Pmi Project Management Professional Pmp Certification Study Guide 1202229012770607 4

Project Management Professional (PMP)
Certification Study Guide

PMI Certification Materials
• To assist PMI candidates for completing the PMI certification exam administered by the Project Management Institute • Content is from “A Guide To The Project Management Body Of Knowledge” (PMBOK) • www.pmi.org

Recurring Themes
• Historical Records – need to collect and use for planning, estimating and risk • Kickoff meetings are important • Work Breakdown Structures • Do not introduce benefits that are not stated in requirements • Needs of all stakeholders should be taken into account during all projects • Team Members must be involved in project planning • Project Mangers must be pro-active

Chapter 1 – Introduction
• Project – temporary endeavor undertaken to create a unique product or service • Has a definite beginning and end and interrelated activities • Programs adopt new set of objectives and continue to work; projects cease when declared objectives have been attained

Chapter 1 – Introduction
• Projects are unique – characteristics are progressively elaborated
– Progressively: proceeding in steps – Elaborated: worked with care and detail

• Scope of project should remain constant even as characteristics are “progressively elaborated”

Chapter 1 - Introduction
• Project Management: the application of knowledge, skills, tools and techniques to project activities in order to meet or exceed stakeholder needs and expectations from a defined project – balancing the following:
– Scope, time, cost, and quality – Stakeholders‟ expectations – Requirements (needs) vs. unidentified requirements (expectations)

Chapter 1 - Introduction
• Programs are groups of projects managed in a coordinated way to obtain benefits not available from managing the projects individually • Most programs have elements of ongoing operations
– Series of repetitive or cyclical undertakings

• Projects are often divided into “subprojects” for more manageability
– Often contracted out to external organizations

Chapter 2 – Project Management Context
• Project Phases are marked by the completion of a deliverable
– Tangible, verifiable work product – Review of deliverables and approval/denial are “phase exits, stage gates, or kill points”

• Phases are collected into the Project Life Cycle
– Set of defined work procedures to establish management control

Chapter 2 – Project Management Context
• Project Life Cycle defines: – Technical work performed in each phase – Who is involved in each phase • Project Phases can overlap – “Fast Tracking” • Common Characteristics of Project Life Cycles:
– Cost and Staffing levels are low at start and move higher towards the end – Probability of successfully completing project is low at beginning, higher towards the end as project continues – Stakeholder influence is high at the beginning and progressively lowers as project continues

Chapter 2 – Project Management Context
• Stakeholders: individuals and organizations who are actively involved in the project
– Often have conflicting expectations and objectives – In general, differences should be resolved in favor of the customer – individual(s) or organization(s) that will use the outcome of the project – Stakeholder management is a proactive task
• Project Mangers must determine all stakeholders and incorporate their needs into the project

Chapter 2 – Project Management Context
• Stakeholders are:
– – – – – – – – – Project Managers Customers Performing Organizations, owners Sponsor Team Internal/External End User Society, citizens Others: owner, funders, supplier, contractor

Chapter 2 – Project Management Context
• Organizational Systems: Project based vs. Non-Project Based
– Project Based – derive revenues from performing projects for others (consultants, contractors),”management by projects” – Non-Project Based – seldom have management systems designed to support project needs (manufacturing, financial services)

Chapter 2 – Project Management Context
• Organizational Cultures and Styles:
– Entrepreneurial firms more likely to adopt highly participative Project Manager – accept higher risk/reward – Hierarchical firms less likely to adopt participative Project Manager – take fewer risks

Chapter 2 – Project Management Context
• Organizational Structures
– Functional (classical) marked by identifiable superiors. Staff grouped by specialty . Perceived scope of project limited by function (Engineering, HR). Typically have part-time Project Manager – Projectized Organization –blend functional and projectized characteristics. Mix crossdepartment personnel with full-time Project Manger

Chapter 2 – Project Management Context
• Project Management Skills
– General Business Management (consistently producing results expected by stakeholders) – Leading (establishing direction, aligning resources, motivating) – Communicating (clear, unambiguous, and complete) – Negotiating (conferring with others to reach an agreement) – Problem Solving (definition and decision making) • Distinguish causes and symptoms • Identify viable solutions – Influencing Organization (understanding power and politics)

Chapter 2 – Project Management Context
• Socioeconomic Influences
– Standards – document approved that provides common, repeated use, rules and guidelines • Compliance is not mandatory – Regulations – document that identifies products, services or characteristics • Compliance is mandatory – Standards often become “de facto” regulations – Internationalization – Cultural Influences

Chapter 2 – Project Management Context
• Organization Structure Pro‟s and Con‟s
– Projectized
• Efficient Organization – No “home” • Loyalty – Lack of Professionalism • Effective Communication – Duplication of functions, less efficient resource usage

– Matrix
• • • • • • • Visible Objectives – not cost effective PM Control – More than 1 boss More support – More complex to control Utilize scarce resources – Tough resource allocation Information distribution – Competition of priorities Coordination – Policies & Procedures Home based – Potential for conflict

Chapter 2 – Project Management Context
• Functional Organization
– Specialists – More emphasis on functions – 1 supervisor – No career path in PM

Chapter 3 – Project Management Processes
• Project Management requires active management of Project Processes
– Series of actions that achieve a result – Project Management Processes
• Describing and organizing the work

– Product-Oriented Processes
• Specifying and creating the product

Chapter 3 – Project Management Processes
• Process Groups:
– Initiating processes: recognizing a project or phase should begin – Planning processes: devising and maintaining a workable plan – Executing processes: coordinating resources to execute the plan – Controlling processes: ensuring project objectives are met; monitoring, correcting and measuring progress – Closing processes: formalized acceptance

Chapter 3 – Project Management Processes
• Process Groups are linked by the results each produces • Process Groups are overlapping activities with various levels of intensity • Process Group interactions cross phases – “rolling wave planning”
– Provides details of work to complete current phase and provide preliminary description of work for subsequent phases

• Individual processes have inputs, tools and techniques, and outputs (deliverables)

Chapter 3 – Project Management Processes
• Initiating and Planning Processes • Committing the organization to begin
– Initiation, High-level planning, Charter

• Amount of planning proportional to the scope of the project – Core Planning
– Scope Planning – written statement – Scope Definition – subdividing major deliverables into more manageable units – Activity Definition – determine specific tasks needed to produce project deliverables – Activity Sequencing – plotting dependencies

Chapter 3 – Project Management Processes
• Core Planning (continued)
– Activity Duration Estimating – determine amount of work needed to complete the activities – Schedule Development – analyze activity sequences, duration, and resource requirements – Resource Planning – identify what and how many resources are needed to perform the activities – Cost Estimating – develop resource and total project costs – Cost Budgeting – allocating project estimates to individual work items – Project Plan Development – taking results from other planning processes into a collective document

Chapter 3 – Project Management Processes
• Planning/Facilitating Processes – manage the interaction among the planning processes
– Quality Planning – standards that are relevant to the project and determining how to meet standards – Organizational Planning – identify, document, and assigning project roles and responsibilities – Staff Acquisition – obtaining the human resources – Communications Planning – determining rules and reporting methods to stakeholders

Chapter 3 – Project Management Processes
• Planning/Facilitating Processes (continued)
– Risk Identification – determining what is likely to affect the project and documenting these risks – Risk Quantification – evaluating risks and interactions to access the possible project outcomes – Risk Response Development – defining enhancement steps and change control measures – Procurement Planning – determining what to buy and when – Solicitation Planning – documenting product requirements and identifying possible sources

Chapter 3 – Project Management Processes
• Planning/Facilitating Processes (continued)
– Order of events:
• • • • • • • • • • • • • • • • • • • Scope Statement Create Project Team Work Breakdown Structure WBS dictionary Finalize the team Network Diagram Estimate Time and Cost Critical Path Schedule Budget Procurement Plan Quality Plan Risk Identification, quantification and response development Change Control Plan Communication Plan Management Plan Final Project Plan Project Plan Approval Kick off

Chapter 3 – Project Management Processes
• Executing Processes
– – – – – Project Plan Execution – performing the activities Complete Tasks/Work Packages Information Distribution Scope Verification – acceptance of project scope Quality Assurance – evaluating overall project performance on a regular basis; meeting standards – Team Development – developing team and individual skill sets to enhance the project – Progress Meetings

Chapter 3 – Project Management Processes
• Executing Processes (continued)
– Information Distribution – making project information available in a timely manner – Solicitation – obtaining quotes, bids, proposals as appropriate – Source Selection – deciding on appropriate suppliers – Contract Administration – managing vendor relationships

Chapter 3 – Project Management Processes
• Controlling Processes – needed to regularly measure project performance and to adjust project plan • Take preventive actions in anticipation of possible problems
– Change Control – coordinating changes across the entire project plan – Scope Change Control – controlling “scope creep” – Schedule Control – adjusting time and project schedule of activities

Chapter 3 – Project Management Processes
• Controlling Processes (continued)
– Cost Control – managing project budget – Quality Control – monitoring standards and specific project results; eliminating causes of unsatisfactory performance – Performance Reporting – status, forecasting, and progress reporting schedule – Risk Response Control – responding to changes in risk during the duration of the project

Chapter 3 – Project Management Processes
• Closing Processes
– Administrative Closure – generating necessary information to formally recognize phase or project completion – Contract Close-out – completion and delivery of project deliverables and resolving open issues
• • • • • • • Procurement Audits Product Verification Formal Acceptance Lessons Learned Update Records Archive Records Release Team

Chapter 3 – Project Management Processes
• Overall Processes
– Influencing the organization – Leading – Problem Solving – Negotiating – Communicating – Meetings

Chapter 3 – Project Management Processes
• Project Selection Techniques
– Comparative Approach (similar projects)
• Benefit measurement method

– Constrained Optimization (mathematical approach)

• Key aspect of scope verification is customer acceptance • Only 26 % of projects succeed

Chapter 4 – Project Integration Management
• Project Integration Management
– Ensures that the project processes are properly coordinated – Tradeoffs between competing objectives and alternatives in order to meet stakeholder approval
• Project Plan Development • Project Plan Execution • Overall Change Control

– These processes may occur repeatedly over the project duration – Historical Records are needed to perform project management well, they are inputs to continuous improvement
• • • • • • • Files Lessons Learned Actual Costs Time Estimates WBS Benchmarks Risks

Chapter 4 – Project Integration Management
• Project Plan Development
– Uses outputs from other planning processes to create consistent document to guide project execution and control – Iterated several times – Documents planning assumptions – Documents planning decisions that are chosen – Facilitates communication – Defines key management reviews – Provides a baseline to track progress measurement and project control

Chapter 4 – Project Integration Management
• Project Plan Development Inputs
– Other planning outputs: primarily the planning process outputs (WBS, base documents, application area inputs) – Historical information – verify assumptions, records of past project performance – Organizational policies – quality management, personnel administration, Financial controls – Constraints – factors that limit performance, contractual provisions, budget – Assumptions – risk factors

Chapter 4 – Project Integration Management
• Tools & Techniques for Plan Development
– Project Planning Methodology – any structured approach (software, templates, forms, start-up meetings – Stakeholder Skills & Knowledge – tap into plan development; use expertise for reasonableness – PMIS – Out of the box approach to support all project aspects through closure

Chapter 4 – Project Integration Management
• Project Plan Development Outputs
– Project Plan is a collection that changes over time as more information about the project becomes available – Baseline will change only in response to approved scope change – Project Plan includes some or all of the following:
• • • • • • • Project Charter Project Management approach or strategy Scope statement Work Breakdown Structure (WBS) Budget, schedule, risks Key Staff, Major Milestones Change Control Plan, Management and Communications Plan

Chapter 4 – Project Integration Management
• Project Plan Components (continued)
• Cost Estimates, scheduled start dates and responsibility assignments • Performance measurement baselines • Major milestones and target dates • Required Staff • Risks, constraints and assumptions • Subsidiary management plans (scope, schedule) • Open Issues • Pending Decisions

Chapter 4 – Project Integration Management
• Supporting Details to the Project Plan
– Outputs from planning processes – Technical documentation – Business requirements, specifications, and designs – Relevant standards – Additional information not previously known

Chapter 4 – Project Integration Management
• Project Plan Execution
– Primary process for carrying out the project plan – Most costly aspect of project management – Direction of organizational resources and interfaces

Chapter 4 – Project Integration Management
• Project Plan Execution Inputs:
– Project Plan – Supporting Detail – Organizational Policies – Corrective Action – anything to bring expected performance in line with the project plan

Chapter 4 – Project Integration Management
• Tools & Techniques for Plan Execution
– General Management Skills – Product Skills and Knowledge – defined as part of planning, provided by staffing – Work Authorization System – formal procedure for sanctioning work to ensure completion – written or verbal authorization – Status review meetings – regular exchanges of information – Project Management Information System – Organizational Procedures

Chapter 4 – Project Integration Management
• Project Plan Execution Outputs
– Work results – the outcome of activities performed is fed into the performance reporting process – Change Requests – expand/shrink project scope, modify costs and schedule estimates

Chapter 4 – Project Integration Management
• Overall Change Control
– Influencing factors that create change to ensure beneficial results; ensure that change is beneficial – Determining that change has occurred – Managing actual changes as they occur
• Evaluate impact of change • Meet with team to discuss alternatives • Meet with management to present decision

• Change control requires
– Maintaining integrity of performance measurement baselines (project plan) – Ensuring changes to scope are accurately recorded – Coordinating changes across knowledge areas (scheduling, risk, cost, quality, etc.) – Determine all factors that control change and pro-actively preventing the occurrence; evaluate the impact of change

Chapter 4 – Project Integration Management
• Inputs to Change Control
– Project Plan – baseline performance – Performance Reports – issue tracking, risk management – Change Requests – orally or written, externally or internally initiates, legally mandated or optional

Chapter 4 – Project Integration Management
• Change Control Tools & Techniques
– All Changes must be evaluated before a decision can be reached – Change Control System – collection of formal procedures, paperwork, tracking systems, approval levels – Change Control Board – decision making authority – Configuration Management – documented procedure to apply technical and administrative direction
• • • • ID and document functional and physical characteristics Control changes to these characteristics Record and report change and implementation status Audit items and system to verify requirements

Chapter 4 – Project Integration Management
• Change Control Tools & Techniques
– Performance Measurement – earned value, plan variance analysis – Additional Planning – revised cost estimates, modify activity sequences, plan adjustments – Project Management Information System – Change Control System may have
• • • • • Change Control Plan Change Control Board Change Control Procedures, Corrective Action plans Performance Statistics, Reports, Change forms Specification reviews, Demonstrations, Testing, Meetings

– Configuration Management

Chapter 4 – Project Integration Management
• Change Control Outputs
– Project Plan Updates – Corrective Actions – Lessons Learned – variance causes and reasoning documented for historical purposes

Chapter 4 – Project Integration Management
• Configuration Management
– Rigorous Change Management as it relates to scope
• Subset of the change control system

• Work Authorization System
– Controls “gold plating”; defines what task is/is not

• Meetings
– Most are inefficient; keep minutes – Status can be determined without meeting

Chapter 4 – Project Integration Management
• Lessons Learned
– Project is not complete until a Lessons Learned is completed – What have we done, how can we do it better
• • • • • Technical Aspects of the project Project Management (WBS, plans, etc.) Overall Management (communications, leadership) Best to have whole team complete and made available Also called “Post – Mortem”

Chapter 4 – Project Integration Management
• Integration is a result of need for communication within a project • Primary responsibility to decide what changes are necessary is Management • Project Managers must pro-actively define and solve problems before reporting to superiors

Chapter 5 – Project Scope Management
• Project Scope Management
– Processes required to ensure that the project includes all, and only, work required – Defining what “is/is not” included in the project – Project scope – work that must be done – measured against project plan – Product scope – features and functions included in the product or service – measured against requirements

Chapter 5 – Project Scope Management
• Initiation – process of formally recognizing that a new project exists, or an existing project continue to next phase • Involves feasibility study, preliminary plan, or equivalent analysis • Authorized as a result of:
– – – – – Market Demand Business Need Customer Request Technological Advance Legal Requirement

Chapter 5 – Project Scope Management
• Initiation Inputs:
– Product Description – characteristics of the product/service that the project was to create
• • • • Less detail in early phases, more comprehensive in latter Relationship between product/service and business need Should support later project planning Initial product description is usually provided by the buyer

– Strategic Plan – supportive of the organization's goals

Chapter 5 – Project Scope Management
• Initiation Inputs (continued)
– Project Selection Criteria – defined in terms of the product and covers range of management concerns (finance, market) – Historical Information – results of previous project decisions and performance should be considered

Chapter 5 – Project Scope Management
• Tools & Techniques for Initiation
– Project Selection Methods:
• Benefit measurement models – comparative approaches, scoring models, economic models
– – – – – Murder Boards Peer Review Scoring Models Economic Models Benefits compared to costs

• Constrained operation models – programming mathematical
– – – – Linear Programming Integer Programming Dynamic Programming Multi-objective programming

Chapter 5 – Project Scope Management
• Tools & Techniques for Initiation
– Project Selection Methods:
• Decision models – generalized and sophisticated techniques

– Expert judgment
• • • • • Business Units with specialized skills Consultant Professional and Technical Associations Industry Groups Delphi Technique – obtain expert opinions on technical issues, scope of work and risks
– Keep expert‟s identities anonymous – Build consensus

Chapter 5 – Project Scope Management
• Outputs from Initiation:
– Project Charter – formally recognizes project, created by senior manager, includes:
• • • • • • • Business need/Business Case Product description & title Signed contract Project Manager Identification & Authority level Senior Management approval Project‟s Goals and Objectives Constraints – factors that limit project management team‟s options • Assumptions – factors that are considered true for planning purposes. Involve a degree of risk

Chapter 5 – Project Scope Management
• Scope Planning – process of developing a written statement as basis for future decisions
– Criteria to determine if the project or phase is successful

• Scope Planning Inputs:
– – – – Product description Project Charter Constraints Assumptions

Chapter 5 – Project Scope Management
• Scope Planning Tools & Techniques
– Product Analysis - - developing a better understanding of the product of the project – Cost/Benefit Analysis – estimating tangible/intangible costs and returns of various project alternatives and using financial measures (R.O.I.) to assess desirability – Alternatives Identification – generate different approaches to the project; “brainstorming” – Expert Judgment

Chapter 5 – Project Scope Management
• Scope Planning Outputs
– Scope Statement – documented basis for making project decisions and confirming understanding among stakeholders. Includes:
• Project justification – business need, evaluating future tradeoffs • Project Product – summary of project description • Project Deliverables – list of summary of delivery items marking completion of the project • Project Objectives – quantifiable criteria met for success. Addresses cost, schedule and metrics – unqualified objectives indicate high risk (customer satisfaction)

Chapter 5 – Project Scope Management
• Scope Planning Outputs (continued)
– Supporting detail – includes documentation of all assumptions and constraints – Scope Management Plan – how project scope is managed, change control procedure, expected stability, change identification and classification
• Control what is/is not in the project; prevents delivering “extra” benefits to the customer that were not specified/required

Chapter 5 – Project Scope Management
• Scope Definition – subdividing major deliverables into smaller, manageable components
– Improve accuracy of cost, time, and resource estimates – Define a baseline for performance measurement – Clear responsibility assignments – Critical to project success – reduces risk of higher cost, redundancy, time delays, and poor productivity – Defines “what” you are doing; WBS is the tool

Chapter 5 – Project Scope Management
• Scope Definition Inputs:
– Scope Statement – Constraints – consider contractual provisions – Assumptions – Other Planning Outputs – Historical Information

Chapter 5 – Project Scope Management
• Scope Definition Tools & Techniques
– Work Breakdown Structure – templates from previous projects – Decomposition – subdividing major deliverables into manageable components:
• Major elements – project deliverables and project management approach • Decide cost and duration estimates are appropriate at level of detail • Constituent elements – tangible verifiable results to enable performance management, how the work will be accomplished • Verify correctness of decomposition
– All items necessary and sufficient? – Clearly and completely defined? – Appropriately scheduled, budgeted, assigned?

Chapter 5 – Project Scope Management
• Scope Definition Outputs
– Work Breakdown Structure (WBS) – a deliverableoriented grouping of project assignments that organizes and defines the scope of the project
• Each descending level represents further detail; smaller and more manageable pieces • Each item is assigned a unique identifier collectively known as “code of accounts” • Work element descriptions included in a WBS dictionary (work, schedule and planning information) • Other formats:
– – – – – Contractual WBS – seller provides the buyer Organizational (OBS) – work elements to specific org. units Resource (RBS) – work elements to individuals Bill of Materials (BOM) – hierarchical view of physical resources Project (PBS) – similar to WBS

Chapter 5 – Project Scope Management
• Scope Definition Outputs
– Work Breakdown Structure (WBS)
• First Level is commonly the same at the Project Life Cycle (requirements, design, coding, testing, conversion and operation) • First level is completed before the project is broken down further • Each level of the WBS is a smaller segment of level above • Work toward the project deliverables • Break down project into tasks that
– – – – – Are realistically and confidently estimable Cannot be logically divided further Can be completed quickly (under 80 hours rule of thumb) Have a meaningful conclusion and deliverable Can be completed without interruption

• Provides foundation for all project planning and control

Chapter 5 – Project Scope Management
• Scope Definition Outputs
– Work Breakdown Structure (WBS) - Benefits
• Prevent work slippage • Project team understands how their tasks fit into the overall project and their impact upon the project • Facilitates communication and cooperation between project team and stakeholders • Helps prevent changes • Focuses team experience into what needs to be done – results in higher quality • Basis and proof for estimating staff, cost and time • Gets team buy-in, role identification • Graphical picture of the project hierarchy • Identifies all tasks, project foundation

Chapter 5 – Project Scope Management
• WBS phrases
– – – – – – Graphical hierarchy of the project Identifies all tasks Foundation of the project Very important Forces thought of all aspects of the project Can be re-used for other projects

Chapter 5 – Project Scope Management
• Scope Definition Outputs
– Work Breakdown Structure (WBS) – Dictionary
• Designed to control what work is done and when • Also known as a task description • Puts boundary on what is included in a task and what is not included

Chapter 5 – Project Scope Management
• Scope Verification Inputs
– Work results – partially/completed deliverables, costs to date – Product documentation – description available for review (requirements)

• Scope Verification Tools & Techniques
– Inspection – measuring, examining, testing to determine if results conform to requirements

• Scope Verification Outputs
– Formal acceptance – documentation identifying client and stakeholder approval, customer acceptance of efforts

Chapter 5 – Project Scope Management
• Scope Change Control:
– Influencing factors to ensure that changes are beneficial – Determining scope change has occurred – Managing changes when they occur – Thoroughly integrated with other control processes

Chapter 5 – Project Scope Management
• Scope Change Control Inputs:
– Work Breakdown Structure – Performance Reports- issues reported – Change Requests – expansion/shrink of scope derived from :
• External events (government regulations) • Scope definition errors of product or project • Value adding change – new technology

– Scope Management Plan

Chapter 5 – Project Scope Management
• Scope Change Control Tools & Techniques
– Scope Change Control System – defines procedures how scope change can occur
• All paperwork, tracking systems, approval levels • Integrated with overall change control procedures

– Performance Measurement – determine what is causing variances and corrective actions – Additional Planning

Chapter 5 – Project Scope Management
• Scope Change Control Outputs:
– Scope Changes – fed back through planning processes, revised WBS – Corrective Actions – Lessons Learned – cause and reasoning for variances documented for historical purposes

Chapter 5 – Project Scope Management
• Management By Objectives (MBO)
– Philosophy that has 3 steps:
• Establish unambiguous and realistic objectives • Periodically evaluate if objectives are being met • Take corrective action
– Project Manager must know that if project is not aligned or support corporate objectives, the project is likely to lose resources, assistance and attention. – MBO only works if management supports it

Chapter 6 – Project Time Management
• Project Time Management
– Processes required to ensure timely completion of the project – No consensus concerning differences between activities and tasks – Activities seen as composed of tasks –most common usage – Other disciplines have tasks composed of activities

Chapter 6 – Project Time Management
• Activity Definition: identifying and documenting specific activities to produce project deliverables identified in the WBS
– Must be defined to meet the project objectives

Chapter 6 – Project Time Management
• Activity Definition Inputs
– WBS – primary input – Scope Statement – project justification & project objectives – Historical Information – Constraints – Assumptions

Chapter 6 – Project Time Management
• Activity Definition Tools & Techniques
– Decomposition – outputs are expressed as activities rather than deliverables – Templates – reuse from previous projects

Chapter 6 – Project Time Management
• Activity Definition Outputs
– Activity List – all to be performed; extension to the WBS and includes description to ensure team members understand work to be performed – Supporting Detail – organized as needed and include all assumptions and constraints – WBS Updates – identify missing deliverables and clarify deliverable descriptions. WBS updates often called refinements; more likely using new technologies in project

Chapter 6 – Project Time Management
• Activity Sequencing – identifying and documenting interactive dependencies among activities. Support later development of a realistic schedule
– Project Management software often used

Chapter 6 – Project Time Management
• Activity Sequencing Inputs:
– Activity List – Product Description – product characteristics often affect activity sequencing – Mandatory Sequencing – physical limitations, hard logic, prototypes needed; inherent in nature of work being done – Discretionary Dependencies – defined by project management team; “best practices” or unusual aspects of project – soft logic, preferred logic, preferential logic – External Dependencies – relationship between project activities and non-project activities (company policies, procurement, etc.) – Constraints – Assumptions

Chapter 6 – Project Time Management
• Network Diagrams
– Shows how the project tasks will flow from beginning to end – Proves how long the project will take to complete – Takes project tasks from low levels of WBS and placing them into their order of completion (beginning to end)

Chapter 6 – Project Time Management
• Activity Sequencing Tools & Techniques
– Precedence Diagramming Method (PDM) – constructing network diagram using nodes to represent activities and arrows to indicate dependencies; also called Activity On Node (AON) – Most project management software uses – Includes 4 types of dependencies:
• Finish to Start – “from” activity must finish before “to” activity can begin; most commonly used • Finish to Finish – “from” activity must finish before the next may finish • Start to Start – “from” activity must start before next “to” activity can start • Start to Finish – task must start before next activity can finish

– Use caution with last 3 techniques - logical relationships often not consistently implemented with project management software

Chapter 6 – Project Time Management
• Activity Sequencing Tools & Techniques (continued)
– Arrow Diagramming Method (ADM) – uses arrows to represent activities and connecting at nodes to illustrate dependencies
• Also called Activity On Arrow (AOA) • Only uses finish to start dependencies • PERT and CPM only can be drawn using AOA

Chapter 6 – Project Time Management
• Activity Sequencing Tools & Techniques (continued)
– Conditional diagramming methods
• GERT (Graphical Evaluation and Review Technique) • System Dynamic Models • Allow for non-sequential activities (loops) or conditional branches – not provided by PDM or ADM methods

Chapter 6 – Project Time Management
• Activity Sequencing Tools & Techniques (continued)
– Network Templates – standardized networks can be used. Composed of subnets, or fragnets
• Subnets are several nearly identical portions of a network (floors on a building, clinical trials, program modules) • Useful for several identical processes (clinical trials, programming modules).

Chapter 6 – Project Time Management
• Activity Sequencing Outputs:
– Project Network Diagram – schematic display of project activities and relationships (dependencies). Should be accompanied by a summary narrative that describes the diagram approach – Activity List Updates

Chapter 6 – Project Time Management
• Activity Duration Estimating
– Involves assessing number of work periods needed to complete identified activities – Requires consideration of elapsed time, calendars, weekends, and day of week work starts

Chapter 6 – Project Time Management
• Activity Duration Estimating Inputs:
– – – – Activity Lists Constraints Assumptions Resource Requirements – amount of labor assigned to activity – Resource Capabilities – human and material resources, expertise – Historical Information
• Project Files, or records of previous project results • Commercial Duration Estimates – useful when durations are not driven by actual work (approval periods, material resources) • Project Team Knowledge

Chapter 6 – Project Time Management
• Activity Duration Estimating Tools & Techniques
– Expert Judgment – guided by historical information should be used whenever possible; high risk without expertise avail. – Simulation – using different sets of assumptions (Monte Carlo Analysis) to drive multiple durations – Analogous Estimating – “top down estimating” – use actual, similar, previous known durations as basis for future activity duration. Used when limited knowledge is available. Form of expert judgment

Chapter 6 – Project Time Management
• Activity Duration Outputs:
– Activity Duration Estimates – quantitative assessments of work periods to complete an activity. Should indicate a range +/- of possible results – Basis of Estimates – all assumptions should be documented – Activity List Updates

Chapter 6 – Project Time Management
• Schedule Development
– Determining start and finish dates for project activities – Without realistic dates, project unlikely to be finished as scheduled – Schedule development process often iterates as more information becomes available (process inputs)

Chapter 6 – Project Time Management
• Schedule Development Inputs:
– – – – Project Network Diagram Activity Duration Estimates Resource Requirements Resource Pool Description – availability patterns; shared resources are highly variable – Calendars – define eligible work periods
• Project Calendars affect all resources • Resource Calendars – affect specific resource pools or individuals

Chapter 6 – Project Time Management
• Schedule Development Inputs (continued):
– Constraints
• Imposed Dates – may be required • Key events or milestones – are initially requested and become expected during project

– Assumptions – Lead and Lag Time – dependencies may specify time in order to satisfy relationship (example – 2 weeks to receive order)

Chapter 6 – Project Time Management
• Schedule Development Tools & Techniques
– Mathematical Analysis – calculating theoretical early/late finish and start dates without regard for resource pool limitations; indicate time periods which activity should be scheduled given resource limits and other constraints:
• Critical Path Method (CPM) – single early/late start and finish date for all activities. Based on specified, sequential network and single duration estimate. Calculates float to determine flexibility • Graphical Evaluation and Review Technique (GERT) – probabilistic treatment of network and activity duration estimates • Program Evaluation and Review Technique (PERT)- sequential network and weighted average duration to calculate project duration – differs from CPM by using mean (expected value) instead of most-likely estimate in CPM

Chapter 6 – Project Time Management
• Schedule Development Tools & Techniques
– Critical Path Method: refers to estimating based on one time estimate per activity
• • • • One time estimate per task (Most Likely) Emphasis on controlling cost and leaving schedule flexible Drawn using AOA diagrams Can have dummy task

– PERT (Program Review and Estimating Technique)
• 3 Time estimates per activity
– Optimistic – Pessimistic – Most Likely

• Emphasis on meeting schedule, flexibility with costs • Drawn on AOA diagrams • Can have dummy tasks

Chapter 6 – Project Time Management
• Schedule Development Tools & Techniques
– Monte Carlo Analysis
• Uses a computer with PERT values and network diagram • Tells
– Probability of completing a project on any specific day – Probability of completing a project for any specific amount of cost – Probability of any task actually being on the critical path – Overall Project Risk

• Suggests that Monte Carlo simulation will create a project duration that is closer to reality than CPM or PERT

Chapter 6 – Project Time Management
• Schedule Development Tools & Techniques (continued)
– Duration Compression – look to shorten project schedule without affecting scope
• Crashing – cost and schedule trade-offs to determine greatest amount of compression for least incremental cost – often results in higher costs • Fast Tracking – performing activities in parallel that normally would be sequenced – often results in re-work and usually increases risk

– Simulation

Chapter 6 – Project Time Management
• Schedule Development Tools & Techniques (continued)
– Resource Leveling Heuristics – leveling resources that apply to critical path activities a.k.a. “resource constrained scheduling” – when limitation on quantity of available resources; sometimes called “Resource Based Method” – often increases project duration – Project Management Software

Chapter 6 – Project Time Management
• Schedule Development Tools & Techniques (continued)
– Project Manger‟s role
• Provide the team with the necessary information to properly estimate the task • Complete a sanity check of the estimate • Formulate a reserve

– Project Team should be involved; determine task estimates
• • • • • Historical Records Guesses Actual Costs Benchmarks CPM and PERT

Chapter 6 – Project Time Management
• Schedule Development Tools & Techniques
– Critical Path Method: longest path through a network diagram and determines the earliest completion of the project – Proves how long the project will take – Indicates tasks that need most monitoring – Almost always have no slack

Chapter 6 – Project Time Management
• Schedule Development Outputs:
– Project Schedule – includes planned start and finish dates for each activity; remains preliminary until resources assignments are approved. Usually in following formats:
• Project Network Diagrams (with date information added) – show logical and critical path activities • Bar or Gantt charts – activity start and end dates, expected durations • Milestone Charts – identifies key deliverables and interfaces • Time-scaled network diagrams – blend of project network and bar charts

Chapter 6 – Project Time Management
• Schedule Development Outputs (continued):
– Supporting Detail – all assumptions and constraints. May also include:
• Resource requirement by time period (resource histogram) • Alternative schedules (best/worst case) • Schedule reserve/risk assessments

– Schedule Management Plan – how updates are managed – Resource requirement updates – leveling and activity impact

Chapter 6 – Project Time Management
• Schedule Control:
– Influencing factors which create schedule changes to ensure changes are beneficial – Determining that schedule has changed – Managing actual changes as they occur

• Inputs to Schedule Control
– Project Schedule – baseline approved, measure against project performance – Performance Reports – planned dates met, issues – Change Requests – Schedule Management Plan

Chapter 6 – Project Time Management
• Schedule Control Tools & Techniques
– Schedule Change Control System – defines procedures for schedule changes, paperwork, approval, tracking systems – Performance Measurement – assess magnitude of variations to baseline; determine if corrective action is needed – Additional Planning – Project Management Software

Chapter 6 – Project Time Management
• Schedule Control Outputs:
– Schedule Updates – any modifications, stakeholder notification
• Revisions change scheduled start and finish dates – generally in response to scope changes. “Rebaselining” may be needed in drastic situations

– Corrective Action – re-align performance with project plan – Lessons Learned

Chapter 6 – Project Time Management
• Key knowledge points not in PMBOK
– Need to know manual calculations of network diagrams
• Created after project charter and WBS (task estimates and dependencies are determined)
– Mandatory dependencies (Hard Logic) – inherent in nature of work – Discretionary dependencies (Soft Logic) – based on experience, desire or results – External dependencies – based on needs and desires of organizations outside the project

Chapter 6 – Project Time Management
• Methods to draw network diagrams
– Activity on Node (AON) or Precedence Diagramming Method (PDM)
• Boxes represent tasks • Arrows show task dependencies • 4 types of task relationships
– – – – Finish to Start (task must finish before next can start) Finish to Finish (task must finish before next can finish) Start to Start (task must start before next can start) Start to Finish (task must start before the next can finish)

• No dummy tasks used

Chapter 6 – Project Time Management
• Methods to draw network diagrams
– Activity on Arrow (AOA or Arrow Diagramming Method (ADM)
• • • • Arrows used to represent tasks Only Finish to Start relationships are used May use dummy tasks (show dependencies) PERT and CPM estimating techniques can only be drawn using AOA
– CPM (Critical Path Method) – estimating based on one time estimate per activity (the most likely time estimate) » Emphasizes controlling cost and allowing schedule flexibility » Can have dummy tasks

Chapter 6 – Project Time Management
• Methods to draw network diagrams
– Activity on Arrow (AOA or Arrow Diagramming Method (ADM) continued:
• PERT (Program Evaluation and Review technique)
– 3 time estimates per activity: Optimistic (O), Most Likely (M), Pessimistic (P) – Emphasizes meeting schedule, flexibility with cost – Can have dummy tasks

Chapter 6 – Project Time Management
• Methods to draw network diagrams
– PERT (Program Evaluation and Review technique) – Estimating based on 3 formulas:
• PERT Duration: (P + 4M + O)/6 • Standard Task Deviation: (P – O)/6 • Task Variance:

[P – O]2

• Total project estimate: 6
– Add up all Optimistic, Most Likely and Pessimistic values of the critical path tasks and apply P + 4M + O/6

• Total project variance (+/-):
– Add up the individual task variances and take the square root of the value. Use the value as a +/- figure to compute the Optimistic and Pessimistic values. The total project estimate will serve as the basis.

Chapter 6 – Project Time Management
• Monte Carlo Simulation:
– Uses a computer with PERT values (P, M, O) and a network diagram but does not use the PERT formula – Indicates
• Probability of completing project on a specific day • Probability of completing project for any specific amount of cost • Probability of any task actually being on critical path • Overall project risk

Chapter 6 – Project Time Management
• Estimating techniques in general:
– Should be performed by entire project team
• Project manager needs to provide information to allow team to create estimates; sanity check; formulate reserve

– Estimates are:
• Guesses, Historical Records, Actual Costs, Benchmarks, CPM, PERT
– Critical paths determines the earliest completion date and identifies tasks that need monitoring – Can be obtained by CPM, PERT and Monte Carlo estimating techniques

Chapter 6 – Project Time Management
• Key Definitions:
– Slack (Float): the amount of time a task can be delayed without delaying the entire project. Tasks on critical path have no slack.
• Slack is calculated by the difference between Early Start and Late Start of a task
– Free Slack (Float): the amount of time a task can be delayed without delaying the early start date of its successor – Total Slack (Float): the amount of time a task can be delayed without delaying the project completion date

– Lag: inserted waiting time between tasks

Chapter 6 – Project Time Management
• General Comments:
– Projects can have more than 1 critical path (increases risk) and can involve dummy tasks – Negative float indicates that you are behind – Resource Leveling involves possibly letting schedule and cost slip – Heuristics – just means “rule of thumb” e.g. 80/20 rule – Schedules are calendar based – makes this different than a time estimate
• Bar Chart a.k.a. Gantt chart (track progress, report to entire team including stakeholders, control tool) • Network Diagram (to show task inter-dependencies, show project organization, basis for project control) • Milestone chart (report to Senior management, shows major events)

Chapter 6 – Project Time Management
• General Comments:
– To shorten project schedule examine the critical path
• Crashing – add more resources to the critical path tasks
– Usually results in increased cost

• Fast Tracking – performing tasks in parallel
– Can result in re-work and increased risk

– Best to select method that has least impact on the project (is the importance on cost, risk or schedule?)

Chapter 6 – Project Time Management
• General Comments:
– Bar (Gantt) Charts
• Weak Planning Tool, effective progress and reporting tool • Does not show interdependencies of tasks • Does not help organize the project more effectively

– Network Diagrams (PERT, CPM, PDM)
• Shows task interdependencies • Aids in effectively planning and organizing work • Provides a basis for project control

– Milestone Charts
• Only shows major events • Good for reporting to management and customer

– Flow Charts
• Depicts workflow and not commonly used for project management

Chapter 6 – Project Time Management
• General Comments:
– Free Slack (Float) – amount of time a task can be delayed without delaying the early start date of its successor – Total Slack (Float) – amount of time a task can be delayed without delaying the project completion date

• • •

Lag – inserted waiting time between tasks Resource Leveling – level peaks of resource usage; stable number of resources – allows schedule and cost slip in favor of leveling resources Heuristic – rule of thumb (80/20 rule)

Chapter 7 – Project Cost Management
• Project Cost Management
– Ensure that the project is completed within budget – Concerned with cost of resources needed to complete activities; consider effect of project decisions on cost of using product “life-cycle costing” – Most prospective financial impact of using the product is outside the project scope – Consider information needs of stakeholders, controllable and uncontrollable costs (budget separately for reward and recognition systems)

Chapter 7 – Project Cost Management
• Project Cost Management
– – – – Estimating should be based on WBS to improve accuracy Estimating should be done by the person performing the work Having historical records is key to improving estimates Costs (schedule, scope, resources) should be managed to estimates – A cost (schedule, scope, baseline) should be kept and not changed – Plans should be revised as necessary during completion of work – Corrective action should be taken when cost problems (schedule, scope and resources) occur.

Chapter 7 – Project Cost Management
• Resource Planning:
– Determining what physical resources and quantities are needed to perform work

• Inputs to Resource Planning:
– – – – Work Breakdown Structure Historical Information Scope Statement – justification & objectives Resource Pool Description – what resources are potentially available for resource planning – Organizational Policies – staffing, procurement

Chapter 7 – Project Cost Management
• Inputs to Resource Planning:
– – – – – – – Work Breakdown Structure Network Diagram Schedule Risks Historical Information Scope Statement – justification & objectives Resource Pool Description – what resources are potentially available for resource planning – Organizational Policies – staffing, procurement

Chapter 7 – Project Cost Management
• Resource Planning Tools & Techniques
– Expert Judgment – Alternatives Identification

• Resource Planning Outputs:
– Resource Requirements – what type & how many resources are needed for each activity in the Work Breakdown Structure

Chapter 7 – Project Cost Management
• Cost Estimating:
– Develop approximate costs of resources – Distinguish estimating from pricing
• Estimating – likely amount • Pricing – business decision

– Identify alternatives and consider realigning costs in phases to their expected savings

Chapter 7 – Project Cost Management
• Cost Estimating Inputs:
– – – – – Work Breakdown Structure Resource Requirements Resource Rates (if known) Activity Duration Estimates Historical Information – (project files, commercial cost databases, team knowledge – Chart Of Accounts – coding structure for accounting; general ledger reporting

Chapter 7 – Project Cost Management
• Cost Estimating Tools & Techniques
– Analogous Estimating – “top down”; using actual costs from previous project as basis for estimate
• Reliable when previous projects are similar and individuals have expertise – form of expert judgment

– Parametric Modeling – uses project characteristics in mathematical models to predict costs (e.g.building houses)
• Reliable when historical information is accurate, parameters are quantifiable, and model is scalable
– 2 types: Regression analysis, Learning Curve

– Bottom Up Estimating – rolling up individual activities into project total – smaller work activities have more accuracy – Computerized tools – spreadsheets, software

Chapter 7 – Project Cost Management
• Cost Estimating Tools & Techniques
– Pro‟s and Con‟s – Analogous Estimating
• Quick - Less Accurate • Tasks don‟t need to be identified – Estimates prepared with little detail and understanding of project • Less costly – Requires considerable experience to do well • Gives PM idea of management expectations – Infighting at high levels of organization • Overall project costs are capped – Difficult for projects with uncertainty

Chapter 7 – Project Cost Management
• Cost Estimating Tools & Techniques
– Pro‟s and Con‟s – Bottom Up Estimating
• More Accurate – Takes time and expense • Gains buy-in from the team – Tendency for team to pad estimates • Based on detailed analysis of project – Requires that project be defined and understood • Provides a basis for monitoring and control – Team infighting to get biggest piece of pie

Chapter 7 – Project Cost Management
• Outputs from Cost Estimating
– Cost estimates – quantitative assessments of likely costs of resources required to complete tasks
• For all resources of the project (labor, materials, supplies, inflation allowance, reserve) • Expressed in units of currency

– Supporting Detail
• • • • Description of scope (reference to the WBS) Documentation how estimate was developed Indication of range of possible results Assumptions

– Cost Management Plan – how cost variances will be managed – Cost Risk: associated to seller for Fixed Price; associated to buyer for Time and Materials budget

Chapter 7 – Project Cost Management
• Cost Budgeting
– Involves allocation of total estimate to individual work to establish a cost baseline to measure performance

• Cost Budgeting Inputs
– Cost Estimate – Work Breakdown Structure – Project Schedule – includes planned start and finish dates for items costs are allocated to
• Needed to assign costs during the time period when the actual cost will be incurred

Chapter 7 – Project Cost Management
• Cost Budgeting Tools & Techniques
– same as Cost Estimating Tools and Techniques

• Outputs from Cost Budgeting
– Cost Baseline – time phased budget to measure and monitor cost performance
• Developed by summing estimated costs by period (S curve of values vs. time) • Larger projects have multiple baselines to measure different aspects of cost performance

Chapter 7 – Project Cost Management
• Cost Control
– Concerned with influencing factors that create changes to the cost baseline that are beneficial – Determining that the cost baseline has changed – Managing actual changes as they occur
• Monitor cost performance to detect variances • Record all appropriate changes accurately in the cost baseline • Preventing incorrect, unauthorized changes being included in the cost baseline • Informing stakeholders of authorized changes
– Determine the “why‟s” of positive and negative variances – Integrated will all other control processes (scope, change, schedule, quality)

Chapter 7 – Project Cost Management
• Inputs to Cost Control
– Cost Baseline – Performance Reports – meet, exceed budget
• 50/50 Rule – task is considered 50% complete when it begins and gets credit for remainder 50% only when completed • 20/80 Rule - task is considered 20% complete when it begins and gets credit for remainder 80% only when completed • 0/100 Rule – task only credited when fully completed

– Change Requests – Cost Management Plan

•

Tools & Techniques of Cost Control
– Cost Change Control System – defines the procedures by which the cost baseline may be changed – Performance Measurement – assess magnitude of cost variations (Earned Value Analysis) and what is causing the variance – Additional Planning – examine alternatives – Computerized Tools – forecast planned costs, track actual costs, forecast effect of cost changes

Chapter 7 – Project Cost Management
• Cost Control Outputs
– Revised Cost Estimate
• Modifications to cost information; require stakeholder approval and adjustments to other project areas

– Budget Updates – changes to approved cost baseline; revised in response to scope changes – Corrective Action – Estimate at completion – (EAC) – forecast of total expenditures
• Actual to date plus remaining budget modified by a factor (cost performance index)
– Current variances are seen to apply to future variances

• Actual to date plus new estimate for remaining work
– Original estimates are flawed, or no longer relevant

• Actual to date plus remaining budget
– Current variances are typical and similar variances will not occur in the future

– Lessons Learned

Chapter 7 – Project Cost Management
• Earned Value Analysis
– Integrates cost, schedule and scope – Better that comparing projected vs. actual because time and cost are analyzed separately – Terms:
• BCWS – Budgeted Cost of Work Scheduled (how much work should be done) • BCWP – Budgeted Cost of Work Performed a.k.a. Earned Value (how much work is budgeted, how much did we budget) • ACWP – Actual Cost of Work Performed (how much did the completed work cost)

Chapter 7 – Project Cost Management
• Earned Value Analysis
– Terms:
• BAC – Budget at Completion (how much did you budget for the total job) • EAC – Estimate at Completion (what do we expect the total project to cost) • ETC – Estimate to Completion (how much more do we expect to spend to finish the job) • VAC – Variance at Completion (how much over/under budget do we expect to be)

Chapter 7 – Project Cost Management
• Earned Value Analysis
– Formulas
• Variance (Plan – Actual) • Cost Variance (CV): BCWP – ACWP; negative is over budget • Schedule Variance (SV): BCWP – BCWS; negative is behind schedule • Cost Performance Index (CPI): BCWP BCWP ACWP ACWP • I am only getting x¢ out of every $

Chapter 7 – Project Cost Management
• Earned Value Analysis
– Formulas
BCWP • Schedule Performance Index (SPI): BCWP BCWS BCWS

BAC • Estimate at Completion (EAC): BAC CPI CPI

– I am only progressing x % of the planned rate

– As of now we expect the total project to cost x$

• Estimate to Complete (ETC): EAC – ACWP; how much will it cost from now to completion • Variance at Completion: BAC – EAC; when the project is over how much more or less did we spend (most common way of calculating EVA

Chapter 7 – Project Cost Management
• Earned Value Analysis
– – – – – – – BCWP comes first in most formulas If it is a variance, BCWP comes first If it is an index, BCWP is divided by If the formula relates to cost, use AWCP If the formula related to schedule, use BWCP Negative is bad; positive results are good ETC refers to “this point on”; EAC refers to when job is completed

Chapter 7 – Project Cost Management
• Accuracy of Estimates
– Order of Magnitude Estimate: -25% - 75%; usually made during Initiation Phase – Budget Estimate: -10% - 25%; usually made during the Planning phase – Definitive Estimate: -5% - 10%; usually made during the Planning phase

Chapter 7 – Project Cost Management
• Accounting Standards
– Not usually part of the exam – Present Value (value today of future cash flows):
• PV = FV
(1 + r) N FV = Future Value R = Interest Rate N = Number of time periods

Chapter 7 – Project Cost Management
• Accounting Standards
– Net Present Value: total benefits (income or revenue) less the costs. NPV is the sum of each present value of each income/revenue item – Internal Rate of Return (IRR): company may select project based on highest IRR – Payback Period: number of time periods it takes to recover the investment in the project before generating revenues – Benefit Cost Ratio (BCR): compares costs to the benefits of different projects
• Greater than 1 means benefits are greater than costs • Less than 1 means costs are greater than benefits

– Opportunity Cost: opportunity given up by selecting one project over another

Chapter 7 – Project Cost Management
• Accounting Standards
– Sunk Costs: expended costs. Sunk costs should not be considered when determining to continue with a troubled project – Law of Diminishing Returns: the more that is put in the less of an outcome is received – Working Capital: current assets – current liabilities – Variable Cost: costs that change with the amount of production or the amount of work (materials, wages) – Fixed Cost: non-recurring costs that do not change – Direct Cost: directly attributable to project work (travel, wages, materials) – Indirect Cost: overhead items or costs for the benefit of more than one project (taxes, fringe benefits)

Chapter 7 – Project Cost Management
• Accounting Standards
– Depreciation: assets lose value over time
• Straight Line depreciation: same amount is taken each year • Accelerated Depreciation: 2 forms
– Double Declining Balance – Sum of the Years Digits

– Life Cycle Costing: includes operations and maintenance phases – Value Analysis: find a less costly way to do same work

Chapter 7 – Project Cost Management
• Accounting Standards
– Make or Buy decisions –at Development (Planning) phase, not conceptual phase – Project Objectives – are not necessarily needed to fund project – Project Definition – focus on end product initially; costs and benefits will be evaluated later – 25% of project lifecycle expended at end of planning – No guarantees; only most likely results

Chapter 7 – Project Cost Management
• Accounting Standards
– Line of Balance charts are used for manufacturing – Negative Float – the late start date is earlier than the early start date – Value Engineering/analysis – does not trade performance for cost – Prospectus – profitability and technical feasibility used to solicit funding

Chapter 7 – Project Cost Management
• Accounting Standards
– Definitive Estimate –most precise/accurate estimate for determining project costs – Management Reserve – over time PM wants no change to reserve; customers wants $ back – Cost and Schedule Data – predicts future performance – ROI, Nest Present Value and Discounted Cash Flow – all can be used to measure total income vs. total $ expended – Undistributed budget – budget that contains approved scope changes but are not planned yet – Depreciation is not a measurement of profitability – Pay Back Period - # of periods required to recover the initial investment

Chapter 8 – Project Quality Management
• Project Quality Management
– Processes required to ensure that the project will satisfy the needs for which it was designed – Includes all activities of the overall management function that determine the quality policy, objectives, and responsibilities. These are implemented by quality planning, quality control, quality assurance, and quality improvement

Chapter 8 – Project Quality Management
• 3 major processes:
– Quality Planning – identifying quality standards that are relevant to the project (Plan); Project Manager, Project Owner – Quality Assurance – evaluating overall project performance to provide confidence that project will satisfy relevant quality standards (Implement or Execution); Project Team – Quality Control – monitoring specific results to comply with quality standards and eliminating unsatisfactory performance causes (Check or Control); Project Manager, Project Team
• Compatible with ISO 9000 and 10000 series • Proprietary and non-proprietary approaches (total quality management • Must address the management of the project and the product of the project

Chapter 8 – Project Quality Management
• Quality – the totality of characteristics of an entity that bear on its ability to satisfy stated or implied needs
– Critical aspect is to turn implied needs into stated needs through project scope management – Do not confuse with grade – category or rank given to entities having the same functional use but different requirements for quality – Customer satisfaction – conformance to specifications (must produce what is stated) and fitness for use (must satisfy real needs) – Prevention – avoid mistakes vs. cost of correction – Management responsibility – requires participation of team; responsibility of management to provide resources – Processes within phases – plan-do-check-act cycle
• Recognize that the investment in product quality improvements may be borne by the performing organization since the project may not last long enough to reap reward

Chapter 8 – Project Quality
Management
• Quality Planning
– Identify quality standards are relevant and how to satisfy

• Inputs to Quality Planning
– Quality Policy – the overall intentions and direction of an organization with regard to quality as expressed by management – Scope Statement – Product Description – Standards and Regulations – Other Process Outputs – processes from other knowledge areas (procurement planning)

Chapter 8 – Project Quality
Management
• Tools &Techniques for Quality Planning
– Benefit/Cost Analysis – consider trade-offs, benefit is less rework; cost is expense of project management activities – Benchmarking – comparing actual or planned practices to those of other projects – Flowcharting
• Cause and effect diagramming (Ishikawa or fishbone diagrams) illustrate how causes relate to potential problems or effects • System or Process flowcharts – show how various elements of the system interrelate
– Helps anticipation of what and where quality problems may occur

– Design of Experiments – analytical technique which defines what variables have most influence of the overall outcome
• Cost and schedule tradeoffs

Chapter 8 – Project Quality
Management
• Outputs from Quality Planning
– Quality Management Plan – describes how team will implement its quality policy; describes the project quality system – organizational structures, responsibilities, procedures, processes and resources needed to implement quality management – Operational Definitions – defines how an item is measured by the quality control process. Also known as Metrics. – Checklists – structured tool used to verify that a set of required steps has been performed – Inputs to other processes – may identify a need for further activity in another area

Chapter 8 – Project Quality
Management
• Quality Assurance
– All planned and systematic activities implemented within the quality system to provide confidence that the project will satisfy quality standards

• Inputs to Quality Assurance
– Quality Management Plan – Results of quality control measurements (testing) – Operational definitions

Chapter 8 – Project Quality
Management
• Tools & Techniques for Quality Assurance
– Quality planning tools & techniques – Quality Audits – structured review of quality management activities to identify lessons learned

• Outputs from Quality Assurance
– Quality improvements – taking action to increase the effectiveness and efficiency of the project to provide added benefits to the stakeholders
• Most likely will involve change control

Chapter 8 – Project Quality
Management
• Quality Control – monitoring specific results to determine if they comply with quality standards and identifying ways to eliminate causes of unsatisfactory results
– Includes project (deliverables) and management (cost and schedule performance) results – Awareness of statistical quality control
• Prevention (keep errors out of process) and inspection (keep errors from customers) • Attribute sampling (result conforms) and variable sampling • Special Causes (unusual events) and random causes • Tolerances (acceptable range) and control limits (result falls within range)

Chapter 8 – Project Quality
Management
• Inputs to Quality Control
– Work results – include process and product results – Quality Management Plan – Operational Definitions – Checklists

Chapter 8 – Project Quality
Management
• Tools & Techniques for Quality Control
– Inspection – activities such as testing to determine if results comply with requirements – Control Charts – plot results over time – Pareto diagrams – frequency of occurrence that identifies type or category of result (80/20 rule) – guides corrective action – Statistical sampling – select population of interest for inspection – Flowcharting – Trend Analysis – forecast future outcomes based on historical results
• Technical performance (# of errors identified; # of errors that remain) • Cost and Schedule performance (activities per period with significant variances)

Chapter 8 – Project Quality
Management
• Outputs from Quality Control
– Quality Improvement – Acceptance Decisions (accept/reject) – Rework – action to bring defective item into compliance
• Frequent cause of project overruns

– Completed checklists – Process Adjustments – immediate corrective/preventive actions
• Most likely involves change control

Chapter 8 – Project Quality
Management
• Tips from the Review Guide
– Philosophy: definition of quality, avoidance of “gold plating” – giving customer extras, prevention over inspection – “Conformance to requirements, specifications and fitness of use” – Quality Management – processes required to ensure that the project will satisfy the needs for which it was undertaken – Continuous Improvement - small improvements to reduce costs and ensure consistency – Marginal Analysis – optimal quality is reached at the point when revenue from improvement equals the costs to secure it
– Just in Time - decrease amount of inventory/decrease investment

Chapter 8 – Project Quality
Management
• Tips from the Review Guide
– ISO 9000 or 10000 – standards to ensure that corporations follow their own quality procedures – Total Quality Management – continuous improvement in business practices – Normal Distribution – most common probability – used to measure variations – Standard deviation (sigma) – measure how far away from the mean (dotted vertical line) – 3 or 6 sigma – represents level of quality
• • • • +/- 1 sigma equal to 68.26% +/- 2 sigma equal to 95.46% +/- 3 sigma equal to 99.73% +/- 6 sigma equal to 99.99%

Chapter 8 – Project Quality
Management
• Tips from the Review Guide
– Responsibility to quality – entire organization
• Ultimate – employee • Overall or Primary – Project Manager • Design and Test Specifications – engineer

– Prevention over inspection – quality must be planned in not inspected in

Chapter 8 – Project Quality
Management
• Tips from the Review Guide
– Cost of conformance vs. non-conformance
• Quality Training vs. rework • Studies vs. Scrap • Surveys vs. Inventory Costs and warranty costs

– Quality Planning (Plan) – determine what will be quality on project and how quality will be measured – done during Planning Phases
• Identifying which standards are relevant to project –how to satisfy them • Benchmarking – look at past projects to determine ideas for improvement • Cost Benefit Analysis • Flowcharts (fishbone) • Design of Experiments

Chapter 8 – Project Quality
Management
• Tips from the Review Guide
– Quality Assurance (Implement) – determine if your measurement of quality is appropriate – done during Execution phases
• Process of evaluating overall performance on a regular basis • Quality Audits – structured review of quality activities that identify lessons learned

Chapter 8 – Project Quality
Management
• Tips from the Review Guide
– Quality Control (Check) – perform the measurement and compare to the quality plan – done during Control phases
• Process of monitoring specific project results to determine if they comply with relevant quality standards and identify ways of eliminating unsatisfactory performance • Performance of the measurement or process, using quality control tools – checking work

Chapter 8 – Project Quality
Management
• Tips from the Review Guide
• Quality Control Tools
– Pareto Diagrams – 80/20 rule – the chart presents the information being examined in its order of priority and helps focus attention on the most critical issues – Fishbone diagram (Cause and Effect) » A creative way to look at the causes or potential causes of a problem » Helps stimulate thinking, organizes thoughts and generates discussion » Can be used to explore a desired future outcome and the factors to which it relates

Chapter 8 – Project Quality
Management
• Tips from the Review Guide
• Quality Control Tools
– Checklists – list of items to inspect – Control Charts – graphic displays of the results over time – used to determine if a process is in control » Upper and Lower Control Limits – two dashed lines – show the acceptable range of a variation – range determined by company‟s quality standard (sigma) » Mean – line in the middle – shows middle of the range of acceptable results » Specification Limits – 2 solid lines outside the upper and lower control limits – represent the customer's expectations/requirements of quality

Chapter 8 – Project Quality
Management
• Tips from the Review Guide
• Quality Control Tools
» Out of Control – process is out of control when: » A data point falls outside of the upper or lower control limit » Non-random data points are within the upper control and lower control limits » Rule of 7 – non-random points outside the mean process should be investigated » Assignable Cause – data point the requires investigation to determine the cause of the variation

Chapter 8 – Project Quality
Management
• PMI and Deming
– Cost of conformance – 85% of costs of quality are responsibility of Management
• Quality Training – Rework • Studies – Scrap • Surveys – Inventory and Warranty costs

• Crosby – absolutes of quality
– Performance standard is zero defects; measurement system is cost of nonconformance Continuous Improvement – Japanese (Kaizen)

Chapter 8 – Project Quality
Management
• Marginal Analysis – optimal quality is reached when incremental revenue from improvement equals incremental cost to secure • Variable – characteristic to be measured • Attribute – measurement (objective or subjective) • Increase quality = increased productivity, increased cost effectiveness, decreased cost risk

Chapter 8 – Project Quality Management
• Review Guide Tips
– Primary responsibility for quality management is the PM – Results of increase in quality
• Increased productivity • Increased cost effectiveness • Decreased cost risk

– Quality attributes – can be subjective, objective and are specific characteristics for which a project is designed and tested – Quality assurance – example is team training – Cost of Conformance = team training

Chapter 8 – Project Quality Management
• Review Guide Tips
– Marginal Analysis: optimal quality is reached when incremental revenue from improvement equals the incremental cost to secure – Standard Deviation: how far away from mean – Variable: characteristic you want to measure – Attribute: measurement (subjective or objective) – Ultimate Responsibility – Employee – Overall Responsibility – PM – Design/Test Specifications - Engineer

Chapter 8 – Project Quality Management
• Review Guide Tips
– If quality sample size increases, the quality control band decreases – Product Cost plus Operations and Maintenance costs increase perceived value when balanced – Cost of Conformance = training – Crosby Absolutes of Quality – performance of standard is zero defects and the measurement system is the cost of non-conformance – Deming & Japanese are associated with Quality Improvement programs – Quality Control – performed by operating personnel

Chapter 8 – Project Quality Management
• Review Guide Tips
– Quality objectives are approved in conceptual stage by project owner – QA – auditing function that provides feedback to team and client about quality of output being produced – If sample size is a constant and acceptance numbers increase, the producers risk decreases and consumer risk increases – 85% of costs of quality are direct responsibility of management

Chapter 9 – Human Resource Management
• Project Human Resource Management
– Processes required to make the most efficient use of people – 3 major processes:
• Organizational Planning • Staff Acquisitions • Team Development

– Keep in mind of transient nature of projects – Apply techniques that apply to current project needs – Ensure HR compliance with project management activities

Chapter 9 – Human Resource Management
• Project Human Resource Management
– 1,9 manager = good relationship with team – Project Organization
• • • • Conflict between PM and Functional Managers Dual allegiance of team members Complex prioritization of resources Loss of developed procedures on project dissolution

– Compromise = both sides will lose – Delegation
• • • • Defer the decision Interpreted as passive Emphasize task vs. personnel Can be frequently used

Chapter 9 – Human Resource Management
• Project Human Resource Management
– If there is a team of experts, PM decisions will promote high satisfaction – Functional/Project Managers likely to exercise:
• Power • Authority • Influence

– Traditional organization forms have no single point of contact for client/sponsor

Chapter 9 – Human Resource
Management
• Organizational Planning
– Identifying, documenting and assigning project roles, responsibilities, and reporting relationships
• Individual and group assignments • Internal and external employees • Linked with communication planning

Chapter 9 – Human Resource
Management
• Inputs to Organizational Planning
– Project Interfaces
• Organizational interfaces – formal and informal reporting relationships among organizational units • Technical interfaces - formal and informal reporting relationships among technical disciplines
– Engineers, manufacturers, electrical, etc.

• Interpersonal interfaces – formal and informal reporting relationships among individuals

– Staffing Requirements – define skill sets from individual/group in particular time frames

Chapter 9 – Human Resource
Management
• Inputs to Organizational Planning
– Constraints – factors that limit project team‟s options
• Organizational structure (strong vs. weak matrix) • Collective bargaining agreements – contractual arrangements • Preferences of project management team • Expected staff assignments

Chapter 9 – Human Resource
Management
• Tools & Techniques for Organizational Planning
– Templates – reuse a similar project‟s role and responsibility definitions – Human Resource Practices – corporate policies, guidelines, and practices – Organizational Theory – how organizations are structured – Stakeholder Analysis – needs of stakeholders are ensured

Chapter 9 – Human Resource
Management
• Outputs from Organizational Planning
– Role and Responsibility Assignments – can vary over time, closely linked to scope definition. Utilizes a Responsibility Assignment Matrix (RAM) to define responsibility for each item in the Work Breakdown Structure/task list – Staffing Management Plan – when and how personnel are included and removed from the project team
• Resource leveling, reduce transition periods, eliminate “dead time” between assignments, sensitivity to morale

– Organizational Chart – display reporting relationships – Supporting Detail
• Organizational impact • Job descriptions • Training needs

Chapter 9 – Human Resource
Management
• Staff Acquisition
– Ensure resources are available for project work

• Inputs to Staff Acquisition
– Staffing Management Plan – Staffing Pool Description
• • • • Previous experience Personal interests Personal characteristics Availability

– Recruitment Practices

Chapter 9 – Human Resource
Management
• Tools & Techniques for Staff Acquisition
– Negotiations with functional managers and other teams
• Staff utilization and corporate politics

– Pre-assignment – result of a competitive proposal, or an internal initiative – Procurement – outside services are needed (lacking internal skills or availability can not be met)

• Outputs from Staff Acquisition
– Project staff assigned – Project Team Directory – contact list

Chapter 9 – Human Resource
Management
• Team Development – enhancing stakeholders to contribute along with maintaining the project team‟s functionality
– Personal development is the foundation – Team members often balance responsibilities to a functional manager and project manager
• Critical to success of project

Chapter 9 – Human Resource
Management
• Inputs to Team Development
– Project Staff – Project Plan – Staffing Management Plan – Performance Reports – External Feedback
• Periodic measurements of performance

Chapter 9 – Human Resource
Management
• Tools & Techniques for Team Development
– Team-building activities – General Management Skills – Reward and recognition systems
• Promote desired behavior • Must be achievable; apply to the project • Cultural differences recognition

– Co-location – place members in physical location – Training – enhance skills, knowledge, and capabilities of project team
• Must be factored in cost analysis of project

Chapter 9 – Human Resource
Management
• Outputs from Team Development
– Performance Improvements
• Individual skills • Team Behavior • Identify more efficient methods of work

– Input for performance appraisals

Chapter 9 – Human Resource
Management
• Review Guide Tips
– Roles and responsibilities
• Project Manger – plan, estimate and schedule of project • Team – help prepare the WBS, Network Diagrams, and estimate time for tasks, complete tasks • Senior Management – approve Overall project plan, budget and schedule and to approve any changes that are made to those figures • The person experiencing the problem must try to solve it themselves as long as means are in their control

Chapter 9 – Human Resource
Management
• Review Guide Tips
– Powers:
• • • • • Formal (legitimate) Reward Penalty (coercive) Expert (earned) Referent – authority of a higher position

– Best are Expert and Reward; Penalty is the worst
• Formal, Reward and Penalty derived from PM‟s position within the company

Chapter 9 – Human Resource
Management
• Review Guide Tips
– Conflict
• Inevitable consequence of organizational interactions • Can be beneficial • Resolved by identifying the causes and problem solving by people that are involved & their immediate manager • Nature of project • Limited power of the project manager • Necessity for obtaining resources from functional managers

Chapter 9 – Human Resource
Management
• Review Guide Tips
– Avoid conflict
• Informing the team • Clearly assigning tasks without ambiguity • Challenging and interesting work assignments

– Conflict Sources (in order of frequency)
• • • • • • • Schedules Project Priorities Resources Technical opinions Administrative Procedures Cost Personality

Chapter 9 – Human Resource
Management
• Review Guide Tips
– Motivational Theories
• Maslow‟s Hierarchy of Needs – people work to get a chance to contribute and use their skills
– „self-actualization‟

• McGregor‟s Theory of X and Y
– X – people need to be watched every minute – Y – people willing to work without supervision

• Herzberg‟s Theory – poor hygiene factors destroy motivation but improving them will not improve motivation
– Motivating Agents » Responsibility » Self-actualization » Professional growth » Recognition

Chapter 9 – Human Resource
Management
• Review Guide Tips
– Responsibility Charts
• Matrix – cross references team members with tasks (does not show time – when job is done) • Histogram – months vs. number of resources • Gantt Chart – shows when staff allocated to tasks

– Leadership Skills
• • • • Directive Facilitating Coaching Supportive

– Team Building Skills

Chapter 9 – Human Resource
Management
• Review Guide Tips
– Projectized Organization
• • • • Conflict between PM and Functional Managers Dual Allegiance of team members Complex prioritization of resources Loss of developed procedures on project dissolution

– Compromise – both sides will lose – Delegation
• • • • Defer the decision Interpreted as passive Emphasize task vs. personnel Can be frequently utilized

Chapter 10 – Project Communications Management
• Project Communications Management
– Processes to ensure timely and proper generation, collection, dissemination and disposition of project information – General communications management
• Communications Planning – determining informational needs, who needs what and when; 90% of PM‟s time is spent communicating • Information Distribution – making information available • Performance Reporting – collecting and disseminating project information • Administrative Closure – formalize project/phase completion

Chapter 10 – Project Communications Management
• Communications Planning
– Determining information requirements of stakeholders – Tightly linked with organizational planning

• Inputs to Communications Planning
– Communication requirements – sum of the information requirements of the stakeholders
• Define type and format of information with analysis of value of information • Project organization and stakeholder responsibility relationships • Disciplines, departments and specialties involved in project • Logistics of number of individuals at location • External communication needs (media)

Chapter 10 – Project Communications Management
– Communication Technology – used to transfer information
• Immediacy of need for information • Availability of technology • Expected project staffing – compatible with personnel experience • Length of project – will technology change during duration?

– Constraints – factors that limit project team‟s options – Assumptions

Chapter 10 – Project Communications Management
• Tools & Techniques for Communication Planning
– Stakeholder analysis – informational needs should be analyzed to develop methodology suited for the project; eliminate unnecessary information or technologies

• Outputs from Communications Planning
– Communication Management Plan
• Collection and filing structure to detail the gathering and storage of information; updating and dissemination • Distribution structure – who gets info in certain format; compatible with project organization chart • Description of information included – format, level of detail, conventions • Production schedules of each type of communication • Methods for accessing information • Method for updating and refining communications plan

Chapter 10 – Project Communications Management
• Information Distribution – making information available in a timely manner by implementing the communications plan; responding to requests for information • Inputs to Information Distribution
– Work Results – Communication Management Plan – Project Plan

Chapter 10 – Project Communications Management
• Tools & Techniques for Information Distribution
– Communication Skills – used to exchange information. Sender is responsible for clarity; receiver is responsible for receipt and understanding – Information retrieval systems – filing systems, software – Information distribution systems – meetings, correspondence, networked databases, video/audio conferencing

• Outputs from Information Distribution
– Project Records – maintained in an organized fashion

Chapter 10 – Project Communications Management
• Performance Reporting
– Collecting and disseminating performance indicators to provide stakeholders information how resources are achieving project objectives
• • • • Status reporting Progress reporting Forecasting Project scope, schedule, cost and quality, risk and procurement

Chapter 10 – Project Communications Management
• Inputs to Performance Reporting
– Project Plan – Work Results – deliverables completed, % completed, costs incurred – Other Project records

Chapter 10 – Project Communications Management
• Tools & Techniques for Performance Reporting
– Performance reviews – meetings to assess status – Variance Analysis – comparing actual results to planned or expected results (baseline); cost and schedule most frequent – Trend Analysis – examining results over time to determine performance – Earned Value Analysis – integrates scope, cost and schedule measures – calculate 3 keys:
• Budgeted Cost of Work (BCWS) – portion of approved cost estimate planned to be spent on activity during a given period • Actual Cost of Work Performed (ACWP) – total of direct and indirect cost incurred in accomplishing work on activity in a given period • Earned Value (Budgeted Cost of Work Performed – BCWP) – percentage of total budget equal to percentage of work actually completed
– Cost Variance (CV) = BCWP – ACWP – Schedule Variance (SV) = BCWP – BCWS – Cost Performance Index (CPI) = BCWP/ACWP

– Information Distribution Tools & Techniques

Chapter 10 – Project Communications Management
• Outputs from Performance Reporting
– Performance Reports – organize and summarize information gathered and present results
• Bar charts, Gantt charts, S-curves, etc.

– Change Requests – handled as part of change control

Chapter 10 – Project Communications Management
• Administrative Closure
– Projects/phases after achieving results or terminated require closure – Verifying and documenting project results to formalize acceptance – Collection of project records, analysis of effectiveness, reflect final specifications and archiving of material

Chapter 10 – Project Communications Management
• Inputs to Administrative Closure
– Performance Measurement Documentation – includes planning docs; all information that records and analyzes performance – Documentation of product and project – Other project records

• Tools & Techniques of Administrative Closure
– Performance Reporting tools & techniques

• Outputs from Administrative Closure
– Product Archives –complete index of all records, database updates – Formal Acceptance – signoffs from client or sponsor – Lessons Learned

Chapter 10 – Project Communications Management
• Tips from Review Guide
– Understand all concepts and major points – Memorize the communications model – Understand the inputs/outputs of Administrative Closure – Understand how administrative closure differs from contract closeout
• Contract closeout has product verification and administrative closeout but the contract terms may have special provisions/procedures for closeout

Chapter 10 – Project Communications Management
• Communication Model
– Messages are encoded by sender and decoded by receiver based on receiver‟s education, experience, language and culture
• Sender should encode message carefully
– Nonverbal – Paralingual (pitch and tone) – Active Listening – receiver confirms they are listening, confirms agreement and ask for clarification – Effective Listening – watching speaker, think before speaking, ask questions, repeating and providing feedback

Chapter 10 – Project Communications Management
• Communication Methods
– Pick the form of communication that is best for the situation
• Formal Written – complex problems, All Plans, communicating over long distances • Formal Verbal – Presentations, speeches • Informal Written – memos, e-mail, notes • Informal Verbal – Meetings, conversations

Chapter 10 – Project Communications Management
• Communication Blockers
– Noise, Distance, Improper en-coding, “bad idea”, Hostility, Language, Culture

• Performance Reporting
– – – – – – Status Reports (where project stands) Progress Reports (what has been accomplished) Trend Report (project results over time) Forecasting Report (projecting future status) Variance Report (actual results vs. planned) Earned Value

• Communication Channels – communications grow at a linear rate
– N (N-1)/2 where N = the number of people – Example 4 people equals 6 communication channels

Chapter 10 – Project Communications Management
• To determine if someone understands message feedback must be obtained • Unanimous Agreement
– – – – All members committed Decisions reached slowly Integrity is developed Future decision making is enhanced

• Clearly defined group goals
– Motivate team behavior – Cause tension until completed – Encourage member identification

• Complex messages need oral, written and non verbal methods • There are 5 directions of communication • Façade – when an individual processed needed information but withholds the information

Chapter 10 – Project Communications Management
• Least effective form of communication for complex situations is verbal and formal • If there are a team of experts, PM decisions will likely promote high satisfaction • Functional/Project Mangers likely to exercise
– Power – Authority – Influence

• Traditional organization forms have no single point of contact for clients/sponsors • To determine if someone understands message, must obtain feedback • Unanimous Agreement – all members committed, decisions reached slowly, integrity is developed, future decision making is enhanced • Clearly defined group goals: motivate team behavior, cause tension until completed, encourage member interaction

Chapter 10 – Project Communications Management
• Complex messages need oral, written and non verbal methods • Least effective form of communication for complex issues: verbal and formal

Chapter 11 – Project Risk Management
• Project Risk Management
– Includes identifying, analyzing, and responding to risk areas; maximizing results of positive events and minimizing consequences of adverse events
• Risk Identification – which are likely to affect the project • Risk Quantification – evaluation of risk to assess the range of possible outcomes
– Sometimes treated as single process; risk analysis/assessment

• Risk Response Development – defining enhancement steps for opportunities and response
– Sometimes called response planning/mitigation

• Risk Response Control – responding to changes in risk over course of project
– May be combined as risk management

Chapter 11 – Project Risk Management
• Risk Identification
– Determining which risks are likely to affect the project and documenting them – Performed on a regular basis; address internal and external risks
• Internal –project team has control/influence over • External – beyond project team‟s control

– Identify cause and effect and effects and causes; what could happen vs. what outcomes should be avoided

Chapter 11 – Project Risk Management
• Inputs to Risk Identification
– Product Description – more risk associated with unproven technologies (innovation/invention). Often described in terms of cost and schedule impact – Other Planning Reports
• WBS (any non-traditional approaches) • Cost/Duration Estimates – aggressive schedules; limited amount of information • Staffing Plan – hard to replace/source skill sets • Procurement Management Plan – market conditions

– Historical Information – previous projects
• Project Files • Commercial Databases • Project Team Knowledge – member experiences

Chapter 11 – Project Risk Management
• Tools & Techniques for Risk Identification
– Checklists – organized by source of risk, included project context, process outputs, product and technology issues, internal sources – Flowcharting – understand cause and effect relationships – Interviewing – conversations with stakeholders

Chapter 11 – Project Risk Management
• Outputs from Risk Identification
– Sources of Risk – categories of possible risk events, all-inclusive
• • • • Changes in requirements Design errors, omissions, misunderstanding Poorly defined roles and responsibilities Insufficiently skilled staff
– Include estimate of probability, range of possible outcomes, expected timing, anticipated frequency

– Potential Risk Events – discrete occurrences that may affect project
• Identified when probability/magnitude of loss is high (e.g. turnover)
– New technologies obsolete need of product – Socio, Political and Economic events – Include estimate of probability, range of possible outcomes, expected timing, anticipated frequency

– Risk Symptoms – triggers that are indirect manifestations of actual risk events (e.g. poor morale) – Inputs to other processes – identify need in another area; constraints and assumptions

Chapter 11 – Project Risk Management
• Risk Quantification
– Evaluation of possible project outcomes and determining which events warrant response
• Opportunities and threats can provide unanticipated results (e.g. schedule delay considers a new strategy) • Multiple effects from a single event • Singular Stakeholder opportunities may force suffering in other areas • Reliance on statistics and forecasting (mathematical errors)

Chapter 11 – Project Risk Management
• Inputs to Risk Quantification
– Stakeholder risk tolerance
• More capital to expend; perceptions of severity

– Sources of Risk – Potential Risk Events – Cost Estimates – Activity Duration Estimates

Chapter 11 – Project Risk Management
• Tools & Techniques for Risk Quantification
– Expected Monetary Value – product of 2 numbers
• Risk Event Probability – estimate that event will occur • Risk Event Value – estimate of gain or loss

– Statistical Sums – calculate range of total costs from cost estimates for individual work items – Simulation – representation or model; provide statistical distribution of calculated results.
• Monte Carlo, Critical Path, PERT techniques

– Decision Trees – depicts key interactions among decisions and possible outcomes – Expert Judgment

Chapter 11 – Project Risk Management
• Outputs from Risk Quantification
– Opportunities to pursue; threats to respond – Opportunities to ignore; threats to accept

Chapter 11 – Project Risk Management
• Risk Response Development
– Defining enhancement steps for opportunities and responses to threats
• Avoidance – eliminating threat by eliminating the cause • Mitigation – reducing expected monetary value of event by reducing the probability of occurrence • Acceptance – accept the consequences (active contingency plan - or passive response)

Chapter 11 – Project Risk Management
• Inputs to Risk Response Development
– Opportunities to pursue, threats to respond – Opportunities to ignore, threats to accept

• Tools & Techniques for Risk Response Development
– Procurement – acquire resources (exchange 1 risk for another) – Contingency Planning – defining action steps should a risk event occur – Alternative Strategies – change planned approach – Insurance

Chapter 11 – Project Risk Management
• Outputs from Risk Response Development
– Risk Management Plan – document procedures to manage risk events. Addresses risk identification and quantification processes, personnel responsible for managing areas of risk, maintenance of identification and quantification process, implementation of contingency plans and allocation of reserve – Inputs to other processes – alternative strategies, contingency plans, anticipated procurements – Contingency Plans – Reserves – provision in project plan to mitigate costs and schedule risks. Used with a modifier (management, schedule, budget) to provide further detail when type of reserve can be used – Contractual Agreements – insurance, services and other functions to avoid and mitigate threats.

Chapter 11 – Project Risk Management
• Risk Response Control
– Involves executing the risk management plan in order to respond to risk events during the project
• Control and iteration are required; not all risks can be identified

• Inputs to Risk Response Control
– Risk Management Plan – Actual Risk Events – recognize occurrence – Additional Risk Identification – surfacing of potential or actual risk sources

Chapter 11 – Project Risk Management
• Tools & Techniques for Risk Response Control
– Workarounds – unplanned responses to negative risk events (response was not defined in advance) – Additional Risk Response Development – planned response may not be adequate

• Outputs from Risk Response Control
– Corrective Action – performing the planned risk response – Updates to Risk Management Plan

Chapter 11 – Project Risk Management
• Tips from Review Guide
– Definition of risk: a discrete occurrence that may affect the project for good or bad – Definition of uncertainty: an uncommon state of nature, characterized by the absence of any information related to a desired outcome – Definition of risk management: The processed involved with identifying, analyzing, and responding to risk. Maximize results of positive events; minimizing consequences of negative events

Chapter 11 – Project Risk Management
• Tips from Review Guide
– Inputs to Risk Management:
• • • • • • • • • • All project background information Historical records Past Lessons Learned Project Charter Scope Statement Scope of work WBS Network Diagram Cost and Time estimates Staffing Plan

Chapter 11 – Project Risk Management
• Tips from Review Guide
– Risk Management Process
• Risk Identification – majority during Planning; onset of project to close of project
– 2 Types » Business: Risk of a gain or loss » Pure (insurable): only a risk of loss – Sources: » External: Regulatory, environmental, government » Internal: Schedule, cost, scope change, inexperience, planning, people, staffing, materials, equipment » Technical: Changes in technology » Unforeseeable: small (only about 10%)

Chapter 11 – Project Risk Management
• Tips from Review Guide
– Risk Management Process
• Risk Factors – determine:
– – – – Probability that it will occur (what) Range of possible outcomes (impact, amount at stake) Expected Timing (when) Anticipated frequency (how often)

• Symptoms – early warning signs determined by PM • Risk Tolerances – amount of risk that is acceptable

Chapter 11 – Project Risk Management
• Tips from Review Guide
– Common Stumbling Blocks
• Risk identification is completed without knowing enough about the project • Project Risk evaluated only by questionnaire, interview or Monte Carlo; does not provided a per task analysis of risk • Risk identification ends too soon • Project Risk identification and Evaluation are combined – results in risks that are evaluated when they appear; decreased total number of risks and stops identification process • Risks are identified too generally • Categories of risks are forgotten (technology, culture) • Only 1 identification method is used • First risk response strategy is used without other consideration • Risks are not devoted enough attention during the Execution phase

Chapter 11 – Project Risk Management
• Tips from Review Guide
– Risk Management Process
• Risk Quantification – assess risks to determine range of possible outcomes; which risk events warrant a response
– Probability – Amount at stake (impact) – Develop a ranking (priority) of risks » Qualitative – take an educated guess » Quantitative – estimation by calculation

• Risk Assessment = Risk Identification + Risk Quantification

Chapter 11 – Project Risk Management
• Tips from Review Guide
– Risk Management Process
• Risk Quantification – assess risks to determine range of possible outcomes; which risk events warrant a response
– Probability – Amount at stake (impact) – Develop a ranking (priority) of risks » Qualitative – take an educated guess » Quantitative – estimation by calculation

• Risk Assessment = Risk Identification + Risk Quantification

Chapter 11 – Project Risk Management
• Tips from Review Guide
– Risk Management Process
• Monte Carlo simulation – simulates cost and schedule results of project
– Indicates risk of a project and each task by providing a percent probability that each task will be on the critical path – Accounts for path convergence (where tasks in a Network diagram converge into 1 task – more risk)

• Expected Monetary Value – multiply probability by impact
– Helps define and prove what the project reserve should be

• Decision Trees
– Takes into account future events when making a decision today – Makes use of expected value calculations and mutual exclusivity – Be able to draw one; boxes are decisions, circles are what can happen as a result of the decision

Chapter 11 – Project Risk Management
• Tips from Review Guide
– Risk Management Process
• Outputs from Risk Quantification
– – – – – Determination of top risks Opportunities to pursue Opportunities to ignore Threats to respond to Threats to ignore

Chapter 11 – Project Risk Management
• Tips from Review Guide
– Risk Management Process
• Risk Response Development (what will be done, how to make risk smaller or eliminate)
– Not all risks can be eliminated – Alternative Strategies (risk mitigation) » Avoidance – eliminate the cause » Mitigation – effect the probability or impact of risk » Acceptance – do nothing » Deflection (transfer, allocate) – make another party responsible, insurance, outsourcing

Chapter 11 – Project Risk Management
• Tips from Review Guide
– Risk Management Process
• Outputs from Risk Response Development
– Insurance – exchange an unknown risk for a known risk (response to pure risks) – Contracting – hire experience to perform work – Contingency Planning – specific actions to take if risk event occurs – Reserves (contingency) – recommended total of 10% to account for known and unknown risks

• Risk Management Plan – documents risks identified and how they are addressed; non-critical risks should be recorded to revisit during the execution phase

Chapter 11 – Project Risk Management
• Tips from Review Guide
– Risk Management Process
• Risk Response Control – executing and updating the Risk Management Plan
– Workarounds – Unplanned responses to risks; addressing risks that were unanticipated – Contingency Plans – planned responses to risks; risk response development actions

Chapter 11 – Project Risk Management
• Tips from Review Guide
– Risk Mitigation – does not involve ID of risks (they are already known) – Self Insurance – can lead to failure to ensure funds for low probability events and confuse business risks with pure risks – Risk mitigation – can purchase insurance – Schedule Risk – critical path adjusted by High Risk activity float – Sensitivity Analysis – estimate the effect of change of one project variable on overall project

Chapter 11 – Project Risk Management
• Tips from Review Guide
– Standard Deviation of project completion – relationship of uncertainty of critical path activities; indicator of project end target confidence

Chapter 12 – Project Procurement Management
• Project Procurement Management
– Processes required to acquire goods and services from outside the organization – Discussed from the perspective of the buyer
• Terms and conditions of the contract is a key input to many processes • Buyer is the customer, thus a key stakeholder • Seller‟s project management team must be concerned with all processes of project management, not just their knowledge area

Chapter 12 – Project Procurement Management
• Procurement Planning
– Identify project needs that can best be met by acquiring resources – Consideration whether to procure, how to, how much, when to purchase – Subcontractor decisions may provide flexibility
• Internal procurement does not involve formal solicitation and contract

Chapter 12 – Project Procurement Management
• Inputs to Procurement Planning
– Scope Statement – boundary for needs and strategies – Product Description – broad technical issues, not to be confused with a statement of work – Procurement Resources – formal contracting group (RFP) – Market Conditions – supply and demand, what services are available – Other Planning Outputs – preliminary cost and schedule, quality management plans, cash flow, WBS, risks, staffing – Constraints – factors that limit buying options – Assumptions

Chapter 12 – Project Procurement Management
• Tools & Techniques for Procurement Planning
– Make or Buy analysis – determine if the service can be provided from within
• Include direct and indirect costs • Factor ongoing need for items vs. 1-time usage

– Expert Judgment – assess input – Contract type selection
• Fixed Price (lump sum) – incentives for meeting targets • Cost Reimbursable Contracts – Time and Materials basis • Unit Price – preset amount per unit of service

Chapter 12 – Project Procurement Management
• Outputs from Procurement Planning
– Procurement Management Plan – describes how procurement process will be managed
• • • • • • Type of contract Independent estimates needed? Autonomy of project team Standardized documents Multiple provider management? Incorporate with other project aspects (scheduling and performance reporting)

– Statement of Work (SOW) – describes the procurement in detail – clear, concise description of services
• Can also be a Statement of Requirements for problem-solving activities

Chapter 12 – Project Procurement Management
• Solicitation Planning
– Preparing documents needed

• Inputs to Solicitation Planning
– Procurement Management Plan – Statement of Work – Other Planning Outputs

• Tools & Techniques for Solicitation Planning
– Standard Forms and Procedures – Expert Judgment

Chapter 12 – Project Procurement Management
• Outputs from Solicitation Planning
– Procurement Documents – used to solicit proposals from prospective sellers
• Bids, Request for Proposal, Request for Quotation, Contractor Initial Response, etc. • Structure to receive complete and accurate responses
– Description of desired form of response and any required contractual provisions (e.g. nondisclosure statements) – May be defined by regulation – Flexible to allow seller suggestions

– Evaluation Criteria – rate proposals; objective or subjective (previous experience)
• • • • • • Price Understanding of need by seller Overall/Life Cycle cost (purchase plus operating cost) Technical Capability Management Approach Financial Capacity

– Statement of Work Updates

Chapter 12 – Project Procurement Management
• Solicitation
– Obtaining information from prospective sellers

• Inputs to Solicitation
– Procurement Documents – Qualified Seller Lists – preferred vendors

• Tools & Techniques for Solicitation
– Bidder Conferences – mutual understanding meetings – Advertising – primarily with Government projects

• Outputs from Solicitation
– Proposals – seller prepared documents describing willingness and ability to provide the service

Chapter 12 – Project Procurement Management
• Source Selection
– Apply evaluation criteria (seldom straight-forward)
• Price (lowest price may not always result in lowest project cost) • Technical (approach) vs. commercial (price) • Multiple sourcing may be needed for same service

• Inputs to Source Selection
– Proposals – Evaluation Criteria – Organizational Policies

Chapter 12 – Project Procurement Management
• Tools & Techniques for Source Selection
– Contract Negotiation – clarification and mutual agreement on structure and requirements of contract prior to signature
• • • • • Responsibilities and authorities Applicable terms and law Financing Price Technical and business management

– Weighting – quantifying data to minimize personal prejudice of source selection
• Assign numerical weight to evaluation criteria • Rating sellers • Multiply weight by rating and totaling overall score

– Screening System – establish minimum performance criteria – Independent Estimates – “should cost” estimates

Chapter 12 – Project Procurement Management
• Outputs from Source Selection
– Contract – mutually binding agreement obligates seller provide goods and services and buyer to make payment.
• Legal relationship • Legal review is most often necessary

Chapter 12 – Project Procurement Management
• Contract Administration
– Ensuring that the seller‟s performance meets contractual requirements
• Project Team must be aware of legal ramifications of all actions taken • Apply project management processes to contractual relationships and integrate outputs within the project
– – – – – Project Plan Execution (authorize work) Performance Reporting (monitor cost, schedule) Quality Control (verify contractor‟s output) Change Control Financial Management

Chapter 12 – Project Procurement Management
• Inputs to Contract Administration
– Contract – Work Results – seller‟s deliverables, quality standards, actual costs – Change Requests – modify contract, or description of product/service
• May result in disputes, claims, appeals

– Seller Invoices

Chapter 12 – Project Procurement Management
• Tools & Techniques for Contract Administration
– Contract Change Control System – defines how a contract may be modified
• Includes paperwork, tracking system, dispute resolution procedures and approval levels

– Performance Reporting – Payment System – Accounts Payable

Chapter 12 – Project Procurement Management
• Contract Close Out
– Similar to administrative closure; involves product verification and administrative paperwork
• Early termination is a special case • Contract terms and conditions may prescribe procedures

• Inputs to Contract Close Out
– Contract Documentation – supporting schedules, documentation

Chapter 12 – Project Procurement Management
• Tools & Techniques for Contract Close Out
– Procurement Audits – structured review of entire procurement process; identify successes and failures that warrant transfer to other procurement items

• Outputs from Contract Close Out
– Contract File – complete index of records – Formal Acceptance and Closure – contract administration responsibility to provide a formal notice that contract has been completed

Chapter 12 – Project Procurement Management
• Tips from Review Guide
– – – – Most questions are process oriented Most questions are from the buyer‟s perspective Contracts are formal agreements All requirements should be specifically stated in the contract – All contract requirements must be met – Changes must be in writing and formally controlled – US Gov‟t backs all contracts by providing a court system

Chapter 12 – Project Procurement Management
• Tips from Review Guide
– What forms a contract
• • • • An offer An acceptance Consideration - something of value Legal Capacity – separate legal parties, competent parties • Legal Purpose – can not perform illegal goods or services

Chapter 12 – Project Procurement Management
• Tips from Review Guide
– Project Manager‟s role for procurement
• Risk identification and evaluation • Work within the procurement process

– Procurement Process
• • • • • • Procurement Planning = Make or buy Solicitation Planning = Request for Proposal Solicitation = Questions and Answers Source Selection = Pick vendor Contract Administration = Admin Contract Closeout = Finish

Chapter 12 – Project Procurement Management
• Tips from Review Guide
– Make or Buy: consider out of pocket costs and indirect cost of managing procurement – Buy – to decrease risk (cost, schedule, performance, scope of work) – Make
• • • • Idle plant or workforce Retain control Proprietary information/procedures Buy vs. lease questions (use X = number of days when purchase and lease costs are equal)

Chapter 12 – Project Procurement Management
• Tips from Review Guide
– Contract Type Selection – reasonable risk between the buyer and seller and greatest initiative for seller‟s efficient and economic performance
• Scope – well defined? • Amount or frequency of changes expected after start date • Amount of effort and expertise the buyer can devote to manage the seller • Industry standards

Chapter 12 – Project Procurement Management
• Tips from Review Guide
– Cost Reimbursable (CR); seller‟s cost are reimbursed; buyer bears highest risk (cost increases)
• CPFF – cost plus fixed fee, buyer pays all costs – fee (profit) established • CPPC – cost plus percentage of costs; bad for buyers (seller not motivated to control costs) • CPIF – cost plus Incentive Fee; seller costs + fee + bonus for meeting/exceeding target (incentive clause)

Chapter 12 – Project Procurement Management
• Tips from Review Guide
– Time and Materials; priced on per hour basis, elements of fixed price contract and cost reimbursable contracts – buyer has medium risk – Fixed Price (lump sum, or firm fixed price) - most common (1 price for all work), risk of costs is upon seller
• FPIF – Fixed Price Incentive Fee • FPEPA – Fixed Price Economic Price Adjustment – long duration projects

– Incentives – help bring seller‟s objectives in line with buyer‟s

Chapter 12 – Project Procurement Management
• Tips from Review Guide
– Incentive Fee and Final Price Calculations
• Must Have:
– – – – – Target Cost Target Fee Target Price Sharing Ratio (buyer/seller) Actual Cost

• Fee = (Target Cost – Actual Cost) x Seller Ratio (%) • Total Fee = Fee + Target Fee • Final Price = Actual Cost + Total Fee

Chapter 12 – Project Procurement Management
• Tips from Review Guide
– Procurement Documents, Contract Type and Scope of Work
• Request for Proposal – Cost Reimbursable – Performance or Functional Scope (can be somewhat loosely defined) • Invitation for Bid – Time & Materials – Design Scope (moderately defined) • Request for Quotation – Fixed Price – Any Scope (must be detailed)

Chapter 12 – Project Procurement Management
• Tips from Review Guide
– Terminology (Terms and Conditions)
• Force majeure – act of God • Indemnification – who is liable • Liquidated damages – estimated damages as a result of contract breach • Material breach – a breach so large the project may not continue • Special Provisions – provided by the Project Manager to contracts so that particular needs are addressed • Privity – contractual relationship • Single Source – contract directly with preferred seller • Sole Source – only one supplier available in market

Chapter 12 – Project Procurement Management
• Tips from Review Guide
– Evaluation Criteria
• • • • • • Understanding of need Overall or life-cycle cost Technical ability Management Approach Financial Capacity Project Management Ability
– Invitation for Bids are usually not evaluated with entire criteria (lowest rate is chosen)

Chapter 12 – Project Procurement Management
• Tips from Review Guide
– Solicitation
• Bidder‟s Conference
– Benefit both buyer and seller – Watch out for » Collusion » Sellers not asking questions in front of their competition » Make sure all questions and answers are in writing and issued to all sellers (respond to same scope in work)

Chapter 12 – Project Procurement Management
• Tips from Review Guide
– Source Selection
• Negotiation Objectives
– Obtain a fair and reasonable price – Development a good relationship with seller » Project manager must be involved – Main Terms to negotiate » Responsibilities » Authority » Applicable Law » Technical and Business Management approaches » Contract Financing » Price

Chapter 12 – Project Procurement Management
• Tips from Review Guide
– Contract Administration – assure that seller‟s performance meets contractual requirements
• Project Managers must understand the contract and manage its completion
– Sometimes contract is in conflict with Scope of Work – Only the contracting officer (CO) can change contract language » Often a source of conflict » Need to deal with a different company‟s set of procedures » It is not as easy to “see” problems » Greater reliance on reports to determine if a problem exists » Greater reliance on relationships between buyer and seller‟s project managers

Chapter 12 – Project Procurement Management
• Tips from Review Guide
– Contract Closeout – more attention to documentation and completion of files
• All documentation must be preserved and filed • Centralized vs. decentralized contracting

– Contract Interpretation
• Based on analysis of intent

Chapter 12 – Project Procurement Management
• Tips from Review Guide
– – – – – – – – – Fee = Target Cost – Actual Cost X Seller Ratio ($) Total Fee = Fee plus Target Fee Final Price = Actual Cost plus Total Fee Contractor = seller Purchasing Cycle – define need, prepare and issue purchase order Functional Spec – delineates specific end-use capabilities that are tested in acceptance procedure Measurable Capabilities = Performance Specifications Requisition Cycle – review of specification completeness Requirements Cycle – develops the statement of work

Supplement – Professional Responsibility
• 6th Process area added
– – – – – Insuring Integrity and professionalism Contributing to the project management knowledge base Enhancing individual competence Balancing Stakeholders‟ interests Interacting with team and stakeholders in a professional and cooperative manner

• Could be approx. 30 questions in this area • Understand Project Management Professional Code of Conduct
– – – – Ethics Legal Issues Cultural Sensitivity Managing conflicts of interest

Supplement – Professional Responsibility
• Integrity and Professionalism
– Understand the legal requirements surrounding the practice of projects – Know ethical standards that should govern the behavior of project managers – Comprehend the values of the community and the various project stakeholders – Practice proper judgment in the pursuit of successful project work – Compliance with all organizational rules and policies
• Upon a reasonable and clear factual basis report violations • Responsibility to disclose circumstances that could be construed as a conflict of interest or appearance of impropriety

Supplement – Professional Responsibility
• Integrity and Professionalism
– Provide accurate and truthful representation to the public – Maintain and satisfy the scope and objectives of professional services – Maintain the confidentiality of sensitive information – Ensure a conflict of interest does not compromise legitimate interests of client/customer or interfere with professional judgment – Refrain from accepting gifts, inappropriate payments, compensation for personal gain unless in conformity with applicable laws or customs

Supplement – Professional Responsibility
• Contribute to advancing the project management profession
– Overall understanding of project management principles – Understand the community and media surrounding projects – Knowledge of research strategies available and proper communication techniques – Learn to communicate and transfer knowledge effectively as a coach and mentor and to use available research strategies – Respect and recognize intellectual property

Supplement – Professional Responsibility
• Enhance Individual Competence
– Understand the project manager‟s strengths and weaknesses and learning style – become aware of instructional processes and tools – Know the useful competencies for project managers and possible training – Be able to perform self-assessment and competencies development plan – Ability to apply lessons learned

Supplement – Professional Responsibility
• Balance Stakeholder‟s Objectives
– Understand the various competing stakeholders‟ interests and needs – Comprehend the conflict resolution techniques useful in handling differing objectives – Be able to resolve conflicts in a fair manner – Exercise negotiation skills based on proper information

Supplement – Professional Responsibility
• Interact with team and stakeholders in a professional and cooperative manner
– Understand cultural diversity, norms and stakeholders‟ communication styles – Show flexibility towards diversity, tolerance and self control – Becoming empathetic to differences