based on actual measurement of a representative sample of that population.Sampling is a way to determine if large batches of a product should be accepted orrejected without having to test every single item produced. Its goal is to produce a pro-cess that does not require inspection of every item. The size of samples and thefrequency and cost of sampling must be determined when planning for project quality.

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Example: Statistical Sampling Through PollingA common example of statistical sampling is polling. Polling organizations ask ques-tions of a small, random sample of participants. The answers given by the samplegroup are used to suggest how an entire group may feel regarding an issue.

Determining Sample SizeSample size can affect the accuracy of results. Generally speaking, the larger thesample size, the higher the likelihood the sample will truly represent the variability ofthe population. In quality terms, the larger the sample size, the more confidence youcan have that your measurements reflect the quality level of the entire product popula-tion.

It is important that members of a team whose focus is quality control have a strong understanding ofstatistics. Other members need only have a basic understanding of statistical concepts.

The Statistical Sampling ProcessThe statistical sampling process involves dividing sampling data into two categories—attributeand variable—each of which is gathered according to sampling plans. As corrective actions aretaken in response to analysis of statistical sampling and other quality control activities, and astrend analysis is performed, defects and process variability should be reduced. The use of sta-tistical sampling during quality control can reduce overall quality cost by helping to forecastand prevent errors before they occur.

Figure 13-4: The process of statistically sampling the given data.

Attribute Sampling DataDefinition:

Attribute sampling data is data from the sample that is counted, such as the:

• Number of employees participating in profit sharing.

• Number of customer complaint calls.

• Number of returned items.

Attribute sampling uses no scale. It simply tells you whether or not a standard hasbeen met. Implementing an attribute sampling plan is fairly simple. Team membersmay be required to count the number of items that do not conform to a quality specifi-cation or that show evidence of a quality defect. If the number exceeds a certain limit,the sample fails to meet quality specifications.

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Example: Attribute Sampling for a Random Sample of WidgetsA project team is given a sampling plan that involves taking a random sample of 500widgets and counting the number of widgets that do not meet the relevant operationaldefinition. The plan states that there must be fewer than 10 defective widgets in orderfor the sample to pass the inspection. The team inspects each of the widgets, comparesthem to the standard specified by the operational definition, and determines that 30 ofthe widgets do not meet the standard. The sample did not pass the inspection becausethe number of defective widgets exceeded the minimum acceptance level of 10.

This is an example of attribute sampling because no scale is used. The test was a pass-or-fail inspection to determine whether the sample exceeded a certain acceptance level.

Variable Sampling DataDefinition:

Variable sampling data is data from the sample that is measured on a continuous scale,such as:

• Time

• Temperature

• Weight

For variable data, the compliance to specifications is rated on a continuous scale. Mea-surements can fall between an upper and lower range. To implement a variablesampling plan, you would collect a sample of product and take some specific measure-ment to determine if the sample meets quality specifications. Variable samples typicallyprovide the same level of accuracy as attribute samples with much smaller samplesizes.

Example: Variable Sampling by an Ice Cream Manufacturing CompanyA company manufacturing premium ice cream would use variable sampling data toensure quality control. Not every batch of ice cream produced would be tested forquality measurements, but testers would take measurements of random batches andmeasure for flavor, consistency, color, texture, visual appeal, and other internal markersfor quality.

How to Perform Quality ControlMonitoring and controlling project quality ensures that the quality complies with relevant qual-ity standards. Meeting quality standards enhances the team’s ability to deliver an overallproject performance that meets the project objectives.

Guidelines:To effectively control project quality, follow these guidelines:

• Conduct inspections to detect quality errors as project work is ongoing.

— Consult the quality management plan for the procedures and guidelines touse during quality control.

— Check work results against relevant operational definitions and checklists.Document the results.

— Use statistical sampling to determine whether large batches of a productshould be accepted or rejected based on the quality of the sample(s). Ensure

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that samples are chosen randomly and that the sample size is large enough todemonstrate the variability of the entire group.

• Use Pareto diagrams to focus corrective actions on the problems having the great-est effect on overall quality performance and to measure and monitor the effect ofcorrective actions over time.

• Use control charts to analyze and communicate the variability of a process orproject activity over time. As you analyze performance with control charts, youmust not only look for variability outside the control limits, but you should alsoanalyze patterns of data within control limits.

• Identify ways to eliminate causes of unsatisfactory results in order to minimizerework and bring nonconforming items into compliance. Use flowcharts to iden-tify redundancies, missed steps, or the source of quality performance problems.

• Initiate process adjustments by implementing corrective or preventive actions nec-essary to bring the quality of work results to an acceptable level. Majoradjustments must be made according to the project’s change control system.

• Continue to monitor, measure, and adjust quality throughout the project life cycle.

Example: Performing Quality Control for the Arithmetic on a Stick ProjectAs the project team for the Arithmetic on a Stick project continues through production,the team continually monitors work results by conducting online reviews of the com-pleted lessons and documenting any problems in the project’s database. During one ofthe core team’s meetings, the project manager does a quick trend analysis and noticesthat there is an unusually high number of problems in the database for the fifth lessonwhen compared to the previous four lessons.

The project manager asks the quality control engineer to evaluate the problems todetermine which are generating the most problems. The quality control engineer does aPareto analysis and plots the results on a Pareto diagram. Since curriculum changesand technical problems are generating most of the problems, the team decides to focuson those two issues. Further analysis of the problems caused by technical problemsreveals that one technical problem was the cause of all of the trouble. The technicallead was able to isolate the problem and resolve the issues.

The curriculum changes were not so easily resolved. A new curriculum developer hadbeen hired recently. The new curriculum developer was having difficulty understandingthe project team’s development process and consistently changed lessons after they hadalready been produced and programmed. This resulted in change requests for the artdirector, as well as for the programmers. Intensive training sessions were suggestedand implemented.

Trend analyses conducted on the sixth, seventh, and eighth lessons indicated that thecorrective actions were effective in reducing the number of problems due to curriculumchanges and technical problems. Now the highest number of problems was due to cur-riculum and programming errors, so the team focused their attention on those issues.As they moved through the remaining lessons, the overall number of problems in thedatabase significantly declined, indicating an overall increase in project quality.

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DISCOVERY ACTIVITY 13-1Performing Quality Control

Scenario:You are managing the construction of the Seattle OGC New Store project. The HVAC contrac-tors are completing the work for the installation of the heating and cooling activity. Your teamhad developed operational definitions and checklists for this work, and you have providedthese to the lead quality control engineer. Historically, on similar projects, there has been nomore than an average variance of one degree between floors. The quality inspections revealthat the second floor is three degrees cooler than the first floor.

1. Given that there is a significant variation in temperature between the first and secondfloor, what should be done?

a) Report this information to the appropriate people, according to the project’s changecontrol system.

b) Because of the potentially high re-work cost, finding a solution should be a top prior-ity.

c) Initiate process adjustments.

d) Continue to monitor quality as the HVAC installation continues.

2. The quality management plan documented acceptability of the installation with a tol-erance of a one degree variance between floors. What would you do to determine thereasons for the variance in quality tests?

3. After researching the cause of the variance, you discover that the testing was done byone quality control engineer. You then meet with the contract supervisor to investi-gate the process. You discover that the duct work on the second floor was installedover a weekend by a different, less experienced crew. What should your next step be?

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TOPIC BReport on Project PerformanceIn order to ensure that your project meets stakeholder needs, you have created quality controlmeasurements and controlled its quality. Now that the project quality is being monitored, youneed to communicate with your stakeholders about how well your project is performing. Inthis topic, you’ll examine the report performance process and report project performance.

Implementing control processes into your project work can make a tremendous difference inyour ability to communicate project performance to upper management, stakeholders, and cus-tomers, and to reassure those with a vested interest in project success that the work is on timeand within budget. Performance reports are really the heart of the entire monitoring and con-trolling process. Effective performance reporting enables you—as well as your team members,sponsors, stakeholders, and customers—to make reasoned, informed, timely decisions regardingproject status.

The Report Performance ProcessReport performance is the process of gathering and communicating information regarding thecurrent status of a project as well as projections for progress over time. During performancereporting, information regarding the work being accomplished versus the baseline, andresources being used, is collected, analyzed, and displayed in various report formats. Thishelps the project management team to forecast project progress and performance.

Figure 13-5: The report performance process.

Report Performance InputsProject managers use several performance reporting inputs.

Input DescriptionProject management plan Project execution is compared to an approved project work

plan, and variations are measured for management control. Thisincludes scope, schedule, and cost restrictions, but may includetechnical and quality constraints.

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Input DescriptionWork performance information Any information on performance results such as schedule

progress and costs incurred is collected and put into the perfor-mance reporting process.

Work performance measurements The comparison of actual performance against planned perfor-mance. It is used to create the project activity metrics. Themetrics thus generated include planned versus actual scheduleperformance, planned versus actual cost performance, andplanned versus actual technical performance.

Budget forecasts Help estimate the budget required to complete the remainingproject work. Stakeholders will be given either a calculatedEAC and ETC value or a performing organization-reportedEAC and ETC value.

Organizational process assets Assets such as report templates, policies, and organizationallydefined variance limits can impact the report performance pro-cess.

Report Performance Tools and TechniquesSeveral tools and techniques are used in performance reporting.

Tools and Techniques DescriptionVariance analysis The retrospective analysis of causes of variance between the baseline

and actual performance.

Forecasting methods Used to predict the future performance of the project based on itscurrent performance.

Communication methods Used to communicate project performance and progress.

Reporting systems Tools used to collect, store, and distribute project information tostakeholders. Information can be distributed through various formatssuch as presentation and a spreadsheet analysis.

The Variance Analysis ProcessThough the process of variance analysis may vary based on factors such as applicationareas and standards used, the common steps involved are:

• Verifying if the collected quality information is complete, consistent, and validwhen compared with other project information.

• Identifying variances between the project baseline and the project outcome.

• Evaluating the impact of the identified variances on project cost, schedule, perfor-mance, and scope.

Report Performance OutputsSeveral outputs result from performance reporting.

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Output DescriptionPerformance reports An arrangement and review of collected information in which

analysis results are compared to the performance baseline.Techniques such as variance analysis and forecast data areused to create performance reports.

Organizational process assets updates Include lessons learned and report formats. Lessons learnedare documented to become part of the database for the cur-rent project and performing organization, and should includecauses of issues and reasoning behind corrective action cho-sen.

Change requests Requested changes are generated as analysis of project per-formance takes place. Changes such as recommendedcorrective and preventive actions are processed through theperform integrated change control process.

Components of a Performance ReportPerformance reports mainly serve the purpose of making the actual vs. baseline infor-mation with forecasted results available in a consolidated manner. It may be simple ormore detailed. A simple report may contain information on the project scope, time,cost, and quality, whereas the detailed report may also contain components such as:

• Inferences of the past analysis

• Current risk status

• Work completed

• Work to be completed

• Summary of approved changes

• Variance analysis results

• Forecasted results

Examples include: SV, CV, SPI, CPI, EAC, and ETC.

Forecasting MethodsForecasting methods are classified into various categories.

Category DescriptionTime series methods Estimation of future outcomes is based on historical data.

Some of the methods under this category include earned valueand moving average.

Causal or econometric methods Forecasting the factors that may influence the identified vari-ables, by combining economic theories and statisticalinformation. Some of the methods under this category includeregression analysis and econometrics.

Judgmental methods Forecasting by intuitive methods and probability estimates.Some of the methods under this category include compositeforecasts, Delphi method, and surveys.

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Benefits of Creating Performance ReportsSome of the overall benefits of creating performance reports include:

• Analysis of the current status of the schedule and budget.

• Feedback to team members and work package owners.

• Communication with upper management and customers.

• Early identification of variance.

• Early implementation of corrective actions.

How to Report on Project PerformanceIdentifying variance to performance as early as possible helps the team pinpoint programmaticand administrative problems that may need to be resolved and enhances the team’s ability toimplement corrective actions early enough to make a difference. Final performance reports pro-vide historical information that may improve the likelihood of success for future projects.

Guidelines:To effectively report project performance, follow these guidelines:

• Analyze work results against planned performance based on performance elementsdefined during the planning processes.

— Involve the team members who are closest to the work in the data analysis.They are the people who understand the work and can probably identifyappropriate corrective actions for resolving variances.

— Use EVM techniques to assess cost and schedule progress against plannedperformance.

— Evaluate the results of corrective actions to determine whether they have pro-duced the desired results.

• Hold performance reviews to communicate and assess project status and/orprogress.

— Keep meetings productive and concise by creating meeting rules that every-one clearly understands and agrees to follow.

— Define the start and stop times.

— Prepare and distribute a written agenda.

— Make sure the people presenting are ready and understand their role in themeeting.

• Consult your project management plan’s subsidiary plans for guidelines and pro-cedures for reporting on the various aspects of project performance.

— Consult the procurement management plan for guidelines and procedures foranalyzing and reporting contractor cost, schedule, and technical performance.

— Consult the cost management plan for guidelines and procedures for analyz-ing and reporting project cost performance.

— Consult the schedule management plan for guidelines and procedures for ana-lyzing and reporting project schedule performance.

— Consult the quality management plan for guidelines and procedures for ana-lyzing and reporting project quality performance.

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• Determine the type of report needed for the information being reported. Makesure that the format of the report adequately provides the type of information andlevel of detail required by various stakeholders. Refer to the communicationsmanagement plan for information regarding stakeholder needs.

• Prepare performance reports that provide the required information in a format thatenhances understanding of the material. Formal reports should contain:

— A cover page with the project name, project manager’s name, type of report,and date of report.

— A narrative description of the project’s actual accomplishments for the report-ing period as compared to the goals established for the period. Thedescription should include qualitative and quantitative terms if possible. Inaddition, any changes implemented or anticipated should be described.

— Interim performance reports should include a forecast of how the project isexpected to perform in the future.

— End of project reports should include a brief description of major accom-plishments, an evaluation of the project’s performance (including in-housestaff and contractor performance), an explanation of any variances in the per-formance and project objectives, and any future plans for the project.

— Appendices, which may include any supporting material that contributes toan understanding of the project and its progress to date, such as charts,tables, and samples.

— If available, use standard formats for status, progress, and forecasting reports.These standard formats should be specified in the communications manage-ment plan or as part of the PMIS.

• Balance the cost, time, and logistics of preparing performance reports against thebenefits gained by the reporting.

• Measure and monitor performance the same way throughout the project life cycleso that meaningful comparisons can be made.

Example: Reporting the Performance of a Construction ProjectThe project team for a construction project has completed the first phase. Before mov-ing on to phase two, the executive board asks the project manager to prepare a mid-project report. The project manager assembles the team and discusses the requirementsof the report and explains its value in terms of future development for the remainingwork on the current project and for future projects.

The team takes a few days to evaluate the project’s accomplishments against expectedperformance and to discuss and document lessons learned. Because they have regularlymonitored and documented project progress and held performance review meetings,they have solid data to evaluate.

Their mid-project report uses the standard format specified in the communicationsmanagement plan and consists of the following information as required by the plan: acover page, a narrative description of accomplishments as compared to establishedgoals, interim performance reports and end of project reports, and any appendices orsupporting materials. The comparison section also includes a table showing the earnedvalue information for phase one development.

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DISCOVERY ACTIVITY 13-2Reporting Project Performance

Scenario:There were some unexpected delays in the OGC’s Seattle New Store project due to the prob-lems with the HVAC installation and other contractor problems. You and your project teamhave minimized the impact of these issues; however, senior management is concerned as tohow the actual schedule and costs performance compare with their original baselines.

1. You need to provide a progress report to senior management. What should your firststep be in gathering data for your report?

a) Hold performance reviews.

b) Consult subsidiary plans for guidelines on reporting project performance.

c) Prepare a professional performance report.

d) Include in the report EV measurements for SV and CV with appropriate action plansto remedy any variances.

2. After you completed your analysis of work results, you held project deliverables per-formance reviews with project team members to assess project status. You havegathered all relevant data necessary for completing your progress report. Given thecost and schedule concerns of senior management, what type of report format shouldyou prepare?

3. Since project baselines have shifted, one of the team leads for the project suggeststhat you should alter the format of the progress report before handing it off to seniormanagement. She says that extensive enhancements to the graphic elements are nec-essary to truly express the major points of the report. Should you implement hersuggested changes?

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Lesson 13 Follow-upIn this lesson, you monitored and controlled quality and reported performance of the project.Managing project quality ensures that the project meets your stakeholder’s quality require-ments. Reporting project performance keeps the stakeholder informed of the project progressand helps them make appropriate decisions regarding project status.

1. What quality control methods have you used in the past? Were they effective? Why orwhy not?

2. What steps do you plan to take to ensure that your future performance reports areeffective?

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NOTES


Monitoring and ControllingProject Risks andProcurements

In this lesson, you will monitor and control project risks and procurements.

You will:

• Monitor and control project risk.

• Administer project procurements.


LESSON 14

Lesson 14: Monitoring and Controlling Project Risks and Procurements 463


IntroductionDuring project planning, you developed a risk management plan that describes how the projectteam will respond to identified risks. Now that your project is in full swing, you need to con-tinue to monitor project work and contracts for new and changing risks. In this lesson, you’llcontinue to monitor and control the project, focusing on project risk and procurements.

Monitoring and controlling project risks may involve choosing alternative strategies, executinga contingency plan, or taking corrective actions to keep the project on track. If an assessed riskchanges during the project’s life cycle, it’s important to analyze it quickly to determine if athreat or opportunity may result. As the project manager, your command of the tools and tech-niques to monitor and control project risks and procurements will enhance your ability tosuccessfully complete your project.

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LESSON 14



TOPIC AMonitor and Control Project RisksIn prior process groups, you developed a risk management plan and a risk response plan tocontrol project risks. During project execution, you will need to implement those plans. In thistopic, you will monitor and control project risks.

You’ve identified the project risks, quantified and ranked them, and planned an appropriateresponse to each risk. That’s just the beginning. When risk events occur, it’s up to you, asproject manager, to implement your risk plans in the face of predicted and unforeseen risks.Effective project risk monitoring and control ensures that you respond in a reasoned manner.

The Monitor and Control Risks ProcessThe monitor and control risks process is the process of responding to identified and unforeseenrisks. It involves tracking identified risks, identifying new risks, implementing risk responseplans, and monitoring their effectiveness. During the monitor and control risks process, youwill constantly monitor your project for the introduction of new risks in addition to monitoringtriggers for the risks already identified.

When new risks surface, they must be documented and analyzed, and a response plan must beselected using the risk analysis and response planning processes. As the project progresses,risks change. Constant monitoring is essential. Risk monitoring and control is iterative andongoing, and takes place throughout the project life cycle.

Figure 14-2: The monitor and control risks process.

Monitor and Control Risks InputsMonitoring and controlling project risks includes several inputs.

Input DescriptionRisk register Identifies risks, risk owners, actions to respond to risks, char-

acteristics of risks, and a watch list of risks of low priority.

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Input DescriptionProject management plan Contains the risk management plan, which includes risk toler-

ances, risk owners, protocols, human resources, time, andother resources allocated for project risk management.

Work performance information Items relating to risk monitoring and control such as deliver-able status, corrective action, and performance reports.

Performance reports Information on project work performance that may affect theprocesses of risk management or the actual occurrence of risk.

Monitor and Control Risks Tools and TechniquesA project manager uses several tools and techniques to monitor and control project risk.

Tools and Techniques DescriptionRisk reassessment The risk register should be reassessed at project team status meet-

ings. Tasks in risk assessment require the identification of new risks,reassessment of current risks for their probability and impact, andthe closure of outdated risks. The extent of risk assessment at thestatus meetings depends on how the project is flowing compared toits objectives. For example, if an unanticipated risk develops, it maybe necessary to have additional response planning.

Risk audit Examines effectiveness of the team’s risk response efforts. Riskaudits are performed as per the risk management plan schedules andare conducted during project review meetings or in separate riskaudit meetings.

Variance and trend analysis Project trends should be reviewed using data collected on perfor-mance. Results from trend analysis may forecast a difference of costand schedule from their initial targets. Any variation from the planmay result in threats or lost opportunities on the project.

Technical performance measure-ment

A comparison of the project’s technical accomplishments to theplanned accomplishments as outlined in the project plan. Any differ-ences can help predict if the project scope will be achieved.

Reserve analysis Makes a comparison of the amount of contingency reserves to theremaining amount of risk to decide if the reserve is sufficient.

Status meetings Project risk management should be on the to-do list at project statusmeetings. The time it takes to address the issue depends on whatrisks have been identified, their priority, and complexity of response.

Monitor and Control Risks OutputsMonitoring and controlling project risk results in several outputs.

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Output DescriptionRisk register updates Includes results from risk assessments, risk audits, and periodic

risk reviews that may include updates to probability, impact,priority, response plans, ownership, and risks that are no longeractive; also includes results of project risks that can help infuture risk planning. This will complete the records of riskmanagement, and is part of the close project or phase processand project closure documents.

Organizational process assets updates Project risk management processes should be documented inthe organizational process assets to be references in futureprojects. The probability and impact matrix, risk register, andrisk breakdown structure can be updated at project closeout.Lessons learned from project risk management activities can beadded to the lessons learned database. Cost and project activitylength can be added to the organization’s database.

Change requests Anything that deviates from the project baseline results inchanges to the project management plan. These changes aresubmitted through the perform integrated change control pro-cess as an output of the monitor and control risks process.Approved changes become inputs to the direct and manageproject execution process and monitor and control risks pro-cess. Change requests can include recommended correctiveactions, namely contingency plans and workaround plans.Change requests can also include recommended preventiveactions that are used to make sure the project is following theguidelines of the project management plan.

Project management plan updates The project management plan needs to be revised and reissuedif any approved changes have an effect on risk managementprocesses.

Project document updates Various project documents that require updates include theassumptions log, technical documentation, contract terms, andthe schedule and cost baselines.

The Project Risk Response AuditA project risk response audit is the process of examining the team’s ability to identify risks,the effectiveness of risk response plans, and of the performance of risk owners. The audit maybe conducted by a third party, by the project’s risk officer, or by other qualified personnel.

The auditor reviews the risk response plan and data concerning project work results to deter-mine whether the planned responses to identified risks are producing the desired results interms of avoiding, transferring, or mitigating risk. In addition, the auditor evaluates the perfor-mance of the risk owner in implementing the response plan. The auditor documents the resultsof the audit and makes recommendations for improvement in the project’s risk managementefforts.

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Figure 14-3: Risk response audit for a project.

How to Monitor and Control Project RisksMonitoring and controlling project risks ensures that appropriate responses to risk events areimplemented.

Guidelines:To effectively monitor and control project risks, follow these guidelines:

• When an event affects the project objectives, consult the risk response plan toexecute actions as mentioned in the risk response plan.

• Monitor the environment for any new risks that may arise due to:

— Changes in the project objectives. Any change to the overall cost, schedule,or quality/performance level of your project will change your overall riskpicture.

— Changes to scope. Whether the scope of the project increases or decreases,the risk picture changes. For example, increasing the scope of the projectwithout assessing the impact on time or cost can spell disaster. Changes inscope require iterating the risk management process.

— Changes within the organization, such as restructuring within functionaldepartments that may mean some of the resources you were counting on willno longer be available for assignment to the project.

— Changes outside of the organization, such as technological changes, changesin industry standards, economic or market changes, or legal/regulatorychanges.

• Monitor the effectiveness of the risk response plan, as well as the contingency andfallback plans laid out in the risk response plan. Make sure your monitoring isdone in accordance with the policies and procedures defined in the risk manage-ment plan.

— Conduct project risk response audits to examine and document the effective-ness of the risk response plan and the performance of the risk owner.

— Perform earned value analysis to monitor overall project performance againstthe baselines. If the project is deviating significantly from the baseline, reiter-ate the risk identification and analysis processes.

— Conduct periodic project risk reviews that are part of the project schedule tocommunicate risk response effectiveness and to identify new risks or triggersthat may require additional response planning.

— Measure technical performance to determine whether variances are significantenough to warrant additional risk response planning.

— If the response plans are not effective in reducing or eliminating risk, con-sider implementing the fallback plan.

• Deal with unforeseen risks by systematically planning a reasoned response.

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— Develop workarounds for risks with low impact.

— Perform additional response planning for risks with significant impact onproject objectives.

• Update project documentation as changes are indicated.

— Keep the risk response plan up-to-date as risks occur and response plans arechanged or added.

— Issue change requests in accordance with the integrated change control sys-tem.

— Update performance baselines if the changes are significant.

— Update risk identification checklists to help manage risk in future projects.

• Manage the contingency reserve so that the additional time, money, and resourcesare utilized as planned.

Example: Monitoring and Controlling Project Risk for a Driver’s Safety VideoAs the project work for a driver’s safety video nears completion, the parent organiza-tion announces a restructuring of the department. As part of the restructuring effort,two of the project’s resources, one graphic designer and one video producer, are trans-ferred. The transfer of those resources will significantly impact the project and maycause some turbulence in the team.

In addition to their regular risk review meetings, the project manager calls an emer-gency core team meeting to develop a strategy for dealing with this new risk. The riskofficer and the project sponsor attend the emergency meeting, at which the groupbrainstorms alternative strategies in response to the risk.

Since two other projects have been canceled as part of the organization’s restructuringplan, other graphic designers are now available. Those resources will be distributedamong the various other projects that had lost resources. The new team members willneed to be trained.

With the deadline looming, the project manager allocates a portion of the contingencyreserves to cover the additional expenses that will be incurred to complete the videoproduction, which had to be outsourced. This is a serious setback because four videosstill need to be written and produced.

The multimedia lead takes ownership of this new risk. He hires a seller to edit the vid-eos using the in-house editing equipment. He collaborates on rewriting the scripts tomake use of stock footage rather than having to shoot new footage to produce the fourremaining videos. A risk response audit shows that the team’s response plan for deal-ing with this unforeseen risk was effective in reducing its impact on project objectives.The team updates the project’s risk database to reflect the actions taken and the resultsof those actions.

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DISCOVERY ACTIVITY 14-1Monitoring and Controlling Project Risks

Scenario:During the course of OGC’s New Seattle Store project, you receive an email from the electri-cal contractor outlining a 3-week delay in the Install and Terminate Electrical Devices activity,due to defective materials. The electrical contractor’s SOW states that if there is a potentialdelay, all subcontractors must inform you in writing within 48 hours of the onset of the delay,and the email meets this requirement. The project has already been significantly delayed due tosevere weather conditions. Although your risk analysis included a schedule contingency forweather conditions and the receipt of defective materials, this is a serious problem that threat-ens to further delay the project.

1. What action should you take in regard to the material delay?

a) Monitor the environment for new risks.

b) Conduct a project risk response audit.

c) Update performance baselines.

d) Consult the risk response plan.

2. You have developed a very robust risk response plan in the risk register. Based on thevendor performance report, you notice that chances of delay have now become veryhigh (from an earlier rating of high). You now need to decide what would be your nextstep.

a) Consult the risk response plan.

b) Follow the risk management process.

c) Implement the fallback plan.

d) Develop a workaround.

3. The contractor suggests that it might ultimately be more cost-effective to buy materi-als from another contractor, although the initial cost of materials will be higher. Doyou think this is an effective solution?

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TOPIC BAdminister Project ProcurementsYou selected a vendor to fulfill your project’s procurement requirements. Now you need toensure that the vendor’s performance meets the contract requirements. In this topic, you willadminister project procurements.

Whether or not you were involved in procurement negotiations, you must understand yourrights and responsibilities under the contract so that problems can be worked out with a mini-mum impact on project goals. Meanwhile, you need to be careful not to take actions that couldundermine your organization’s legal position, should litigation be necessary later on.

The Administer Procurements ProcessThe administer procurements process is the process of managing the relationship with theseller. During administer procurements, the project manager applies other project managementprocesses to the contractual relationship and integrates the coordination of the outputs fromthese processes into the overall management of the project.

The other project management processes include:

• Project plan execution to formally sanction the seller’s work to begin at the appropriatetime.

• Performance reporting to monitor seller cost, schedule, and technical performance.

• Quality control to ensure that the quality of the seller’s service or product meets contractobjectives.

• Change control to ensure that changes to the contract are carefully managed and properlyapproved.

• Monitor and control the project risks to ensure that the risks are mitigated.

Figure 14-4: The administer procurements process.

Administer Procurements InputsProject managers use several inputs for the administer procurements process.

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Input DescriptionProcurement documents The instructions that you provide to prospective sellers so that

they can completely and accurately respond to your request.These include the procurement SOW with description of thegoods or services to be purchased.

Project management plan Describes every management step of the procurement processstarting with development and ending with closing the contract.

Contract A mutually binding agreement that details the obligations of thebuyer and seller. One is given to each selected seller.

Performance reports Performance evaluation documentation for providers includestechnical documentation and other deliverables that are providedand meet the needs of the contract. Past performance recordswhen dealing with this vendor figure heavily in the decisionmaking for current and future vendor solicitation.

Approved change requests Any changes to the current contract may include the procure-ment statement of work, price, and the description of products,services, or results. All changes need to be in writing andapproved before implementation. However, any verbal, undocu-mented changes are not required to be processed orimplemented.

Work performance information These include amount of costs incurred, how quality standardsare being met and followed, and invoices. Performance reportsshow what deliverables have been completed and which stillneed to be accomplished. Invoices must be submitted to requestpayment. All documentation on invoices are established withinthe contract.

Administer Procurements Tools and TechniquesA project manager uses several tools and techniques to administer procurements.

Tools and Techniques DescriptionContract change control system A contract change control system is an offshoot of the overall

change control system, but dedicated specifically to controllingcontract changes.

Procurement performance reviews A review of the seller’s performance on project scope, quality,and the project’s associated schedule and costs as compared tothe contract. It can include a review of documentation submittedby the seller, inspections, or quality audits. The purpose of thisreview is to identify strengths and weaknesses with project per-formance, and to monitor the progress of schedules and tasks.

Inspections and audits Can be conducted during the project to identify weaknesses inhow the seller conducts work. This is outlined in the contract.Some contracts allow buyer procurement personnel as part oftheir inspection and audit teams.

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Tools and Techniques DescriptionPerformance reporting Performance reporting for administer procurements provides the

project management team with information about how the selleris doing in regard to meeting the contractual obligations. Thecontract performance reporting system is an offshoot of the over-all project performance reporting system, but dedicatedspecifically to reporting contract performance.

Payment systems Payments to the seller are made contingent on the acceptance ofthe delivered goods or services, and on the receipt of a validinvoice for the goods or services. Typically, invoices are sent tothe organization’s Accounts Payable Department. They, in turn,check with the project organization to verify that goods or ser-vices were delivered and accepted, and then authorize payment.

Claims administration When buyers and sellers cannot agree on changes, these disputesare referred to as claims or appeals. Claims are handled in accor-dance with contract terms, and are managed throughout the termof the contract. If the buyer and seller do not resolve the claim, itwill be handled according to the dispute resolution procedures inthe contract. Contract clauses may include arbitration or litigationand may be brought up after contract closure.

Records management system Contains processes, and controls functions and automation tools.It is used by the project manager to control procurement and con-tract documentation and records. This system is used to keeptrack of and retrieve documents and correspondence.

Administer Procurements OutputsAdminister procurements results in several outputs.

Output DescriptionProcurement documentation Includes the contract, schedules, and approved and unapproved

change requests. It can also include technical documentation,deliverables, seller performance reports, warranties, financial docu-ments, and results of contract inspections.

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There are several assets to update.

• Correspondence: Contract terms and conditions often needdocumentation of communications between the buyer andseller. Some documentation may include warnings of bad per-formance and contract change requests or verifications. Acomplete written record of all communication between thebuyer and seller is given to both parties.

• Payment schedules and requests: This is required if theproject has an external payment system. If an internal system isused, the output would just be payments.

• Seller performance evaluation documentation: Prepared bythe buyer to document the seller’s ability to comply with thecontract, to indicate if the seller will be hired for futureprojects, or to rate the quality of the seller’s work on theproject. These documents can indicate early contract termina-tion, or determine how contract penalties, fees, or incentivesare administered. Any results can be used in the qualified sell-ers list.

Change requests Can include changes in project direction by the buyer or through achange in seller actions. These changes can affect the project man-agement plan and subsidiary plans, the project schedule, and theprocurement management plan. Any changes need to be identifiedand documented in project correspondence.

Project management plan updates The procurement management plan is modified to includeapproved change requests affecting procurement management.Each contract management plan is modified to include approvedchange requests affecting contract administration. The baselineschedule is modified to reflect slippages that affect the overallproject performance and also the current expectations.Further, updates to the project management plan include anychanges to the contracts, human resource requirements, and theproject scope or cost baselines.

The Duties of the Procurements AdministratorOn a small project, the project manager may play the role of procurements administrator. On alarger project, the project manager may delegate this task to one or more team members andmonitor them.

In either case, the procurements administrator has several duties:

• Acting as contract compliance officer.

• Interpreting contract specifications and ensuring that its terms are met.

• Monitoring seller performance.

• Integrating sub-contracted elements.

• Managing change requests.

• Resolving disputes and managing payments.

• Dealing with contract breach, early termination, and so forth.

LESSON 14



Changes to Contract TermsEither party can propose contract change requests for any of the contract terms, includingscope, cost, delivery date, or quality of goods or services.

Contract Change DescriptionAdministrative changes These are non-substantive changes to the way the contract is admin-

istered. This is the most common type of contract change.Administrative changes should be documented and written notifica-tion sent to the seller with a clear expectation that the seller willapprove and return the change document. Administrative changesrequire no adjustment in payment.

Contract modification This is a substantive change to the contract requirements such as anew deadline or a change to the product requirements. Contractmodifications should be documented and a formal change ordershould be sent to the seller. Contract modifications may result inclaims for payment adjustment.

Supplemental agreement This is an additional agreement related to the contract but negotiatedseparately. A supplemental agreement requires the signatures of bothbuyer and seller. A separate payment schedule is attached for thework in a supplemental agreement.

Constructive changes These are changes that the seller may have caused through action orinaction. As a result of constructive changes, a seller is required tochange the way the contract is fulfilled. The seller may claim a pay-ment adjustment as a result of constructive changes.

Termination of contract A contract may be terminated due to seller default or for customerconvenience. Defaults are typically due to non-performance such aslate deliveries, poor quality, or non-performance of some or allproject requirements. Termination due to customer convenience mayresult due to major changes in the contract plans, through no fault ofthe seller.

Legal IssuesProject managers should be familiar with some of the common legal issues related to procure-ment administration.

Legal Issue DescriptionWarranty A promise, explicit or implied, that goods or services will meet a pre-

determined standard. The standard may cover features such as reliability,fitness for use, and safety.

Waiver The giving up of a contract right, even inadvertently.

Breach of contract Failure to meet some or all of the obligations of a contract. It may resultin damages paid to the injured party, litigation, or other ramifications.

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Types of WarrantiesAs a project manager, you may encounter several types of warranties.

Type of Warranty DescriptionExpress warranty If the pre-determined standard for quality or performance is

specified, either in a formal warranty or in the manufacturer’sdescription of the product, it is considered an express warranty.

Implied warranty If the pre-determined standard for quality or performance existsbut is not specified, it is considered an implied warranty. Thistype of warranty takes effect if the buyer depends on the sell-er’s expertise when making a purchasing decision. If youpurchase items that are widely available on the market, it isassumed that you are relying on the seller’s expertise in deter-mining that the goods are merchantable and fit for a particularpurpose.On the other hand, if you are a technical expert, and yourequire an unusual modification to the product or you intend touse the standard product in an unusual way, you won’t be ableto claim implied warranties.Similarly, if you provide detailed product specifications and theseller meets them, you won’t be able to claim that the sellerbreached an express warranty if the goods do not meet yourneeds.

Warranties of merchantability Implied warranties that require goods to be fit for ordinaryusage. Any sale of an item is subject to warranties of merchant-ability. The sale of an item for use in a particular project wouldmean that the item was also subject to warranty of fitness if itcan be proven that the seller knew how it would be used.

Warranties of fitness for purpose Implied warranties that require goods to be fit for the usage thatwas intended by the buyer.

Types of WaiversIt is possible for a party to a contract to explicitly waive a contract right. However, projectmanagers should be particularly aware of the ways in which they can inadvertently waive theircontract rights. These include:

• Accepting a product that fails to meet standards for quality or performance.

• Accepting late deliveries.

• Overlooking some other aspect of non-conformance to contractual obligations.

To protect against losses incurred by an inadvertent waiver of contract rights, some contractsare written to specifically exclude the possibility of waiving a specified right.

Breaches of ContractProject managers may encounter different types of breaches of contracts.

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Type of Breach DescriptionAnticipatory breach An unavoidable indication that the other party will not be able to produce

the performance necessary to fulfill the contract.

Fundamental breach A breach so serious that it negates the very foundation of the contract.

Material breach A serious breach that prevents the injured party from benefiting from thecontract. In a material breach, the injured party can claim damages, but isno longer obligated to fulfill any contract commitments.

Immaterial breach The contract has breached in such a way that there is no resulting damageto the injured party; since there are no damages, the injured party is notentitled to receive compensation. This is also called a minor breach.

Legal ExpertiseProject managers should have a general understanding of contracts and breaches ofcontracts, but they are not expected to be legal experts. The best way to protect your-self, your project, and your organization is to make sure that your legal department hasreviewed and approved any contracts before you sign them. As a general guideline,you should never sign a contract unless you are sure that you understand all of itsterms.

The Force Majeure ClauseForce majeure, or superior force, is a common clause added to contracts that addressesthe actions from both the parties when an extraordinary circumstance beyond the con-trol of either party occurs. The extraordinary circumstances include war, strike, riot,crime, or a natural disaster (a so-called “Act of God” that includes floods, earthquakes,and storms) that prevent one or both parties from fulfilling their obligations under thecontract.

However, the force majeure clause is not intended to excuse negligence or other mis-conduct by the parties and the nonperformance is caused by the usual and naturalconsequences.

How to Administer Project ProcurementsRegardless of project size, the project manager is responsible for administering procurementsfor the project. Experienced project managers always rely heavily on the contract administra-tion expertise of their organizations’ procurement, purchasing, and legal departments. Effectiveprocurement administration ensures that the seller’s performance meets contractual require-ments and objectives.

Guidelines:To administer procurements, follow these guidelines:

• Index and store all contract correspondence for ease of retrieval.

• Develop and implement an effective contract change control system. The systemshould be integrated with the project’s overall change control system and shouldinclude these elements:

— Forms and paperwork required to request a contract change.

— Contract performance-tracking mechanisms.

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— Procedures for submitting and approving change requests, including approvallevels based on cost or impact of change.

— Procedures for reviewing and resolving contract disputes.

• Evaluate the risk of each contract change request.

• Document all contract changes and incorporate any effects of the changes into theproject plan.

• Develop and implement an effective performance reporting system for the seller.The performance reporting system should include these elements:

— Baseline time, cost, and quality specifications.

— Actual time, cost, and quality specifications.

— Procedures for determining contract performance, including status reporting,on-site visits, and product inspection.

— Procedures for determining acceptance or non-acceptance of delivered goodsor services. These might include the options to accept the entire delivery,reject the entire delivery, or accept part of a delivery.

• Spell out in the contract any performance reporting specifications to be imposedon the seller.

• Set performance milestones to monitor project progress.

— Depending on your project, you might use partial deliveries, completion ofselected portions of the product, or preliminary versions of the finished prod-uct as milestones.

— Make sure the milestones are arranged and agreed upon with the seller aheadof time.

— Negotiate a deadline for each milestone, as well as quality and completenessspecifications for the milestone.

• If work is performed at another site, conduct site visits to determine how the sell-er’s work is progressing.

— Be sensitive to the cost of site visits in terms of time and impact on vendorrelationships.

— Schedule the visits up-front, set an agenda for each visit, and use only thetime required.

• Submit approved invoices for payment in accordance with the contract and theproject’s payment system.

Example: Administering a Contract for a Website ProjectWith his change request approved, Peter, a project manager, becomes responsible formonitoring the graphic artist’s contract for his company website project. Peter fills outa conversation log for each conversation he has with the artist about the project andfiles the conversation logs in the seller’s file.

Peter schedules meetings with the artist to monitor progress and to clarify expectationsif necessary. As partial deliverables are made according to pre-determined milestones,he reviews them for quality before signing and submitting the artist’s invoices to theAccounts Payable Department for payment. Peter places a copy of each invoice in theseller’s file.

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As the project team gets closer to completing the project, they decide to add anothersection to the website. This change to the project goes through the appropriate changecontrol system set up for the project. After being analyzed for its impact on projectcost, schedule, and quality, the change request is approved.

The additional section requires a modification to the contract for the design and pro-duction of the graphics for the new section. Peter negotiates the terms of the changewith the artist and submits a change request for the contract modification using thechange request form specified in the contract change control system.

This change request is also evaluated for its impact on project cost, schedule, and qual-ity before being approved and signed. Peter submits the request for the contractmodification to the Legal Department, who incorporates the change and sends themodified contract to the artist to sign and return. Peter then files the signed modifica-tion with the seller’s file.

The seller’s work goes smoothly with no legal issues. Eventually, the final deliverableis made and accepted and the seller submits her final invoice for payment. Peter signsand submits the invoice for payment and thanks the artist for a job well done.

DISCOVERY ACTIVITY 14-2Administering a Contract

Scenario:The OGC Training Roll-Out project is continuing through the execution processes. You haveselected InfiniTrain to develop the assessment and to deliver the project software training. Youhave been asked to administer the contract. InfiniTrain has done training for OGC in the past,with good results. However, since the Business Transformation Project kick-off is dependent onthe training being completed on time, you want to carefully monitor the work to stay ahead ofproblems and take actions early to mitigate the risk of delays.

1. The work done by InfiniTrain is scheduled to be completed in three phases. Whataction can you take to ensure that these deadlines are met?

a) Set performance milestones.

b) Document contract changes.

c) Implement a contract change control system.

d) Index all contract correspondence.

2. Your contact at InfiniTrain informs you that their primary project software instructorhas given her resignation. They have asked to push the training date out a week to getanother instructor up to speed. What action should you take?

a) Document contract changes.

b) Conduct an on-site visit.

c) Consult the contract change control system.

d) Negotiate a milestone deadline.

LESSON 14



3. InfiniTrain has informed you that they have completed the beta verification of theAssessment documents as specified in the contract. It is your responsibility as projectmanager to verify that all feedback was incorporated correctly. Upon your review, younotice that some of the alpha review feedback was not incorporated. What actionshould you take?

Lesson 14 Follow-upIn this lesson, you monitored risks, controlled component processes, analyzed the administerprocurements process, and administered project procurements. As the project manager, you areresponsible for monitoring the risks facing your project, controlling them appropriately, andexecuting the project contracts effectively so that you can successfully bring your project to itsconclusion.

1. How will developing and implementing an effective performance reporting system helpyou administer contracts on future projects?

2. How have changes to the business environment affected your project’s risk monitoringand control efforts?

LESSON 14



NOTES


Closing the Project

In this lesson, you will close the project.

You will:

• Close project procurements.

• Close the project or phase.


LESSON 15

Lesson 15: Closing the Project 483


IntroductionYou have successfully completed your last project deliverable and approved your last invoicefor payment. You are almost done! But first, you must properly close out the project. In thislesson, you will focus on the closing process group, which is the final project managementprocess group. You will close a project.

Unfinished business, contracts not correctly closed out, and poor documentation can turn intomonths of additional work and expenditures. The last thing you do on a project will be the firstthing people remember about your efforts overall. Mastering the tools and techniques of effec-tive project closure helps ensure that there are no loose ends that could unravel the good workof your team and the success of your project.

LESSON 15




LESSON 15



TOPIC AClose Project ProcurementsYou and your project team have successfully carried out your project plan, produced workresults, and controlled the project’s performance baselines. You also need to close any con-tracts with service providers and sellers who contracted for part of the project. In this topic,you’ll examine the close procurements process and close the necessary contracts.

Incomplete or inaccurate project records indicate poor organizational skills. Although you maynever have to go back into your procurement files, other project managers in your organizationmay want to use them as historical information for their projects. Properly closing a contractensures that contract records will serve as valuable information for future contracts and thatwork completed under contract was accomplished completely and correctly.

The Close Procurements ProcessThe close procurements process is the process of completing each project procurement byensuring that contractual obligations have been met on both sides and resolving any outstand-ing issues. It involves verifying that work was done and delivered as specified, updatingcontract records accordingly, and arranging for final settlement of contract obligations. Theclose procurements process supports the close project or phase process, as it involves verifyingif all the project deliverables have been accepted. Procurements are closed whenever contrac-tual obligations are satisfied. The same process is used for contracts that end successfully andthose that are terminated early for some reason.

Figure 15-2: The close procurements process.

Close Procurements InputsTwo inputs are necessary to begin the close procurements process.

Input DescriptionProject management plan Includes criteria for fulfillment of procurement contracts (such as

outsourcing or equipment rental), and documentation as towhether these contracts have been satisfied.

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Input DescriptionProcurement documentation Contains information about vendor performances on cost, scope,

quality, contract change notes, approved and rejected changes,payment notifications, and claims. These indexed documents areacknowledged and validated for contract closure. The documenta-tion is created when administering project procurements.

Close Procurements Tools and TechniquesSeveral tools and techniques are available to project managers for closing procurements.

Tools and Techniques DescriptionProcurement audits Evaluations of the effectiveness of the seller as well as the pro-

curement process itself.

Negotiated settlements The primary goal is to arrive at a final equitable settlement of alloutstanding issues, claims, and disputes by negotiation. The par-ties may resort to Alternative Dispute Resolution (ADR), whichincludes mediation and arbitration, if settlement cannot beachieved through direct negotiations held between the parties.

Records management system Part of the project management information system; indexes con-tract documents and correspondences, as well as assists in projectdocumentation archiving.

Close Procurements OutputsThere are two primary outputs of the close procurements process.

Output DescriptionClosed procurements Usually, the contract spells out the terms for contract accep-

tance and closure. At minimum, the seller should receive awritten notice of contract completion.

Organizational process assets updates Updates to the organization’s process assets might include:

• Procurement file: An organized, indexed, up-to-date setof records reflecting what occurred during the contract.

• Deliverable acceptance: Includes all formal documenta-tion from the buyer that accepts or rejects deliverables.

• Lessons learned documentation: Includes documenta-tion of lessons learned, project experiences, and processimprovement recommendations.

The updated project files serve as a historical archive of theproject and act as an input to future contracting decisions oras evidence in future litigation.

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Procurement AuditsDefinition:

A procurement audit is a formal evaluation of both the seller’s performance of the con-tract, and the effectiveness of the procurement process itself. The goal of the audit is toestablish a record that may be used to shape procurement practices in other contractsfor this project, or for other projects.

Example: Second Grade Phonics Textbook Sellers EvaluationA project manager asked each of his core team members to evaluate the sellers theyhad used during the course of the project for a new second grade phonics textbook. Hegave the team leads a checklist and asked them to answer each of the questions thatwere relevant to the type of contract used. Randy, the multimedia lead, used over 50freelance illustrators, video producers, audio producers, photographers, and animatorsthroughout the project. Randy developed a template to use for each seller.

This is an example of an effective procurement audit because it provides valuableinformation regarding the seller’s performance that will be helpful on future projects. Italso provides lessons learned information that will increase the freelance illustratordatabase.

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Figure 15-3: A sample procurement audit document.

Elements of Procurement AuditsProcurement audits seek to answer several questions about the procurement process.

• Were the seller’s responses in bids or proposals useful in conducting pre-contract assess-ments for consistency and compliance with rules and standards?

• Were the contract specifications completed as specified, and were all terms and conditionsmet?

• Were the quality, timeliness, and cost acceptable?

• Were the seller’s project management, contract management, financial management, andcommunications management practices acceptable?

• Was the seller able to accommodate requested changes?

• Was the seller ensuring conformance during process audits?

• Were the members of the seller’s staff acceptable? Did any individuals merit special rec-ognition?

• Was there anyone you would not recommend for future assignments?

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• Were there areas for improvements?

• What were the lessons learned from this contract?

Procurement Audit Lessons LearnedThe lessons learned from a procurement audit can be invaluable information for future con-tracts. For example, the contract structure or payment terms that seemed appropriate at the startof the contract may have acted as disincentives to performance during the contract itself. Byincluding as much anecdotal detail in the lessons learned as possible, you help others in theorganization apply the learning to their situations.

How to Close Project ProcurementsProcedure Reference: Close Procurements

To properly close project procurements:

1. Ensure that all required products or services were provided by the seller.

2. Make sure that any buyer-furnished property or information was returned to thebuyer.

3. Settle any outstanding contracting issues. Are there any claims or investigationspending on this contract?

4. Conduct a procurement audit to identify successes and failures of the procurementprocess and to evaluate the performance of the seller.

5. Address any outstanding invoices and payments.

6. Archive the complete contract file with the project archives.

7. Provide the seller with formal written notice that the contract has been completed.

Special Issues in Contract CloseoutThere are a number of special issues that may impact contract closeout.

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Issue DescriptionIncomplete contract closeout • Contracts may be terminated early due to seller non-

performance, or through no fault of the sellerwhatsoever.

• If a project is shut down prematurely due to issueswithin the customer or project organization, how doesthat impact contract closeout? In this situation, the con-tract itself will probably provide guidance as to how todeal with early termination.

• For example, the contract may have a clause thatspecifies that either side may withdraw from the con-tract with 30-days written notice to the other side.During the 30-day notice period, the seller may con-tinue working on the project, tying up loose ends,taking receipt of material ordered for the project, andso forth. Once the project has been terminated, theproject manager should take whatever steps are nec-essary to provide the appropriate written notice assoon as possible, in order to start the terminationclock.

• In addition, an explanatory call to the seller inadvance of the written notice is an expected cour-tesy. If the contract ties payment to specificdeliverables, the procurement audit should verify thatdeliverables were received as specified, and thatinvoices reflect only those deliverables that werereceived. Issues of time, cost, and quality are stillrelevant.

• Be sure to evaluate these issues based on the versionof the deliverable you are paying for, rather than forthe final deliverable. For example, say the seller wascontracted to supply a beta version of the product inJanuary, and a final version in March. The project iscanceled in February.

• The product quality audit should be based onwhether it met the specifications for a beta product,not for a final product.

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Issue DescriptionSeller staff evaluations • In some cases, sellers will request that you participate

in evaluating their staff members who are participatingon your project.

• In other cases, you may wish to send letters of com-mendation to a seller, in order to recognize theperformance of some of their staff members.

• Your organization may have a policy that limits yourparticipation in evaluating the ongoing performance ofseller staff. You should consult this policy before pro-viding any sort of written performance evaluation.

• Most organizations allow letters of commendation thatrecognize the contribution of particular seller staffmembers. This practice is highly motivating to theseller staff.

• Usually, a copy is sent both to the staff member indi-vidually as well as to the seller organization.

DISCOVERY ACTIVITY 15-1Closing a Contract

Data Files:

• Tri-Mark_SOW

• RTL_Quote

Before You Begin:From the C:\085042Data\Closing the Project folder, open the Tri-Mark SOW and Project\RTL_Quote documents.

Scenario:The store sidewalk work package for the OGC Seattle New Store project is wrapping up.According to the Tri-Mark_SOW document, the sidewalk is complete and the landscape archi-tect’s plans have been returned. You receive a final invoice from Rudison Technologies Ltd.(RTL), the subcontractor for the concrete work, based on their quote for the job (as detailed inthe RTL_Quote document). You also receive a telephone call from the store manager, Justine,who tells you there is excess concrete and other debris behind the store and a small crack inthe new sidewalk.

LESSON 15



1. Based on the information you have, can you close out the contract with the subcon-tractor?

a) Yes, the contract has been fulfilled.

b) No, the contract has not been fulfilled.

c) You cannot determine this until a procurement audit has been completed.

d) You cannot determine this until the seller completes a staff evaluation.

2. What would you do to resolve incorrect or unsatisfactory contract work in the situationdescribed in the scenario?

3. RTL returned to the work site and resolved the outstanding contract issues and com-pleted the cement work correctly and satisfactorily. Can you close out the contract?Why or why not?

4. Would you include a seller evaluation in your procurement audit? Why or why not?

TOPIC BClose the Project or PhaseAdministrativelyYou and your project team have successfully carried out your project plan, produced workresults, and controlled the project’s performance baselines. It is time to tie up all the looseends and close your project or phase. In this topic, you’ll perform the administrative portion ofproject or phase closure.

Ending a project or phase requires the same care and attention as starting the project or phase.As a project manager, the way in which you end your project or phase says a great deal aboutyou to your stakeholders. Obtaining formal acceptance of your project’s or phase’s final prod-uct, service, or result ensures that the project or phase is properly closed.

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The Close Project or Phase ProcessThe close project or phase process involves closing out all project activities and formally end-ing the project or, in the case of multi-phase projects, closing out a specific project phase.During this process, the project manager reviews all previous documents and the project man-agement plan to ensure that all project work is complete, the objectives are met, and theproject can be considered to be closed. This process also establishes procedures that help vali-date and document deliverables, formalize acceptance of those deliverables, and document thereasons for termination and any actions taken if a project has not been successfully completed.The process includes activities required for closing the project or phase administratively.

Figure 15-4: The close project or phase process.

Close Project or Phase InputsSeveral inputs are necessary to initiate the close project or phase process.

Input DescriptionProject management plan Contains key information, including descriptions of the

deliverables and criteria for their delivery.

Accepted deliverables Include deliverables that have met the acceptance criteria andhave been formally signed off by the customer.

Organizational process assets Include existing guidelines or policies about project closure, his-torical information, and the lessons learned from previousprojects.

Close Project or Phase Tools and TechniquesOnly one tool and technique is available to project managers while closing a project or phase.

Tools and Techniques DescriptionExpert judgment Either internal (experienced managers) or external (consultants) persons

can provide expert guidance during the closing process.

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Close Project or Phase OutputsThere are two main outputs of the close project or phase process.

Output DescriptionFinal product, service, or result tran-sition

The official delivery and acceptance by the customer or sponsor.Ideally, this acceptance is documented in writing for storage inthe project archives.

Organizational process assetsupdates

Updates to the organization’s process assets include:

• Project files: Documents resulting from project activities thatinclude project management plan, project calendars (scope,cost, schedule, and project), risk registers, change managementdocumentation, planned risk response actions, and risk impactdocuments.

• Project or phase closure documents: Includes completionand transition documents.

• Historical information: Includes historical project documenta-tion and lessons learned, which are transferred to theorganization’s knowledge base for use by future projects orphases.

Administrative ClosureAdministrative closure involves verifying and documenting project results to formalize projector phase completion. During the administrative closure process, the project team gathers andupdates project documentation and relevant records and reports. Project results are comparedagainst customer and stakeholder expectations and requirements. A properly completed admin-istrative closure process ensures that the project or phase requirements were met and formalacceptance was granted.

Project Records to ArchiveDuring administrative closure, it may be beneficial to archive selected project records:

• The project management plan with its subsidiary plans and supporting detail.

• Project performance records, audit reports, and financial records.

• Contract documentation.

• Copies of all communications, status reports, meeting minutes, and change requests.

• Relevant project databases.

• Staff evaluations.

• Lessons learned reports and the final project report.

• Formal acceptance documentation.

Outstanding ItemsIt may be helpful to construct a checklist of outstanding items that must be resolved,addressed, or completed before the customer will accept the final work results. Makesure to include the actions taken to resolve any outstanding issues and any time framesassociated with completion.

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Lessons Learned ReportsDefinition:

Lessons learned reports are documents that capture salient and helpful informationabout the work done in a project or a project phase; they identify both the projectteam’s strengths and areas for improvement. They can be formal or informal, depend-ing on the organizational norms or requirements. They are compiled for the benefit offuture project teams, so that people can capitalize on the organization’s knowledgebase about work that has already been done and avoid repeating mistakes and alsobenefit from ongoing organizational learning.

Example: Lessons Learned When Launching a New Product LineAfter a particularly challenging project involving the launch of a new product line, theproject manager compiled a lessons learned report. The information came from severalsources, including a final meeting with key team members and stakeholders, at whichthe participants were asked about what went well on the project and what they woulddo differently next time. The project manager documented their responses into a reportfor future reference; it captured the challenges that had been overcome, suggestionsthat were generated, and other lessons that had been learned.

Considerations of Lessons LearnedDuring administrative closure, project managers should take into account some considerationsof lessons learned.

Consideration DescriptionScheduling lessons learned These include any relevant scheduling problems or issues. They

also document the management strategies that were implementedto deal with schedule or resource constraints.

Conflict management lessons learned These include any issues that arose within the team or betweenthe team and customers. They include documentation of thenature and source of the conflict as well as the impact that theconflict had on the project. The documentation should alsospecify how management intervened in response to the conflict.

Sellers lessons learned New seller experience and performance should be documentedand provided to the procurement department.

Customer lessons learned If a customer is excessively litigious or unreasonable to workwith, that information should be conveyed to the sales and legaldepartments as well as documented in the lessons learned reposi-tory.

Strategic lessons learned Strategic lessons learned are those that typically impact someaspect of the organization’s project management methodology orsignificantly improve a template, form, or process. These addressthe questions: Can we reuse this project’s artifact to get moredone with the same resources and/or deliver work sooner?

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Consideration DescriptionTactical lessons learned Those that answer the question: If we were to do this type of

project again, what should we stop, start, and continue so that wecan execute flawlessly? They focus on developing recommenda-tions, reviewing recommendations with other managers in otherdepartments, developing implementation plans, and implementingthose plans.

Other aspects of lessons learned Project managers should take into account scope, schedule, cost,quality, and customer satisfaction, as well as any correctiveaction taken in response to issues.

Closeout MeetingsDefinition:

Closeout meetings are sessions held at the end of a project or phase; they involve dis-cussing the work and capturing lessons learned. Closeout meetings may includestakeholders, team members, project resources, and customers. They typically follow aformal agenda and may require official minutes to be recorded. Not all organizations orprojects require closeout meetings. Some organizations require the minutes from close-out meetings to be completed in full, approved by management, and preserved in aspecific manner.

Varieties of Closeout MeetingsSome organizations require official closeout meetings so that they can obtain the cus-tomers’ formal project acceptance, while others use them as an opportunity to discussthe project with the customers as a prelude to soliciting additional business. Otherorganizations use closeout meetings for internal purposes, for the edification of thestaff and improvement of internal processes. From an organizational standpoint, goodendings lead to good beginnings on subsequent projects.

Example: Fire Safety Closeout MeetingsA project manager responsible for fire safety equipment and inspections would hold acloseout meeting at the conclusion of the inspection process. He would invite thestakeholders, project team members, and representatives from the fire marshal’s office.They would review inspection documentation records; complete and sign inspectioncertificates; review, approve, and sign the plans for evacuation procedures; and docu-ment the inspections and testing of fire safety equipment. Those signed, officialdocuments would be filed both with the fire marshal and at the company in accordancewith fire safety procedures.

LESSON 15



How to Close the Project or PhaseProcedure Reference: Close a Project or Phase

Each phase of the project must be properly closed to ensure that valuable informationis safeguarded for future projects. To properly close a phase or project, follow thesesteps:

1. Some organizations and application areas have a project termination checklist thatmay be useful when closing out a project or phase. You may find it useful to pre-pare one if there is not one available. This helps to ensure that you are thoroughin your administrative closeout.

2. Gather and organize performance measurement documentation, product documen-tation, and other relevant project records for ease of review by stakeholders.

3. Release project resources.

4. Update records to ensure that they reflect final specifications. Be sure to updatethe resource pool database to reflect new skills and increased levels of proficiency.

5. Analyze project success and effectiveness and document lessons learned.

6. Prepare lessons learned reports and a final project report.

7. Obtain project approval and formal project acceptance. Demonstrate to the cus-tomer or sponsor that the deliverables meet the defined acceptance criteria toobtain formal acceptance of the phase or project. This may involve preparing anend-of-project report or giving a presentation.

8. Archive a complete set of indexed project records.

9. Celebrate the success of the project with the team and other stakeholders.

DISCOVERY ACTIVITY 15-2Closing a Project

Scenario:Your good project planning and control has resulted in the OGC PM Training Roll-Out projectcoming to a successful close. The final project deliverable is complete. You have collected theperformance measurement reports and updated product documents and other relevant projectrecords for archiving. Before you can close your project, you need to obtain formal projectapproval from the project sponsor. You have scheduled a meeting for the following afternoon.

1. Are your project records ready for review by the project sponsor? Why or why not?

LESSON 15



2. What document will you prepare before obtaining formal acceptance from your projectsponsor to officially complete the project?

3. In this case what might constitute formal acceptance?

4. What types of documentation or computer files should you store in the projectarchives?

Lesson 15 Follow-upIn this lesson, you learned how to effectively close a project. Your efforts to create a smoothand orderly closure will help shape stakeholders’ perceptions of the overall project. In addition,effectively closing the project provides valuable lessons learned and input for your organiza-tion’s future projects.

1. What steps do you plan to take to improve the project closure process in the future?

2. How will compiling a formal lessons learned report help you manage future projectsmore effectively? Explain your ideas.

LESSON 15



Follow-upIn this course, you discovered how to manage projects by applying the generally recognizedproject management knowledge and processes acknowledged by the PMI. You now have theskills and knowledge you need to successfully manage projects in your organization by apply-ing a standards-based approach to most projects, most of the time, across industry groups. Youcan use these widely recognized tools and techniques on the job to effectively initiate, plan,execute, control and monitor, and close projects across application areas and industries.

1. How do you think that applying a standards-based approach to project managementwill help you be successful in managing future projects?

2. How is the planning process group helpful to you during project execution? What arethe areas that you would concentrate the most when planning for your project?

3. How do you anticipate using the project management skills learned in this course toyour advantage in your current position?

What’s Next?This course provided you with a solid foundation in the generally recognized good practices onmost projects, most of the time, across industries including Construction, Manufacturing, Edu-cation, Government, Engineering, Health Services, Consulting, and Information Technology. Toexpand your breadth of knowledge, consider taking the Project+ course, which delves into theunique challenges of managing IT projects and may help you to prepare for professional certi-fication in CompTIA Project+.

FOLLOW-UP



PMP® Certification Mapping

Project Management Professional (PMP)® Certification: Fourth Edition maps directly to theobjectives of the PMP® Certification Exam and aligns to the Knowledge Areas and ProjectManagement Process Groups outlined in the PMBOK® Guide, Fourth Edition. The followingtable lists the project management tasks that will be assessed on the PMP® Certification Examand where they are covered in this course.

Map to PMP® Certification Objectives Lesson & TopicInitiating the Project

Conduct Project Selection Methods 2B

Define Scope of Project 3C

Document Project Risks, Assumptions, and Constraints 7A, 7B

Perform Stakeholder Analysis 2E

Develop Project Charter 2D

Obtain Project Charter Approval 2D

Planning the Project

Record Detailed Customer Requirements, Constraints, and Assumptions 2D, 3B, 3C

Identify Project Team and Define Roles and Responsibilities 9C

Create the WBS 3D, 4A, 4B, 4C, 4D

Develop Change Management Plan 11C

Identify Risks and Define Risk Strategies 7A, 7B, 7C, 7D, 7E

Obtain Plan Approval 3A

Conduct Kick-off Meeting 9D

Executing the Project

Execute Tasks Defined in Project Plan 9A

Ensure Common Understanding and Set Expectations 9C

Implement the Procurement of Project Resources 8A, 8B, 8C, 10A,10B, 10C

Manage Resource Allocation 6B

Implement Quality Management Plan 6A, 9B

APPENDIX A

APPENDIX A

Appendix A: PMP® Certification Mapping 501


Map to PMP® Certification Objectives Lesson & TopicImplement Approved Changes 9A

Implement Approved Actions and Workarounds 9A

Improve Team Performance 9D

Monitoring and Controlling the Project

Measure Project Performance 13A, 13B

Verify and Manage Changes to Project Scope, Schedule, and Costs 11A, 11C, 11E, 12A,12B

Ensure Project Deliverables Conform to Quality Standards 13A

Monitor Status of Identified Risks 14A

Closing the Project

Formalize Final Acceptance for the Project 15B

Obtain Financial, Legal, and Administrative Closure 15A, 15B

Release Project Resources 15B

Communicate Lessons Learned 15B

Distribute Final Project Report 15B

Archive Project Records, Information, and Documents 15B

Measure Customer Satisfaction 15B

Professional and Social Responsibility

Ensure Personal Integrity and Professionalism 1B

Contribute to the Project Management Knowledge Base 1B

Enhance Personal Professional Competence 1B

Promote Interaction Among Team Members and Stakeholders 1B

APPENDIX A



Updates to the PMBOK® FourthEdition Guide

The release of the PMBOK® Guide, Fourth Edition by the PMI continues to provide excellencein the project management profession. This standard greatly focuses on maintaining consis-tency in the usage of process names and bringing clarity to the content that is easy tocomprehend and implement.

The following are the major differences between the third and fourth editions of the PMBOK®

Guide.

• The usage of verb-noun format for all the process names.

• The decrease of 44 processes to 42 with few process changes.

• Deleted two old processes: Develop Preliminary Scope Statement and Plan Scope.

• Added two new processes: Collect Requirements and Identify Stakeholders.

• Reorganized six processes as four in the Project Procurement Management knowl-edge area.

• Combined the Plan Purchases and Acquisitions and Plan Contracting processesas the Plan Procurements process.

• Combined the Request Seller Responses and Select Sellers processes as theConduct Procurements process.

• Changed the Contract Administration process to the Administer Procurementsprocess.

• Changed the Contract Closure process to the Close Procurements process.

• Renamed two processes.

• Manage Stakeholders to Manage Stakeholder Expectations.

• Close Project to Close Project or Phase.

• Moved the Manage Project Team and Manage Stakeholder Expectations processesfrom the Monitoring and Controlling process group to the Executing process group.

• A differentiation between the project management plan and the project documents hasbeen provided.

• A clear distinction between the elements of the project charter and project scope statementis accommodated.

APPENDIX B

APPENDIX B

Appendix B: Updates to the PMBOK® Fourth Edition Guide 503


• A standardized approach is adopted for documenting inputs and outputs.

• A clear distinction between the enterprise environmental factors and organizational pro-cess assets has been made throughout the processes.

• A defined approach for discussing requested changes, preventive actions, correctiveactions, and defect repairs is employed.

• A new appendix describing the key interpersonal skills necessary for a project manager isgiven.

APPENDIX B



Due to classroom setup constraints, some labs cannot be keyed in sequence immediately fol-lowing their associated lesson. Your instructor will tell you whether your labs can be practicedimmediately following the lesson or whether they require separate setup from the main lessoncontent. Lesson-level lab setup information is listed in the front of this manual in the coursesetup section.

LESSON 1 LAB 1Reviewing Professional Project Management

Activity Time:

10 minutes

Scenario:In this lab, you will have an opportunity to review the PMP® certification exam related infor-mation that was presented in this lesson.

1. What information and data will project managers use to guide their work in a specificprocess?

a) Tools

b) Techniques

c) Inputs

d) Outputs

2. Which process group involves defining the need for the project or phase and obtaininga commitment to move forward?

a) Planning

b) Executing

c) Controlling

d) Initiating

LESSON LABS

LESSON

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Lesson Labs 505


3. Which process group involves developing a strategy and refining objectives?

a) Monitoring and controlling

b) Executing

c) Planning

d) Initiating

4. Which knowledge area ensures that the project will satisfy the needs for which it wasundertaken?

a) Project integration management

b) Project scope management

c) Project quality management

d) Project communications management

5. Which project management knowledge area includes schedule control?

a) Project scope management

b) Project time management

c) Project cost management


6. What does the term “progressive elaboration” refer to?

a) Constantly changing project scope.

b) Gaining additional clarity and detail of project deliverables as the project movesthrough the project life cycle.

c) Letting team members make scope changes without customer approval.

d) Tailored guidelines and criteria for organizational processes that satisfy specificproject needs.

7. What are the values that are considered most important to the global project manage-ment community?

a) Respect, fairness, honesty, and compassion.

b) Fairness, honesty, compassion, and responsibility.

c) Honesty, compassion, responsibility, and respect.

d) Responsibility, respect, fairness, and honesty.

8. What are the barriers that deter good teamwork?

a) Withholding information

b) Ineffective meetings

c) Uncontested ideas

d) Cultural diversity

LESSON

LABS



LESSON 2 LAB 1Reviewing Project Initiation

Activity Time:

20 minutes


1. Choose the component that should always be included in the project charter.

a) A breakdown of the functions and activities to be performed on the project.

b) A list of the project stakeholders and their areas of responsibilities.

c) A schedule of project activities.

d) A statement of project goals, via a project SOW, and authorization of the projectmanager to use organizational resources on the project.

2. Which one or more of these is a common reason for an organization to undertake anew project?

a) Meeting a customer’s needs.

b) Gaining a competitive advantage in the market.

c) Identifying best practices.

d) Meeting regulatory requirements.

3. What is the basic purpose of a feasibility study?

a) To determine the major activities within the project and break them down into com-ponent work packages.

b) To determine if the organization should do the project based on economic and/orsocietal costs associated with what is being proposed.

c) To link the project to strategic goals.

d) To determine how to manage a project throughout its life cycle.

4. Choose the component that a formal feasibility study is likely to contain.

a) Estimate of the time and cost for each activity in a project.

b) Estimate of the time and cost for each of a number of project alternatives.

c) Likelihood of the project to meet capital budgeting targets.

d) Rating of the relative priority of a number of projects.

LESSON

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5. Which are reasons that it is important for the project charter to be signed by a highlyplaced person in the organization?

a) This indicates the relative importance and priority of the project within the organiza-tion.

b) This provides authority for the project manager to cross functional boundaries whencarrying out project plans and activities.

c) This provides a signed document, which indicates that the project team members canstart work on the project.

d) This provides greater credibility with people outside of the project who may be askedto contribute resources or join the project team.

6. Which is a quick and objective method for evaluating project proposals?

a) Screening system

b) Weighting system.

c) Team-based evaluation system

d) Capital budgeting system

7. How will you categorize the use of standard organizational procedures and terminologyby all team members and suppliers?

a) A bad management practice because it stifles creativity.

b) A bad management practice because it dictates practices that may not be industrystandard best practices.

c) A good management practice because it helps establish the foundation and frame-work for a common project language.

d) A good management practice because it highlights the project manager’s absoluteauthority over the project.

8. Which approach documents an approach to increase the support and minimize nega-tive impacts of stakeholders throughout the project life cycle?

a) Stakeholder analysis

b) Stakeholder management strategy

c) Stakeholder communications planning

d) Risk management planning

9. What are the tools and techniques of the identify stakeholders process?

a) Project charter

b) Stakeholder analysis

c) Organizational process assets

d) Expert judgment

LESSON

LABS



LESSON 3 LAB 1Reviewing Project Work

Activity Time:

15 minutes


1. What is the item at the lowest level of a WBS?

a) Task

b) Sub-task

c) Work package

d) Cost account

2. What is the purpose of the scope management plan?

a) List all of the tasks that will be included in the project.

b) Prevent scope creep by ensuring that all changes to a project plan be reviewed by areview board.

c) Identify how the project’s scope will be defined, verified, and controlled whenchanges are proposed.

d) Archive all of the information in WBS, RBS, and PBS.

3. What is meant by the code of accounts?

a) A numbering system used to define activities in the statement of work.

b) A numbering system that identifies the specific accounting category for each elementof project work.

c) A numbering system that rates activity durations for each work package.

d) A numbering system for analyzing cost based on expert opinion.

4. What is the purpose of scope definition?

a) Create an overall strategy for approaching the project.

b) Define which tasks are included in a project and which tasks are not included.

c) Provide a common understanding of the project’s major objectives by identifyingwhat is within scope and what is currently out of scope.

d) Define the quality parameters affecting project procurements.

LESSON

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Lesson Labs 509


5. What are the reasons that deliverables should be broken down into work packages dur-ing the development of the work breakdown structure?

a) In order to define the scope of the project.

b) In order to make the activities easier to manage.

c) In order to make costing easier.

d) In order to create activities that can be assigned to a single organizational unit.

6. What is the main purpose of the work package decomposition process?

a) Document results of lessons learned.

b) Break down of deliverables into component activities.

c) Estimate costs and duration for each sub-project.

d) Allocate resources to each activity.

7. Which component is a graphical representation of the deliverables included in theproject?

a) Resource assignment matrix.

b) Work breakdown structure.

c) Organizational breakdown structure.

d) Project schedule.

8. Which elements are included in a project scope statement?

a) Detailed project risks.

b) Project justification and deliverables.

c) Project description and objectives.

d) Schedule and costs for the project.

9. Which statement is true of WBS templates?

a) They are time savers for the project team.

b) They are usually not used, because no two projects are the same.

c) They are only useful for high technology projects.

d) They are used only when all of the work packages are identical to the project.

10. What does the WBS dictionary consist of?

a) Terms used by project managers.

b) Information about each work package in the WBS.

c) Who’s who on the project team.

d) Details of the scope of the project.

LESSON

LABS



11. Which process involves defining and documenting the stakeholders’ needs and expec-tations to meet the project objectives?

a) The define scope process.

b) The develop project management plan process.

c) The collect requirements process.

d) The create WBS process.

12. Which technique involves decision making methods such as Unanimity, Majority, Plu-rality, and Dictatorship?

a) Group decision making techniques


c) Interviews

d) Questionnaires and surveys

13. Which document links the requirements to their origin and tracks them throughout theproject life cycle?

a) Requirements management plan

b) Stakeholder register

c) Requirements documentation

d) Requirements traceability matrix

LESSON 4 LAB 1Reviewing Schedule Development

Activity Time:

30 minutes


1. Activity A has a start-to-start precedence relationship with Activity B; further, ActivityB has a two-day lag. If A’s duration is eight days, and B’s duration is five days, what isthe total amount of time it should take to complete both A and B?

a) 13 days

b) 8 days

c) 15 days

d) 5 days

LESSON

LABS

Lesson Labs 511


2. Choose the tasks for which project schedules are required.

a) Sponsor reporting

b) Performance reporting

c) Customer reporting

d) Functional reporting

3. What is meant by near-critical activity?

a) An activity that is on the critical path

b) An activity that may have higher risk to the project due to less risk mitigation thanactivities on the critical path

c) An activity that has low total float

d) An activity that has the longest duration

4. What would be the outcome in a finish-to-start precedence relationship with a one-daylead?

a) The precedent activity can start one day before the subsequent activity starts.

b) The subsequent activity can start one day before the precedent activity is com-pleted.

c) The subsequent activity cannot start until one day after the precedent activity fin-ishes.

d) The subsequent activity must start within one day of when the precedent activitystarts.

5. Which statements are true of the critical path?

a) It is used to analyze the schedule model.

b) It is the path with the longest total duration through the network.

c) It always has the least amount of total float.

d) It shows the shortest amount of time required for completing the project.

6. Which is an example of an FS (finish-to-start) interactivity relationship?

a) Activity B can’t finish until Activity A is completed.

b) Activity B can’t finish until Activity A starts.

c) Activity B can’t start until Activity A is completed.

d) Activity B can’t start until Activity A starts.

7. What is the most commonly used formula for three-point estimates?

a) [Optimistic time + 4(most likely time) + pessimistic time]/6

b) [Optimistic time + most likely time + pessimistic time]/6

c) [Optimistic time + most likely time + pessimistic time]/3

d) [Optimistic time + most likely time – pessimistic time]/2

LESSON

LABS



8. Activity A has a finish-to-finish precedence relationship with Activity B. If A’s durationis two days, and B’s duration is eight days, what is the shortest total duration for com-pleting both A and B?

a) 10 days

b) 12 days

c) 6 days

d) 8 days

9. Activity A has a start-to-start precedence relationship with Activity B, with a four-daylag. If A’s duration is two days, and B’s duration is 12 days, what is the total amount oftime it will take to complete both A and B?

a) 18 days

b) 14 days

c) 16 days

d) 12 days

10. Who is eligible for estimating activity duration?

a) The persons most familiar with the work to be done in collaboration with the workpackage owner.

b) The project manager working closely with the resource manager.

c) The project schedule manager and the project’s resource calendar.

d) The project management team to make sure all voices are heard.

11. Choose the appropriate term that corresponds to “analogous estimating.”

a) Bottom-up estimating

b) Simulation

c) Form of expert judgment

d) Heuristics

12. What are the two schedule compression techniques—fast tracking and crashing—usedfor?

a) Planning activity sequence.

b) Shortening total project schedule duration.

c) Developing an activity schedule.

d) Estimating activity duration.

13. What task is related to the estimate activity resources planning process?

a) Developing cost estimates for each resource required for project work.

b) Apportioning resource cost estimates across all the work packages.

c) Documenting product requirements and identifying potential sources.

d) Estimating the type and quantities of the resources required to complete activities.

LESSON

LABS

Lesson Labs 513


14. Choose the most appropriate approach that you would take to shorten a project dura-tion.

a) Change the project scope.

b) Crash as many activities as possible.

c) Crash all activities on the critical path.

d) Fast-track activities on the critical path.

15. What does the Precedence Diagram Method (PDM) show?

a) Resource allocation

b) Significant points in time

c) Task duration

d) Relationships

16. Choose the statements that are true of bottom-up estimating.

a) The most accurate estimating method.

b) The most challenging estimating method.

c) The most costly and time-consuming estimating method.

d) Used when enough historical information is present.

17. What are the disadvantages of bottom-up estimating?

a) Accurate historical data requirement

b) Timeliness

c) Accuracy

d) Cost-effectiveness

18. Choose the option that is true of milestone charts.

a) Display the scheduled start or completion of major deliverables.

b) Show inter-relationships.

c) Are excellent planning and scheduling tools.

d) Provide the project team with detail for decision making.

19. Which is not true for network diagrams?

a) They show dependencies among project activities.

b) They facilitate communications among all project stakeholders.

c) They have nodes that show the deliverables of the WBS.

d) They provide a highly effective visual for project planning and scheduling.

LESSON

LABS



20. In a PDM network, which formula would you use to calculate the slack for an activity?

a) Total project duration minus total duration on the critical path.

b) Earliest time when the event can start, minus the latest time when the event can fin-ish.

c) Earliest start date minus the earliest finish date for that activity.

d) Earliest time when the event can start, minus the latest time when the event canstart.

21. When a lead occurs in an activity, what is its effect upon other activities?

a) Delays a successor task.

b) Accelerates a successor task.

c) Delays a predecessor task.

d) Accelerates a predecessor task.

22. Choose the statements that are not true of a hammock activity.

a) Has an estimated duration different than the sum of its interdependent work pack-ages.

b) Includes activities performed by different resources.

c) Includes activities that are non-sequential.

d) Spans across several activities in a work package.

23. When will a project completion date slip?

a) If total float = 0

b) If total float > 0

c) If total float < 0

d) If total float > 1

24. Choose the appropriate task a project manager needs to perform when levelingresources on a project.

a) Manually determine where to adjust resources.

b) Extend the finish date.

c) Add resources.

d) Discuss a change in the project scope with the stakeholders.

25. When would you perform a forward and backward pass?

a) To determine early start and finish dates for each activity.

b) To identify the start and end dates of each activity on the critical path.

c) To calculate the theoretical time period within which an early refinement of theschedule can occur.

d) Typically done without considering resource limitations.

LESSON

LABS

Lesson Labs 515


26. What is total float?

a) The amount of float on any network path.

b) The amount of time that an activity can be delayed without delaying the early startof any immediately following activities.

c) Calculated by subtracting late start from late finish.

d) The amount of time on a critical network path that an activity can be delayed with-out delaying the completion date of the project.

27. Which technique involves overlapping project activities to shorten project duration?

a) Risk conversion

b) Fast-tracking

c) Parallel management

d) Synchronous manufacturing

28. When crashing an activity, which task should the project team focus on?

a) Accelerating performance of those tasks on the critical path.

b) Accelerating performance of as many tasks as possible.

c) Accelerating performance of non-critical tasks.

d) Accelerating performance by minimizing costs.

29. Which activity duration estimation technique uses optimistic, pessimistic, and mostlikely calculations?

a) GERT

b) Gantt

c) Three-point estimates

d) CPM

30. Which element is drawn from the schedule network analysis and includes baselinestart and finish dates?

a) Activity list


c) WBS package

d) Summary activities

LESSON

LABS



LESSON 5 LAB 1Reviewing Cost and Budget Estimates

Activity Time:

5 minutes


1. Identify the sources from where you can obtain cost estimate information.

a) Trade organizations, vendors, and suppliers.

b) Past project experience and current project team members.

c) Project schedule.

d) Commercial databases.

2. What should be included in a project cost baseline?

a) Estimates of the most likely project costs.

b) Management contingency reserves.

c) Unforeseen expenditures for the project.

d) Assumptions for the estimates.

3. What step will a project manager take to help prevent cash flow problems?

a) Use the contingency reserves of other projects.

b) Make efforts to engage the finance department to put in place a cash flow forecast.

c) Make sure customers are financially stable.

d) Request additional funding from project sponsors.

4. Which cost estimating method requires managers to use their experience, historicalinformation from similar projects, and expert judgment to determine a total projectcost or time estimate?

a) Analogous or top-down estimating

b) Parametric estimating

c) Bottom-up estimating

d) Revenue estimating

LESSON

LABS

Lesson Labs 517


5. Which are inputs to the determine budgets process?

a) Activity cost estimates, Resource calendars, Funding limit reconciliation, and costaggregation.

b) Basis of estimates, scope baseline, resource calendars, and reserve analysis.

c) Activity cost estimates, scope baseline, project schedule, and contracts.

d) Activity cost estimates, scope baseline, project schedule, and cost performancebaseline.

6. Which is a method of adjusting, spending, scheduling, and resource allocation in orderto bring expenditures into alignment with budgetary constraints?

a) Cost aggregation

b) Funding limit reconciliation

c) Reserve analysis

d) Activity cost estimation

7. Which guidelines allow you as the project manager to reconcile the costs with thefunding that has been approved by the sponsor?

a) Map the project budget, scope statement, and schedule to the funding available.

b) Involve the project sponsor.

c) Consider adding in a contingency amount to accommodate the risk of incurring extraexpenses.

d) Partner formally with the company’s financial decision makers.

LESSON 6 LAB 1Reviewing Quality, Staffing, and CommunicationsPlanning

Activity Time:

25 minutes


LESSON

LABS



1. Which tool is consistently used to document the roles and responsibilities on a project?

a) Role administration matrix

b) Responsibility assignment matrix

c) Responsibility and role hierarchy

d) Staffing management plan

2. Which document shows the reporting structure within the project, as well as its rela-tionship to the parent organization?

a) Resource staffing histogram

b) Organization chart

c) Responsibility assignment matrix


3. When does common experience show that a learning curve becomes apparent?

a) As cumulative production time doubles, time and costs associated with that produc-tion increase randomly.

b) As cumulative production time decreases, time and costs associated with that pro-duction lower at a constant and predictable rate.

c) As the quantity of items produced increases, costs decrease at a predictable rate.

d) As cumulative production time doubles, time and costs associated with that produc-tion increase at a constant and predictable rate.

4. On which concept is “total quality management” based?

a) Quality is an ongoing process rather than a one-time event.

b) Quality standards should be established universally in every industry.

c) Quality issues should be supervised and controlled by a quality management team.

d) Quality planning is the most integral part of the quality system.

5. What is quality planning?

a) The process of identifying the quality standards that apply to the project and deter-mining how to meet those standards.

b) The process of evaluating quality results and planning improvement strategies.

c) The process of systematically evaluating project quality.

d) The process of establishing a communications plan between stakeholders and workpackage owners for quality updates.

6. What are the uses of project benchmarking?

a) Compare project practices to those of other projects to develop performance mea-surements.

b) Identify potential problems and possible effects for those problems.

c) Determine marketing costs associated with a specific product.

d) Determine what product or services to offer and what features to include.

LESSON

LABS

Lesson Labs 519


7. The communications management plan is the most important portion of the projectmanagement plan for managing stakeholders. For what reason?

a) It keeps the stakeholder involved with the day-to-day management of the project.

b) It helps the project manager to understand stakeholder expectations for projectcommunications.

c) It gets stakeholders involved in the planning process.

d) It helps identify all stakeholder needs and objectives for the project.

8. Which of these project factors is likely to prevent effective performance of the com-munications plan?

a) The virtual team will use the company intranet to transmit documents.

b) All client company meeting time has been set at no more than 30 minutes a week foreach employee.

c) The customer wants its technical manager to review project data monthly.

d) The team is co-located in a trailer behind the main plant.

9. Which part of the communications management plan is concerned with collectinginformation and getting it to the right stakeholders?

a) Information distribution

b) Feedback system management

c) Communications management

d) Communications systems planning

10. Which tasks are included in the cost of quality?

a) Cost of quality planning.

b) Cost of preventing conformance.

c) Cost of rework.

d) Cost of monitoring nonconformance.

11. Which statements are true about formal project recognition and rewards?

a) Documented in the communications management plan.

b) Documented in the human resource management plan.

c) Perceived by project team members as being tied to performance.

d) Addressed only at the end of the project.

12. At what points in the project should the quality audits or inspections take place?

a) At the end of every process cycle.

b) When each project activity starts.

c) At random intervals within a process cycle.

d) At random intervals over the course of the project.

LESSON

LABS



13. Why is the cost of quality used during quality assurance?

a) To determine the most effective approach when considering prevention, inspection,and repair.

b) To determine if the cost of the product will meet budget requirements.

c) To persuade management to invest in quality product methods.

d) To assess the cost of implementing quality improvements.

14. Who is the quality guru associated with “breakthrough improvement”?

a) Taguchi

b) Deming

c) Juran

d) Crosby

15. A team has 20 people on it. How many potential communication channels exist on thisteam?

a) 19

b) 190

c) 20

d) 380

16. Which is true of using project intranets and home pages for communication?

a) Limited because only large organizations have access to these tools.

b) Ineffective as external project stakeholders cannot access them.

c) A security risk because there is no way to restrict access to them.

d) An effective way to provide a lot of information to a variety of users.

17. Which task is an example of a cost of nonconformance?

a) Training

b) Product design

c) Planning

d) Rework

18. Which tool is used to verify if the steps in a process are being followed?

a) Checklist

b) Trend analysis

c) Inspection

d) Performance review

LESSON

LABS

Lesson Labs 521


19. Which tool would you use for analyzing and communicating the relationships betweenprocess steps?

a) Scatter diagram

b) Control chart

c) Flowchart

d) Trend analysis

20. Choose the factors to be considered when analyzing project trade-offs among cost,time, and quality, where cost must be controlled in order to meet the cost baseline.

a) The impact on quality only.

b) The impact on schedule and quality.

c) The impact of additional risk that may be introduced.

d) The impact on schedule and scope.

21. In which organizational structure is an individual assigned to report to a single man-ager?

a) Weak matrix

b) Strong matrix

c) Functional structure

d) Projectized structure

22. Which project structure typically results in greater levels of technical depth andbreadth within the parent organization?

a) Weak matrix

b) Strong matrix

c) Functional structure

d) Divisional structure

23. Which is true of a matrix structure?

a) In a matrix structure, employees’ administrative, developmental, and performancemanagement are typically focused with their functional manager with proportionalperformance and developmental input by project managers.

b) In a matrix structure, employees are typically assigned 50% of the time to functionaltasks and 50% of the time to project tasks.

c) In a matrix structure, employees are equally answerable to both functional andproject managers.

d) In a matrix structure, employees are answerable to the project manager, but reportboth to the functional and project manager.

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24. Of the various organizational structure alternatives, for managing projects, which ide-ally has the fastest response time?

a) Functional structure

b) Projectized structure

c) Weak matrix

d) Strong matrix

LESSON 7 LAB 1Reviewing Analyzing Risks and Planning Risk Responses

Activity Time:

15 minutes


1. What is the purpose of a qualitative risk analysis?

a) Assess the impact and likelihood of the identified risks actually occurring.

b) Analyze numerically the probability of each risk.

c) Determine if the risk responses have been implemented as planned.

d) Select alternative strategies for dealing with risks.

2. Which option best describes “transference”?

a) Reducing the probability of an adverse risk event to an acceptable level.

b) Changing the project plan to eliminate the risk.

c) Shifting responsibility for a response and possible impact of a risk to a third party.

d) Developing a contingency plan.

3. What are the four main areas that project managers typically consider when discussingrisks?

a) Methods, materials, metrics, and people.

b) Initiation, planning, executing, and closing.

c) Time, cost, quality, and scope.

d) Design, supply chain, production, and marketing.

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4. What do you call a specific occurrence that may impact the project in the future,either positively or negatively?

a) Project risk

b) Risk factor

c) Risk-opportunity dichotomy

d) Expected value

5. What are residual risks?

a) The same as secondary risks.

b) A direct result of implementing a risk response.

c) Those that remain after risk responses have been taken.

d) Those risks that have no impact on the project budget or schedule.

6. During the project’s life cycle, risk identification:

a) Is no longer needed during the closing phase of a project.

b) Is done during the implementation and planning phases only.

c) Is done during the planning phase only.

d) Should take place during each project phase.

7. For what reasons are the network diagramming method and/or flowcharting used inrisk identification?

a) To determine the root cause of a project risk.

b) To show the effect of a particular risk on a project.

c) To indicate areas of the WBS that should be redrawn as a result of risk identification.

d) To identify all the possible risks for a project.

8. For what reasons is the Delphi technique often used during risk identification?

a) It emphasizes the potential impact of risk by telling about incidents that illustratethe consequences of ignoring the risk.

b) It ensures all stakeholder inputs are received and the risk process is not unduly influ-enced by a small number of persons.

c) It motivates stakeholders to invest in the risk identification process through the useof anonymous input via questionnaires.

d) It identifies the overall project risks and focuses on a particular project segment orwork package.

9. Which selection lists processes of risk management?

a) Risk management planning and risk recovery.

b) Qualitative risk analysis and quantitative risk analysis.

c) Risk documentation and risk monitoring.

d) Risk identification and risk avoidance.

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10. Jennifer is a publisher. In order to make sure that her writer delivers on time, sheinserts a penalty clause for late delivery into her writer’s contract. Which riskresponse is Jennifer using?

a) Risk avoidance

b) Risk mitigation

c) Risk acceptance

d) Risk transference

11. Which risk response can be categorized as either passive or active?

a) Risk avoidance

b) Risk mitigation

c) Risk acceptance


12. When is additional response development needed during risk response control?

a) When the organization is restructuring.

b) When the project objectives change.

c) When the contingency reserves are used up.

d) When the original risk response is not working as expected.

LESSON 8 LAB 1Reviewing Planning Project Procurements

Activity Time:

5 minutes


1. Which statement best describes the “Time and Materials” contract?

a) The buyer pays the seller one fixed price.

b) The buyer pays the seller for time and expenses of project work.

c) The buyer pays the seller a fee, plus a percentage of profit.

d) The buyer pays the seller their allowable costs plus a fee.

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2. In which contract does the buyer reimburse the seller’s allowable costs (defined by thecontract) plus a fee?

a) Firm fixed price plus incentive contract.

b) Cost plus incentive fee contract.

c) Time and materials contract.

d) Cost plus fixed fee contract.

3. In which contract does the buyer reimburse the seller’s allowable costs (defined by thecontract) plus a predefined fee?




d) Cost plus fixed fee contract.

4. Which is used to evaluate each seller’s proposal and make comparisons among differ-ent proposals?

a) Procurement documents

b) Procurement statements of work

c) Teaming agreements

d) Source selection criteria

5. Which document provides a description of the work authorized to be performed by asupplier?

a) Project plan

b) Procurement statement of work


d) Work breakdown system

6. Which document includes the invitation for bid and request for proposal?

a) Procurement statements of work

b) Procurement document


d) Procurement management plan

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LESSON 9 LAB 1Reviewing the Project Work Execution

Activity Time:

20 minutes


1. When negotiating for resources, the project manager arranged for the loan of a par-ticular technical expert by implicitly promising to raise the functional manager’svisibility with executive stakeholders on the project. Which currency was the projectmanager using?

a) Inspiration-related currency

b) Position-related currency

c) Relationship-related currency

d) Task-related currency

2. Which of these tasks are examples for training a project team?

a) Feedback

b) Computer-based

c) Mentoring

d) Coaching

3. What would be the important reasons behind the efforts taken by the project managerto foster motivation?

a) To help the team work through a temporary setback.

b) To help the team to overcome a lack of confidence.

c) To accomplish early “wins” in the project’s life cycle.

d) To ensure that there are no activities that have late start criteria.

4. Which system notifies the work package owners when to begin work?

a) Project schedule

b) Status review system

c) Work authorization system

d) PMIS

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5. What does a work authorization system ensure?

a) Work done is in line with the project goals.

b) What work to be done is clearly outlined.

c) Who is to do the work.

d) When the work is to begin and end is understood.

6. Which element is a form of operational definition?

a) Metrics

b) Control limits

c) PCIs

d) COQ

7. Which manual or automated tool and technique is used to collect, archive, and distrib-ute project information on a project?

a) Project management information system

b) Communications plan

c) Project management enterprise software

d) Communications and feedback system

8. Which information is contained within the work performance information?

a) Completed and incomplete deliverables.

b) Actual conformance to quality plan.

c) Intended performance details of the work to be completed.

d) ETC for scheduled activities that have started.

9. What is quality assurance?

a) Conforming product specifications to customer requirements.

b) Strategizing how to create products that meet quality requirements.

c) A pattern of activities which ensure that the product meets quality requirements.

d) A set of tactics used to determine if goods meet quality requirements.

10. Which statements best describe project quality audit?

a) Contains an approved quality audit methodology.

b) Ensures that efficient or effective processes and procedures are used.

c) Contains future change recommendations.

d) Determines whether the project complies with organizational and project policies,processes, and procedures.

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11. What does co-location mean?

a) That the team members are distributed geographically.

b) That the team is located in one physical location.

c) That the team uses a war room.

d) That the team members work from home.

12. Which statement is true of version control?

a) Required so that team members do not over-write one another’s work.

b) Not a problem for project managers who use adequate backup systems.

c) Required to make sure everyone is working with the same, most recent document.

d) Required to maintain only the latest version of the document.

13. Which of these statements are true of a project management office?

a) A team that manages multiple projects concurrently.

b) The same as the office of the CEO.

c) A unit that centralizes and coordinates the management of projects.

d) An organization that may provide project support functions.

14. Which of these statements are true of quality audits?

a) Are only done at the end of the project.

b) Check the fitness of the project’s output or the fitness of the quality plan.

c) Are done only once during the entire project life cycle.

d) Are best done at random intervals over the course of the project.

15. Why are quality audits performed?

a) To evaluate whether the project output is fit for the purpose it was intended.

b) To evaluate if best practices identified in the previous projects have been imple-mented.

c) To evaluate whether the quality management plan is still appropriate after qualityimprovements have been made.

d) To evaluate if the quality assurance team members are qualified

e) To evaluate how statistical process control may be used to improve the capability ofa process.

16. What should you do when the quality assurance team suggests quality improvements inyour project?

a) Assess for risk to project success.

b) Subject them to trade-off analysis.

c) Ensure that the change does not affect the project scope.

d) Determine the cost of quality.

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17. On which idea is quality assurance based?

a) Creating a margin of error for product specifications.

b) Preventing problems, rather than fixing them.

c) Establishing upper and lower specifications for products.

d) Increasing production rates by providing training for quality control inspectors.

LESSON 10 LAB 1Reviewing Managing Project Procurement

Activity Time:

10 minutes


1. What does the project manager do when requesting seller responses?

a) The project manager plans purchases.

b) The project manager solicits quotations.

c) The project manager selects a seller.

d) The project manager evaluates project progress.

2. Which allows potential sellers to ask questions about the project and its requirements?

a) Advertised bids

b) Bidder conference

c) Sellers conference

d) Annual meeting

3. Which is included on a qualified sellers’ list?

a) Sellers’ names

b) Procurement documents

c) Proposals

d) Advertised bids

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4. Which provides a pass or fail mechanism for criteria critical to project success?

a) Weighted scorecard

b) Expert judgment

c) Seller rating system

d) Screening system

5. Which document sent to prospective sellers provides information regarding therequirement specifications and needs of your project?

a) Procurement management plan

b) Project documents

c) Procurement document

d) Request for information

6. Which is a legal contractual agreement signed between the organization and an exter-nal entity to form a partnership in a buyer-seller arrangement between them?

a) Procurement contract

b) Teaming agreement

c) Seller proposal

d) Purchase order

7. Which are tools and techniques for the conduct procurement process?

a) Bidder conferences, SWOT analysis, independent estimates, expert judgment.

b) Procurement negotiations, advertising, contingent response strategies, proposalevaluation techniques.

c) Independent estimates, make-or-buy decisions, qualified seller lists, source selectioncriteria.

d) Bidder conferences, independent estimates, expert judgment, procurement negotia-tions.

8. Which are outputs of the conduct procurement process?

a) Procurement contract award

b) Qualified seller list

c) Resource calendars

d) Selected sellers

9. True or False? A procurement contract is a mutually binding agreement that details theobligations of only the seller.

True

False

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10. Which output of the conduct procurement process lists the quantity, availability, andutilization of project resources?

a) Project management plan

b) Procurement contract

c) Resource calendar

d) Seller proposal

LESSON 11 LAB 1Reviewing Monitoring and Controlling Project Work

Activity Time:

15 minutes


1. What type of information is documented in the project management plan?

a) The information about project status, scheduled activities, and issues.

b) The processes of executing and controlling during the project.

c) The early stages of the planning phase of the project.

d) The potential changes to the project.

2. What statements best describe inspections?

a) May also be referred to as product reviews, audits, or walkthroughs.

b) Involve comparing schedules and budgets to the actual project results.

c) Are examinations of change requests to verify that the objectives are met.

d) Are only effective if done at random intervals in a production process.

3. Which statement best describes the project controlling process?

a) Is used strictly to control scope changes.

b) Is used by the project team throughout the project.

c) Is used only in the control phase of the project.

d) Is used to control changes made as a result of project planning and execution.

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4. The control processes are repeated throughout the project life cycle. Therefore,which term can be attributed to the control processes?

a) Facilitative

b) Integrative

c) Core processes

d) Iterative

5. What types of information do the performance reports provide you with?

a) Percentage of activity work completed to date.

b) Activities to be completed from the current date.

c) Activities completed to date.

d) Activities started to date.

6. What is scope creep?

a) Reduction of project scope.

b) A type of residual risk.

c) Undocumented changes to the project scope.

d) An activity that needs to be included in the project schedule.

7. Which documents are included in a project’s scope baseline?

a) WBS dictionary

b) Work breakdown structure

c) Milestone list

d) Project charter

8. What actions should be taken regarding issues relating to the customer’s installationand support requirements?

a) Addressed if currently part of the project’s scope.

b) Ascertained through a cut-over needs analysis.

c) Addressed as a separate project.

d) Addressed as a change to the current project’s scope.

9. What is the overall process of managing changes that affect the function or character-istics of the deliverable known as?

a) Managing by objective

b) Change control management

c) Managing by exception

d) Configuration management

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10. Which element is a collection of formal, documented procedures that defines the stepsby which the project may be changed?


b) Change control system



11. Who is responsible for ensuring that changes are processed through the integratedchange control process?

a) Project sponsor

b) President

c) Project manager

d) Functional manager

12. Which statements are true of change requests?

a) Must be documented.

b) Can come from anyone.

c) Will not affect the project scope.

d) Must be subjected to an integrated change control process.

LESSON 12 LAB 1Reviewing Monitoring and Controlling Project Scheduleand Costs

Activity Time:

15 minutes


1. Which analytical tools are used to assess project progress and identify the magnitudeof cost, resource, and production variations?

a) Gantt chart review

b) Monte Carlo analysis

c) Project cost baseline audit

d) Earned value analysis

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2. What does a Cost Performance Index (CPI) of 0.8 mean to the project?

a) Under-budget to date.

b) Over-budget to date.

c) On budget.

d) Nothing; CPI values are always above 1.0.

3. For what reasons are Gantt charts useful for reporting project progress?

a) They display schedule performance trends.

b) They are easy to read.

c) They are available in most project management software packages.

d) They provide detailed analysis for making adjustments.

4. A project has a negative cost variance and an SPI less than 1.0. What does this mean tothe project?

a) It is over-budget and ahead of schedule.

b) It is under-budget and behind schedule.

c) It is over-budget and behind schedule.

d) It is under-budget and ahead of schedule.

5. What is the purpose of trend analysis?

a) Forecast future project performance.

b) Improve variance reporting.

c) Create change requests.

d) Mitigate the harmful effects of scope creep.

6. What is the essential first step in the control schedule process?

a) Making changes to the project schedule.

b) Computing the SPI.

c) Making sure schedule requirements are clear.

d) Determining the current status of the project schedule.

7. What is the difference between the Earned Value (EV) and the Planned Value (PV)?

a) Cost variance.

b) Schedule variance.

c) Unearned value.

d) Actual cost

8. What does a Schedule Performance Index (SPI) of 1.2 mean to the project?

a) Ahead of schedule.

b) According to schedule.

c) Behind schedule.

d) Nothing; SPI values are always below 1.0.

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9. During the control schedule process, the project schedule serves what functions?

a) Schedule baseline.

b) Basis for measuring project performance.

c) Cost baseline.

d) Time management component of the project.

10. What is the Schedule Variance (SV) if the Planned Value (PV) is $275,000 and theEarned Value (EV) is $300,000?

a) $25,000

b) - $25,000

c) $125,000

d) $575,000

11. What are the changes made to keep project activities on schedule called?

a) Corrective actions.

b) Change requests.

c) Performance measurements.

d) Schedule baselines.

12. How do you calculate the Cost Performance Index (CPI)?

a) Divide the Earned Value (EV) by the Actual Cost (AC).

b) Divide the Earned Value (EV) by the Planned Value (PV).

c) Subtract the Actual Cost (AC) from the Earned Value (EV).

d) Subtract the Planned Value (PV) from the Earned Value (EV).

13. Based on the performance measures indicated in the following table, what is the CostVariance (CV) for Case 3?

a) -1,000

b) 1,000

c) 2,000

d) -2,000

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14. Based on the performance measures indicated in the following table, what is theSchedule Variance (SV) for Case 2?

a) -1,000

b) 1,000

c) 2,000

d) -2,000

15. In the cost curve shown in the following figure, Height A represents:

a) Cost variance

b) Schedule variance

c) Earned value

d) Budget at Completion (BAC)

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Lesson Labs 537


LESSON 13 LAB 1Reviewing Monitoring and Controlling ProjectPerformance and Quality

Activity Time:

15 minutes


1. Which reason causes variance to be sporadic, unusual, and difficult to predict?

a) Random causes

b) Common causes

c) Special causes

d) External causes

2. What is the statistical range of variation for processes or products called?

a) Specification limits

b) Tolerances

c) Control limits

d) Quality standards

3. “500 rejected parts” is an example of which sampling technique?

a) Attribute sampling

b) Variable sampling

c) Random sampling

d) Stratified sampling

4. Which statement is true of the quality problems that are faced by organizations?

a) Originate on the shop floor because of waste and rework.

b) Could be avoided by management taking action on potential quality improvementideas.

c) Could be eliminated if supervisors monitored their work more closely.

d) Originate in the QA organization where the ultimate responsibility for quality rests.

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5. A + or – 3-sigma limit indicates approximately what percentage of the process outputwill be within acceptable limits?

a) 30.3

b) 80.3

c) 68.5

d) 99.7

6. Which chart is ordered by frequency of categorized causes of poor quality perfor-mance?

a) A control chart

b) A fishbone diagram

c) A Pareto diagram

d) A trend analysis

7. The graphic is an example of which diagram/chart?

a) A control chart


c) A Pareto diagram

d) A cause-and-effect diagram

8. What action is taken to bring a product or service into compliance with customerspecifications?

a) Scrap

b) Audit

c) Recall

d) Rework

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a) A control chart


c) A Pareto diagram

d) A decision tree diagram

10. A Pareto diagram is a tool used to determine the relative impact each quality problemhas on project performance. Which statement best describes the philosophy of thePareto Principle?

a) In general, 80% of the quality problems can be justified as correctable using a cost-benefit analysis. The remaining 20% are not financially worth fixing.

b) To achieve zero defects, all quality problems, including those that do not have adirect cost, should be corrected.

c) The vast majority of defects are caused by a small percentage of the identifiableproblems. Improvement efforts therefore should be reserved for these vital few prob-lems.

d) To minimize financial loss to the firm from quality problems, all problems that have ameasurable cost should be corrected.

11. Which technique is useful for identifying corrective action alternatives?

a) Changing the project scope.

b) Requesting additional funds immediately.

c) Holding a brainstorming session with the project team.

d) Leaving decision-making to the functional managers.

12. Which document should reflect the updates to project performance and control docu-ments?

a) Project plan


c) Change control plan

d) Cost baseline

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LESSON 14 LAB 1Reviewing Monitoring and Controlling Project Risks andProcurements

Activity Time:

5 minutes


1. When a project is terminated before its scheduled completion date, which of these isnot a correct action?

a) You should halt further expenditures in an orderly way.

b) You should cancel vendor contracts.

c) You should identify and document reasons for termination.

d) You should work with the sponsor to identify status of complete and incompletedeliverables.

2. Which are inputs to administer procurements?

a) Work performance information

b) Contracts

c) Procurement performance reviews

d) Approved change requests

3. Which are suitable contract performance milestones?

a) Partial deliveries of the requirements.

b) Deferred deliveries of the requirements.

c) Completion of selected portions of the project work.

d) Delivery of preliminary versions of the product.

4. Which of these are true of supplier provided component surveillance?

a) Is illegal monitoring of a supplier’s performance.

b) Is a good way to mitigate risk of supplier non-performance.

c) Is not a suitable acceptance procedure.

d) May include making site visits.

LESSON

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5. As a buyer, what is the purpose of an on-site visit to a supplier?

a) Assess the engagement of the workforce.

b) Determine if your supplier’s employees are legal workers.

c) Determine contract performance.

d) Develop a change control system.

6. Which statement is true of the contract change control system?

a) Belongs to the seller rather than the project organization.

b) Contains all of the forms, performance tracking, and procedural information neededto deal with contract changes.

c) Does not feed information into the project’s change control system.

d) Does not include procedures for reviewing and resolving contract disputes.

LESSON 15 LAB 1Reviewing Project Closure

Activity Time:

15 minutes


1. What is true of lessons learned during the project?

a) Should be documented only in the closeout report.

b) Should consist of only project data.

c) Should be documented throughout the project.

d) Should consist of only things that went well during project execution.

2. Which process is concerned with obtaining formal stakeholder acceptance of com-pleted project deliverables?

a) Project plan execution

b) Scope management

c) Scope verification

d) Quality assurance

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3. Which activities are included in an orderly close-out process?

a) Formal acceptance by the customer.

b) Project milestone review.

c) Closure of all contracts.

d) Administrative closure and final reporting.

4. Which is true of a formal project handoff?

a) It is a bad idea because it embroils the project in the customer’s political intrigues.

b) It can positively shape perceptions of the product by highlighting product benefits.

c) It should only be held if the customer pays extra for this service.

d) It does not have a structured agenda for the handoff meetings.

5. At what points does administrative closure occur in a project?

a) At the end of the project.

b) At the end of each project phase.

c) Upon delivery of pre-specified milestone deliverables.

d) On completion of the project scope definition.

6. Which is true of project archives?

a) Should never contain computerized records, because they may not be retrievable inlater software.

b) Should include key information, such as baselines and performance data.

c) Should be handed to the sponsor at the end of the project.

d) Should be updated only at the end of the project.

7. When can the contract close-out occur?

a) At the end of a project only.

b) Whenever a contract is completed and accepted.

c) At the end of a project only, unless the project is terminated early.

d) Whenever the seller submits an invoice.

8. What are the goals of contract close-out?

a) To arrange for final settlement of seller payments and claims.

b) To verify that work was done and delivered to specification.

c) To provide performance evaluation of seller staff.

d) To update contract records and documents.

9. Which content categories should the final project report include?

a) Administrative performance and recommendations.

b) Project lessons learned information.

c) Project structure and recommendations.

d) Project management performance and recommendations.

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10. For what reasons is publishing a project close-out schedule a good idea?

a) It helps keep people motivated by imposing a deadline.

b) It provides a sense of order in a time of fluctuating team membership.

c) It helps team members who are leaving to understand what they must accomplish orhand off before they can move to a different position.

d) It provides stakeholders with information on the status of the project.

11. Which is the output of the close project or phase process?

a) Project management plan updates.

b) Final product, service, or result transition.

c) Contract closure.

d) Work performance information.

LESSON

LABS



SOLUTIONS

Lesson 1Activity 1-1

1. Upon review of the document, at which point in the project management process areyou?

✓ a) Initiating

b) Planning

c) Executing


e) Closing

2. Match each stakeholder with the appropriate responsibility.

e Sponsors a. Supervises and coordinates the man-agement of all projects in anorganization.

c Customers/users b. Performs project work and might notbe involved in the management sideof the project.

d Project managers c. Defines needs for the project output.b Project team d. Keeps the sponsor and the stakehold-

ers informed.f Operations managers e. Signs and publishes the project char-

ter.a The PMO f. Manages the core business area of the

organization.

3. Based on the OGC Business Transformation Scenario Overview document, who are theappropriate stakeholders for the Business Transformation program? Choose all thatapply.

✓ a) Senior executives

✓ b) Venture capital principals

✓ c) CEOs and CFOs

✓ d) Program IT staff

e) OGC travel

4. Which project management process will you apply to refine program objectives andthe courses of action the project team will take to meet program objectives?

a) Initiating

✓ b) Planning

c) Executing


SOLUTIONS

Solutions 545


e) Closing

5. Which project management process group will you apply to regularly measure progressand identify variances from the project management plan?

a) Initiating

b) Planning

c) Executing

✓ d) Monitoring and controlling

e) Closing

6. Which project management process group will you apply to integrate people and otherresources to fulfill the project management plan for the program?

a) Initiating

b) Planning

✓ c) Executing


e) Closing

7. True or False? OGC follows an overlapping phase-to-phase relationship in the currentprogram.

True

✓ False

Activity 1-2

1. Which statement is not a responsibility of a PMO?

✓ a) To plan and execute projects and subprojects based on the overall business objec-tives.

b) To primarily approve and reject projects that do not support business goals.

c) To audit projects for compliance to project management processes and metrics.

d) To ensure that all of the projects included in the portfolio are aligned with the busi-ness’ strategic objectives and priorities.

2. Who provides the software, templates, and standardized policies for a project?

a) Stakeholders

b) Human resources

✓ c) Project Management Office (PMO)

d) Project budget

3. True or False? Based on the scenario, OGC is using specific criteria to determine whichprojects will be included in the portfolio.

✓ True

False

4. Which statement best describes a program?

a) A set of repetitive ongoing tasks.

✓ b) A set of related projects that have a common objective.

SOLUTIONS



c) A collection of projects that are grouped to achieve the strategic business objectivesof an organization.

d) A temporary endeavor that is undertaken to create a unique product, service, orresult.

5. Which tasks produce the same outcome every time they are performed?

a) Programs

b) Projects

c) Portfolios

✓ d) Operations

Activity 1-3

1. Based on the scenario, what unethical behavior has been described?

Funds have been allocated to potentially non-existent contractors. In the PMI Code ofEthics and Professional Conduct, the guidelines for Upholding Responsibilities to the Pro-fession clearly states to disclose to clients, customers, owners, or contractors significantcircumstances that could be construed as a conflict of interest or an appearance of impro-priety.

2. Within the context of your organization, what steps would you take next and withinwhat time frame?

Once you are sure of your facts you should inform your manager. You don’t want yourmanager to be surprised by bad news. Gradually escalate the issue following the project’sorganizational structure. Continued escalation should occur if there is no substantive,timely action at any given step in the process that produces clear observable results.

3. What would you expect your manager, the overall program manager, to do next and inwhat time frame?

Including the next level of management during a two to three week investigation, if adetermination of unethical behavior has been substantiated, the management should beexpected to engage people from the finance and legal departments.

4. In a general fashion, outline what your organization has in place that might facilitatethe resolution of this problem.

Many organizations have specific financial controls that project managers must follow.

5. What would you change in your organization to prevent the above scenario fromoccurring?

Engage the CFO and CEO to rapidly put in place a set of controls that are highly inte-grated within the organization’s core financial processes and controls. Develop anddeliver the training in how to implement the controls for all current and future projects.Make it clear to the project management community that this is nonnegotiable. Establishirregular but frequent audits for the next several quarters until the new processes andbehaviors have been integrated into the organization’s operation and culture.

Activity 1-4

1. One of your team members, a shy person, values working quietly on projects andappreciates an ordered and secure work environment. Which assignment do you thinkwould be most motivating for this person?

a) An assignment with frequent changes and interruptions.

SOLUTIONS

Solutions 547


b) An assignment to lead a new team.

✓ c) An assignment to work on independent research.

d) An assignment to represent the company in the public eye.

2. You have directed one of your team members to complete a task, and he has tried totake your directions and work on the project independently. Once the job is com-pleted, you are disappointed to find that it was not done the way you had envisionedit. As a manager, which response would you consider most appropriate?

✓ a) I guess I did not adequately explain to you what I had in mind. Let me try to explainit better.

b) I feel very disappointed that you did not do what I specifically asked you to do.

c) If you are not willing to follow my directions exactly, I will find someone who is.

d) I guess if I want something done right, I have to do it myself.

3. Tom is a manager who maintains an optimistic outlook and lifts employees’ spirits withhis unique sense of humor. The employees feel that Tom listens to their concerns andlooks out for them in an ever-changing organization. As a result of this, his employeeswant to work harder. This results in Tom’s team having one of the highest productivityrates in the organization. His employees’ morale is usually fairly high, and they feellike they can have fun occasionally on the job. Tom appreciates how much work theteam processes daily. Based on this scenario, what interpersonal skill is Tom display-ing?

a) Communications skills

b) Decision making skills

c) Team building skills

✓ d) Influencing skills

4. You are leading a team that is contemplating instituting new work processes to helpimprove productivity. Your productivity has fallen off, deadlines are not being met,and the team members are complaining about a lack of resources as well as beingoverworked. The management has blamed the employee’s work habits and ineffi-ciency, while employees have complained about management’s failed leadership andgeneral myopia. What is the most important decision you will make while tackling yourteam’s problems?

a) Develop an individual strategy to deal with each problem.

✓ b) Search for an underlying cause of problems.

c) Avoid involving individuals from outside your immediate team.

d) Always assume that the cause of your problem was a major change.

SOLUTIONS



Lesson 1 Follow-upLesson 1 Lab 1

1. What information and data will project managers use to guide their work in a specificprocess?

a) Tools

b) Techniques

✓ c) Inputs

d) Outputs

2. Which process group involves defining the need for the project or phase and obtaininga commitment to move forward?

a) Planning

b) Executing

c) Controlling

✓ d) Initiating

3. Which process group involves developing a strategy and refining objectives?

a) Monitoring and controlling

b) Executing

✓ c) Planning

d) Initiating

4. Which knowledge area ensures that the project will satisfy the needs for which it wasundertaken?

a) Project integration management

b) Project scope management

✓ c) Project quality management


5. Which project management knowledge area includes schedule control?

a) Project scope management

✓ b) Project time management

c) Project cost management


6. What does the term “progressive elaboration” refer to?

a) Constantly changing project scope.

✓ b) Gaining additional clarity and detail of project deliverables as the project movesthrough the project life cycle.

c) Letting team members make scope changes without customer approval.

d) Tailored guidelines and criteria for organizational processes that satisfy specificproject needs.

7. What are the values that are considered most important to the global project manage-ment community?

SOLUTIONS

Solutions 549


a) Respect, fairness, honesty, and compassion.

b) Fairness, honesty, compassion, and responsibility.

c) Honesty, compassion, responsibility, and respect.

✓ d) Responsibility, respect, fairness, and honesty.

8. What are the barriers that deter good teamwork?

✓ a) Withholding information

✓ b) Ineffective meetings

✓ c) Uncontested ideas

d) Cultural diversity


1. Based on the scenario, who is responsible for portfolio management within the organi-zation?

a) Project managers

b) Project sponsors

c) Stakeholders

✓ d) Senior management

2. How would you describe portfolio management?

A collection of projects and programs that are grouped together to facilitate effectivemanagement of that work to meet strategic business objectives.

3. Who is responsible for a group of similar projects?

✓ a) Program manager

b) Project manager

c) Operations manager

d) Portfolio manager

Activity 2-2

1. Match the rating and scoring system on the left with its description on the right.

SOLUTIONS



a Decision tree a. A type of screening system decisionmodel that uses a branch diagram tochoose among two different alterna-tives.

e Criteria profiling b. A decision model using groups ofpeople to rate the relative priority ofa number of alternatives.

d Weighted factor c. A group technique that extracts andsummarizes anonymous group inputto choose among various alternatives.

b Q-sorting d. A decision model that applies a mul-tiplier based on importance to eachcriterion, which is factored into thescoring.

c Delphi technique e. A decision model used to evaluateand score alternatives on each crite-rion.

2. Choose the option to which the OGC’s project selection criteria should be linked.

✓ a) Their strategic objectives

b) Their cost-benefit analysis

c) Their feasibility analysis

d) Root cause analysis

3. In OGC’s decision-making methodology, there are 10 weighted project criteria thatyield a score which determines the project’s priority. One of those criteria is purelysubjective for those times when an emphasis on go-with-your-gut is appropriate. Theresulting statistics are fed back to the participants along with a summary of thegroup’s reasoning. Participants can then revise their rating using a zero-to-ten scale.The process repeats until some pre-determined score is reached. Which combinationof scoring and rating systems is being used?

a) Decision tree and weighted factor

b) Decision tree and Q-sorting

c) Weighted factor and Q-sorting

✓ d) Weighted factor and Delphi technique

4. You have moved into the feasibility analysis and cost-benefit analysis of project selec-tion. One project budgeted for $100,000 came out of the selection process. This is thecompany-wide training initiative to be implemented for all project managers to adhereto PMO project management standards and guidelines. The intent of the training is toensure that each member of the project management team understands the scope,time, and costs in managing competing project requirements. The program will includespecific technology training in the use of a software tool that OGC recently purchasedthat totaled $20,000 so that managers can create, manage, and track their projects.Currently only 10% of the project managers are using the software. One senior man-ager is questioning the need for the budget to be as high as $100,000. What are yourjustifications for the allotted budget? What are the benefits?

The justifications include: 1 — There will be a higher return on software investment byincreasing efficiencies in team members’ use of the tool. 2 — Compare the cost of thesoftware with the current 10% usage of the managers in the company. 3 — Knowledge ofthis tool will ultimately provide better reporting on the status of each individual sub-project to the overall business transformation project.The benefits include: 1 —Consistency can be maintained across all projects that are included in the portfolio. 2 —Provides an opportunity for all managers at all levels in identifying what is involved inmanaging competing project requirements. 3 — Provides reinforcement of the company’sstrategic objective before project initiation.

SOLUTIONS

Solutions 551


Activity 2-3

1. What might be a logical first step in preparing the SOW?

✓ a) Verify if you should use the standard OGC SOW format.

b) Present the information in a logical sequence.

c) Provide a description of the project completion criteria.

d) List every person or work group that will perform actual work on the project.

2. Based on the scenario, which one or more of the following should be included in theSOW?

✓ a) A clear description of what is required for the internal and external training.

✓ b) The specifications as to how both the internal and external training will be producedand methods for ensuring that the specifications have been met.

c) A detailed breakdown of all deliverables that will be required to complete theproject.

✓ d) A list of the human resources or work groups that will perform actual work for thetraining project.

✓ e) The estimated date of completion for both the internal and external training classes.

3. Yes or No? Based on the scenario, do you think that it will be necessary for OGC to cre-ate an additional external SOW for this training project?

✓ Yes

No

Activity 2-4

1. How would you describe the goals and objectives of this project?

All Business Transformation team members must provide consistency in developingproject schedules in order to efficiently manage the many projects that will fall underthe Business Transformation umbrella. Team members must be able to identify all newinternal processes that are the direct result of the Business Transformation acquisitions.

2. How would you describe the project’s impact to the organization?

The newly combined companies are depending on integrating project management bestpractices and all project managers becoming proficient with a new scheduling and track-ing software tool. Without these significantly enhanced skills, the businesstransformation initiative will fail. The impact to the organization is extremely high andcannot be overstated.

3. Are there any assumptions that you would include? If so, describe them.

Since the company cannot provide the software training due to classroom and computerlimitations, it is expected that the company will need outside help from a training pro-vider who has expertise with the project software and can manage the classroomtraining. Internal training will be developed by the Business Transformation PMO team.

4. Based on what you know at this point, how would you describe the primarydeliverables for this project?

Internal Training—for all new internal processes that are the direct result of the BusinessTransformation acquisitions. External Training—outsourced training provider to conduct abasic, intermediate, and advanced level of training on the project software.

SOLUTIONS



5. Yes or No? At this time, are there any real constraints in the project charter?

✓ Yes

No

Activity 2-5

1. How would you approach ascertaining the total list of project stakeholders for the OGCPM Training Roll-Out project?

Answers will vary, but may include: study the input documents, namely the project char-ter and the stakeholder register for the OGC Quality Plans Training project, to identifythe potential stakeholders of the project. The objectives, business need, assumptions,and project description mentioned in the project charter are understood from the per-spective of contributors in the organization. A dialog with the project sponsor will be ofgreat help. Document this information along with details of impact and support thatthese stakeholders would have on the project.

2. True or False? Members of the OGC PM Training Roll-Out project team are consideredto be stakeholders.

✓ True

False

3. How would you identify the positive and negative stakeholders of the project?

Answers will vary, but may include: you would perform a stakeholder analysis to identifyall potential stakeholders, analyze their potential impact or support to the project, andassess how each stakeholder is likely to positively or negatively react or respond to vari-ous situations during the project life cycle. This would result in creating and documentinga stakeholder management strategy for the project.

4. Which statements are true of the stakeholder management strategy?

✓ a) Identifies key stakeholders who can impact the project.

b) Describes the government and industry standards to be applied to stakeholder man-agement.

✓ c) Describes the level of participation for each identified stakeholder in the project.

✓ d) Identifies the stakeholder groups and their management.

5. How would you establish levels of stakeholders based upon their interest in the projectand the impact they can have on the project?

Answers will vary, but may include: you would perform a stakeholder analysis to identifythe various levels of stakeholders, use interviews to gain insight into their interest in theproject, assess their support and impact on the project, and categorize these stakehold-ers into various levels based on their interest and their impact on the project.

6. What is the documentation needed for each level of stakeholder?

Answers will vary, but may include: you will document information relating to the stake-holder’s identification, their assessment, and their classification in the stakeholderregister. This information could include the stakeholder name, primary role or designa-tion, their interest or objective, their influence, the communication strategy and mode,and the artifacts or documents required for these stakeholders.

7. Which documents can you use as a basis for your stakeholder register?

You can use the OGC Project Charter and the OGC Quality Plans Training Stakeholder Reg-ister as a basis for identifying stakeholder information.

SOLUTIONS

Solutions 553



1. Choose the component that should always be included in the project charter.

a) A breakdown of the functions and activities to be performed on the project.

b) A list of the project stakeholders and their areas of responsibilities.

c) A schedule of project activities.

✓ d) A statement of project goals, via a project SOW, and authorization of the projectmanager to use organizational resources on the project.

2. Which one or more of these is a common reason for an organization to undertake anew project?

✓ a) Meeting a customer’s needs.

✓ b) Gaining a competitive advantage in the market.

c) Identifying best practices.

✓ d) Meeting regulatory requirements.

3. What is the basic purpose of a feasibility study?

a) To determine the major activities within the project and break them down into com-ponent work packages.

✓ b) To determine if the organization should do the project based on economic and/orsocietal costs associated with what is being proposed.

c) To link the project to strategic goals.

d) To determine how to manage a project throughout its life cycle.

4. Choose the component that a formal feasibility study is likely to contain.

a) Estimate of the time and cost for each activity in a project.

✓ b) Estimate of the time and cost for each of a number of project alternatives.

c) Likelihood of the project to meet capital budgeting targets.

d) Rating of the relative priority of a number of projects.

5. Which are reasons that it is important for the project charter to be signed by a highlyplaced person in the organization?

✓ a) This indicates the relative importance and priority of the project within the organiza-tion.

✓ b) This provides authority for the project manager to cross functional boundaries whencarrying out project plans and activities.

c) This provides a signed document, which indicates that the project team members canstart work on the project.

✓ d) This provides greater credibility with people outside of the project who may be askedto contribute resources or join the project team.

6. Which is a quick and objective method for evaluating project proposals?

a) Screening system

✓ b) Weighting system.

c) Team-based evaluation system

SOLUTIONS



d) Capital budgeting system

7. How will you categorize the use of standard organizational procedures and terminologyby all team members and suppliers?

a) A bad management practice because it stifles creativity.

b) A bad management practice because it dictates practices that may not be industrystandard best practices.

✓ c) A good management practice because it helps establish the foundation and frame-work for a common project language.

d) A good management practice because it highlights the project manager’s absoluteauthority over the project.

8. Which approach documents an approach to increase the support and minimize nega-tive impacts of stakeholders throughout the project life cycle?

a) Stakeholder analysis

✓ b) Stakeholder management strategy

c) Stakeholder communications planning

d) Risk management planning

9. What are the tools and techniques of the identify stakeholders process?

a) Project charter

✓ b) Stakeholder analysis

c) Organizational process assets

✓ d) Expert judgment


1. As you review the OGC Project Management Plan outline, identify the elements thatyour organization requires, if any, for your project management plans.

Answers will vary, but may include: the table of contents, templates for making RevisionHistory, Deliverable Approval Authority Designations, and Project Team Roles and Respon-sibilities entries, Glossary, and Definitions.

2. Match the project management plan input with the appropriate description.

SOLUTIONS

Solutions 555


d Project charter a. This input uses baselines and subsid-iary management plans that areintegrated to create or update theproject management plan.

a Outputs from planningprocesses

b. This input uses existing processesthat may impact a project’s successsuch as policies, guidelines, orknowledge gained from previousprojects.

c Enterprise environmentalfactors

c. This input includes factors that influ-ence the project’s success, such asanything from existing assets to exter-nal factors that should always beconsidered during plan development.

b Organizational processassets

d. This input authorizes and providesvital information relating to theproject based on which the projectmanagement plan is built.

3. Which subsidiary plan of the project management plan deals with closure of contracts?

a) Scope management plan

✓ b) Procurement management plan


d) Communications management plan

Activity 3-2

1. What would you do to identify the internal stakeholders for the OGC PM Training Roll-Out project?

Answers will vary, but may include: you will interview the sponsor, Vicky Morris, to iden-tify the various internal stakeholders for the project. These internal stakeholders willbelong to departments such as Legal, Administration, and IT Infrastructure. You caninterview the supervisors of these departments to know the high level details of approxi-mately 50 managers who will need to complete the training.

2. Where would you start the process of finding the external stakeholders for the OGC PMTraining Roll-Out project?

Answers will vary, but may include: you will interview the sponsor, Vicky Morris, to iden-tify the various external stakeholders of the project. Further, some of the internalstakeholders you identify will most likely be in touch with the external stakeholders, andcan be of great help to you as you identify appropriate external stakeholders.

3. Which is the method used to identify requirements by studying the individuals in theirwork environment or while using the product?

a) Surveys


✓ c) Observations

d) The Delphi technique

4. For the OGC PM Training Roll-Out project, which one or more of these tools and tech-niques could you use initially to identify the requirements of the stakeholders?

✓ a) Interviews

SOLUTIONS



✓ b) Focus groups

✓ c) Facilitated workshops

d) Prototypes

5. In which output document would you store the guidelines on requirementsprioritization along with product related metrics for the OGC PM Training Roll-Outproject?


b) Requirements traceability matrix

✓ c) Requirements management plan

d) Idea/mind map

6. Which documents can you use as a basis for your requirements documentation?

You can use the project charter and your notes from discussions with stakeholders givenin the scenario as a basis for the requirements documentation.

Activity 3-3

1. Which documents can you use as a basis for your scope statement?

You can use the Requirements Documentation and the Project Charter as a basis for yourscope statement.

Activity 3-4

1. When creating the WBS for the OGC Training Roll-Out, what types of reference materi-als and other inputs could you use?

You can reference the requirements documentation, project charter, project statementof work, and the project scope statement. You should also determine if there is an exist-ing WBS template that can be used.

2. Based on the scenario, which work breakdown structure in Group 1 of the OGC WorkBreakdown document follows PMI recommendations for the OGC Training Roll-Outproject?

a) WBS A

✓ b) WBS B

c) WBS C

d) WBS D

3. As the project manager, you are asked to decompose the WBS deliverables. Whichactivity would you perform during decomposition?

a) Assign unique ID numbers to each deliverable.

✓ b) Break the deliverables down into smaller components.

c) Arrange the deliverables into categories, based on risk.

d) Organize the deliverables, based on which project team is responsible for theircompletion.

4. The scenario shows two deliverables that have been partially decomposed during arecent meeting. Which of these activities are decomposed? Choose all that apply.

✓ a) Assemble Internal Training

SOLUTIONS

Solutions 557


b) Identify Resources

c) Needs Assessment

✓ d) Determine External Training Provider

5. In Group 2, which WBS would most resemble the inclusion of the decomposeddeliverables?

a) WBS A

✓ b) WBS B

c) WBS C

d) WBS D

Activity 3-5

1. Based on the scenario, develop the second-level work components for the WBS.

The second-level work components for the Warehouse Management System project willlook like this.

2. Based on the points you recorded from the kick-off meeting and discussions with thestakeholders, what work packages would you include in the Project Management workcomponent?

The work components for the Project Management work component will look like this. Itincludes Project Planning, Schedule and Cost Management, Scope Management, Task Man-agement, Project Communications, Human Resource Management, Space and FacilitiesManagement, Risk Management, Procurement Management, and Quality Management.

SOLUTIONS



3. To the WBS you have created, add the subcomponents for the Software Design andDevelopment work component and their corresponding work packages.

Your WBS would now look like this. Software Design and Development work componentwill include the Software Design, Software Build, and Unit Test subcomponents.

4. Complete the remainder of the Warehouse Management System project WBS.

The completed work breakdown structure for the Warehouse Management System projectwill look like this.

SOLUTIONS

Solutions 559



1. What is the item at the lowest level of a WBS?

a) Task

b) Sub-task

✓ c) Work package

d) Cost account

2. What is the purpose of the scope management plan?

a) List all of the tasks that will be included in the project.

b) Prevent scope creep by ensuring that all changes to a project plan be reviewed by areview board.

✓ c) Identify how the project’s scope will be defined, verified, and controlled whenchanges are proposed.

d) Archive all of the information in WBS, RBS, and PBS.

3. What is meant by the code of accounts?

a) A numbering system used to define activities in the statement of work.

✓ b) A numbering system that identifies the specific accounting category for each elementof project work.

c) A numbering system that rates activity durations for each work package.

d) A numbering system for analyzing cost based on expert opinion.

4. What is the purpose of scope definition?

a) Create an overall strategy for approaching the project.

b) Define which tasks are included in a project and which tasks are not included.

✓ c) Provide a common understanding of the project’s major objectives by identifyingwhat is within scope and what is currently out of scope.

d) Define the quality parameters affecting project procurements.

5. What are the reasons that deliverables should be broken down into work packages dur-ing the development of the work breakdown structure?

a) In order to define the scope of the project.

b) In order to make the activities easier to manage.

✓ c) In order to make costing easier.

✓ d) In order to create activities that can be assigned to a single organizational unit.

6. What is the main purpose of the work package decomposition process?

a) Document results of lessons learned.

✓ b) Break down of deliverables into component activities.

c) Estimate costs and duration for each sub-project.

d) Allocate resources to each activity.

SOLUTIONS



7. Which component is a graphical representation of the deliverables included in theproject?

a) Resource assignment matrix.

✓ b) Work breakdown structure.

c) Organizational breakdown structure.

d) Project schedule.

8. Which elements are included in a project scope statement?

a) Detailed project risks.

✓ b) Project justification and deliverables.

✓ c) Project description and objectives.

d) Schedule and costs for the project.

9. Which statement is true of WBS templates?

✓ a) They are time savers for the project team.

b) They are usually not used, because no two projects are the same.

c) They are only useful for high technology projects.

d) They are used only when all of the work packages are identical to the project.

10. What does the WBS dictionary consist of?

a) Terms used by project managers.

✓ b) Information about each work package in the WBS.

c) Who’s who on the project team.

d) Details of the scope of the project.

11. Which process involves defining and documenting the stakeholders’ needs and expec-tations to meet the project objectives?

a) The define scope process.

b) The develop project management plan process.

✓ c) The collect requirements process.

d) The create WBS process.

12. Which technique involves decision making methods such as Unanimity, Majority, Plu-rality, and Dictatorship?

✓ a) Group decision making techniques


c) Interviews

d) Questionnaires and surveys

13. Which document links the requirements to their origin and tracks them throughout theproject life cycle?

a) Requirements management plan

b) Stakeholder register


✓ d) Requirements traceability matrix

SOLUTIONS

Solutions 561



1. The first step in creating an activity list is to gather your resource materials. Whichitems below will be helpful in creating your list?

a) Cost-benefit analysis

✓ b) The WBS

✓ c) The scope statement

✓ d) Activity lists from similar projects

2. In the provided table, list the activities and the appropriate WBS codes that are neces-sary and sufficient for the successful completion of the Assessing Needs work package.

SOLUTIONS



The completed activity list should look like this.

Activity 4-2

1. During a recent meeting with your team, a decision was made to add five daysbetween identifying resources and defining roles and responsibilities due to othercommitments that some members of the team need to address in other projects. Willthis be a lag or lead relationship that you should account for? Please explain.

There will be a five day lag between identifying the resources and defining roles andresponsibilities.

2. Referring to the OGC Activity List document, for the Assessing Needs activity, which ofthe following activities are summary activities? Choose all that apply.

SOLUTIONS

Solutions 563


✓ a) Training Needs Review with Key Resources

b) Identify High-Level BT PM Needs

✓ c) Training Needs Review with PMO Steering Committee

d) Review Current Documentation for Deficiencies

3. Referring to the OGC Activity List document, draw your network diagram for WBSTRN0001, Assembling Internal Training Team. Make sure that all the required activitiesare included in your network diagram. Make sure your diagram shows the sequenceconstraints from left to right. Check to make sure the activities that are connected byarrows correctly indicate their precedence relationship. Include inside each node theWBS Code, duration, and lag or lead time.

The completed network diagram should look like this.

Activity 4-3

1. What are some additional factors that you would consider when identifying theresources to fill the identified roles?

Answers will vary, but may include: resource availability, reporting structure, experi-ence, and costs.

2. What are some things that you would consider when determining the software trainingvendor?

Answers will vary, but may include: OGC’s organizational policies that could affectresource acquisition and usage, availability, industry expertise, travel distance, andcosts.

SOLUTIONS



3. As the project manager, what factors would you consider to make a decision onwhether to outsource development of the internal training content?

Answers will vary, but may include: verifying the project scope statement and consideringresource availability, resource experience, costs, and time for development.

4. What other types of resources, other than people, would you list for this project?

Answers will vary, but may include: availability of an internal classroom(s) to accommo-date the number of people to be trained, an in-house expert, and IT support. Materials.Necessary equipment, such as computers, software, and overhead projector and possiblyan external copy center.

Activity 4-4

1. For the summary task, Resources Identification, the team members explained that,based on past experience, they would need a week to complete the interviews, if allof the managers were available during that week. When asked how many hours theyexpected to work during the week, they responded with 10 hours. Based on theirresponse to this question, what will the elapsed time be for these activities?

a) 10 hours

✓ b) One week

c) 50 hours

d) A day and a half

2. When the team members determined how long they thought it would take to completethe manager interviews, what type of duration estimating technique were they prob-ably using?

a) Parametric estimating

b) Analogous estimating

c) Reserve analysis

✓ d) Expert judgment

3. In the Estimating Activity Duration document, what will be the total duration for thesummary activity, Training Needs Review with Key Resources?

a) 1 day

✓ b) 2 days

c) 4 days

d) 11 days

4. Do you find it helpful in the activity list to have milestones represented with zeroduration? Why or why not?

Answers may vary, but may include: yes, it is helpful, because a zero duration activitywill immediately indicate a milestone. A milestone indicates a significant event that doesnot need time for completion, but should be tracked for completion.

Activity 4-5

1. What other inputs will you need to have available before developing the project sched-ule?

✓ a) Resource calendars


SOLUTIONS

Solutions 565


✓ c) Project scope statement

✓ d) Specific milestone dates that must be met

2. Use the supplied table to draft the project schedule for the work package, WBSTRN0001, Assembling Internal Training Team.

The completed project schedule should look like this.

Activity 4-6

1. Perform a forward pass to determine the Early Start (ES) and Early Finish (EF) for eachactivity. Enter your answers in the appropriate place in the network diagram. What isthe ES for activity TRN1.1, Identify Team Lead?

The ES for the first activity is assumed to be zero.

2. What is the EF for activity TRN1.1?

The EF is 1. The EF for the first activity is the same as its duration.

3. What is the ES for activity TRN1.2.1, Human Resources?

The ES is 6, because the relationship with its predecessor is FS with a five-day lag.

SOLUTIONS



4. What is the EF for activity TRN1.2.1, Human Resources?

The EF is 11, its ES + duration.

5. Calculate the ES and EF for the remaining activities. Why is the ES for activitiesTRN1.2.3 and TRN1.2.4 the same as the ES for TRN1.2.2?

They all have the same relationship with the predecessor activity TRN0001.2.1.

6. Determine the float for this network. Which activities have total float in this network?

Activity TRN2.1.1.1, Identify High-level BT PM Needs, has 4.25 days of float.

7. What is the critical path?

Critical path = 1.1 + five-day lag +1.2.1 / 1.2.2 / 1.2.3 / 1.2.4 + 1.3 + 1.4 + 2.1.2.1 + 2.2.1+ 2.2.2 + 2.2.3 + 2.2.4 + 2.2.5 = 17.25

Other path = 1.1 + five-day lag +1.2.1 / 1.2.2 / 1.2.3 / 1.2.4 + 1.3 + 1.4 + 2.1.1.1 + 2.2.5= 13

Activity 4-7

1. Which activity has the highest crash cost per week? Which has the lowest?

Activity A has the highest crash cost per week ($6,000 per week). D has the lowest ($250per week).

2. Which activities are on the critical path for this project?

Activities A, B, C, F, and G are on the critical path.

3. What is the project duration under normal conditions?

Project duration is 50 weeks under normal conditions.

4. Which activities are the best candidates for crashing, and in what sequence?

Consider crashing in the sequence G, B, F, C, and then A. G or B will compress the sched-ule by 2 weeks, at a cost of $1,000 per week; F will compress the schedule by 7 weeks ata cost of $2,000 per week; C will compress the schedule by 1 week at a cost of $2,000 perweek; A will compress the schedule by 3 weeks at a cost of $6,000 per week. Carefullyexamine any possible crashing because another network path might emerge as the criticalpath.

5. Plot the slope for crashing each activity on the critical path. Use the graph to makeyour plots.

SOLUTIONS

Solutions 567


The result should look like this.

6. Which activity is the best candidate for crashing? Why?

Activity B or Activity G. This is because the best candidates are those with the flattestslope, meaning they incur the least cost per incremental unit of time saved.

7. If you crashed all the activities identified on the original critical path, what would hap-pen to the duration for that network path?

It would go from 50 weeks (normal) to 35 weeks (10 + 4 + 5 + 13 + 3), a net decrease of 15weeks.

8. If you crashed all activities identified on the original critical path, what would happento the total project cost?

It would increase from $92,000 to $130,000, a net increase of $38,000.

9. What would happen to the total project cost if you decided to crash every activity inthe project?

Total project cost would increase to $137,000.

SOLUTIONS



10. What other factors would you need to consider when deciding whether to crash thisschedule?

Answers will vary, but may include: consider resource allocation under normal and crashconditions. Consider also the possible quality and risk implications of compressing theduration of each of those activities.

11. What should you do if the normal time and the crash time for an activity are the same?

Nothing. You can’t crash that activity.

Activity 4-8

1. What should be done before establishing the schedule baseline?

a) Distribute the stakeholder register templates to the project management team forapproval.

b) Distribute the procurement documents to the appropriate stakeholders and projectteam for approval.

✓ c) Distribute the project management plan to the appropriate stakeholders and projectmanagement team for an in-depth review, then after revising, obtain approval by theproject sponsor.

d) Distribute the project charter to the appropriate stakeholders and project manage-ment team for approval.

2. How would you describe the difference between the draft schedule and the schedulebaseline?

Answers will vary, but may include: the draft schedule evolves through the planningcycle. However, once the draft schedule is committed to by the project stakeholders, thescheduled activities’ start and finish dates, durations, and calculated work are set in theschedule baseline data, which can be used as a comparison once the project is underway.

3. Which tasks will you be able to do once the schedule baseline has been established andproject execution has begun?

✓ a) You will be able to determine project or activity slippage.

✓ b) You will be able to determine a variance in the start and finish dates for the project.

c) You will be able to determine if resources are over-allocated.

✓ d) You will be able to determine if the amount of scheduled work for each work pack-age has changed.

4. True or False? When the schedule baseline is first saved, the schedule variance foreach activity should be equal to zero.

✓ True

False

SOLUTIONS

Solutions 569



1. Activity A has a start-to-start precedence relationship with Activity B; further, ActivityB has a two-day lag. If A’s duration is eight days, and B’s duration is five days, what isthe total amount of time it should take to complete both A and B?

a) 13 days

✓ b) 8 days

c) 15 days

d) 5 days

2. Choose the tasks for which project schedules are required.

✓ a) Sponsor reporting

b) Performance reporting

✓ c) Customer reporting

✓ d) Functional reporting

3. What is meant by near-critical activity?

a) An activity that is on the critical path

b) An activity that may have higher risk to the project due to less risk mitigation thanactivities on the critical path

✓ c) An activity that has low total float

d) An activity that has the longest duration

4. What would be the outcome in a finish-to-start precedence relationship with a one-daylead?

a) The precedent activity can start one day before the subsequent activity starts.

✓ b) The subsequent activity can start one day before the precedent activity is com-pleted.

c) The subsequent activity cannot start until one day after the precedent activity fin-ishes.

d) The subsequent activity must start within one day of when the precedent activitystarts.

5. Which statements are true of the critical path?

a) It is used to analyze the schedule model.

✓ b) It is the path with the longest total duration through the network.

✓ c) It always has the least amount of total float.

d) It shows the shortest amount of time required for completing the project.

6. Which is an example of an FS (finish-to-start) interactivity relationship?

a) Activity B can’t finish until Activity A is completed.

b) Activity B can’t finish until Activity A starts.

✓ c) Activity B can’t start until Activity A is completed.

d) Activity B can’t start until Activity A starts.

SOLUTIONS



7. What is the most commonly used formula for three-point estimates?

✓ a) [Optimistic time + 4(most likely time) + pessimistic time]/6

b) [Optimistic time + most likely time + pessimistic time]/6

c) [Optimistic time + most likely time + pessimistic time]/3

d) [Optimistic time + most likely time – pessimistic time]/2

8. Activity A has a finish-to-finish precedence relationship with Activity B. If A’s durationis two days, and B’s duration is eight days, what is the shortest total duration for com-pleting both A and B?

a) 10 days

b) 12 days

c) 6 days

✓ d) 8 days

9. Activity A has a start-to-start precedence relationship with Activity B, with a four-daylag. If A’s duration is two days, and B’s duration is 12 days, what is the total amount oftime it will take to complete both A and B?

a) 18 days

b) 14 days

✓ c) 16 days

d) 12 days

10. Who is eligible for estimating activity duration?

✓ a) The persons most familiar with the work to be done in collaboration with the workpackage owner.

b) The project manager working closely with the resource manager.

c) The project schedule manager and the project’s resource calendar.

d) The project management team to make sure all voices are heard.

11. Choose the appropriate term that corresponds to “analogous estimating.”

a) Bottom-up estimating

b) Simulation

✓ c) Form of expert judgment

d) Heuristics

12. What are the two schedule compression techniques—fast tracking and crashing—usedfor?

a) Planning activity sequence.

✓ b) Shortening total project schedule duration.

c) Developing an activity schedule.

d) Estimating activity duration.

13. What task is related to the estimate activity resources planning process?

a) Developing cost estimates for each resource required for project work.

b) Apportioning resource cost estimates across all the work packages.

c) Documenting product requirements and identifying potential sources.

✓ d) Estimating the type and quantities of the resources required to complete activities.

SOLUTIONS

Solutions 571


14. Choose the most appropriate approach that you would take to shorten a project dura-tion.

a) Change the project scope.

b) Crash as many activities as possible.

c) Crash all activities on the critical path.

✓ d) Fast-track activities on the critical path.

15. What does the Precedence Diagram Method (PDM) show?

a) Resource allocation

b) Significant points in time

c) Task duration

✓ d) Relationships

16. Choose the statements that are true of bottom-up estimating.

✓ a) The most accurate estimating method.

✓ b) The most challenging estimating method.

✓ c) The most costly and time-consuming estimating method.

d) Used when enough historical information is present.

17. What are the disadvantages of bottom-up estimating?

a) Accurate historical data requirement

✓ b) Timeliness

c) Accuracy

✓ d) Cost-effectiveness

18. Choose the option that is true of milestone charts.

✓ a) Display the scheduled start or completion of major deliverables.

b) Show inter-relationships.

c) Are excellent planning and scheduling tools.

d) Provide the project team with detail for decision making.

19. Which is not true for network diagrams?

a) They show dependencies among project activities.

b) They facilitate communications among all project stakeholders.

✓ c) They have nodes that show the deliverables of the WBS.

d) They provide a highly effective visual for project planning and scheduling.

20. In a PDM network, which formula would you use to calculate the slack for an activity?

a) Total project duration minus total duration on the critical path.

b) Earliest time when the event can start, minus the latest time when the event can fin-ish.

c) Earliest start date minus the earliest finish date for that activity.

✓ d) Earliest time when the event can start, minus the latest time when the event canstart.

21. When a lead occurs in an activity, what is its effect upon other activities?

SOLUTIONS



a) Delays a successor task.

✓ b) Accelerates a successor task.

c) Delays a predecessor task.

d) Accelerates a predecessor task.

22. Choose the statements that are not true of a hammock activity.

✓ a) Has an estimated duration different than the sum of its interdependent work pack-ages.

b) Includes activities performed by different resources.

✓ c) Includes activities that are non-sequential.

d) Spans across several activities in a work package.

23. When will a project completion date slip?

a) If total float = 0

b) If total float > 0

✓ c) If total float < 0

d) If total float > 1

24. Choose the appropriate task a project manager needs to perform when levelingresources on a project.

✓ a) Manually determine where to adjust resources.

b) Extend the finish date.

c) Add resources.

d) Discuss a change in the project scope with the stakeholders.

25. When would you perform a forward and backward pass?

✓ a) To determine early start and finish dates for each activity.

b) To identify the start and end dates of each activity on the critical path.

c) To calculate the theoretical time period within which an early refinement of theschedule can occur.

✓ d) Typically done without considering resource limitations.

26. What is total float?

a) The amount of float on any network path.

b) The amount of time that an activity can be delayed without delaying the early startof any immediately following activities.

c) Calculated by subtracting late start from late finish.

✓ d) The amount of time on a critical network path that an activity can be delayed with-out delaying the completion date of the project.

27. Which technique involves overlapping project activities to shorten project duration?

a) Risk conversion

✓ b) Fast-tracking

c) Parallel management

d) Synchronous manufacturing

28. When crashing an activity, which task should the project team focus on?

SOLUTIONS

Solutions 573


✓ a) Accelerating performance of those tasks on the critical path.

b) Accelerating performance of as many tasks as possible.

c) Accelerating performance of non-critical tasks.

d) Accelerating performance by minimizing costs.

29. Which activity duration estimation technique uses optimistic, pessimistic, and mostlikely calculations?

a) GERT

b) Gantt

✓ c) Three-point estimates

d) CPM

30. Which element is drawn from the schedule network analysis and includes baselinestart and finish dates?

a) Activity list

✓ b) Schedule baseline

c) WBS package

d) Summary activities


1. Which estimating technique was used to come up with the $63,000 allocation to theMedia Campaign deliverable? Why?

Analogous estimating was used to come up with $63,000 because you used historical infor-mation based on similar previous projects to allocate a portion of the $100 million totalproject budget (top-down).

2. How would you describe the level of accuracy for the $63,000 estimate?

Since one OGC store is very much like any other OGC store, it may have originated as anappropriation, in which case, budgetary estimation may have been used with an accuracyof -10 percent to +25 percent. It could also have been an approximate estimate, since itlacks the detail required for high accuracy, with an accuracy of ± 15 percent.

3. What was the impact of involving the work package owners in preparing the cost esti-mates? Why?

The work package owners are closest to the work and have a better understanding of thework, so their cost estimates can be expected to be more accurate.

4. Which estimating technique was used when you asked the work package owners fortheir estimates?

Bottom-up estimating was used.

SOLUTIONS



5. What technique would you use to estimate the Conduct Planning Meetings activity?Why?

Use parametric modeling because you can use mathematical models to develop the esti-mate.

6. What are the benefits of the parametric modeling technique?

The parametric model is reliable and can provide a high level of accuracy. However, theinformation that forms the parameters must be accurate, quantifiable, and scalable.

7. What is the estimated cost of the Conduct Planning Meetings activity?

The four 2-hour planning meetings involving 10 in-house people at $80 an hour will cost$9,600 (4 x 2 x 15 x $80), and the two catered lunches for the 15 people at $15 per personwill cost a total of $450 (2 x 15 x $15). So the total cost of the Conduct Planning Meetingsactivity is $10,050.

8. Are there activities in the work package for which you will use more than one estimat-ing technique? Why?

The Arrange Staffing activity uses analogous estimating for the air travel and parametricmodeling for the other costs. The Hold Event activity uses analogous estimating for thelabor and equipment that will be provided by the cable station and parametric modelingfor the other costs.

9. Using the information in Public Meeting Estimate document, estimate the cost of eachof the activities.

The breakdown is: 1.1.4.2.1: $10,050; 1.1.4.2.2: $4,950 to $5,540; 1.1.4.2.3: $6,700;1.1.4.2.4: $7,800 to $8,300; 1.1.4.2.5: $2,000.

10. What is your total cost estimate for the Public Meeting work package?

The total cost estimate should be $32,500 to $33,590.

11. What is the level of your cost estimate now?

You now have a definitive (control or detailed) estimate that has an accuracy of -5% to+10%.

12. Do you need to take any action regarding your preliminary estimate of $63,000 for theMedia Campaign deliverable? If so, what action should you take?

Because the more accurate estimate for the public meeting exceeds the initial assump-tion of $30,000, your overall estimate is $2,500 to $3,590 more than $63,000, so you needto take some action. You can adjust your earlier estimate and try to reconcile the deficitwith one of the other major deliverables; you can work with the work package owners ofthis deliverable to try to get the costs down to below $63,000; or you can go back formore funding.

Activity 5-2

1. Do you have all the necessary inputs to establish a cost baseline?

Yes, you have the WBS with cost codes assigned, the project schedule with at least startand finish dates for each activity, and cost estimates.

2. During what time period will the Public Meeting activities take place?

All activities will take place over a 10-week period.

SOLUTIONS

Solutions 575


3. What cost assignment method will you choose to allocate funds? Why?

Answers will vary, but might include the Percentage Complete rule, since the milestonesare clearly defined and can be easily reported on; or the 0/100 percent rule, where nocredit is given until the work is complete.

4. What are the weekly cost estimates for the activities in the Public Meeting work pack-age? Refer to the Cost Estimates Per Week chart given below to estimate costs perweek and round up to the nearest thousand.

The allocation of costs will look similar to this table.

5. Will you include a contingency amount?

No, since this is a relatively low-risk work package.

6. How would you plot the estimates to create an S-curve? Use the graph to plot yourresults. Cost is on the y-axis and time is on the x-axis.

SOLUTIONS



Based on how the costs were allocated, the answers will look similar to this graph, whichplots the S-curve based on the previous Estimated Cost Per Week table.

Activity 5-3

1. The project scope statement specifies a specific number of ads to be placed in thenewspaper in the weeks leading up to the grand opening. You have researched thecost of ad space and you know that the sponsors’ requirements will exceed the fundingcommitment. How would you proceed?

Answers will vary, but could include: you could approach the sponsor with a cost break-down for the ad placement and suggest placing fewer ads. Come up with solutions such asspend less per ad, place smaller ads, purchase black and white ads instead of full color,and approach the advertising agency about cost savings. You might also consult with asubject matter expert, such as someone in the marketing department, who can speakdirectly to the sponsor in this matter.

SOLUTIONS

Solutions 577


2. Assume that you have no background in advertising or marketing. How could you goabout generating alternative ideas to suggest regarding less expensive advertisingoptions so that you can deliver the desired results within budget?

Answers will vary, but could include: you could consult with your company’s public rela-tions department for suggestions of cost saving efforts. You might consider implementinga partnership with a local university by offering a marketing internship program to uni-versity students, thereby gaining extra help at little or no additional cost.

3. You need to partner formally with your company’s financial decision makers regardingthe costs of this project. Given the above scenario, what steps would you take to fur-ther this goal?

Answers will vary, but could include: you could ask your financial decision makers for ameeting, bring documentation regarding advertising costs and budget, and ask for theirhelp in identifying additional sources of revenue. It is possible that they might choose toincrease the funding commitment. However, keep in mind that the forecasted cost vari-ance should be a guideline for how elaborate an escalation should be.

4. The advertising agency that has been contracted to produce the ads for the Seattlestore’s grand opening has unexpectedly gone over budget. You receive an invoice thatexceeds their original estimate. How would you proceed?

Answers will vary, but could include: you could meet with the agency to determine whythey went over budget and whether they did anything that was beyond the scope that hadbeen agreed to. You could ask the advertising agency to work with you to identify savingselsewhere, such as a discount on future work so that you can recoup some of your losses.You could alert the sponsor regarding the cost overrun so that changes could be made tothe scope of the project.


1. Identify the sources from where you can obtain cost estimate information.

✓ a) Trade organizations, vendors, and suppliers.

✓ b) Past project experience and current project team members.

c) Project schedule.

✓ d) Commercial databases.

2. What should be included in a project cost baseline?

✓ a) Estimates of the most likely project costs.

b) Management contingency reserves.

c) Unforeseen expenditures for the project.

✓ d) Assumptions for the estimates.

3. What step will a project manager take to help prevent cash flow problems?

a) Use the contingency reserves of other projects.

✓ b) Make efforts to engage the finance department to put in place a cash flow forecast.

c) Make sure customers are financially stable.

d) Request additional funding from project sponsors.

SOLUTIONS



4. Which cost estimating method requires managers to use their experience, historicalinformation from similar projects, and expert judgment to determine a total projectcost or time estimate?

✓ a) Analogous or top-down estimating

b) Parametric estimating

c) Bottom-up estimating

d) Revenue estimating

5. Which are inputs to the determine budgets process?

a) Activity cost estimates, Resource calendars, Funding limit reconciliation, and costaggregation.

b) Basis of estimates, scope baseline, resource calendars, and reserve analysis.

✓ c) Activity cost estimates, scope baseline, project schedule, and contracts.

d) Activity cost estimates, scope baseline, project schedule, and cost performancebaseline.

6. Which is a method of adjusting, spending, scheduling, and resource allocation in orderto bring expenditures into alignment with budgetary constraints?

a) Cost aggregation

✓ b) Funding limit reconciliation

c) Reserve analysis

d) Activity cost estimation

7. Which guidelines allow you as the project manager to reconcile the costs with thefunding that has been approved by the sponsor?

✓ a) Map the project budget, scope statement, and schedule to the funding available.

✓ b) Involve the project sponsor.

c) Consider adding in a contingency amount to accommodate the risk of incurring extraexpenses.

✓ d) Partner formally with the company’s financial decision makers.


1. Based on the scenario, which documents would you have used to identify the primaryproject objectives for this project quality plan?

✓ a) OGC quality policies and procedures

✓ b) Project scope statement


✓ d) Project management plan

2. True or False? The process improvement plan helps remove activities that do not con-tribute to producing products of required quality.

✓ True

SOLUTIONS

Solutions 579


False

3. Which tool can be used to monitor repetitive activities and help identify if the projectmanagement processes are under control?

a) Benchmarking

✓ b) Control charts

c) Flowcharting

d) Cost-benefit analysis

4. The PMO has identified a list of objectives for all project managers in the use of thesoftware. What would you include in your quality plan that will address the level ofquality achieved by each project manager?

Answers will vary, but may include: the assessment is a form of benchmarking. A checklistcould be used as a helpful tool. Knowledge gaps can be identified and the follow-up sup-port from the training provider can address these gaps to get each manager to theappropriate 75% or above.

5. The PMO has provided a complete list of activities as expected improvements aftertraining. What could your team use as a way to determine the degree of improvementafter training?

Answers will vary, but may include: the post-assessment evaluations taken by eachproject manager will assess their level of knowledge and the regularly scheduled PMOconducted project reviews and audits will evaluate whether the managers have incorpo-rated what they have learned.

6. What are some ways that you could identify the level of quality of the vendor instruc-tor?

Answers will vary, but may include: ask that the training vendor provide evaluations fromprevious classes taught by the instructor in the use of the software at all three levels oftraining. Ask for a resume from the instructor. If resources were available, you couldobserve the instructor in front of a classroom.

7. How will you measure the quality of support after training?

Answers will vary, but may include: using evaluations where project managers providefeedback at a statistically valid rate.

Activity 6-2

1. Which step would be the logical first step in documenting the roles, responsibilities,and reporting relationships of project team members?

a) Create a RAM to document the roles and responsibilities for key project stakeholders.

b) Create an organization chart to organize the team members into a hierarchy.

c) Consider the competencies of expected staff members and how they affect theproject’s reporting relationships or roles and responsibility assignments.

✓ d) Examine the staffing requirements of the project.

2. After examining the staffing requirements of the project, your next step is to list pos-sible constraints that would affect the organizational planning. Which options wouldyou include as constraints for this project?

a) The project includes resources from several different OGC buildings.

✓ b) The project includes resources from outside the organization.

SOLUTIONS



✓ c) The project requires resources that are assigned to another project that may not bereleased.

✓ d) The project includes some resources that are new hires.

3. Which item would you include in your documentation of the reporting relationships onthis project?

a) The training quality requirements.

b) The number of years of experience of each project manager.

✓ c) The training instructor and manager will not only report to their management but willalso be responsible for several deliverables in your project.

d) The training and assessment costs.

4. You have reviewed the Staffing Management Plan; to your surprise, it appears thatthere are now staffing gaps due to resource reassignments. What could you do toaddress this problem?

Answers will vary, but may include: one of the first things would be to develop somerough choices for the project sponsor in terms of acquiring new resources and lead timesto fill these staffing gaps. Typically, this is where the budget and schedule get their firstexercise.

5. At the conclusion of documenting project roles and reporting relationships, what keydocuments would you create and distribute to project team members?

a) The project charter and a RAM.

✓ b) An organization chart and a RAM.

c) The company quality policy and a RAM.

d) A cost-benefit analysis and a RAM.

Activity 6-3

1. Which item should you use to determine the communications needs of your projectstakeholders?

a) Research material

✓ b) Stakeholder analysis data

c) Project report deadlines

d) Executive board schedule

2. Given the scenario, what would be a good technology for enhancing team memberinteractions and building relationships through the life of the project?

a) Team building event at project kick-off.

b) Project team threaded discussion board.

c) Use email and databases to collect and store information.

✓ d) High quality virtual teleconferencing on a semi weekly or weekly basis.

3. Given the scenario, what would be a good primary communication technology forexchanging project information?

✓ a) Phone exchange with email confirmation

b) Weekly face to face meetings

c) Voice mail

d) Video conferencing

SOLUTIONS

Solutions 581


4. After integrating the communications management plan into the overall project plan,what would be the next logical step?

a) Determining whether there will be changes to the proposed technology before theproject is over.

b) Creating a schedule for the production of each type of communication.

✓ c) Distributing the plan to all the stakeholders.

d) Creating a description of stakeholder communication requirements.


1. Which tool is consistently used to document the roles and responsibilities on a project?

a) Role administration matrix

✓ b) Responsibility assignment matrix

c) Responsibility and role hierarchy


2. Which document shows the reporting structure within the project, as well as its rela-tionship to the parent organization?

a) Resource staffing histogram

✓ b) Organization chart



3. When does common experience show that a learning curve becomes apparent?

a) As cumulative production time doubles, time and costs associated with that produc-tion increase randomly.

b) As cumulative production time decreases, time and costs associated with that pro-duction lower at a constant and predictable rate.

✓ c) As the quantity of items produced increases, costs decrease at a predictable rate.

d) As cumulative production time doubles, time and costs associated with that produc-tion increase at a constant and predictable rate.

4. On which concept is “total quality management” based?

✓ a) Quality is an ongoing process rather than a one-time event.

b) Quality standards should be established universally in every industry.

c) Quality issues should be supervised and controlled by a quality management team.

d) Quality planning is the most integral part of the quality system.

5. What is quality planning?

✓ a) The process of identifying the quality standards that apply to the project and deter-mining how to meet those standards.

b) The process of evaluating quality results and planning improvement strategies.

SOLUTIONS



c) The process of systematically evaluating project quality.

d) The process of establishing a communications plan between stakeholders and workpackage owners for quality updates.

6. What are the uses of project benchmarking?

✓ a) Compare project practices to those of other projects to develop performance mea-surements.

b) Identify potential problems and possible effects for those problems.

c) Determine marketing costs associated with a specific product.

✓ d) Determine what product or services to offer and what features to include.

7. The communications management plan is the most important portion of the projectmanagement plan for managing stakeholders. For what reason?

a) It keeps the stakeholder involved with the day-to-day management of the project.

✓ b) It helps the project manager to understand stakeholder expectations for projectcommunications.

c) It gets stakeholders involved in the planning process.

d) It helps identify all stakeholder needs and objectives for the project.

8. Which of these project factors is likely to prevent effective performance of the com-munications plan?

a) The virtual team will use the company intranet to transmit documents.

✓ b) All client company meeting time has been set at no more than 30 minutes a week foreach employee.

c) The customer wants its technical manager to review project data monthly.

d) The team is co-located in a trailer behind the main plant.

9. Which part of the communications management plan is concerned with collectinginformation and getting it to the right stakeholders?

a) Information distribution

b) Feedback system management

c) Communications management

✓ d) Communications systems planning

10. Which tasks are included in the cost of quality?

✓ a) Cost of quality planning.

b) Cost of preventing conformance.

✓ c) Cost of rework.

✓ d) Cost of monitoring nonconformance.

11. Which statements are true about formal project recognition and rewards?

a) Documented in the communications management plan.

✓ b) Documented in the human resource management plan.

✓ c) Perceived by project team members as being tied to performance.

d) Addressed only at the end of the project.

12. At what points in the project should the quality audits or inspections take place?

✓ a) At the end of every process cycle.

SOLUTIONS

Solutions 583


b) When each project activity starts.

✓ c) At random intervals within a process cycle.

✓ d) At random intervals over the course of the project.

13. Why is the cost of quality used during quality assurance?

✓ a) To determine the most effective approach when considering prevention, inspection,and repair.

b) To determine if the cost of the product will meet budget requirements.

c) To persuade management to invest in quality product methods.

d) To assess the cost of implementing quality improvements.

14. Who is the quality guru associated with “breakthrough improvement”?

a) Taguchi

b) Deming

✓ c) Juran

d) Crosby

15. A team has 20 people on it. How many potential communication channels exist on thisteam?

a) 19

✓ b) 190

c) 20

d) 380

16. Which is true of using project intranets and home pages for communication?

a) Limited because only large organizations have access to these tools.

b) Ineffective as external project stakeholders cannot access them.

c) A security risk because there is no way to restrict access to them.

✓ d) An effective way to provide a lot of information to a variety of users.

17. Which task is an example of a cost of nonconformance?

a) Training

b) Product design

c) Planning

✓ d) Rework

18. Which tool is used to verify if the steps in a process are being followed?

✓ a) Checklist

b) Trend analysis

c) Inspection

d) Performance review

19. Which tool would you use for analyzing and communicating the relationships betweenprocess steps?

a) Scatter diagram

b) Control chart

SOLUTIONS



✓ c) Flowchart

d) Trend analysis

20. Choose the factors to be considered when analyzing project trade-offs among cost,time, and quality, where cost must be controlled in order to meet the cost baseline.

a) The impact on quality only.

✓ b) The impact on schedule and quality.

✓ c) The impact of additional risk that may be introduced.

d) The impact on schedule and scope.

21. In which organizational structure is an individual assigned to report to a single man-ager?

a) Weak matrix

b) Strong matrix

✓ c) Functional structure

d) Projectized structure

22. Which project structure typically results in greater levels of technical depth andbreadth within the parent organization?

a) Weak matrix

b) Strong matrix

✓ c) Functional structure

d) Divisional structure

23. Which is true of a matrix structure?

✓ a) In a matrix structure, employees’ administrative, developmental, and performancemanagement are typically focused with their functional manager with proportionalperformance and developmental input by project managers.

b) In a matrix structure, employees are typically assigned 50% of the time to functionaltasks and 50% of the time to project tasks.

c) In a matrix structure, employees are equally answerable to both functional andproject managers.

d) In a matrix structure, employees are answerable to the project manager, but reportboth to the functional and project manager.

24. Of the various organizational structure alternatives, for managing projects, which ide-ally has the fastest response time?

a) Functional structure

✓ b) Projectized structure

c) Weak matrix

d) Strong matrix

SOLUTIONS

Solutions 585



1. During your project review, you determine that a risk officer is needed to handle riskmanagement activities. Which activities would you assign to this person?

a) Develop response strategies.

✓ b) Confirm and articulate the risks’ probability and impact to the business strategy.

✓ c) Coordinate risk identification and analysis activities.

d) Assign roles and responsibilities to each team member.

2. With your planning meetings started and budget decided, your team begins the task ofdetermining how to identify risks. Which is the first place to look for risk planning?

a) Other project risk management policies

✓ b) The organization’s risk management policy

c) The project scope statement

d) The organization’s quality policy

3. The risk management plan for your OGC PM Training Roll-Out project uses a probabilityscale to define the probability of occurrence of a risk listed in the risk register. Whichis the probability scale defined for the project?

a) 1, 3, 5, 7, 9, 11

✓ b) 0.1, 0.3, 0.5, 0.7, 0.9

c) 2, 4, 6, 8, 10, 12

d) 1.1, 1.3, 1.5, 1.7, 1.9

4. Which additional factor should you consider when developing your risk managementplan?

a) Job descriptions

b) Geography of the project team

✓ c) Thresholds

d) Communication technology

5. You have integrated specific risk related activities and deliverables into the project’sschedule and documented how to track risk response efforts in your risk managementplan. Which task should you perform to complete the risk management plan?

✓ a) Determine how to document lessons learned for future projects.

b) Determine the necessary budget.

c) Make sure that roles and responsibilities are clearly understood by the team andother stakeholders.

d) Create a payoff matrix.

6. Which section of the risk management plan highlights the risk priority areas for theproject?

a) Methodology

✓ b) Probability and Impact Matrix

c) Roles and Responsibilities

SOLUTIONS



d) Frequency of Updating Risk Registers

7. True or False? As per the OGC Risk Management Plan, the OGC PM Training Roll-Outproject requires a quantitative risk analysis to be performed to assess the risk expo-sure events of your project.

True

✓ False

Activity 7-2

1. To identify risks for this project, you and your project team will meet as a group toidentify and examine as many of the strengths and weaknesses within OGC that canpotentially impact the project as you can, as well as any opportunities or threats thatmay be imposed by the external training provider. Which information-gathering tech-niques will you use?

✓ a) Brainstorming

b) Interviewing

c) Delphi technique

✓ d) SWOT analysis

2. There is a new upgrade to the project management software with enhancements tothe project tracking and communications features. This upgrade is mandatory in anetworked environment and therefore, when available, will be required by OGC. Inwhat risk category should your team place this risk?

✓ a) Technical, quality, or performance risks

b) Project management

c) Organizational

d) External

3. What is the trigger for the software upgrade risk that has been identified?

a) The enhancements to the project tracking and communications software.

✓ b) The IT department scheduling the software upgrade.

c) The impact the upgrade will have on the PM Training Roll-Out project by narrowingthe RFPs sent to external training providers.

d) The potential increase to the total costs of training that the upgrade will cause.

Activity 7-3

1. Based on the OGC Risk Event Impact Scale, which of the risks should receive the high-est priority for this project?

SOLUTIONS

Solutions 587


a) IT might not approve project management software upgrade.

b) Temporary loss of a team member.

✓ c) Change in organizational requirements to use external training.

d) RFPs do not meet OGC specifications for training, i.e., dates and costs.

2. Based on OGC’s risk event impact scale, the risk event impact is 2.5. How is the riskimpact for this project best described?

✓ a) Between Very Low to Low

b) Between Low to Moderate

c) Between Moderate to High

d) Between High to Very High

3. You need to enter the risk factors into the risk register for the work activity, ObtainExternal Training Provider. In the Risk Register document, list the risk probability rat-ing for each task.

SOLUTIONS



The risk probability rating for each task:

4. For each risk that is identified, provide an impact rating for the work activity, ObtainExternal Training Provider. In the Risk Register document, list the risk impact ratingfor each task.

The risk impact rating for each task:

SOLUTIONS

Solutions 589


Activity 7-4

1. Which analysis technique was used in the Analyzing Project Risk image to determinethe most cost-effective choice of a training provider?

a) Delphi

b) Diagrammatic

c) Simulation

✓ d) Decision tree

2. What is the probability that Vendor 1 will complete the project on time?

a) 70 percent

b) 60 percent

c) 50 percent

✓ d) 40 percent

3. What is the probability that Vendor 2 will run over the allotted time for the project?

a) 40 percent

✓ b) 50 percent

c) 60 percent

d) 70 percent

4. What is Vendor 3’s expected monetary value?

a) $0

✓ b) $200

c) $1,700

d) $10,300

5. Your team combines the EMV at the end of each vendor’s network end-points to arriveat a net proceed for each vendor. You want to choose the vendor bid with the mosteconomic advantage for OGC. Based on this number, which vendor should your teamchoose?

a) Vendor 1

✓ b) Vendor 2

c) Vendor 3

d) Vendor 1 and Vendor 3

Activity 7-5

1. The first risk has possible positive outcomes. Which risk response strategy should youemploy?

a) Risk avoidance

✓ b) Risk enhancement

c) Risk mitigation

d) Risk sharing

SOLUTIONS



2. What response do you have regarding the risk of a potential project software upgradeduring the project life cycle?

If the software meets the approval of the IT department, you may want to include a pro-vision to obtain a beta version of the software. You may choose to add more people whocan be trained on the upgrade and they can train others. You may choose to have a pilotgroup work with the software.

3. The change in organizational requirements due to the resignation of Vicky Morris haspossible negative outcomes to the project, but you have determined there is no way toavoid the scenario completely. Which risk response strategy should you employ?

a) Risk avoidance

b) Risk enhancement

✓ c) Risk mitigation

d) Risk exploitation

4. You determine that instructor illness cannot be avoided. Which risk response strategyshould you employ?

a) Risk enhancement

b) Risk exploitation

✓ c) Risk acceptance with a contingency plan

d) Risk acceptance without a contingency plan

5. What are some ways you would respond to the potential risk of instructor illness dur-ing the training?

Answers will vary, but may include: include in the vendor contract the availability of abackup instructor.


1. What is the purpose of a qualitative risk analysis?

✓ a) Assess the impact and likelihood of the identified risks actually occurring.

b) Analyze numerically the probability of each risk.

c) Determine if the risk responses have been implemented as planned.

d) Select alternative strategies for dealing with risks.

2. Which option best describes “transference”?

a) Reducing the probability of an adverse risk event to an acceptable level.

b) Changing the project plan to eliminate the risk.

✓ c) Shifting responsibility for a response and possible impact of a risk to a third party.

d) Developing a contingency plan.

3. What are the four main areas that project managers typically consider when discussingrisks?

a) Methods, materials, metrics, and people.

SOLUTIONS

Solutions 591


b) Initiation, planning, executing, and closing.

✓ c) Time, cost, quality, and scope.

d) Design, supply chain, production, and marketing.

4. What do you call a specific occurrence that may impact the project in the future,either positively or negatively?

✓ a) Project risk

b) Risk factor

c) Risk-opportunity dichotomy

d) Expected value

5. What are residual risks?

a) The same as secondary risks.

b) A direct result of implementing a risk response.

✓ c) Those that remain after risk responses have been taken.

d) Those risks that have no impact on the project budget or schedule.

6. During the project’s life cycle, risk identification:

a) Is no longer needed during the closing phase of a project.

b) Is done during the implementation and planning phases only.

c) Is done during the planning phase only.

✓ d) Should take place during each project phase.

7. For what reasons are the network diagramming method and/or flowcharting used inrisk identification?

✓ a) To determine the root cause of a project risk.

✓ b) To show the effect of a particular risk on a project.

c) To indicate areas of the WBS that should be redrawn as a result of risk identification.

d) To identify all the possible risks for a project.

8. For what reasons is the Delphi technique often used during risk identification?

a) It emphasizes the potential impact of risk by telling about incidents that illustratethe consequences of ignoring the risk.

✓ b) It ensures all stakeholder inputs are received and the risk process is not unduly influ-enced by a small number of persons.

✓ c) It motivates stakeholders to invest in the risk identification process through the useof anonymous input via questionnaires.

d) It identifies the overall project risks and focuses on a particular project segment orwork package.

9. Which selection lists processes of risk management?

a) Risk management planning and risk recovery.

✓ b) Qualitative risk analysis and quantitative risk analysis.

c) Risk documentation and risk monitoring.

d) Risk identification and risk avoidance.

SOLUTIONS



10. Jennifer is a publisher. In order to make sure that her writer delivers on time, sheinserts a penalty clause for late delivery into her writer’s contract. Which riskresponse is Jennifer using?

a) Risk avoidance

b) Risk mitigation

c) Risk acceptance

✓ d) Risk transference

11. Which risk response can be categorized as either passive or active?

a) Risk avoidance

b) Risk mitigation

✓ c) Risk acceptance


12. When is additional response development needed during risk response control?

a) When the organization is restructuring.

b) When the project objectives change.

c) When the contingency reserves are used up.

✓ d) When the original risk response is not working as expected.


1. In the OGC Procurement Management Plan, who is authorized by OGC to enter a pre-scribed contract with the external training provider?

a) Project sponsor

b) Project manager

✓ c) Procurement manager

d) Operations manager

2. In the OGC Procurement Management Plan, which of these job tasks are defined forthe solicitation process of the project?

✓ a) Characteristics of project requirements are to be documented in a procurementstatement of work.

✓ b) A Request for Proposal (RFP) will be sent to prospective sellers.

c) Provide necessary electronic and paper documentation and source files.

✓ d) Evaluation criteria are to be determined to evaluate proposals from sellers.

3. Which of OGC’s plan procurements inputs contains information about the time framefor each project deliverable?


b) Scope baseline

✓ c) Project schedule

SOLUTIONS

Solutions 593


d) Activity resource requirements

4. Match the plan procurement inputs with their descriptions.

d Risk-related contract deci-sions

a. Factors that can influence the planprocurements process such as marketconditions and supplier information.

c Teaming agreements b. Factors that can influence the planprocurements process such as poli-cies, procedures, guidelines, andmanagement systems.

e Activity resource require-ments

c. Contracts between the organizationand one or more external entities towork together.

a Enterprise environmentalfactors

d. Include details of the agreements thatare prepared to specify each party’sresponsibility for specific risks in theproject.

b Organizational processassets

e. Include information on the specificactivity resource needs of the project.

5. Which section in the OGC Procurement Management Plan refers to the parameters tochoose sellers?

a) Contract Type

b) Procurement Description

c) Procurement Responsibility

✓ d) Source Selection

Activity 8-2

1. In the OGC Procurement SOW document, which components define the specifics of thework being procured?

The description of the work, the Seller/Trainer Responsibilities list, and exhibits A and Bdefine the work being procured.

2. Were there any inconsistencies used in the document that might be confusing?

Answers will vary, but may include: “Seller” and “Training Provider” are being used inter-changeably, and using two terms in this way is confusing.

3. Does the OGC Procurement SOW include any collateral services to be provided by theclient?

The follow-up support would be considered a collateral service in this contract.

4. Does the OGC Procurement SOW describe when, where, and how delivery is required?

The work schedule describes when the work will be delivered. The Seller/Training respon-sibilities list that the seller must provide a classroom and instructor to accommodate ninemanagers. Exhibits A and B describe in detail how delivery is required for both the assess-ment and training.

SOLUTIONS



5. Does the OGC Procurement SOW provide specifications on how the assessment must beproduced and methods for ensuring that the specifications have been met?

Under OGC Responsibilities, it states: OGC will provide all necessary electronic and paperdocumentation, source files, and imagery required or requested by Seller, which is perti-nent to the work requested. The Lead Contact will review and validate the pre- and post-assessment content prior to supplying it to Seller. Seller will need to receive this prior tothe project kick-off. Also, Exhibit B describes the assessment review process.

Activity 8-3

1. Based on the scenario, what would be a logical first step in creating the procurementdocument?

a) Determine how you want training sellers to respond.

b) Define the training specifications.

✓ c) Determine the most appropriate procurement document to use.

d) Examine the project SOW and make any necessary changes.

2. The assessment development, the project software training needs, delivery of thetraining, and costs will be the determining factors in your choice of training providers.What type of procurement document would be most appropriate to use in this situa-tion?

a) Request for quotation

✓ b) Request for proposal

c) Request for bid

d) Invitation for bid

3. From the C:\085042Data\Planning Project Procurements folder, open the OGC Pro-curement SOW and Procurement document. Which criterion for evaluating trainingsellers is subjective?

a) Seller must provide an instructor with a minimum 3 years of project managementsoftware training.

✓ b) Seller must be creative and flexible about changes made to the design of the assess-ment documents, even in late production phases.

c) Seller must have a minimum 20 years of collective training experience on staff.

d) Seller must have produced at least three projects of similar scope in the last 10years.

SOLUTIONS

Solutions 595



1. Which statement best describes the “Time and Materials” contract?

a) The buyer pays the seller one fixed price.

✓ b) The buyer pays the seller for time and expenses of project work.

c) The buyer pays the seller a fee, plus a percentage of profit.

d) The buyer pays the seller their allowable costs plus a fee.

2. In which contract does the buyer reimburse the seller’s allowable costs (defined by thecontract) plus a fee?


✓ b) Cost plus incentive fee contract.


✓ d) Cost plus fixed fee contract.

3. In which contract does the buyer reimburse the seller’s allowable costs (defined by thecontract) plus a predefined fee?




✓ d) Cost plus fixed fee contract.

4. Which is used to evaluate each seller’s proposal and make comparisons among differ-ent proposals?

a) Procurement documents

b) Procurement statements of work

c) Teaming agreements

✓ d) Source selection criteria

5. Which document provides a description of the work authorized to be performed by asupplier?

a) Project plan

✓ b) Procurement statement of work


d) Work breakdown system

6. Which document includes the invitation for bid and request for proposal?

a) Procurement statements of work

✓ b) Procurement document


d) Procurement management plan

SOLUTIONS




1. You need to assist the systems analyst in the creation of a PMIS that is workable foryour project. In order to design an effective PMIS, what are the inputs that a systemsanalyst should know about the project that the PMIS will manage?

✓ a) What people will have access to the information?

✓ b) When will the information be needed?

✓ c) Who will incorporate the information into the system?

d) Who is the customer?

2. As the project manager, you have made sure all organizational policies and procedureswere followed, and the contract training vendor is familiar with their responsibilities.What would you do next?

a) Call a meeting with the project sponsor so she can commence work.

✓ b) Issue work authorization.

c) Work with a systems analyst to create a PMIS.

d) Collect work performance information.

3. An activity did not start on its scheduled date. The responsible team, Team 1, claimedthat they could not start the activity because its predecessor activity did not show acompletion date in the latest status report. Team 2 claimed that they had completedthe activity on time and had followed the appropriate procedure for updating itscompletion status. What are some things you would do to investigate why the statusreport was not up to date?

Review the status for the activities in the PMIS since it is the central point of data collec-tion for activity status. If you discover that the completion status for the activity is notreflected in the system, alert the PMIS technical experts so that the cause can be identi-fied. Along with the current system for activity updates, you may also ask that resourcescommunicate on a weekly basis their activity progress through a quick email or phone calluntil the original system is proven.

Activity 9-2

1. The manager of quality assurance has asked you about your quality management plan.Which feature might he find problematic?

a) Scheduled and random quality inspections will take place, which will be conductedby an internal quality assurance engineer, as well as by the city.

✓ b) Any corrective actions that a project manager feels will improve the effectiveness orefficiency.

c) Operational definitions were defined for measuring the quality of the constructionwork.

d) Occurrence of scheduled and random quality inspections during the course of theproject.

SOLUTIONS

Solutions 597


2. As construction gets underway, random inspection results of completed constructionelements are unexpectedly negative. What sort of quality activities should be takingplace?

Perform a random or scheduled quality audit to evaluate the quality management plan,quality testing procedures, and measurement criteria for inconsistencies in the way thatthe quality plan and operational definitions are being carried out.

3. The stakeholders are questioning the amount of resources dedicated to quality assur-ance. How can you demonstrate to them that the benefits of quality assuranceoutweigh the cost?

a) Perform benchmarking to compare project practices to other projects to generateideas for improvement.

b) Conduct an array of experiments to identify which factors may be influencing specificvariables.

c) Use flowcharts to see how systems relate and how various factors might be linked toproblems or effects.

✓ d) Document the identified corrective actions so that their effect on project quality,cost, and schedule can be monitored during quality control.

Activity 9-3

1. Three members of your project team have to be allocated to you on a part-time, 50percent basis from the IT department. What would be your first step in acquiring theseresources for the project team?

Answers will vary, but may include: form good relationships with the functional managerin order to identify and acquire resources, resolve problems, and manage team members.Discuss the specific time frames that you will need for those people.

2. The functional manager of the IT department informs you that, based on the timeframe for your project, two of the resources that are available are new hires who havenot worked earlier in a project on their own at this point. What should you do?

Ask the functional manager if a senior member of his team can serve as a mentor to thenew hires, at least throughout the beginning phases of the project. Verify that theassigned resources will be able to perform the work required. Discuss who will be respon-sible for training the new hires. Learning to negotiate effectively with functionalmanagers is a crucial part of the team acquisition process.

3. During the first meeting of the new project team, some confusion arises between twoteam members about their roles and responsibilities. Since this conversation is notappropriate in this forum, how might you respond?

Answers will vary, but may include: as the project manager, you should identify theissue, table it, and use the human resource plan, which was developed for the projectand clearly documents the roles and responsibilities and organizational structure. Thetwo resources will be informed and once again be made aware of it. This sets the expec-tation that “working the problem” should be the focus, not “arguing the problem.”

Activity 9-4

1. Match each team development stage to its appropriate description.

SOLUTIONS



c Forming a. Team members complete theirassigned project work and shift to thenext project or task.

b Storming b. Team members begin to assert them-selves and conflict managementapproaches are used to help the teamwork through problems.

d Norming c. Team members make initial judg-ments about the skills and personalqualities of their teammates, as wellas worry about how they personallywill be viewed by the rest of theteam.

e Performing d. Team members begin to work produc-tively, without worrying aboutpersonal acceptance or control issues.

a Adjourning e. Team members collaborate easily,communicate freely, work at optimumproductivity, and solve their own con-flict problems.

2. You notice that Rachel, a team member, has consistently met her deliverable dead-lines and is always on time with her status reports. She actively participates inbrainstorming sessions and makes valuable contributions to the discussions. Whenrequired, she has gone beyond her responsibilities and has helped her project managerfacilitate brainstorming meetings and discussion sessions. How should you respond?

Consider publicly recognizing her in a team meeting to reinforce the desirable behaviors.The team may congratulate her and it may give everyone motivation to go the extra milewhen needed to meet aggressive deadlines.

It is also advisable to provide positive input to her functional manager for her perfor-mance appraisal. This will also boost her motivation to go the extra mile, and might leadto a raise.

3. One of your junior team members, who is assigned to gather information from manag-ers through an interview process, has confided in you that he is not comfortable duringthe interviews. He feels that the managers seem impatient with the questions he isasking. The other junior team members assigned to interviews have not had any prob-lems. What are some things you would do to address this issue?

Answers will vary, but may include: as a project manager, you can talk to the team mem-ber about certain aspects of his voice, such as intonation, and his communication style,such as nonverbal cues. You need to identify if the team member has a problem in any ofthese aspects, which might create a negative impression while interviewing the manag-ers.

Activity 9-5

1. Given the masonry supervisor’s email about the conflict between the plumbing and tilecontractors, what should you do?

✓ a) Confirm their inability to get along and its probable impact on the team. Respondingto alleged interpersonal conflict from second hand sources is almost always a mis-take.

b) Wait for results of the weekly masonry work progress report.

c) Provide constructive feedback to the contractors.

d) Consider offering an online conflict resolution course for the contractors.

SOLUTIONS

Solutions 599


2. In speaking with the contractors, you discover that the tile contractor feels that theplumber is spending too much time at lunch and on breaks, which causes him to workpast 6:00 each day. The plumber responds that he takes a normal lunch break. Whatcan you to do resolve this situation?

To help resolve this conflict, you can review the expected ground rules that were set atthe beginning of the project based on the communications management plan. Confirm theamount of time that should be used for lunch and breaks and verify the facts of thebreaks being taken. Remind the plumber of the team’s ground rules and schedule expec-tations, as well as his responsibilities on the project. Document the incident and monitorthe situation as the contractors continue to work together to complete the project.

3. The roofing team has been working effectively, meeting all deadlines and experiencingno personnel problems. What approach should you take when monitoring this team?

Give positive feedback. Providing constructive feedback to team members on a frequentbasis enables the team members to know that they are on track. Speaking to team mem-bers one-on-one is an excellent way to maintain communication and monitor progress.

Activity 9-6

1. An automated information retrieval system will provide stakeholders with access toproject information via the intranet. What, if any, concerns do you have with relyingon this type of distribution of project information to stakeholders?

Answers will vary, but may include: while this may be a good method for making informa-tion available to stakeholders in an efficient manner, the information is left up to thestakeholders to interpret. One-on-one meetings would still be necessary to provide anoverview of how the information reflects the reality of the project status. Also, theinformation must be carefully screened for accuracy. Consider the importance of versioncontrol; they should be able to share information without losing earlier versions of thematerial. Consider whether only selected people should have the ability to modify thecontent.

2. As people strive to meet their deadlines, reporting the status of activities can becomea low priority. This is a problem when you are trying to distribute up-to-date informa-tion on the status of the project. What are some things that you could do to make surethat people report accurate and timely information to you?

Answers may vary, but may include: schedule weekly project status meetings or meetwith resource groups on an individual basis. If they are using the same document toreport their status, you may consider implementing a date and time stamp for versioncontrol.

3. You are asked by your manager to provide the senior executives your project’sprogress to date. Which information distribution methods would be most appropriatein this situation?

a) Send an email announcing that a report is posted on the intranet site.

b) Make a telephone call to schedule one-on-one meetings with each executive.

c) Send an email based on status notes that you took over the phone while communicat-ing with team members.

✓ d) Make a presentation to the senior executives and highlight the important points inthe report.

Activity 9-7

1. Stakeholders are worried about the current state of the project. How should youhandle their concerns?

SOLUTIONS



a) Follow processes outlined in the communications plan.

b) Take corrective action.

✓ c) Conduct a face-to-face meeting with a clear agenda targeting their specific concerns.


2. Two stakeholders are out of town on a business trip and are available sporadically.Another has an extremely busy schedule and can’t squeeze another lengthy meetinginto his day. You know it is important to have face-to-face interaction with each stake-holder. How can you accommodate their needs? Check all that apply.

✓ a) Use video conferencing.

b) Send a memo via email.

c) Use an instant messaging service.

✓ d) Hold a brief summarization meeting.

3. During the face-to-face meeting with project stakeholders, you offer a recap of somecontractor changes that occurred. It became necessary to add another electrical con-tractor to the team, which resulted in changes to the project cost baseline. While youare talking about this issue, you notice that one of the project stakeholders continuallylooks down at the floor and rapidly taps her pen against the table. What does herbehavior indicate?

Assessing body language provides the project manager with an opportunity to determineif the stakeholder is pleased or not with the project’s progress. Based on her body lan-guage, you can determine that the project stakeholder is uncomfortable with theinformation you are providing to the group. Draw her into a conversation to determinewhat aspect of the information is unsettling to her. Her answer will tell you if there areoutstanding issues to address in regards to project cost baselines, or any other issue thatmay be of concern to her.


1. When negotiating for resources, the project manager arranged for the loan of a par-ticular technical expert by implicitly promising to raise the functional manager’svisibility with executive stakeholders on the project. Which currency was the projectmanager using?

a) Inspiration-related currency

✓ b) Position-related currency

c) Relationship-related currency

d) Task-related currency

2. Which of these tasks are examples for training a project team?

a) Feedback

✓ b) Computer-based

✓ c) Mentoring

✓ d) Coaching

SOLUTIONS

Solutions 601


3. What would be the important reasons behind the efforts taken by the project managerto foster motivation?

✓ a) To help the team work through a temporary setback.

✓ b) To help the team to overcome a lack of confidence.

✓ c) To accomplish early “wins” in the project’s life cycle.

d) To ensure that there are no activities that have late start criteria.

4. Which system notifies the work package owners when to begin work?

a) Project schedule

b) Status review system

✓ c) Work authorization system

d) PMIS

5. What does a work authorization system ensure?

a) Work done is in line with the project goals.

✓ b) What work to be done is clearly outlined.

✓ c) Who is to do the work.

✓ d) When the work is to begin and end is understood.

6. Which element is a form of operational definition?

✓ a) Metrics

b) Control limits

c) PCIs

d) COQ

7. Which manual or automated tool and technique is used to collect, archive, and distrib-ute project information on a project?

✓ a) Project management information system

b) Communications plan

c) Project management enterprise software

d) Communications and feedback system

8. Which information is contained within the work performance information?

✓ a) Completed and incomplete deliverables.

✓ b) Actual conformance to quality plan.

c) Intended performance details of the work to be completed.

✓ d) ETC for scheduled activities that have started.

9. What is quality assurance?

a) Conforming product specifications to customer requirements.

b) Strategizing how to create products that meet quality requirements.

✓ c) A pattern of activities which ensure that the product meets quality requirements.

d) A set of tactics used to determine if goods meet quality requirements.

10. Which statements best describe project quality audit?

✓ a) Contains an approved quality audit methodology.

SOLUTIONS



b) Ensures that efficient or effective processes and procedures are used.

✓ c) Contains future change recommendations.

✓ d) Determines whether the project complies with organizational and project policies,processes, and procedures.

11. What does co-location mean?

a) That the team members are distributed geographically.

✓ b) That the team is located in one physical location.

c) That the team uses a war room.

d) That the team members work from home.

12. Which statement is true of version control?

a) Required so that team members do not over-write one another’s work.

b) Not a problem for project managers who use adequate backup systems.

✓ c) Required to make sure everyone is working with the same, most recent document.

d) Required to maintain only the latest version of the document.

13. Which of these statements are true of a project management office?

a) A team that manages multiple projects concurrently.

b) The same as the office of the CEO.

✓ c) A unit that centralizes and coordinates the management of projects.

✓ d) An organization that may provide project support functions.

14. Which of these statements are true of quality audits?

a) Are only done at the end of the project.

✓ b) Check the fitness of the project’s output or the fitness of the quality plan.

c) Are done only once during the entire project life cycle.

✓ d) Are best done at random intervals over the course of the project.

15. Why are quality audits performed?

✓ a) To evaluate whether the project output is fit for the purpose it was intended.

b) To evaluate if best practices identified in the previous projects have been imple-mented.

✓ c) To evaluate whether the quality management plan is still appropriate after qualityimprovements have been made.

d) To evaluate if the quality assurance team members are qualified

✓ e) To evaluate how statistical process control may be used to improve the capability ofa process.

16. What should you do when the quality assurance team suggests quality improvements inyour project?

✓ a) Assess for risk to project success.

✓ b) Subject them to trade-off analysis.

c) Ensure that the change does not affect the project scope.

d) Determine the cost of quality.

17. On which idea is quality assurance based?

SOLUTIONS

Solutions 603


a) Creating a margin of error for product specifications.

✓ b) Preventing problems, rather than fixing them.

c) Establishing upper and lower specifications for products.

d) Increasing production rates by providing training for quality control inspectors.


1. You have a list of 10 potential sellers and have to narrow the list down to a more man-ageable number of candidates. What will be the process to create a “short list” ofsellers that you will consider?

Based on the qualified sellers list, which lists sellers from previous projects who havebeen pre-screened for their qualifications and their track record of performance, you cannarrow down the potential sellers to a more manageable number of candidates and cre-ate a “short list” of the sellers.

2. You now have a short list of sellers. Name some of the selection criteria you might usein finalizing the selection of the seller.

Some of the possible selection criteria might be, but are not limited to:

• Price—remembering to re-examine the very high or very low responses as the seller maynot have fully understood what was being requested.

• Working relationships—if your company has done business with a seller, are there posi-tive or negative comments recorded regarding the work relationship?

• Prohibited bidder—does your company have a list of sellers that are no longer accept-able for use as a subcontractor? Are there relatives or close friends of executives whohave some association with the bidder? This needs to be examined closely for a potentialconflict of interest and a seller may have to be deemed unsuitable.

• Product scalability—check with technical experts in your company on the scalability ofthe solution suggested by the seller.

• Product maintainability—check on the maintainability of the solution suggested by theseller.

• Product support commitment—evaluate whether the seller provides for adequate opera-tional support for the product.

3. Included in the contract should be performance criteria, on both schedule and costs,expected of the subcontractor. What is some of the information that you would wantto see in the way of performance reporting by the subcontractor?

Answers may vary, but may include: milestone or deliverable tracking to show complianceto requested schedule and cost constraints. You could also include test reports, test datadocumentation, and certification requirements to ensure product quality requirementsare met.

4. Why might you hold a bidder conference in this situation?

To ensure that all the sellers have common understanding about the technical aspects ofthe RFP and the related process, including the required forms and the submission process.

SOLUTIONS



Activity 10-2

1. What do you think would be the most appropriate method of finding qualified trainingproviders for the OGC PM Training Roll-Out project?

Answers will vary, but may include: OGC may have a list of training providers that thecompany has used in the past.

2. There are only two local training providers in a 20 mile radius of OGC. You decide toexpand your seller list outside of your local area. What methods would you use to dothis?

Answers will vary, but may include: perform an Internet search, review professional jour-nals, and contact the project software sales representative. Once you compile your shortlist, you might consider asking them for references.

3. Based on the scenario, would you conduct a bidder conference? Why or why not?

Answers will vary, but may include: based on the initial feedback and queries that youget from various sellers in response to your RFP, you may decide to conduct a bidder con-ference to allow prospective sellers to ask questions and to get clarification about thedeliverables and the procurement requirements for preparing their responses. However,if the proposals from various sellers indicate a proper understanding of the requirements,you would not require a bidder conference, as this incurs additional costs, time, andeffort that need not be expended.

Activity 10-3

1. To find a qualified seller you decide to use a weighted system. What would be yourfirst step?

✓ a) Assign a numerical weighting factor to each evaluation criterion.

b) Score each prospective seller based on the rating scale for criteria.

c) Select the seller with the highest score.

d) Develop a rating scale for scoring the criteria.

2. For each evaluation criterion, you have specified a rating scale. What should you donext?

a) Add the scores of the scale.

b) Select the highest rated score.

✓ c) Score each prospective seller on each criterion using the rating scale.

d) Multiply the seller’s score by the weighting factor for each criterion or sum of the cri-teria in a category.

3. You have selected a seller. You and the procurement manager are meeting with theseller to negotiate the contract. The procurement manager asks the seller if they willuse an in-house instructor or outside contractor for the project software training.Which part of the negotiating phase are they engaged in?

a) The introduction stage

✓ b) The probing stage

c) The bargaining stage

d) The agreement stage

SOLUTIONS

Solutions 605


4. From the C:085042Data\Managing Project Procurement folder, open the OGC SellerProposal Notes and Blank OGC Seller Scoring Sheet documents. Based on the scenarioand the seller notes provided, complete the seller scoring sheet.

Enter your rating for each seller’s selection criteria. Using the Weighting Factor provided,calculate the Score for each criterion (multiply the Rating by the Weighting Factor). Onceyou are done with the calculation of the scores for all sellers, calculate the Total Scorefor each seller.

5. Compare your Blank OGC Seller Scoring Sheet document with the Completed OGCSeller Scoring Sheet document in the C:\085042Data\Managing Project Procurement\Solutions folder.

Ratings for each seller are determined by predetermined selection criteria and the evalu-ation of the seller proposals that were received from different sellers. Scores werecalculated based on the weighting factors and totals for scores were calculated for eachseller. You have performed a quantitative evaluation of the seller proposals.

6. Based on your quantitative evaluation of the seller proposals, which seller would youchoose for your project?

Answers will vary, but may include: based on the total scores that you calculated usingthe weighting system, you now possess a quantitative evaluation of each seller. The finaltotal scores will serve as an objective parameter in the comparison and selection of theseller for your project. In this case, based on the total scores, you may select RudisonTechnologies Ltd. as they posted a score of 390, which is the highest score among thethree sellers.


1. What does the project manager do when requesting seller responses?

a) The project manager plans purchases.

✓ b) The project manager solicits quotations.

c) The project manager selects a seller.

d) The project manager evaluates project progress.

2. Which allows potential sellers to ask questions about the project and its requirements?

a) Advertised bids

✓ b) Bidder conference

c) Sellers conference

d) Annual meeting

3. Which is included on a qualified sellers’ list?

✓ a) Sellers’ names

b) Procurement documents

c) Proposals

d) Advertised bids

4. Which provides a pass or fail mechanism for criteria critical to project success?

SOLUTIONS



a) Weighted scorecard

b) Expert judgment

c) Seller rating system

✓ d) Screening system

5. Which document sent to prospective sellers provides information regarding therequirement specifications and needs of your project?

a) Procurement management plan

b) Project documents

✓ c) Procurement document

d) Request for information

6. Which is a legal contractual agreement signed between the organization and an exter-nal entity to form a partnership in a buyer-seller arrangement between them?

a) Procurement contract

✓ b) Teaming agreement

c) Seller proposal

d) Purchase order

7. Which are tools and techniques for the conduct procurement process?

a) Bidder conferences, SWOT analysis, independent estimates, expert judgment.

b) Procurement negotiations, advertising, contingent response strategies, proposalevaluation techniques.

c) Independent estimates, make-or-buy decisions, qualified seller lists, source selectioncriteria.

✓ d) Bidder conferences, independent estimates, expert judgment, procurement negotia-tions.

8. Which are outputs of the conduct procurement process?

✓ a) Procurement contract award

b) Qualified seller list

✓ c) Resource calendars

✓ d) Selected sellers

9. True or False? A procurement contract is a mutually binding agreement that details theobligations of only the seller.

True

✓ False

10. Which output of the conduct procurement process lists the quantity, availability, andutilization of project resources?

a) Project management plan

b) Procurement contract

✓ c) Resource calendar

d) Seller proposal

SOLUTIONS

Solutions 607



1. What can you do, as the project manager, to mitigate the negative effects of a staffingchange?

a) Put the project on hold until Sarah returns from sick leave.

b) Rebuild the schedule to include additional time for Kevin to complete his tasks.

✓ c) Closely monitor Kevin’s work to assess any possible risk.

d) Discuss with the team the impending change and that the team can expect to gothrough the team development stages again.

2. Kevin missed an important deadline. What action can you take to help Kevin get backon schedule?

You might recommend that another instructional designer be brought in to assist him.Once you’ve determined that project performance is not meeting the project plan, itbecomes necessary to recommend corrective action. A change in head count will have animpact on cost and scheduling, and will require the monitoring of changes as they occur.

3. After he has been given extra help, Kevin manages to meet his next important dead-line. What should be your next action as project manager?

a) Keep a private log for your own reference, detailing changes that have been made tothe project.

✓ b) Update recent cost and schedule changes that have resulted from recent changes.

c) Ask Kevin to closely monitor changes to the project’s cost and schedule.

d) Ask Kevin to let you know if he has any further problems as the project progresses.

Activity 11-2

1. Who will you involve in the change control process for the PM Training Roll-Out projectand what is their role in the change control process?

The change control process should involve the OGC selected senior executives and strate-gic planning individuals who are the key stakeholders. Their role will be to identify whatwill be considered a significant enough change from each baseline to require managementapproval. You should also include the PMO.

2. The IT department informs you that the project software upgrade will have a signifi-cant delay in delivery. In the risk register, you accounted for a delay due to thesoftware upgrade, but this delay is much longer than originally anticipated. Whataction should you take first?

a) Coordinate changes across knowledge areas.

✓ b) Document the change request in a change control system.

c) Update the project plan to reflect changes.

d) Bring the information to the stakeholders for evaluation and approval.

e) Identify corrective action to take to resolve the problem.

SOLUTIONS



3. The procurement manager contacted the software vendor and was able to secure abeta version of the project software. The beta version may have some minor bugs, butit will be available in time for the training. Based on your change control process, whatfurther action, if any, should you take?

You should document the problems regarding the beta version and its flaws, the actionstaken to work within these issues, and the reasoning behind your decision to use the betaversion of the software.

Activity 11-3

1. The internal team responsible for assembling documentation for the training vendorcannot meet their contracted deliverable of March 25. What actions should you take?

✓ a) Identify required corrective action to resolve the problem.

b) Update the project plan to reflect these changes.

✓ c) Recommend corrective actions to the CCB.

d) Use configuration management to document and control changes to the original ven-dor contract.

2. What are the tasks that you should consider when determining appropriate correctiveactions?

a) Record how corrective actions should be tracked.

✓ b) Identify alternative options available.

✓ c) Determine the source of the problem and its severity.

✓ d) Review the project plan and objectives.

3. OGC’s change control process states, “The PMO, upon receipt of change request deci-sions, records the information in a database to track all change request patterns.”What benefits do you see in tracking change request patterns?

Answers will vary, but may include: it may be helpful to see a breakdown as to how manychange requests were due to contractual agreements. They will be able to do research tofind other projects that have had similar change requests and patterns.

Activity 11-4

1. Your team has been designing a plan that calls for testing and verification of theassessment questions. The team has determined the criteria for acceptability for eachassessment question. What should be your next step in the inspection process?

a) Establish the scope of the review.

✓ b) Determine the methodology of the review.

c) Conduct the review.

d) Prepare a review report for stakeholders.

2. Your team has decided to use a checklist and job aid in combination for the assess-ment review. Before beginning the actual review, what else would you consider doing?

Before you begin the review, you should first gather all relevant scope documentation,including the WBS, scope statement, and requirements documentation. You should alsocommunicate with the team members who will participate in the test, so they can pre-pare for the review.

SOLUTIONS

Solutions 609


3. The draft assessments have passed the inspection. What should be included in yourreview report, and why?

1. The project baseline and status comparison. This part of the report compares baselinespecifications, schedules, and budgets to the actual project results. 2. Overall projectstatus. This part of the report discusses whether or not the project as a whole is on trackwith the project plan. 3. Change recommendations. Recommending changes would be nec-essary if the review indicated that the product specification, scope, schedule, or budgetgoals would not be met. 4. Scope and methodology of the inspection. This part of thereport explains the purpose and details of the review.

4. You receive formal approval for the assessments. How will you inform stakeholders?

Provide written documentation to project stakeholders indicating formal acceptance inaccordance with the communications management plan.

Activity 11-5

1. You have various inputs available to manage a scope change, such as the one in thescenario. Match the input with its description.

b Configuration manage-ment plan

a. Periodically collected informationabout project activities that are beingperformed to accomplish the projectwork.

a Work performance infor-mation

b. Provides information on elements thatcan be configured, those that undergoformal change control, and the pro-cess of controlling such changes.

d Requirements documenta-tion

c. Links project requirements to thebusiness and project objectives andensures that the requirements addbusiness value to the project.

c Requirements traceabilitymatrix

d. Documents how each project require-ment meets the overall business needof the project.

2. A scope change request recommending additional test documentation has been submit-ted to the CCB for analysis. This change might impact the project finish date. Whatshould be done first with this request?

✓ a) Evaluate the request.

b) Ensure that new specifications are detailed.

c) Monitor changes.

d) Identify corrective action to take.

3. The CCB informs you that the additional costs for the workshop will be adjusted in theproject budget. However, the project finish date must remain the same. As the projectmanager, what could you do to ensure that the project finishes on time?

Consider assigning additional resources to effort-driven activities on the critical path.

SOLUTIONS




1. What type of information is documented in the project management plan?

a) The information about project status, scheduled activities, and issues.

✓ b) The processes of executing and controlling during the project.

c) The early stages of the planning phase of the project.

d) The potential changes to the project.

2. What statements best describe inspections?

✓ a) May also be referred to as product reviews, audits, or walkthroughs.

✓ b) Involve comparing schedules and budgets to the actual project results.

c) Are examinations of change requests to verify that the objectives are met.

d) Are only effective if done at random intervals in a production process.

3. Which statement best describes the project controlling process?

a) Is used strictly to control scope changes.

✓ b) Is used by the project team throughout the project.

c) Is used only in the control phase of the project.

d) Is used to control changes made as a result of project planning and execution.

4. The control processes are repeated throughout the project life cycle. Therefore,which term can be attributed to the control processes?

a) Facilitative

b) Integrative

c) Core processes

✓ d) Iterative

5. What types of information do the performance reports provide you with?

✓ a) Percentage of activity work completed to date.

b) Activities to be completed from the current date.

✓ c) Activities completed to date.

✓ d) Activities started to date.

6. What is scope creep?

a) Reduction of project scope.

b) A type of residual risk.

✓ c) Undocumented changes to the project scope.

d) An activity that needs to be included in the project schedule.

7. Which documents are included in a project’s scope baseline?

✓ a) WBS dictionary

✓ b) Work breakdown structure

c) Milestone list

SOLUTIONS

Solutions 611


d) Project charter

8. What actions should be taken regarding issues relating to the customer’s installationand support requirements?

✓ a) Addressed if currently part of the project’s scope.

b) Ascertained through a cut-over needs analysis.

✓ c) Addressed as a separate project.

✓ d) Addressed as a change to the current project’s scope.

9. What is the overall process of managing changes that affect the function or character-istics of the deliverable known as?


b) Change control management


✓ d) Configuration management

10. Which element is a collection of formal, documented procedures that defines the stepsby which the project may be changed?


✓ b) Change control system



11. Who is responsible for ensuring that changes are processed through the integratedchange control process?

a) Project sponsor

b) President

✓ c) Project manager

d) Functional manager

12. Which statements are true of change requests?

✓ a) Must be documented.

✓ b) Can come from anyone.

c) Will not affect the project scope.

✓ d) Must be subjected to an integrated change control process.

SOLUTIONS




1. Match the EVM measure with its formula.

b Schedule variance a. EV / PVa Schedule performance

indexb. EV - PV

d Cost variance c. EV / ACc Cost performance index d. EV - AC

2. According to your cost baseline for the project, you planned to spend $15,000 by theend of the eighth week. You collect reporting data for the eighth week and determinethat $12,000 worth of work has actually been completed. What actions should youtake with this information?

a) Bring it to the attention of the CCB with some possible solutions.

✓ b) Use it to identify corrective action to take.

✓ c) Use it to compare actual schedule performance to planned performance.

d) Bring it to the attention of project stakeholders.

3. The SV for the eighth week of your project is -$3,000. The SPI for this reporting periodis .80. What is your analysis of this data and the project’s schedule performance todate?

A negative SV indicates that the project is currently behind schedule. An SPI number lessthan 1.0 also indicates that the project is behind schedule. You need to determine thecause of the variance and whether the activity that is behind schedule is on the criticalpath. You may consider talking to your resources to identify the source of the problem.You may have to change the schedule dates as well.

4. Using performance measurement techniques, you have determined that the project isbehind schedule. What should you do with this information?

Now that you know the project is behind schedule, you need to determine what activity iscausing the problem. Once the activity has been identified, you must then determinewhether it is on the critical path. If it is on the critical path, you most likely will have totake corrective action, such as fast-tracking, compression, or resource leveling to meetyour milestone dates and your project deliverable deadline. Remember to analyze theimpact of your corrective action on project cost and quality performance baselines. Youshould continue to carefully monitor the schedule performance to check the effectivenessof your corrective action.

Activity 12-2

1. Review the PM_CostPerfRpt document. What is the actual cost for the Public MeetingWork Package in the 6th week reporting period?

$16,000 (You can calculate this figure by adding up the amount that has been spent so faron activities: $4,500 + $7,000 + $4,000 + $500.)

2. What is the total EV for the Public Meeting Work package in the 6th week reportingperiod?

SOLUTIONS

Solutions 613


The total EV is $21,600.

3. According to the cost baseline, the PV up through the sixth reporting period is$22,000. What is the CV for this work package?

SOLUTIONS



CV = +$5,600

4. Which formula will allow you to calculate the Estimate at Completion (EAC) for thework package?

a) EV / AC

b) EV – AC

✓ c) AC + [(BAC – EV)/CPI]

d) EV – PV

5. Based on the formula EV/AC, you determine that the CPI for this work package is 1.11.When you take the CPI and CV into consideration, how is this work package perform-ing?

A CPI greater than 1.0 and a positive CV indicates the work package is performing betterthan anticipated when compared against the budget.

6. What is the SV for this work package?

SOLUTIONS

Solutions 615


SV = -$400

7. What is the SPI for this work package?

SPI = EV/PV. The SPI is 0.98, which is less than 1.0 and indicates some work on the sched-ule needs to be done.

8. Based on your analysis of the product costs, what courses of action might you take?

✓ a) Find the cause of the variance.

✓ b) Determine the appropriate corrective action to take.

c) Alert project stakeholders that the project is in crisis.


SOLUTIONS




1. Which analytical tools are used to assess project progress and identify the magnitudeof cost, resource, and production variations?

✓ a) Gantt chart review

b) Monte Carlo analysis

✓ c) Project cost baseline audit

✓ d) Earned value analysis

2. What does a Cost Performance Index (CPI) of 0.8 mean to the project?

a) Under-budget to date.

✓ b) Over-budget to date.

c) On budget.

d) Nothing; CPI values are always above 1.0.

3. For what reasons are Gantt charts useful for reporting project progress?

a) They display schedule performance trends.

✓ b) They are easy to read.

✓ c) They are available in most project management software packages.

d) They provide detailed analysis for making adjustments.

4. A project has a negative cost variance and an SPI less than 1.0. What does this mean tothe project?

a) It is over-budget and ahead of schedule.

b) It is under-budget and behind schedule.

✓ c) It is over-budget and behind schedule.

d) It is under-budget and ahead of schedule.

5. What is the purpose of trend analysis?

✓ a) Forecast future project performance.

b) Improve variance reporting.

c) Create change requests.

d) Mitigate the harmful effects of scope creep.

6. What is the essential first step in the control schedule process?

a) Making changes to the project schedule.

b) Computing the SPI.

c) Making sure schedule requirements are clear.

✓ d) Determining the current status of the project schedule.

7. What is the difference between the Earned Value (EV) and the Planned Value (PV)?

a) Cost variance.

✓ b) Schedule variance.

SOLUTIONS

Solutions 617


✓ c) Unearned value.

d) Actual cost

8. What does a Schedule Performance Index (SPI) of 1.2 mean to the project?

✓ a) Ahead of schedule.

b) According to schedule.

c) Behind schedule.

d) Nothing; SPI values are always below 1.0.

9. During the control schedule process, the project schedule serves what functions?

✓ a) Schedule baseline.

✓ b) Basis for measuring project performance.

c) Cost baseline.

✓ d) Time management component of the project.

10. What is the Schedule Variance (SV) if the Planned Value (PV) is $275,000 and theEarned Value (EV) is $300,000?

✓ a) $25,000

b) - $25,000

c) $125,000

d) $575,000

11. What are the changes made to keep project activities on schedule called?

✓ a) Corrective actions.

b) Change requests.

c) Performance measurements.

d) Schedule baselines.

12. How do you calculate the Cost Performance Index (CPI)?

✓ a) Divide the Earned Value (EV) by the Actual Cost (AC).

b) Divide the Earned Value (EV) by the Planned Value (PV).

c) Subtract the Actual Cost (AC) from the Earned Value (EV).

d) Subtract the Planned Value (PV) from the Earned Value (EV).

13. Based on the performance measures indicated in the following table, what is the CostVariance (CV) for Case 3?

a) -1,000

✓ b) 1,000

c) 2,000

SOLUTIONS



d) -2,000

14. Based on the performance measures indicated in the following table, what is theSchedule Variance (SV) for Case 2?

✓ a) -1,000

b) 1,000

c) 2,000

d) -2,000

15. In the cost curve shown in the following figure, Height A represents:

a) Cost variance

b) Schedule variance

c) Earned value

✓ d) Budget at Completion (BAC)


1. Given that there is a significant variation in temperature between the first and secondfloor, what should be done?

a) Report this information to the appropriate people, according to the project’s changecontrol system.

✓ b) Because of the potentially high re-work cost, finding a solution should be a top prior-ity.

c) Initiate process adjustments.

SOLUTIONS

Solutions 619


d) Continue to monitor quality as the HVAC installation continues.

2. The quality management plan documented acceptability of the installation with a tol-erance of a one degree variance between floors. What would you do to determine thereasons for the variance in quality tests?

You will need to determine the source of the variability so that appropriate correctiveaction can be taken. Take a closer look at how the HVAC installation is being distributedamong the contractors. Also consider how the quality testing is being done. Is the samequality control engineer inspecting all of the floors?

3. After researching the cause of the variance, you discover that the testing was done byone quality control engineer. You then meet with the contract supervisor to investi-gate the process. You discover that the duct work on the second floor was installedover a weekend by a different, less experienced crew. What should your next step be?

Recommend corrective action to the supervisor to bring in the first floor crew to trouble-shoot the variance between floors. It is important that you consider the impact anycorrective action may have on the project budget and schedule. Major adjustments mustbe made according to the project’s change control system.

Activity 13-2

1. You need to provide a progress report to senior management. What should your firststep be in gathering data for your report?

a) Hold performance reviews.

b) Consult subsidiary plans for guidelines on reporting project performance.

c) Prepare a professional performance report.

✓ d) Include in the report EV measurements for SV and CV with appropriate action plansto remedy any variances.

2. After you completed your analysis of work results, you held project deliverables per-formance reviews with project team members to assess project status. You havegathered all relevant data necessary for completing your progress report. Given thecost and schedule concerns of senior management, what type of report format shouldyou prepare?

The format of the report you prepare should provide the type of information and thelevel of detail required by senior management. As a guide, consult your project manage-ment plan’s subsidiary plans for guidelines and procedures for reporting on cost andscheduling performance, as these represent management’s primary concerns.

3. Since project baselines have shifted, one of the team leads for the project suggeststhat you should alter the format of the progress report before handing it off to seniormanagement. She says that extensive enhancements to the graphic elements are nec-essary to truly express the major points of the report. Should you implement hersuggested changes?

No. When you create a progress report, it is important to weigh the time, expense, andeffort it would take to produce the report against the benefits of the report. The sugges-tions of the team lead are primarily cosmetic, and will take additional time, money, andmanpower to implement. It is not in your best interest to change the progress report.

SOLUTIONS




1. Which reason causes variance to be sporadic, unusual, and difficult to predict?

a) Random causes

b) Common causes

✓ c) Special causes

d) External causes

2. What is the statistical range of variation for processes or products called?

a) Specification limits

b) Tolerances

✓ c) Control limits

d) Quality standards

3. “500 rejected parts” is an example of which sampling technique?

✓ a) Attribute sampling

b) Variable sampling

c) Random sampling

d) Stratified sampling

4. Which statement is true of the quality problems that are faced by organizations?

a) Originate on the shop floor because of waste and rework.

✓ b) Could be avoided by management taking action on potential quality improvementideas.

c) Could be eliminated if supervisors monitored their work more closely.

d) Originate in the QA organization where the ultimate responsibility for quality rests.

5. A + or – 3-sigma limit indicates approximately what percentage of the process outputwill be within acceptable limits?

a) 30.3

b) 80.3

c) 68.5

✓ d) 99.7

6. Which chart is ordered by frequency of categorized causes of poor quality perfor-mance?

a) A control chart


✓ c) A Pareto diagram

d) A trend analysis


SOLUTIONS

Solutions 621


✓ a) A control chart


c) A Pareto diagram

d) A cause-and-effect diagram

8. What action is taken to bring a product or service into compliance with customerspecifications?

a) Scrap

b) Audit

c) Recall

✓ d) Rework


a) A control chart

✓ b) A fishbone diagram

c) A Pareto diagram

d) A decision tree diagram

10. A Pareto diagram is a tool used to determine the relative impact each quality problemhas on project performance. Which statement best describes the philosophy of thePareto Principle?

a) In general, 80% of the quality problems can be justified as correctable using a cost-benefit analysis. The remaining 20% are not financially worth fixing.

b) To achieve zero defects, all quality problems, including those that do not have adirect cost, should be corrected.

✓ c) The vast majority of defects are caused by a small percentage of the identifiableproblems. Improvement efforts therefore should be reserved for these vital few prob-lems.

d) To minimize financial loss to the firm from quality problems, all problems that have ameasurable cost should be corrected.

SOLUTIONS



11. Which technique is useful for identifying corrective action alternatives?

a) Changing the project scope.

b) Requesting additional funds immediately.

✓ c) Holding a brainstorming session with the project team.

d) Leaving decision-making to the functional managers.

12. Which document should reflect the updates to project performance and control docu-ments?

✓ a) Project plan


c) Change control plan

d) Cost baseline


1. What action should you take in regard to the material delay?

a) Monitor the environment for new risks.

b) Conduct a project risk response audit.

c) Update performance baselines.

✓ d) Consult the risk response plan.

2. You have developed a very robust risk response plan in the risk register. Based on thevendor performance report, you notice that chances of delay have now become veryhigh (from an earlier rating of high). You now need to decide what would be your nextstep.

✓ a) Consult the risk response plan.

b) Follow the risk management process.

c) Implement the fallback plan.

d) Develop a workaround.

3. The contractor suggests that it might ultimately be more cost-effective to buy materi-als from another contractor, although the initial cost of materials will be higher. Doyou think this is an effective solution?

Answers will vary, but may include: although the cost of materials will be higher whenpurchased in this manner, the cost of the schedule delay might even be more expensive.By buying materials right away, you will forestall any additional work delays.

Activity 14-2

1. The work done by InfiniTrain is scheduled to be completed in three phases. Whataction can you take to ensure that these deadlines are met?

✓ a) Set performance milestones.

b) Document contract changes.

SOLUTIONS

Solutions 623


c) Implement a contract change control system.

d) Index all contract correspondence.

2. Your contact at InfiniTrain informs you that their primary project software instructorhas given her resignation. They have asked to push the training date out a week to getanother instructor up to speed. What action should you take?

a) Document contract changes.

b) Conduct an on-site visit.

✓ c) Consult the contract change control system.

d) Negotiate a milestone deadline.

3. InfiniTrain has informed you that they have completed the beta verification of theAssessment documents as specified in the contract. It is your responsibility as projectmanager to verify that all feedback was incorporated correctly. Upon your review, younotice that some of the alpha review feedback was not incorporated. What actionshould you take?

You might review your contract with InfiniTrain for guidance on the timelines and dead-lines for completing the various work phases. Consult the performance reporting systemto determine how to handle this problem. The procedure for determining acceptance ornon-acceptance of the assessment documents is documented in the performance reportingsystem.


1. When a project is terminated before its scheduled completion date, which of these isnot a correct action?

a) You should halt further expenditures in an orderly way.

✓ b) You should cancel vendor contracts.

c) You should identify and document reasons for termination.

d) You should work with the sponsor to identify status of complete and incompletedeliverables.

2. Which are inputs to administer procurements?

✓ a) Work performance information

✓ b) Contracts

c) Procurement performance reviews

✓ d) Approved change requests

3. Which are suitable contract performance milestones?

✓ a) Partial deliveries of the requirements.

b) Deferred deliveries of the requirements.

✓ c) Completion of selected portions of the project work.

✓ d) Delivery of preliminary versions of the product.

4. Which of these are true of supplier provided component surveillance?

SOLUTIONS



a) Is illegal monitoring of a supplier’s performance.

✓ b) Is a good way to mitigate risk of supplier non-performance.

c) Is not a suitable acceptance procedure.

✓ d) May include making site visits.

5. As a buyer, what is the purpose of an on-site visit to a supplier?

a) Assess the engagement of the workforce.

b) Determine if your supplier’s employees are legal workers.

✓ c) Determine contract performance.

d) Develop a change control system.

6. Which statement is true of the contract change control system?

a) Belongs to the seller rather than the project organization.

✓ b) Contains all of the forms, performance tracking, and procedural information neededto deal with contract changes.

c) Does not feed information into the project’s change control system.

d) Does not include procedures for reviewing and resolving contract disputes.


1. Based on the information you have, can you close out the contract with the subcon-tractor?

a) Yes, the contract has been fulfilled.

✓ b) No, the contract has not been fulfilled.

c) You cannot determine this until a procurement audit has been completed.

d) You cannot determine this until the seller completes a staff evaluation.

2. What would you do to resolve incorrect or unsatisfactory contract work in the situationdescribed in the scenario?

Answers will vary, but may include: make arrangements to meet the subcontractor at thework site to evaluate what outstanding work is required to finish the job correctly andsatisfactorily; call the subcontractor and direct him to return to the work site, clean upthe debris, and repair the crack in the sidewalk; or conduct a procurement audit toensure that the contract work was properly completed.

3. RTL returned to the work site and resolved the outstanding contract issues and com-pleted the cement work correctly and satisfactorily. Can you close out the contract?Why or why not?

Yes. This contract can be closed out because the seller resolved the outstanding contractissues and completed the cement work correctly and satisfactorily.

4. Would you include a seller evaluation in your procurement audit? Why or why not?

Yes, because it is important to document the seller’s performance for use in future simi-lar procurements.

SOLUTIONS

Solutions 625


Activity 15-2

1. Are your project records ready for review by the project sponsor? Why or why not?

Yes, because you have collected performance measurement and product documentationas well as other relevant project records to archive.

2. What document will you prepare before obtaining formal acceptance from your projectsponsor to officially complete the project?

You should prepare a final project report. You should also complete a lessons learnedreport.

3. In this case what might constitute formal acceptance?

Answers will vary, but may include: a formal presentation to stakeholders followed by amemo from the project sponsor that the project is complete. Formal acceptance docu-mentation should be distributed to the appropriate stakeholders and stored with theproject archives. If the customer were external, you might also need to receive their for-mal acceptance in writing.

4. What types of documentation or computer files should you store in the projectarchives?

Answers will vary, but may include: the project plan, project performance records, con-tract records, names of team members, or financial records.


1. What is true of lessons learned during the project?

a) Should be documented only in the closeout report.

b) Should consist of only project data.

✓ c) Should be documented throughout the project.

d) Should consist of only things that went well during project execution.

2. Which process is concerned with obtaining formal stakeholder acceptance of com-pleted project deliverables?

a) Project plan execution

b) Scope management

✓ c) Scope verification

d) Quality assurance

3. Which activities are included in an orderly close-out process?

✓ a) Formal acceptance by the customer.

b) Project milestone review.

✓ c) Closure of all contracts.

✓ d) Administrative closure and final reporting.

SOLUTIONS



4. Which is true of a formal project handoff?

a) It is a bad idea because it embroils the project in the customer’s political intrigues.

✓ b) It can positively shape perceptions of the product by highlighting product benefits.

c) It should only be held if the customer pays extra for this service.

d) It does not have a structured agenda for the handoff meetings.

5. At what points does administrative closure occur in a project?

✓ a) At the end of the project.

✓ b) At the end of each project phase.

✓ c) Upon delivery of pre-specified milestone deliverables.

d) On completion of the project scope definition.

6. Which is true of project archives?

a) Should never contain computerized records, because they may not be retrievable inlater software.

✓ b) Should include key information, such as baselines and performance data.

c) Should be handed to the sponsor at the end of the project.

d) Should be updated only at the end of the project.

7. When can the contract close-out occur?

a) At the end of a project only.

✓ b) Whenever a contract is completed and accepted.

c) At the end of a project only, unless the project is terminated early.

d) Whenever the seller submits an invoice.

8. What are the goals of contract close-out?

✓ a) To arrange for final settlement of seller payments and claims.

✓ b) To verify that work was done and delivered to specification.

c) To provide performance evaluation of seller staff.

✓ d) To update contract records and documents.

9. Which content categories should the final project report include?

✓ a) Administrative performance and recommendations.

b) Project lessons learned information.

✓ c) Project structure and recommendations.

✓ d) Project management performance and recommendations.

10. For what reasons is publishing a project close-out schedule a good idea?

a) It helps keep people motivated by imposing a deadline.

✓ b) It provides a sense of order in a time of fluctuating team membership.

✓ c) It helps team members who are leaving to understand what they must accomplish orhand off before they can move to a different position.

d) It provides stakeholders with information on the status of the project.

11. Which is the output of the close project or phase process?

a) Project management plan updates.

SOLUTIONS

Solutions 627


✓ b) Final product, service, or result transition.

c) Contract closure.

d) Work performance information.

SOLUTIONS



6-Sigma limit, 449

8/80 rule, 110

80/20 rule, 450

AAC, 418, 429

acquire project team process, 329

inputs, 330

outputs, 332

tools and techniques, 331

activities on the critical path

See: critical activities

activity dependencies, 118

common types, 118

activity durations

estimating, 136

activity resources

estimating, 131

Actual Cost

See: AC

administer procurements process, 472

inputs, 472

outputs, 474


administrative closure, 495

aggregated cost, 184

Agile project management, 41

alternatives identification, 90

analogous estimating, 135, 177

analyzing variances task, 448

anticipatory breach, 478

APT, 7

assumptions, 86

attribute sampling data, 451

audit, 401

Autonomous Project Teams

See: APT

average, 269

BBAC, 431

baseline

estimating, 187

baselines, 166

establishing, 167

benchmarking, 209

bottom-up estimating, 178

breaches of contracts, 476, 477

Budget at Completion

See: BAC

business cases, 56

components, 56

business requirements, 43

business risks, 237

types, 237

Ccapital budgeting, 45

cause-and-effect diagram, 207

CCB, 388

Change Control Board

See: CCB

change control systems, 388, 391

change management

advantages, 396

checklists, 205

close procurements process, 486

inputs, 486

outputs, 487


close project or phase process, 494

inputs, 494

outputs, 495


closeout meetings, 497

co-location, 339

code of accounts, 96

collect requirements process, 77

INDEX

INDEX

Index 629


inputs, 77

outputs, 78


common estimate types, 176

common performance reporting techniques, 431

communication skills, 31

communications management plans, 225

creating, 230

communications requirements, 228

communications requirements analysis, 228

communications technology, 228

conditional branches, 123

conditional diagramming method, 123

conduct procurements process, 364

inputs, 364

outputs, 366


configuration management, 390

conflict

causes, 346

conflict management, 346

approaches, 346

constraints, 86

contingency allowances, 186

contingency plans, 281

contingency reserves, 282

contract change requests, 476

contracts, 304

common types of, 305

components of, 304

control charts, 207, 449

control cost process, 426

inputs, 427

outputs, 428


control schedule process, 414

inputs, 414

outputs, 415


control scope process, 403

inputs, 404

outputs, 405


cost assignment methods, 187

cost baseline, 183

cost of quality, 204

Cost Performance Index

See: CPI

Cost Plus Award Fee Contracts

See: CPAF

Cost Plus Fixed Fee Contracts

See: CPFF

Cost Plus Incentive Fee Contracts

See: CPIF

Cost Variance

See: CV

cost-benefit analysis, 47

cost-reimbursable contracts, 306

CPAF, 306

CPFF, 306

CPI, 430

CPIF, 306

CPM, 147

crash cost plotting methods, 161

crashing, 160

create WBS process, 94

inputs, 95

outputs, 96


critical activities, 155

critical chain method, 147

critical path, 143

identifying, 156

Critical Path Method

See: CPM

cultural awareness, 32

CV, 429

Ddecision making skills, 31

decision making under risk, 272

decision tree analysis, 273

define activities

how to, 112

define activities process, 110

inputs, 110

outputs, 111


define scope process, 88

inputs, 88

outputs, 89


deliverables, 108

ensuring completion, 402

Design of Experiments

See: DOE

determine budget process, 184

INDEX



inputs, 184

outputs, 185


develop human resource plan process, 213

inputs, 214

outputs, 215


develop project charter, 54

inputs, 55


develop project charter process

outputs, 56

develop project management plan process, 73

develop project management plans

inputs, 74

outputs, 75


develop project team process, 335

inputs, 336

outputs, 337


develop schedule process, 140

inputs, 140

outputs, 142


direct and manage project execution process,316

inputs, 316

outputs, 317


discounted cash flow, 45

distribute information process, 350

inputs, 351

outputs, 352


DOE, 209

EEAC, 432

Earned Value

See: EV

Earned Value Management

See: EVM

effect-based risk classification, 241

effort, 134

elapsed time, 134

EMV analysis, 273

enterprise environmental factors, 19

estimate activity durations process, 134

inputs, 134

outputs, 136


estimate activity resources process, 128

inputs, 129

outputs, 130


Estimate at Completion

See: EAC

estimate costs process, 174

inputs, 175

outputs, 176


Estimate to Complete

See: ETC

ETC, 431

EV, 417

EVM, 416

calculating, 421

measures, 418

variables, 416

Expected Monetary Value analysis

See: EMV analysis

expert judgment, 135

express warranty, 477

Ffacilitated workshops, 79

fast tracking, 160

feasibility analysis, 46

FF, 119

FFP, 305

Finish-to-Finish

See: FF

Finish-to-Start

See: FS

Firm Fixed Price Contracts

See: FFP

Fixed Price Incentive Fee Contracts

See: FPIF

Fixed Price with Economic Price AdjustmentContracts

See: FP-EPA

fixed-price contracts, 305

float, 144

flowcharts, 206

force majeure, 478

forecasting methods, 457

formal acceptance of project work, 396

INDEX

Index 631


FP-EPA, 305

FPIF, 305

free float, 145

FS, 119

fundamental breach, 478

funding and costs

reconciling, 191

funding limit reconciliation, 186

GGERT, 123

Graphical Evaluation Review Technique

See: GERT

group creativity techniques, 79

group decision making techniques, 80

group interactions, 16

Iidentify risks process, 248

inputs, 249

outputs, 250


identify stakeholders process, 60

inputs, 61

outputs, 62


IFB, 304

immaterial breach, 478

impact scale, 242

implied warranty, 477

influencing skills, 31

information-gathering techniques, 251

inputs, 16

inspection, 401

inspection reports

components, 401

insurable risks, 237

types, 237

integrated change control, 388

interpersonal skills, 28

Invitation for Bid

See: IFB

ISO 9000 Series, 204

Kknowledge areas, 17

Llags, 119

LCL, 207

leadership, 28

leads, 120

lease, rent, or buy decision, 299

legal issues, 476

lessons learned reports, 496

lessons learned considerations, 496

levels of uncertainty, 243

linear presentation, 5

loops, 123

lower control limit

See: LCL

Mmake-or-buy analysis, 299

what to consider, 299

manage project team process, 343

inputs, 344

outputs, 345


manage stakeholder expectations process, 355

inputs, 355

outputs, 357


material breach, 478

mean, 269

median, 269

monitor and control project work process, 384

inputs, 385

outputs, 386


monitor and control risks process, 466

inputs, 466

outputs, 467


monitoring and controlling project work, 386

Monte Carlo analysis, 274

motivation skills, 30

motivational techniques, 31

Nnegative risk strategies, 280

negotiation, 32

NEH programs, 38

Net Present Value

See: NPV

NPV, 45

Oobjective probability, 270

ongoing risk assessment process, 260

INDEX



operations, 7

operations management, 41

organization charts, 216

organizational culture, 15

organizational process assets, 19

organizational structure, 215

types, 216

organizations

cultures, 14

outputs, 16

outsourcing, 298

Pparametric estimating, 135, 178

Pareto analysis, 450

Pareto diagram, 449

payback period, 45

PDF, 269

normal distribution, 270

triangular distribution, 271

uniform distribution, 270

PDM, 122

creating, 125

perform integrated change control process, 393

inputs, 394

outputs, 395


perform qualitative risk analysis process, 256

inputs, 256

outputs, 257


perform quality assurance process, 323

inputs, 324

outputs, 326


perform quality control process, 444

inputs, 444

outputs, 446


perform quantitative risk analysis process, 265

inputs, 265

outputs, 266


performance appraisals, 347

performance measurement analysis techniques,430

performance reports

creating, 458

plan communications process, 225

inputs, 226

outputs, 227


plan procurements process, 290

inputs, 291

outputs, 292


plan quality process, 198

inputs, 199

outputs, 200


plan risk management process, 238

components, 240

inputs, 238

outputs, 239


plan risk responses process, 278

inputs, 279

outputs, 279


Planned Value

See: PV

PMBOK Guide Fourth Edition, 5

PMI Code of Ethics and Professional Conduct,23

PMIS, 318

problems, 318

PMO, 7

PMP Certification, 5

Point of Total Assumption

See: PTA

political skills, 32

portfolio management, 38

portfolios, 6

positive risk strategies, 281

Precedence Diagramming Method

See: PDM

precedence relationships, 118

types, 119

predecessor activities, 118

probability, 268

probability and impact risk rating matrix, 258

Probability Density Function

See: PDF

probability distribution, 269

probability scales, 242

process control structure, 390

process flowcharts, 206

process improvement plan, 201

INDEX

Index 633


process improvement planning, 201

process mean, 207

processes, 15

groups of, 16

procurement audits, 488

elements of, 489

lessons learned, 490

procurement documents, 303

preparing, 308

types, 303

procurement management plan, 293

creating, 294

procurement negotiations, 375

procurement SOW, 297

procurement statement of work

preparing, 300

procurements administrator, 475

product analysis, 89

product review, 401

professional responsibilities, 24

social, 25

to customers and the public, 25

program management, 38

programs, 5

progressive elaboration, 14

project changes, 389

project charters, 54

creating, 57

project costs

controlling, 433

estimating, 179

project deliverables, 86

project execution direction and management,320

project governance, 12

project information

distributing, 352

project interfaces, 218

project life cycle, 11

general characteristics, 12

governance activities, 13

project management, 5

project management and operations management,41

Project Management Information System

See: PMIS

Project Management Office

See: PMO

project management plans, 72

project management processes, 15

project managers

responsibilities, 5

project objectives, 90

project performance

reporting on, 458

project phases, 11

project procurements

administering, 478

properly closing, 490

project records

archiving, 495

project resources, 128

project risk

monitoring and controlling, 469

project risk management process, 236

project risk ranking, 267

project risk response audit, 468

project schedule network diagrams, 121

project schedules, 139

compressing, 162

controlling, 423

developing, 151

project scope

controlling, 406

project scope statements, 86

project selection, 43

criteria, 43

project selection decision models, 44

project selection methods, 44

project sellers

determining, 376

project stakeholders, 8

identifying, 64

types, 8

project statement of work

See: SOW

project teams

acquiring, 333

developing, 340

managing, 347

projects, 4

closing, 498

phases, 13

PTA, 306

PV, 417

Qqualified sellers, 367

INDEX



qualitative criteria, 43

qualitative risk analysis, 255

performing, 260

quality assurance plans, 323

executing, 327

quality audits, 326

topics included in, 326

quality control

performing, 452

quality management plans, 198

creating, 210

quantitative analysis methods, 273

quantitative criteria, 43

quantitative risk analysis, 265

performing, 275

RRAM, 215, 219

random causes, 447

rating systems

criteria profiling, 45

decision tree, 45

Delphi technique, 46

Q-sorting, 45

weighted factor, 45

RBS, 241

regulations, 203

relationships, 39

relative authority, 218

report performance process, 455

inputs, 455

outputs, 456


Request for Bid

RFB, 304

Request for Information

See: RFI

Request for Proposal

See: RFP

Request for Quotation

RFQ, 304

requirements documentation, 80

requirements management plan, 81

requirements traceability matrix, 82

reserve analysis, 135

resource leveling, 148

Responsibility Assignment Matrix

See: RAM

reward and recognition systems, 339

rewarding individual performance, 340

RFB, 304

RFI, 304

RFP, 304

risk analysis, 243

Risk Breakdown Structure

See: RBS

risk categories, 252

risk data quality assessment, 258

risk management plans, 238

creating, 244

risk registers, 252

components, 259

risk response plans

developing, 282

risk tolerance, 244

levels, 244

risk-related contract decisions, 293

risks, 236

risks and triggers

identifying, 253

Sschedule compression, 159

schedule control chart, 419

schedule formats, 148

schedule management plans, 130

schedule network analysis, 146

Schedule Performance Index

See: SPI

schedule performance measurement, 418

Schedule Variance

See: SV

scope creep, 30

scope statements, 86

components, 87

creating, 91

sellers

obtaining resources from, 371

sensitivity analysis, 273

sequence activities process, 116

inputs, 116

outputs, 117


SF, 119

simulations, 274

source selection criteria, 307

source-based risk classification, 242

SOW, 49

INDEX

Index 635


how to prepare, 50

special causes, 447

specifications, 298

SPI, 420

trend analysis, 421

SS, 119

staffing management plans, 221

components, 221

documenting, 222

stakeholder analysis, 62

stakeholder analysis matrix, 63

stakeholder expectations

managing, 357

stakeholder management strategy, 64

stakeholder registers, 63

stakeholder requirements

documenting, 82

standard deviation, 269

standard schedule diagramming notations, 142

standards, 203

Start-to-Finish

See: SF

Start-to-Start

See: SS

statement of work

See: SOW

statistical sampling, 450

statistical sampling process, 451

subjective probability, 270

subprojects, 4

successor activities, 118

summary activities, 123

SV, 420

system dynamic models, 123

system flowcharts, 206

Ttailoring, 15

TCPI, 432

team building, 30

team development stages, 337

team-building activities, 339

teaming agreement, 293

term contract, 376

three-point estimates, 135

Time and Material (T&M) contracts, 306

To-Complete Performance Index

See: TCPI

tolerances, 448


top-down estimating, 177

total float, 144

Total Quality Management

See: TQM

TQM, 202

training, 338

triggers, 248

UUCL, 207

upper control limit

See: UCL

Vvariable sampling data, 452

variance, 447

causes, 447

verify scope process, 399

inputs, 400

outputs, 400


virtual teams, 332

Wwaivers, 476

types, 477

walkthrough, 401

warranties of fitness for purpose, 477

warranties of merchantability, 477

warranty, 476

WBS, 93

developing, 96

WBS dictionary, 96

weighting systems, 374

what-if scenario analysis, 148

work authorization system, 319

Work Breakdown Structure

See: WBS

work packages, 93, 109

work performance information, 320

INDEX


