#Project Management Concepts - Ready Reckoner# A Quick Referance Guide For Preparing PMP Exam Based On PMBOK - 6 Edition by SN Panigrahi

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SN Panigrahi is a Versatile Practitioner, Strategist, Energetic Coach, Learning Enabler & Public Speaker.
He is an International-Corporate Trainer, Mentor & Author
He has diverse experience and expertise in Project Management, Contract
Management, Supply Chain Management, Procurement, Strategic
Sourcing, Global Sourcing, Logistics, Exports & Imports, Indirect Taxes –
GST etc.
He had done more than 150 Workshops on above
Published more than 500 Articles; More than 60 Youtube Presentations &
70 SlideShares
He is an Engineer + MBA +PGD ISO 9000 / TQM with around 29 Yrs of
Experience
He is a certified PMP® from PMI (USA) and become PMI India
Champion
Also a Certified Lean Six Sigma Green Belt from Exemplar Global
Have been Trained in COD for 31/2 Yrs. on Strategy & Leadership
GST Certified – MSME – Tech. Dev. Centre (Govt of India)
ZED Consultant – Certified by QCI – MSME (Govt of India)
Member Board of Studies, IIMM
9652571117
SN Panigrahi snpanigrahi1963@gmail.com Co-Chairman, Indirect Tax Committee, FTAPCCI
Hyderabad Empanelled Faculty in NI MSME
He has shared his domain expertise in various forums as a speaker & presented a number of papers in various national and
international public forums and received a number of awards for his writings and contribution
SN Panigrahi,toEssenpee
business thoughts.
Business Solutions,
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SN Panigrahi, Essenpee Business Solutions,

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PMP : Training Day wise Schedule
• Introduction
•
Day - 1 •
•
Project Management Framework
Project and Development Life Cycles
Role of Project Manager
• Project Integration Management

Day - 2 • Project Scope Management
• Project Schedule Management
• Project Cost Management

Day - 3 • Project Quality Management
• Project Resource Management
• Project Communications Management

Day - 4 • Project Risk Management
• Project Procurement Management
• Project Stakeholder Management

•
Day - 5 •
•
Code of Ethics
Project Best Practices - Recapitulate Lessons Learned
Mock Test – Feed Back SN Panigrahi, Essenpee Business Solutions,
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Be
Committed
to Your Goal
Have a Strong Determination

Desire to Reach Goal Practice,
Have a Self 3D Practice &
Confidence
Practice
Dedicate Your Time
& Resources
Manage
your Time
Well SN Panigrahi, Essenpee Business Solutions,
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India
Why become a PMP?
Demand & Future Prospects:
➢In any Economy the significant part of the growth is achieved through
Economic activities in Project Mode / Mission Critical Project Mode.
➢Project based work–One-fifth of world’s GDP ($12 trillion ) - Source -

World Bank
PM professionals are high in demand, as discussed earlier. Due to emerging

need of PM oriented jobs, there will be bunch of requirements of these skilled
PM workers.
So choosing this career will bring you lot of career opportunities. PMP
Certification Adds Value to the Resume
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Why become a PMP?
Better Compensation:
PM professionals are drawing attractive compensations. Reason being their capabilities to
take challenges in complex scenarios. As per the “Project Management Salary Survey –
10th Edition” report by PMI, the annualized median salary of a PM Professional in USA is
120K US Dollar. And in India, it is between 25K & 26K US Dollar.
PMI survey states that the World Average Median Salary for a project manager with certification
is $ 1,08,000. In contrast, the median income for a non-certified project manager is only $91,000.
Report highlights include:

Survey respondents holding the Project Management Professional (PMP)® certification
(82%) report higher median salaries than those without a PMP certification―23% higher on
average across the 37 countries surveyed.
Most respondents (70%) report that their total compensation (including salary, bonus, and
other forms of compensation) increased over the 12 months prior to completing the salary
survey. About one-quarter (26%) reported increases of at least 5% over that time period.

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Why become a PMP?
Learn Important Skills - Contribution to Organization & Project
Success:
➢Any Project of reasonable complexity can only be Planned, Managed and Delivered through Project
Management Tools & Techniques which is enabled through Technologies.
➢Project management principles, methodologies, tools and techniques have been extensively used to
manage projects in the construction, high-technology, defense, aerospace, transportation, space, Research
and Development industries, Oil & Gas Industries etc.
➢Project Mangers having these Skill Sets is Able to Manage the Projects Better.
➢When a project and program management mindset is embedded into an organization’s DNA, performance
improves and competitive advantage accelerates.
➢The projects of high-performing organizations successfully meet goals two–and–a–half times more often
(90 percent vs. 36 percent), and these organizations waste 13 times less money than their low-performing
counterparts.
Source: PMI: Pulse of the Profession 2015: Capturing the Value of Project Management 2015
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Why become a Project Manager?
Provides Industry Recognition:

PMP certification is universally recognized. Many certification programmes focus only on a
specific domain or geography. PMP on the other hand, is global and works with any industry
and in any location. So, regardless of the professional background and industry, you can
gain by adding the certification to your resume.
What is the PMP certification value in the market? Data show that as the number of
certified project managers increases within a company, the success rate of projects
also increases.
Also, the companies recognize that certified managers are better at completing the project
on time and within the budget.

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Why become a PMP?
Provides Networking Opportunities
PMI currently has about 773,840 active PMP certification holders across the world. When you sign up as
a PMI member, you become part of that club. PMI arranges frequent meetings for members in major
cities across the world.
These meetings are also arranged to help the members earn Professional Development Units (PDUs).
These units are needed to fulfill Continuous Credential Requirements, also called as CCRs. These are
essential to keep the certification for three years.

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Some STATISTICS
60 -80% of Project Failures attributed to Poor Requirement

Gathering (Meta Group)
40% of Problem Found by End Users (Gartner)
25-50% of Spending is Wasted as a Result of Re-work (Carnegie
Mellon)
80% of Budgets Consumed Fixing Self-inflicted Problems (Dynamic

Markets Limited Study 2007)
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➢ What is Project Management Institute (PMI)
➢ PMI Membership & Membership Advantages
➢ Other PM Certifications & Bodies
➢ About PMP® Credential
➢ About PMI’s Certification Programs
➢ What is PMBOK?
➢ PMP Eligibility Criteria
➢ How to Apply for Exam
➢ PMP Exam Cost
➢ Know About the PMP® Exam Pattern & Format
➢ Retake & Maintenance of PMP Credentials
➢ PMI Talent Triangle®
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New Logo
PMI® (Project Management Institute) is the most prominent body on the

subject of Project Management in existence today.
Founded in 1969 in USA as a not-for-profit professional membership

association for the project management profession, PMI delivers value for
more than 2.9 million professionals working in nearly every country in the
world through global advocacy, collaboration, education and research.
PMI advances careers, improve organizational success and further mature

the profession of project management through globally recognized standards,
certifications, resources, tools, academic research, publications, professional
development courses and networking opportunities.
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Membership is being part of the world’s leading community of project, program and portfolio
professionals.
It powers your career by giving you an edge that highlights your dedication to employers,
colleagues and the community. It provides access to knowledge, networks and resources that
help you improve and advance.
Membership in PMI provides PMP Aspirants with:
➢ Complimentary digital copies of all PMI global standards including A Guide to Project
Management Body of Knowledge (PMBOK® Guide)
➢ Networking, mentoring and volunteering opportunities via PMI chapters and Communities of
Practice
➢ 24/7 exclusive access to project management knowledge and information on PMI.org,
ProjectManagment.com, and ProjectsAtWork.com
➢ Access to unabridged project management and business books via eReads and Reference
➢ Money-saving discounts on certification exams and foundational online courses
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➢ Be part of the largest PM community
➢ Track your certification status with myPMI
➢ Download the PMBOK® Guide for free
➢ Unlock 1,000+ tools and templates
➢ Get more, free opportunities to earn PDUs
➢ Save on career-advancing certifications
➢ Find relevant jobs with the PM Job Board
➢ Stay up-to-date with PMI publications

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Besides PMI, there are several other Bodies & Certifications which are offered in Project Management. Let us know
what those are:
• UK government agency Office of Government Commerce (OGC), especially for the UK government projects
• PRINCE2 (Projects in Controlled Environments, version 2) is a methodology
• PRINCE2 Foundation – Basic Level(75Q, 50% Pass Percentage)
• PRINCE2 Practitioner – Advanced Level(80Q, 55% Pass Percentage)
• PRINCE2 Professional – Advanced with Group Exercises(Assessment Based)
• The Association for Project Management(APM) is registered UK organization caters to Project management &
Program Management profession.
• Five Dimensions of Professionalism:
• Breadth – APM Body of Knowledge; Depth – APM Competence Framework; Achievement – APM Qualifications;
Commitment – Continuing Professional Development; Accountability – APM Code of Professional Conduct
• Introductory Certificate
• APMP Qualification
• Practitioner Qualification
• Certificated Project Manager – Discontinued.
• Risk Certificate
• The International Project Management Association (IPMA) is a Swiss registered non- profit organization for
promotion of Project Management as a Profession worldwide.
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• Offer Eight Certifications that recognize knowledge and competency
Certifications • PMP® certification held by more than 750,000 practitioners and growing worldwide
• Standards for Project, Program and Portfolio management are the most widely recognized.
Global Standards • PMBOK® Guide – Sixth Edition; Practice Standards & Frameworks; Lexicon of Project
Management Terms
Chapters and • Much of PMI activities takes place in chapters located in over 80 countries
• Chapters are open to PMI members and led by volunteers
Community
Training and • Live and Virtual events & e-learning courses and face-to-face seminars
• Offers a wide range of professional development opportunities
Education
• Expand the project management body of knowledge through research projects,

Academic symposiums and surveys
• Thought Leadership series each year, focused on a topic of strategic importance, with
Research insights and perspectives for leaders at all levels
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PMI offers a comprehensive certification program for practitioners with different levels of education and
experience. The certifications are developed and maintained through a vigorous process.
PMI® Certifications in Existence

CAPM® (Certified Associate in PMI-PBA
Project Management) (Professional in Business Analysis)
PMP® PMI-ACP®
(Project Management Professional) (Agile Certified Practitioner)
PgMP® PMI-RMP®
(Program Management Professional) (Risk Management Professional)
PfMPSM PMI-SP®
(Portfolio Management Professional) (Scheduling Management
Professional)
OPM3® (Organizational Project Management Maturity Model) Certification
PMI Certification Department Mission
Initiate, establish, evaluate, maintain and administer a professional
certification program to promote and support project management
practitioners SN Panigrahi, Essenpee Business Solutions,
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and the profession. India
➢Widely recognized Project Management Certification
➢Worldwide recognition of your knowledge of Project Management
➢Demonstrates Proof of Professional Achievement

➢Improves the way you manage your Projects
➢Increases your Marketability
➢Displays your willingness to pursue Growth
➢Increases Customer Confidence
➢Valued Globally across Industry Verticals & Companies
SN Panigrahi, Essenpee Business

3 Solutions,
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PMP is one of the best professional credential in the field of Project Management. The Project Management Guidelines,
Methodologies, tools and techniques, and the entire framework provide a more holistic view of project management,
enriching your knowledge.
According to Foote Partners LLC, an IT workforce research company, projects managed by people who are not PMP
certified project managers have only 25% success rate in contrast to 75% success rate of projects handled by PMP
certified managers.
Why should I go for PMP certification?

➢A professional with a PMP certification is recognized worldwide to handle projects with diligence and constructive
approach and enhances your marketability
➢Certifies your expertise in project understanding, time management, risk management, quality control,
leadership, budgeting, communication, documentation and integration
➢ Increased Earnings - contributes to Higher Billing Rate
➢ Better career opportunities to someone who is PMP certified and all of these skills add value to the organization
➢Improved Project Management Skills
➢Professional Validation of your Experience & Competence; a PMP credential gives you the most sought after
appreciation and visibility within your organization.
SN Panigrahi, Essenpee Business/ Solutions,
Source: http://www.pmchamp.com/benefits-of-pmp-certification
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PROJECT MANAGEMENT : ORGANISATIONAL IMPACT
The opportunity for project or senior management to work and learn together helps
ensure the organization make better decisions for the future. To the organization it
means:
•Projects are clearly understood at all levels, allowing them to stay:
• In budget
• On time
• On spec
•Organisations can remain competitive and manage change in a multi-dimensional
environment
•Have the ability to improve productivity and profitability
•Resulting in:
• More project success = profitability for the organization

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PROJECT MANGEMENT : PERSONAL IMPACT
You will gain:
•Enhanced leadership skills

•An understanding of the critical relationship between strategy and execution
•Empowerment to put into practice what they have learnt
•Lead cross-functional teams in a global context
•The ability to make good decisions
•An awareness of their own responsibilities
•A Drive to Succeed with Confidence

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In 1983, PMI published a whitepaper with an aim to identify and collate generally accepted project
management practices. This was then made as a standard. PMI studied thousands of projects across various
geographies to figure out what works and what does not, and put together these standards and practices.
A Guide to the Project Management Body of Knowledge, or in short ‘PMBOK’ is the project management
standard for the PMP and CAPM exams, brought out by PMI, the Project Management Institute.
PMBOK contains Standards, Terminologies, Practices And Guidelines, Methods, Processes and Best
Practices to manage a project, practically in any domain or industry. It describes project management life
cycle and related processes.
PMBOK PMBOK PMBOK PMBOK PMBOK PMBOK

1st Edition 2nd Edition 3rd Edition 4th Edition 5th Edition 6th Edition
1996 2000 2004 2008 20013 2017
There may be other industry-specific project management practices prevalent

in any industry and PMBOK prescribes common project management
standards.
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A Secondary Diploma (high
A Four Year University Degree OR
school or the global equivalent)
At least three years of project At least five years of project

management experience management experience
+ (within last 8 years) with
+ (within last 8 years), with
4,500 hours leading and 7,500 hours leading and
directing project tasks directing project tasks
+ 35 hours of formal Project + 35 hours of formal Project

Management Education Management Education
•Please read the pmphandbook.pdf from the http://www.pmi.org

site for details 24Solutions,
India
➢ Apply via www.pmi.org
➢ Application could be audited
➢ Receive authorization from PMI® (valid for 12 months)
➢ Book an exam appointment at a test center – www.prometric.com/pmi
PMI® Membership Non PMI

Membership
USD 139 – Annual
Membership Fee ($129+$10 Onetime Application Fee) -
Multiple Benefits including PMBoK®
Membership Benefits guide. -
PMI Exam Fee USD 405 USD 555
Total Payment 139+405 = 544 555
PMI Re-Exam Fee USD 275 USD 375
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➢ By default CBT(Computer Based Test) is available at Prometric test centers for Exam takers.
➢ For those who stay farther than 200 KM’s away from CBT test centers could request for PBT (Paper Based Test)
format of examination.
➢ Exam Duration is 4 Hours for total of 200 Objective Type Questions with 4 options and only 1 correct answer and
No Negative Marking
➢ Out of 200 Questions, 175 are for Final Marking and 25 Questions will be “Pre-test Questions” which are included
to assess if these questions can be included in the “master set” subsequently
➢ It is not possible to Differentiate Scoring & Non-scoring Questions.
➢ Exact Passing Score is Not Made Public
➢ Expect 90% Randomized Scenario Based Questions & 10% Straightforward Questions.
➢ Results are Immediate to showcase overall Pass / Fail and 5 Process Group Grades:
➢ Proficient
➢ Moderately Proficient
➢ Below Proficient grades
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What is the PMP Exam Passing Score?
PMI has played around with the passing score several times. It is a
common belief that 61% is the passing score for the PMP Exam.
However, this is not an official pass rate so no hard carded passing score
is available. Also, the passing score is subject to PMI discretion.

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Initiating Planning Executing Monitoring Closing Randomly Total
& placed
PMI® Process Controlling Non-
Groups Scoring
Questions
Percentage of 13% 24% 30% 25% 8%
Questions
Number of Scoring 23 42 52 44 14 175
Questions
Number of Non- Scoring 25 25
Questions
Number of Total 23 42 52 44 14 25 200
Questions

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 In case of Failure, Candidate can Retake the Exam at an Additional fee Three Times in One Year
PMI Re-Exam Fee USD 275 USD 375
 Certified PMPs have to Earn 60 PDUs – Professional Development units in Three Year Cycle
 What are PDUs?
 Professional Development Units (PDUs) are one-hour blocks of time that you spend learning, teaching
others, or volunteering.
Education Technical skill (8)

[Maximum of Leadership skill (8)
35 PDUs] Strategic and Business
PDUs can be Management skill (8)
earned under
Two Areas
Giving back Volunteering and creating
to profession knowledge (17)
(Maximum of Working as a profession (not
25 PDUs) more than 8)
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PMI Talent Triangle® highlights — the combination of skills that employers value most,
namely, technical, leadership, and strategic and business management. This framework
is a valuable asset to your ongoing professional development.
Skill Area Definition

Technical Knowledge, skills and behaviors
related to specific domains of project,
program and portfolio management.
The technical aspects of performing
your job/role.
Leadership Knowledge, skills and behaviors
involved in the ability to guide,
motivate and/or direct others to
achieve a goal.
Strategic & Knowledge of and expertise in the
Business industry/organization, helping you
Management align your team in a way that
enhances performance and better
delivers business outcomes.
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PMBOK® Guide – Sixth Edition
The 6th Edition was released on September 22nd, 2017

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It is a suite of structural elements or units that create a theoretical foundation for the project
management process.
For example, you want to build a house. House building will be your project. First, you need to create
a draft of the house and outline the structure including walls, ceiling, floor, doors, and so on.
Then you need to acquire tools and materials as well as hire workers who will do your project and
construct the house.
In this particular case, the framework of your project will be the draft, all the resources you are
going to utilize for building the house, and all your plans and expectations.
Of course, this example is just an example. Any other project has a specify framework of
management. The framework of a software development project differs from the framework of a
construction project; and so on. Below we give a common definition of PM framework.

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Project Management Framework (PM framework) is a Subset of Tasks, Processes, Tools and
Templates used in combination by the management team to get insight into the major structural
elements of the project in order to Initiate, Plan, Execute, Control, Monitor, and Terminate the Project
Activities throughout the Management Life-Cycle. PM framework allows using various
methodologies and approaches to plan and schedule the major phases of the life-cycle.
Regardless of the Type, Size and Nature of Project, a typical PM Framework includes Micro & Macro
Phases, Templates and Checklists, Processes and Activities, Roles and Responsibilities,
Training Material and Work Guidelines – all this information is organized and systematized
into a structure allowing managers and planners to control progress of their projects throughout the
life-cycle.
The idea behind the project framework is to create and share a clear understanding of the
basis of a project and share this understanding among all stakeholders, including the team.
The idea should be followed by all the stakeholders throughout the whole management life-
cycle, thereby the project will be accomplished according to a chosen methodology and
delivering expected results.

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Project Success Factors
•A project may be a set of interrelated tasks to be executed over a fixed
period and within certain cost, time and other limitations.
•Successful Completion - critical issue in software, infrastructure and other
time bound projects.
•Time and Cost overruns are the norm not Exception
•Cost escalation has been a prime cause of concern for the exchequer.
Meets the
Requirements
Within Meets
Budget Quality
When is a
Project Reduces
On Time
SUCCESSFUL Risk
?
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
Challenges
While the focus is ensuring project delivery, statistics show projects are often not delivered / delivered after missing several target dates
with huge cost overrun.
 Gartner group of 2011 said that projects were still failing at the rate of 70% - 80%
 Most Common Causes of Project Failure:

➢ Changing priorities within organization – 40%
➢ Inaccurate requirements – 38%
➢ Change in project objectives – 35%
➢ Undefined risks/opportunities – 30%
➢ Poor communication – 30%
➢ Inadequate sponsor support – 29%
➢ Inaccurate task time estimate – 27%
➢ Inexperienced project manager – 20%
 Top Contributors to Large IT Project Failure:

✓ Unclear objectives/lack of business focus
✓ Unrealistic schedule/reactive planning
✓ Shifting requirements/technical complexity
✓ Unaligned team/missing skills
✓ Unexplained causes
SN Panigrahi, Essenpee Business36
Solutions,
Source: PMI: Pulse of the Profession 2015: Capturing the Value of Project Management 2015
India
Project Progress Checklist:
•Project charter – does it clearly articulate authority and objectives for the project?
•Project estimates – do the estimates that support the project cost/price appear realistic?
•WBS – is the WBS complete and is it structured appropriately for this project; does it reflect all of the estimates
and all of the work that must be done to complete the project?
•Responsibility assignment matrix (RAM) – does the RAM account for and assign responsibility for all of the work
scope?
•Signed work orders and subcontracts – do these documents cover the entire scope of work outlined in the WBS?
•Performance metrics – are metrics presenting a complete picture of project performance? (Forman & Discenza,
2006)
•Key project indices – CPI, SPI, TCPI, IEAC, etc. (Fleming & Koppleman, 2005, Chap 10)
•Control accounts – are CV and SV clearly explained in variance analysis narratives?
•Time reporting – is time reporting accurate and is time being reported at the work package level?
•Copies of deliverables and deliverables receipts – is the project data management of these critical items
adequate?
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PROJECT MANAGEMENT
Set of knowledge, skills, best practices, tools and techniques that have significant
impact on project objectives and successful project outcome
➢ Has emerged as a Professional Practice on its own – Project Management Professionals
➢ Technical Knowledge and competence alone is not sufficient to MANAGE projects.
➢ “Accidental” Project Managers are a RISK in the business of Project Execution
➢ For Effective management of projects, Managers MUST be trained.
➢ Project Management is a SKILL - not a talent
➢ Project Managers are MADE .. Not BORN

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PROJECT MANAGER
The Person
• Responsible
• Accountable
Project
Manager

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PMBOK® describes the fundamentals of project A Project can be viewed as a Total System which
management in terms of processes. Each Project Transforms Input into Output, and has a
Management Activity is Accomplished as a Feedback Mechanism to assure that the output
Process. A process has some Inputs. A Set of
meets the goals and objectives set for the project.
Tools and Techniques are then applied on these
inputs. As a Result some outputs are produced. System - a set of things working together as parts of
These outputs may further become inputs to some a mechanism or an interconnecting network.
other processes.
Input Process Output

• All that is Required Tools & Techniques • What is Produced out of this
Process – Project
to Carryout a • ….. Which are Applied on the Objectives
Inputs. This is where Project
Process Manager’s Skills are Put to Use
Feedback SN Panigrahi, Essenpee Business Solutions,

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PMI Project Management Framework
10
5
Knowledge
Process Groups
Areas
Total
49
Processes
The Inputs, Tools, Techniques and Outputs (ITTOs) of each
Activity is laid out SN Panigrahi, Essenpee Business Solutions,
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INITIATING
Develop Project Charter
with Defined Objectives
CLOSING
PLANNING
Complete Formalities,
Develop Detailed Project Plan
Contract Closure,
Archive Documents
MONITORING &
EXECUTING
CONTROLLING
Directing and Managing
Measuring & Taking Corrective
Project Execution
Measures
SN Panigrahi SN Panigrahi, Essenpee Business Solutions,
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Process Groups No. of Processess
5th Edition 6th Edition
Initiating Process Groups 2 2
Planning Process Groups 24 24
Executing Process Groups 8 10
Monitoring & Controlling Process Groups 11 12
Closing Process Groups 2 1
Total 47 49

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• Combine, Unify and Coordinate the various project management activities within the five
Integration process groups.
7
Scope • Ensure the project includes all the work required, and only the work required, to complete the
6
Mgt. project successfully
Schedule • Manage the Timely Completion of the Project 6

Mgt
Cost • Plan, Estimate, Fund, Manage, and Control costs so the project can be completed within the
4
Mgt approved budget
Quality • Incorporating the organization’s quality policy regarding planning, managing and controlling
3
Mgt project and product quality requirements in order to meet stakeholders’ expectations.
Resource • Identify, acquire, and manage the resources needed for the successfully completion of the
6
Mgt project.
Communications • Required to ensure the planning, creation, distribution, control and monitoring of project
3
SN Panigrahi
Mgt information's
Risk • Planning risk management, the identification, analysis, and monitoring of risks on a project,
7
Mgt and the implementation of risk responses.
Procurement • Necessary to purchase or acquire products, services, or results needed from outside the
3
Mgt project team.
Stakeholder • Required to identify stakeholders, to analyze their expectations and impact on the project, and
to develop management strategies for effectively engaging stakeholders in decisions that 4
Mgt affect the project.
Total No.
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ITTO
Knowledge Areas Initiating Process Planning Process Group Executing Process Group Monitoring & Controlling Closing Process Group
Group Process Group
3.Direct and Manage 5.Monitor and Control
4. Project Integration 4.1 Develop Project 4.2 Develop Project Project Work 4.7 Close Project or
Project Work
Management Charter Management Plan 6.Perform Integrated Phase
4.Manage Project
Knowledge Change Control
1. Plan Scope Management
5. Project Scope Management 2. Collect Requirements 5. Validate Scope
3. Define Scope 6. Control Scope
4. Create WBS
1. Plan Schedule Management
2. Define Activities
6. Project Schedule
3. Sequence Activities 6.6 Control Schedule
Management
4. Estimate Activity Durations
5. Develop Schedule
7. Project Cost Management 1. Plan Cost Management
2. Estimate Costs 7.4 Control Costs
3. Determine Budget
8. Project Quality Management 8.1 Plan Quality Management 8.2 8.3 Control Quality
9. Project Resource 1. Plan Resource Management 3. Acquire Resources 9.6 Control Resources
Management 2. Estimate Activity Resources 4. Develop Team
5. Manage Team
10. Project Communications 10.1 Plan Communications
Management Management 10.2 Manage Communications 10.3 Monitor Communications
1.Plan Risk Management
2.Identify Risks
11. Project Risk Management 3.Perform Qualitative 11.6 Implement Risk Responses
Risk Analysis 11.7 Monitor Risks
4.Perform Quantitative
Risk Analysis
5.Plan Risk Responses
12. Project Procurement
Management 12.1 Plan Procurement
Management 12.2 Conduct Procurements 12.3 Control Procurements
13. Project Stakeholder 13.1 Identify 13.2 Plan Stakeholder 13.3 Manage Stakeholder SN13.4
Panigrahi, Essenpee Business Solutions,
Monitor Stakeholder
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Management Stakeholders Management Engagement Engagement India
Section – 1
Project Introduction

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Introduction
Projects are typically authorized as a result of one or more of the following strategic considerations:
➢ •Market demand
➢ •Strategic opportunity/business need
➢ •Social need
➢ •Environmental consideration
➢ •Customer request
➢ •Technological advance and
➢ •Legal requirement
Project Management:
The application of knowledge, skills, tools and techniques to project activities to meet project
objectives. Project management is accomplished through the appropriate application and integration
of the 49 logically grouped project management processes, which are categorized into 5 Process
groups and 10 Knowledge areas

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Project management is the practice of initiating, planning, executing, controlling, and
closing the work of a team to achieve specific goals and meet specific success criteria at
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Project Concept to Inception : This is about vision to have some idea / concept, studying the business case and
understanding the broad requirements, undertaking feasibility study to know whether the project is worth taking up, and
analyzing cost Vs benefits; taking a strategic decision outlining plan of action; work on the approach or road map; and
project startup by broadly defining its purpose and scope, the justification for initiating it and getting enough information
to confirm that the project should proceed.

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Project Introduction
What we What is the Objectives / Opportunities / Problem / Issue

Want?
Define the Goal
& Where we
Want to Go? Define the Objectives
Analyze Business Case

Where we Identify Resources & Constraints
are?
Do SWOT Analysis
Project
How do we Generate Strategies; Plan Optimal Resource Utilization

get from
where we are Choose Right Strategy
to where we
want to be? Define Structure, Budget, Schedule
Monitoring
What will
happen when Evaluation
we do?
Reporting
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Project Definition as per PMBOK 6th Edition
Project is a temporary endeavor to achieve defined objectives by creating a unique product,
service, result or outcome with a definite start and end date.
It is - Performed by people - Constrained by limited resources - Planned, executed and controlled
Project Features
Temporary doesn’t mean shorter duration of the project
Temporary it refers to the project’s engagement having a
Endeavour definite beginning and end
The duration of a project is finite - Limited Time frame
Achieve Projects are undertaken to Fulfill Objectives by

Project Defined producing deliverables
Features Objectives Projects Drive Positive Change
Projects Enable Business Value Creation
Unique Projects involve doing something that has not been

Product, done before in the same environment – Outcome May
Service, Result be Tangible or Intangible
or Outcome The project may require some innovation to be
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Project Basic Concepts
Examples of Project :
• Constructing a building or facility or industrial plant or infrastructure
• Developing a new product or service
• Business takeovers & acquisitions
• Effecting a change in structure, staffing or style of an organization
• Designing a new transportation vehicle
• Developing or acquiring a new or modified information system
• Creating a new piece of software or Upgrade of software
• Designing a new network infrastructure or Installing new workstations
• Implementing a new business procedure or process
• Organizing a Conference; Birth Day Party; Marriage celebration; Holiday trip
• Organizing a workshop for imparting knowledge.

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• Has a Lifecycle (phases)
• Has a Defined Timescale (specified start and end date)
• Specific Objectives - Deliverables
• Performs Definable Tasks (Scope)
• Time, Cost, Quality and Resource Constraints

Characteristics
Project
• Approved Budget
• Limited Resources
• Specific Deliverables (defined end result)
• Unique Set of Activities (do not involve repetitive processes)
• Involve an Element of Risk
• Achieve Beneficial Change SN Panigrahi, Essenpee Business Solutions,

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Project Management is the Application of Knowledge, Skills, Tools and
Techniques to meet the Project Requirements*
Project Management is the Planning, Organizing, Monitoring and Controlling of
all aspects of a project in a continuous process to achieve its objectives, both
internal and external
Accomplished through appropriate application and integration of project
management processes identified for the project
*Project requirements are stakeholders need and expectations from the project

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Why Formal Project Management?
Focus on Activities involving Skills, Resources and Cost
 Higher Quality and Increased Reliability.
 Improved Customer Relations.
 Better Control of Financial, Physical, and Resources.
 Shorter Development Times Leading to Lower Costs.
 Higher Profit Margins with Improved Productivity.
 Better Internal Coordination and Teamwork Leading to Higher

Worker Morale (less stress).
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▪Managing a project typically requires :
• Identifying and understanding the requirements
• Addressing various needs and expectations of
stakeholders
• Effective communications with all the stakeholders
• Managing and engaging stakeholders towards meeting
project
• Requirements and Creating Project Deliverables
• Balancing the competing project constraints -
Scope, Cost, Schedule, Quality, Resources and Risks

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Project Operation
Nature Temporary On-Going & Continuous
Purpose Introduce Positive Sustain Business
Change To keep the Organization Functioning
Output Unique Repetitive
Management Project Management Process Management
•At the completion of a project, the end product (or result) may get turned over to
the organization‟s operational areas for ongoing care and maintenance.
•Project can intersect with operations at various points during the project life cycle,
such as
•At each closeout phase
•When developing a new product, upgrading a product, expanding output
•While improving operations
•Until the end of product lifecycle
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Project Operation
Project is a temporary endeavor creating a unique product, Operation is a permanent endeavours that produce repetitive outputs
service, result or outcome
Definite time frame - with a definite start and end date. Projects Ongoing and routine in nature and intended to sustain the business
are conducted to attain an objective and then terminate.
Objective of project is to bring about driving change in the Objective of operations is to improve processes continually.
organization.
Team roles end with the project Team roles are continuing and routine
Temporary team Stable Organization
Team require multiple skill sets Team require specialized skills
Nature of work – first time or not done before Nature of work repeated
Planning – Project to project / case to case basis Annual planning cycle
Time, Cost, Scope constraints - Difficult to estimate schedules Budgets well set and fixed events – fairly known risks
and budget because of uncertainties / risks
Organizations use projects to change or modify operations, An ongoing organizational function that performs activities to produce routine products or
products and services supply services
Shared Characteristics
Project Operation
Performed by People
Constrained by limited Resources
Planned, executed and controlled
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Mock Exam Question
Helena is tasked with the responsibility to manage the process of producing cars. She has
to overlook the availability of raw materials, manufactured components and labour. Also
she has to ensure the cars produced meet the quality standards specified by the company.
What is Helena working on?
1. Project
2. Operation
3. Management
4. Profolio
Ans : 2 Operation

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Portfolios - A collection of projects, programs, sub-portfolios, and operations managed as group
to achieve strategic objectives. Projects and programs with in the portfolio may or may not be
Interdependent or Directly Related.
Linked to organizational strategic objectives related to project selection, prioritization, funding,
and other strategic decisions
Portfolio Management - Centralized management of one or more portfolios to achieve
strategic objectives. It also confirms portfolio are consistent with and within aligned
with organizational strategies

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Project Portfolio Management
The systematic process of selecting, supporting, and managing the firm’s collection of
projects.
Portfolio management requires:
decision making,
prioritization,
review,
realignment, and
reprioritization of a firm’s projects.

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 Grouped with in a portfolio - Are groups of related projects, sub-programs and
program activities managed in a coordinated way to obtain benefits not available from
managing program component individually e.g. shared benefits, shared resources
✓ Example : Installing a new communication satellite system -

Project 1 : Design of the satellite and the ground stations
Project 2 : Construction of satellite and ground stations
Project 3 : Integration of the system
Project 4 : launch of the satellite
Only related projects or Sub-programs are grouped in a program.
However even un-related programs can also form part of portfolio.

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▪ Application of knowledge, skills and principles to a program to achieve
program objectives and to job
▪ Focuses on interdependencies between projects to determine optimal

approach for managing them
▪ Program manager focuses on delivering tangible e.g. Growing operating

margin or intangible e.g. Improving the morale of the team benefits to
the organization while a project manager focuses on fulfilling the
requirements of a project

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Projects
Projects - Related Activities to be performed to achieve a unique outcome with definite start and end
dates.
Related or un-related projects also can form part of a portfolio. However only related projects can be
grouped into a program
Project Management - is a set of processes for initiating, planning, executing, monitoring, controlling and
closing projects through application of knowledge and skills and using relevant tools and techniques to
achieve the project objectives.
Project management is integration of 49 logically grouped project management processes, which are
categorized in to five process groups & 10 Knowledge Areas

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Related Projects, Programs,
Portfolio Or Sub-portfolios, and
un-related Operations
Program
Only Projects
Related
Project
Only Activities
Related
Example of a Project – Construction of a Residential building

Example of a Program – Construction of a housing complex with several buildings
Example of a Portfolio – All the Residential & Commercial Projects of the Company &
also its Maintenance SN Panigrahi, Essenpee Business Solutions,
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• The term Organizational Project Management (OPM) was coined by
John Schlichter in May 1998 in a meeting of the Standards Committee of
the Project Management Institute.
• Framework in which projects, programs and portfolios are integrated

with organizational enablers in order to achieve strategic objectives.
• Ensures undertaking of right projects and allocations of critical resources

appropriately
• Ensures all levels understand and support strategic vision
Strategy
Portfolios
Programs
Projects Results
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Organizational Project Management (OPM) - is a strategy execution framework
utilizing project, program and portfolio management; linking management principles with
strategy, and deliver organizational strategy and advances organizational capability.
OPM - “the systematic management of projects, programs, and

portfolios in alignment with the achievement of strategic goals.” - PMI
71Solutions,
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Aligns with organizational strategies by
Portfolio selecting the right programs or projects,
Management
prioritizing the work, providing resources
etc
Strategies with
Organizational
Harmonizes its projects and program
Organizational
Aligning
Project Program components and controls interdependencies.
Management Management Focusses on Optimal Approach for Managing
(OPM)
them
develops and implements plans to achieve

Project specific scope driven by objectives of the
Management
program or portfolio

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Organizational Project Management Maturity Model (OPM3®) - is a globally recognized best-practice
standard for assessing and developing capabilities in Portfolio Management, Program Management, and
Project Management. It is published by the Project Management Institute (PMI). OPM3 provides a method
for organizations to understand their Organizational Project Management processes and measure their
capabilities in preparation for improvement.
Project Management Office (PMO) - is an organizational entity that centralizes governance and
management of projects by creating and maintaining standards for project management methodologies,
tools, sharing resources, procedures and guidelines to be used in the organization.
PMO Structure may vary in degree of control and influence they have on projects within the organization
such as Supportive, Controlling and Directing
PMO can ensure that responsibilities are properly identified and correctly assigned.

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Competing Project Constraints
The three most significant project constraints -- schedule, cost and scope -- are sometimes known as the triple
constraint or the project management triangle. Additionally Three more Constraints are Added : Quality, Risk
& Resources.
If any one of these factors changes,

then at least one of the other factors
also will change.
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Iterative Activity
Due to the potential for change, the development of the project management plan is an iterative activity,
progressively elaborated throughout the life cycle of the project.
Progressive Elaboration
Progressive elaboration is a continuous iterative process of refining and further detailing the project plan
based on more detailed information and insight that becomes available as the project progresses.
Projects & Strategic Planning

Projects are often used as means of achieving organizational objectives and organizational Strategic Plans
like – Market Demand, Strategic Opportunity / Business Need, Social Need, Environmental consideration,
Customer Request, Technological Advancement, Legal Requirement

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Project Based Organization (PBO) – forms of organization that create temporary systems for
carryout the project work – can be of different types like Functional, Metrics or projectised
Organizational Governance – Provides policies and procedures pertaining to the subject
matter of the product or service and governance criteria can impose constraints on the project
Business Value – Entire value of the business - Total sum of all tangible and intangible values
All organizations (profitable or non-profitable) focus on attaining business value for their
activities.
Tangible Value – which can be seen physically, like monetary assets, fixtures, stockholder equity
and utility
Intangible Value – which can’t be seen, like goodwill, brand image, public benefits, trade mark
etc.
Portfolio Management aligns projects, programs or operations to the organization strategy
Role of Project Manager – responsible to lead the team to achieve project objective
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1. Responsibilities & Competencies of the Project Manager – PM should possess competencies like
Knowledge (subject knowledge), Performance (able to accomplish), Personal (attitudes, leadership,
core personality characteristics)
2. Interpersonal Skills of PM – Leadership, Team Building, Motivation, Communication, Influencing,

Decision Making, Political & Cultural Awareness, Negotiation, Trust Building, Conflict Management and
Coaching
3. Project Management Body of Knowledge - The PMBOK® Guide Sixth edition, is the standard for
managing most projects most of the time across many types of industries. This standard describes the
project management processes, tools, and techniques used to manage a project toward a successful
outcome.

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Chapter – 1.2
Project & Development Life Cycle
This section describes how organizational influences

affect methods used for staffing, planning, execution,
monitoring and controlling

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An organization’s culture, style, and structure influences how it’s projects are
performed.

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• System : collection of various components that together can produce results not obtainable by
individual components alone
• Management Elements
• Governance Frameworks
• Organizational Structure Types
• Components comprising the key functions or principles

or general management
• Division of work using specialized skills and
availability to perform
• Authority given to perform work
• Discipline of action
• Optimal use of resources
• Security and safety of people
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• Refer to organizational or structural arrangements at all levels to
determine and influence the behaviour of organization’s members
• Multidimensional concept:
• Includes consideration to
people, roles, structures, procedures, norms, Relationships and
policies
• Provides direction and oversight

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Project Governance
• Manage projects in a consistentmanner
• Maximize value of project outcomes
• Align projects with company

business strategy

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Project Governance
➢ Refers to framework, functions and processes that guide project management activities to create unique output.
➢ Is a very comprehensive and a consistent method of controlling the projects
➢ It ensures the success of projects by defining and documenting and

➢ communicating reliable, repeatable project practices
➢ Its framework made up of structure, processes, decision-making models and tools for managing the project
helps the entire project team for supporting and controlling the project for successful delivery
➢ An oversight function that is aligned with the organization‟s governance model and that which includes the
project life cycle
➢ PMO may also play some decisive role for project governance
➢ Project governance approach should be described in the project management plan

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• Organizations have their own styles and cultures that influence how
project work is performed
• One of the keys to determining the type of organization you work in is

measuring how much authority senior management is willing to
delegate to project managers

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1. Organization - is an entity, a social unit of people such as an institution or an association,
that is structured and managed to meet a need or to pursue collective goals and is linked
to an external environment.
2. Organizational Culture is the values and behaviours of humans who are part of an
organization that contribute to the unique social and psychological environment of an
organization
3. Organization culture is shaped by shared values, common experiences, traditional
practices and institutionalized systems like – shared vision, mission, values,
believes and expectations; Regulations, policies and procedures; Motivation and reward
systems; Risk tolerance; Leadership, hierarchy, and authority relationships; Code of
conduct, work ethics; Operating environments etc

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1. Organizational Communication - A process by which activities of an organization are
collected and coordinated by exchange of messages among interrelated individuals
within a particular environment or setting to reach the goals of both individuals and the
organization
2. Organizational Structure - The typically hierarchical arrangement of lines of authority,
communications, rights and duties of an organization that defines how activities such as
task allocation, coordination and supervision are directed towards the achievement of
organizational goals
3. Influence of Organizational Structures on Projects – Most organization structure
arrangements are structured in one of 3 ways: Functional, Projectized, or Matrix

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1. Project Expeditor – works as Staff Assistant and communications coordinator –
virtually cannot make or enforce any authority
2. Project Coordinator – have powers to make some decisions, have some authority and
report to higher level manager
Project Expeditor Project Coordinator

Works as Staff Assistant and Has powers to make some decisions
communications coordinator – have some authority and report to
virtually cannot make or higher level manager
enforce any authority

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A manager and the head of engineering discuss a change to a major work
package. After the meeting, the manager contacts you and tells you to
complete the paperwork to make the change. This is an example of:
A-) Management attention to scope management.

B-) Management planning.
C-) A project expediter position.
D-) A change control system.
Answer is C. In this situation, project manager acts as the secretary of the

project and does the paper work. So this is an example of project expediter
position where project manager does not have any authority and power.
Project manager does only paper work.
Knowledge Area: Organizational Influences and Project Lifecycle

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1.Co-location - Co-location is the strategy of placing many or all of the most active project team members in the same physical
location to enhance their ability to perform as a team. This results in an enhanced communication between the team members.
2.Virtual Teams - are individuals or groups who dispersed geographically, but work together to accomplish a common goal or a
project scope. These teams may have limited or no face to face interactions. Though the team members may be physically located in
different geographies, they share a common goal and have roles and responsibilities defined like any other project teams.
3.Virtual Collaboration Technique – enable virtual teams to accomplish the common goal. Virtual teams need to interact in the
same manner as other traditional teams, the collaboration tools facilitate this interaction.
Co-location Virtual Teams

Co-location is the strategy of placing many or Virtual Teams - are individuals or groups who
all of the most active project team members in dispersed geographically, but work together to
the same physical location to enhance their accomplish a common goal or a project scope.
ability to perform as a team. This results in an These teams may have limited or no face to face
enhanced communication between the team interactions. Though the team members may be
members physically located in different geographies, they
share a common goal and have roles and
responsibilities definedSN
likePanigrahi,
any otherEssenpee
project teams.
Business Solutions,
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Project manager - is in charge of all aspects of the project, assigned by the performing
organization to achieve the project objectives.
The project manager is the lead person responsible for communicating with all stakeholders,
particularly the project sponsor, project team, and other key stakeholders.
Project team - is comprised of the project manager, project management team, and other
team members who carry out the work but who are not necessarily involved with management of
the project.
Composition of project team may vary depending on organization culture, scope and location. The
team may be dedicated or part time.

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➢ Enterprise Environment Factors (EEF)
➢ Organizational Process Assets (OPA)
➢ Organizational Systems (OS)

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Enterprise Environmental Factors – (EEF)
Enterprise Environmental Factors – (EEF) are any or all environmental

factors either external or internal to the project that can enhance or constrain
project management options and may have a positive or negative influence on the
outcome.
These include but are not limited to organizational structure and culture,
infrastructure, market conditions, political climate, stakeholders risk
tolerance and project management information system etc.

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• Refer to both internal & external environmental factors that surround or
influence a project’s success
• As an input in almost all project management process
• May enhance or constrain project management options
Enterprise Environmental Factors

Internal to Organization External to Organization
➢ Organizational culture, structure, and ➢ Marketplace conditions
processes ➢ Political, Social and Culture Influences and
➢ Infrastructure Issues
➢ Geographic distribution of facilities and resources ➢ Legal Restrictions / Govt. Regulations
➢ Resource Availability ➢ Commercial Databases
➢ Employee Capability ➢ Government or Industry standards
➢ Information Technology Software (PMIS) ➢ Academic Research

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Organizational Process Assets (OPA)-
Includes plans, policies, processes, Guidelines, SOPs and knowledge bases specific to and
used by performing organization.
Organizational Process Assets (OPA)

Processes & Procedures Corporate Knowledge Base
➢ Organizational Standard Processes such as ➢ Process measurement databases
Standards, Policies, Procedures ➢ Project files from previous projects
➢ Standardized Guidelines, Work Instruction, ➢ Historical Information & lesson learned
SOPs, Proposal Evaluation Criteria, and knowledge bases
Performance Measurement Criteria ➢ Risk Register
➢ Templates ➢ Stakeholder Register
➢ Financial Control Procedures ➢ Issue and defect management databases
➢ Procedures for Prioritizing, approving, and ➢ Configuration management knowledge
issuing work authorization, etc. bases
➢ Financial Databases, etc.
Configuration management specialists identify and document configuration requirements, control changes, record and report
changes, and audit the products to verify conformance to requirements.
This contains the change history: different versions and baselines for the company standards and policies and for the archived
project documents. SN Panigrahi, Essenpee Business Solutions,
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The Environment in which projects
operate
Project Management Office (PMO)
A project management office (PMO) is a management structure that standardizes the project-related
governance processes and facilitates the sharing of resources, methodologies, tools, and techniques.
There are several types of PMO structures in organizations, each varying in the degree of control and
influence they have on projects within the organization, such as:
Supportive. Supportive PMOs provide a consultative role to projects by supplying templates, best
practices, training, access to information and lessons learned from other projects. The degree of
control provided by the PMO is low.
Controlling. Controlling PMOs provide support and require compliance through various means. The
degree of control provided by the PMO is moderate.
Directive. Directive PMOs take control of the projects by directly managing the projects

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➢ Managing shared resources across all the projects administered by the PMO
➢ Identifying and developing project management methodology, practices

➢ & standards
➢ Coaching, Mentoring, Training and Oversight
➢ Monitoring compliance with project management standard policies, procedures , and
templates via project audits
➢ Developing and managing project policies, procedures, templates, and other shared
documentation (organizational process assets)
➢ Coordinating communication across projects

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Integrated Change Control involves identifying, evaluating, and managing changes
throughout the project life cycle.
Change Control Boards (CCBs) - A formal group of people responsible for approving or
rejecting changes on a project.
Provides guidelines for preparing change requests, evaluates them, and manages the
implementation of approved changes
Includes stakeholders from the entire organization

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• Depending on the organization structure, a project manager may
report to a functional manager
• In other cases project manager may be one of the several project

managers who report to a portfolio or program manager that is
ultimately responsible for enterprise wide projects, where he works
closely with the portfolio or program manager to achieve the project
objectives

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Project Manager’s Role
Project Manager’s sphere of influence
Stakeholders
Customers
Suppliers
End Users
Sponsors
Governing Bodies
Steering Committees
PMO
Project Team
Resource Managers
Project
Manager
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Responsible for Accomplishing Project Objectives and managing stakeholders‟ Expectations
Works to Balance the Competing Constraints on the project with the resources available
The project manager must Define the Project, reduce it to a set of Manageable Tasks,
obtain appropriate Resources and build a Team to perform the work.
The project manager must set the final goal for the project and Motivate his / her Team to
complete the project on time.
The project manager must Inform all Concerned Stakeholders of Progress on a regular
basis.
The project manager must Assess and Monitor Risks to the project and Mitigate them.
No project ever goes exactly as planned, so project managers must learn to Adapt to and Manage
Change.
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Analogy is made between a Project Manager and an
Orchestra Conductor
In the first section 3.1 Overview, a useful analogy is made between a
project manager and an orchestra conductor in the following areas:
•Membership and roles–a project and an orchestra are both made up of

many members, each playing a different role, and the project manager, like
the orchestra conductor is the leader of the team.
•Responsibility for team–both the project manager and orchestra
conductor are responsible for the outcome of what their teams produce,
and they need to take a holistic view of their team and the product of their
work in order to make sure the objectives (a project on the one hand, and
a concern on the other) are successfully achieved.
•Knowledge and skills–a project manager needs to know enough about
project management to lead the team, but does not need to know enough
to do every role on the project. He or she will be relying to an extent on
the technical expertise of the members of the team, just in the same way
that an orchestra conductor may lead the violin players as part of the
orchestra without being able to play the violin.
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The ideal skill set – the Talent Triangle – is a combination of technical,
leadership and strategic and business management expertise.
Technical Project Leadership

Management
knowledge, skills and
Domain Specific behaviors specific to
Examples: leadership-oriented skills
•Requirements gathering examples:
techniques •Negotiation; Conflict
•Project scheduling and management
Costing •Motivation; Communication
•Risk Management •Giving/receiving feedback
•Scope Management •Influencing
•Project Planning Strategic & Business •Problem solving
•Project Control Management •Team building
examples: •Leading groups and teams
• Strategic planning/alignment; Mission Business
and environmental analysis; Goals and objectives
•Finance
•Operational functions – e.g. marketing, legal
•Contract management
•Complexity management
•Innovation India
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Technical Project Management Skills
• Knowledge, skills and behaviours related to specific domains of project,
program and portfolio management. The technical aspects of performing
role.
• Critical success factors
• Issue logs
• Tailor tools , techniques and methods
• Planning and prioritization
• Manage project elements e.g. schedule, cost, resources, risks
• Tailor tools, techniques and, method for each project
Leadership Skills
Knowledge, skills and behaviours needed to guide, motivate, and direct a
team, to help an organization achieve its business goals Understand
business aspects of project
• Dealing with people
• Qualities and skills of a leader
• Politics, Power and Getting the things done

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Strategic and Business Management Skills
Knowledge of an expertise in the industry and organization that enhanced
performance and better delivers business outcomes
•Understand business aspects of project

•Work with sponsor, team, and SME to develop an appropriate project
delivery strategy
•Implement strategy to maximize the business value of project
•Ability to determine which business factors to be considered

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TOP 10 QUALITIES OF A PROJECT
MANAGER
VISION
PROBLEM COMMUNICATI
SOLVING ON
TEAM
INTEGRITY
BUILDING
QUALITIES OF A
PROJECT
MANAGER
ENTHUSIASM
COMPOSURE
/PASSION
EMPATHY
DELEGATION
/COMPASSION
COMPETENCE
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Effective project manager should have a balance of technical, interpersonal,
conceptual skills that help them analyze situations and interact effectively.
Project Manager – An Integrator

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That project managers will be updating orders daily, resolve issues and ensure that the
customer formally accepts the product within 30 days of completion. The project manager
will not perform planning or provide documentation other than daily status.
How would you define this situation?

A.Because each individual order is a “temporary endeavor,” each order is a project
B.This is program management since there are multiple projects
involved
C.This is a recurring process
D.Order incurring revenue over $100,000 would be considered project and would
involve project management
Answer is C
Explanation: Because orders are numerous and of short duration and
about resolving issues, these are recurring processes, not a project. The
project manager is not doing planning or other project management
activities, part of operations.
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A project manager is managing his second project. It started one month after the first
and both are ongoing. Though his first project is small, one seems to be growing in size
every day. As each day passes, the project manager is beginning to feel more and more
in need of help. The project manager has recently heard that there was another project
in the company last year that is similar to his project. What should he do?
A.Contact the other project manager and ask for assistance

B.Obtain historical records and guidance from the PMO
C.Wait to see if the project is impacted by the growth in scope
D.Make sure the scope for the project is agreed to by all the
stakeholders

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Answer is B
Explanation: There are many things the project manager could do. Choice A
is not the best choice, as the other project manager might not be an
experienced mentor. His advice might not be adequate to help this project
manager.
Choice C is reactive, while a project manager should be proactive.

Choice D is not the best choice. It would be helpful, but does not
specially address the issues in the situation.
Hence Choice B is the answer - If the PMO is contacted, the project
managers, historical information form many projects and have the
assistance of someone whose job it is to help

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Project Stakeholders
•Stakeholder – is any individual, group, organization or entity that is either
actively involved in the project or has a vested interest in the project.
Stakeholders may be internal or external; positive or negative; performing or
advising.
•Stakeholders are comprised of customers & user, sponsors, the

performing organization team, functional managers, sellers, business
partners and the other affected or interested public.

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1. Stakeholders have different levels of authority and the authority levels are also vary during the
project life cycle. Stakeholders may exert influence over the project & it’s deliverables.
2. Stakeholder identification is a continuous process throughout the life cycle of the project.
3. Project Governance – provides the project manager and team the required structure,
processes, decision-making models, and tools for managing the project
4. Project Life cycle - is a sequence of project phases from project initiation to closure, generally
phased in a sequential order.

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Project Life Cycle consists of four stages - starting the project, organizing and preparing,
carrying out the work, closing the project
Starting the Involves High-level management planning - Conceive the idea, carry out broad
feasibility on the impact and success of the project, identify the project manager, and
project
other relevant project stakeholders; create project charter
Characterized by low cost and staffing level; high risk and uncertainties; Ability of
stakeholder to influence the project outcomes is greatest
Organizing Project scope is defined and the objectives are formalized; project team is formed;
various project plans are developed, such as the communication management plan,
and Preparing
the risk management plan, the cost management plan, etc. The different plans are
Project Work then integrated to form the project management plan, which is the primary output of
this phase.
Carrying out This is the action phase of a project where work is done in fulfilling the project
management plan. In this phase the highest staffing is required in most projects. Also,
project work
this is where the bulk of the budget (cost) is expended. The outputs of project
implementation are the project deliverables.
Closing the This is the last phase of the project lifecycle. It is the phase that formally brings a
project to an end. During this phase, the client must have formally accepted the
project SN Panigrahi, Essenpee Business Solutions,
deliverables of the project (product of the project). This phase of the project is has the 114
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•Each stage in the project life cycle has different characteristics in terms of cost
and staffing levels, level of uncertainty, and the cost of changes
•Cost and staffing – levels are low at the start, peaks in the middle and fall off, and drop
rapidly as the project draws to a conclusion.
•Cost changes is lower at the start and higher as the project continues.
•Completion – The probability of successful completion generally gets progressively higher as
the project continues.
•Stakeholder Influence – on the final characteristics of the project’s product and the final cost of
the project is highest at the start and gets progressively lower as the project continues.
•Level of uncertainty and Risk is greater at the start , chance of successful completion grows higher as
the project continuous SN Panigrahi, Essenpee Business Solutions,
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1. Project life cycle is different from Product life cycle
2. Product Life Cycle - represents the amount of revenue a product generates over time,
from its inception to the point where it is discontinued. It spans the entire lifecycle –
has five stages -introduction, growth, maturity, and decline.
3. A project life cycle can exist independently of a product life cycle, run
concurrently with it, or form part of the product life cycle. A project life cycle
measures the work that goes into a project from beginning to end. The phases in project
life cycle are initiation, planning, execution, monitoring and closure.
4. Project Life Cycle (PLC) is a collection of all phases that a project passes
through from its initiation to closure
5. Maximum time is spent in execution phase
6. Monitoring and control take place throughout the project life cycle
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6. Project phase, a part of the project life cycle is a grouping of
logically related project activities based on some logic or
commonalities. Project phases could be sequential or overlap and
generally result is completion of major deliverables at end of the phase.
For instance there may be a procurement phase, a testing phase, a
pilot phase, a full implementation phase
Project phases are time bound with start and end dates.
Project Phases aren't the same as project Stages and don't have a
natural one-to-one relationship with stages.
7. Project Stage is represented by intervals between each and every
Project Board Meeting. Stage boundaries highlight points in the project
where progress is reviewed and the plan reassessed and decide
whether to continue with, abandon, or kill a project.
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1. Differences – In general, differences between or among stakeholders
should be resolved in favor of the customer.
2. Managing – is primarily concerned with “consistently producing key results

expected by stakeholders,”
3. Leading – Establishing direction vision of the future and strategies,

Aligning people to vision, Motivating and inspiring.

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• Development Life cycle - Phases in a project lifecycle, associated
with development of product, service, or result.
– Development Life Cycles –
predictive, iterative, incremental, adaptive or hybrid
• Project Life Cycle - Phases in project

– Predictive and Adaptive
Predictive Life Cycle
Iterative Life Cycle

Project
Life-Cycle
Incremental Life Cycle
Adaptive Life Cycle

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Predictive Life Cycles– (Also known as Fully Plan – Driven)
In this type of model, the phases defined may have sequential or overlapping
relations or even a combination of both. Work performed in each phase is
distinct from the predecessor or the successor phase. This type of approach
suits well to small projects with minimal complexity and where the product to
be delivered is fairly well understood.

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Predictive Life Cycles
Predictive life cycles (also known as classic or planning-focused life cycles) are those
in which the scope, deadline and cost are determined as soon as possible in the
project life cycle and efforts are focused on meeting the commitments
established for each one of these factors.
These projects are normally organized into a series of sequential or consecutive

phases, where each one is focused on a specific sub-product or activity. Normally, the
work undertaken in one phase is very different to all the rest and so the project team
will vary according to the phase under way at any given time.
From the start, project management focuses on defining the scope and drawing up
a detailed plan of the necessary activities. From there, work is focused on
following the plan. Any project scope change must be managed explicitly and
usually leads to a review of the plan and formal acceptance of the new plan.

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Iterative & Incremental Life Cycle
Iterative & Incremental Life Cycle - This approach evolved to counter the existing constraints
in the traditional approach especially where there was a need to adapt to changes. The
approach is cyclic in nature and each cycle delivers an added functionality and is iterated till
the phase exit criteria are met.
Iterative or incremental life cycles are those in which the activities of the project are repeated in phases
or iterations and understanding of the product by the project team increases in each one. The iterations
develop the product through a series of repeated cycles that successively add functionality to the product.
At the end of each iteration, a deliverable or set of deliverables will have been produced. Future
iterations may improve said deliverables or create new ones. The final product will be the accumulation of
functionalities built up during the various iterations.
Iterative or incremental life cycles are chosen when it is necessary to manage vague objectives or
considerable complexity, or when the partial delivery of the product is key to success. This type of life
cycle enables the project team to incorporate feedback and gradually increase the experience of the team
during the course of the project.
Large and complex projects are frequently executed in an iterative fashion to reduce risk.

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Iterative life cycle
❑ Requirements dynamic, repeated until correct, single delivery
❑ Develop the product through a series of repeated cycles,
❑ Allows feedback on partial completed or unfinished work to improve
and modify deliverable.
❑ Works well when uncertainty is high, when project incurs frequent
changes and stakeholders have different view of desired
Prototype Refine
Analyze Analyse Build Deliver

Design Test

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Incremental life cycle
❑ Requirements dynamic, performed once for a given increment, frequent
small deliveries
❑ Provide finished deliverables which customer can use immediately
Analyze Analyse Analyze Analyse

Design Design Design Design
Build Build Build Build
Test Test Test Test
Deliver Deliver Deliver Deliver

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The main difference between them is that an iterative process makes progress through
continuous refinement while an incremental process makes progress through small increments.
So if I am a PM for a software project, an iterative approach would be to initially build the overall
product and then refine the weak areas, while an incremental approach would be to build each
individual area one at a time.
Generally, an iterative product will get to market before an incremental product, but the
incremental product will be more complete when initially released.

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Adaptive Life Cycle – (Also known as change driven or Agile method) –
This method also iterative and incremental but have very rapid iterations and
within fixed time and cost. In the Adaptive Life Cycle, Customer Involvement
is the key to successful Projects. The customer and the sponsor form a part of
the Delivery Team.
Sometimes in Agile approaches, the phases may not be clearly defined. It

relies heavily on customer feedback and the ability of the team to
quickly work on the feedback and incorporate the same into the Project.
Communication and Collaboration are of paramount importance in
implementing Projects using the agile methodologies.
Adaptive methods are generally preferred when dealing with a rapidly

changing environment, when requirements and scope are difficult to
define in advance

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Adaptive life cycles, also known as change-focused methods or flexible
methods, respond to high levels of change and to ongoing participation by
the interested parties.
There are two basic models for this type of life cycle, those focused on the
flow (for example, Kanban) andothers focused on iterative and incremental
cycles (for example, Scrum).
Very clear limitations are set on the concurrence of activities (Work in Progress) for
the former and on very rapid iterations (between 1 and 4 weeks) in which the work
is done for the latter (Sprint).
In flexible models, the overall scope of the project will usually be broken
down into a set of requirements or projects to be undertaken (sometimes called
Product Backlog). At the start of an iteration, the team defines the functionalities to
be tackled in that cycle. At the end of each iteration, the product should be ready
for review by the client. This type of life cycle requires teams to be highly involved
and the sponsor or client to provide constant feedback.
Generally-speaking, flexible methods are chosen in environments that

change swiftly, when the scope is unclear or when the value contribution is highly
variable and with highly involved teams.
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High
Incremental Agile
Frequency
of Delivery
Predictive Iterative
Low
Low High
Degree of Change

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Assume your company is a leader in the market in production of cereal products. It has been in this market
for over 50 years. You are the project manager for a new product that is a derivative from the company's
core product. As you determine a life cycle for this project, you believe you should follow one that
is______________.
•A. Incremental
•B. Predictive
•C. Iterative
•D. Adaptive
Correct Answer: B
If the product to be delivered is well understood, a predictive life cycle or one that is fully plan driven is
recommended. The project's scope, time, and cost to deliver it are determined in the project life cycle as
early as possible.

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Progressive Elaboration vs Rolling Wave Planning and Prototyping
Some PMP aspirants get confused with the difference between Progressive Elaboration and Rolling Wave
Planning. The concepts are so similar that the confusion is legitimate. So, let’s understand these concepts
and look at the differences (or similarities). We’ll look at a third concept - Prototyping - while we are at it, all
with the help of some easy to understand examples to reinforce the concepts.
What is Progressive Elaboration?
Planning is an iterative process. Often times, it’s difficult to do detailed planning of a project in the beginning.
As the project evolves, and more specific and accurate details are available, the planning gets more detailed.
With each successive iteration of the planning process, the project plan becomes more elaborate and
complete. This approach to planning is known as Progressive Elaboration.
According to the PMBOK® Guide, 6th Edition:

Progressive elaboration involves continuously improving and detailing a plan as more detailed and specific information
and more accurate estimates become available. Progressive elaboration allows a project management team to define
work and manage it to a greater level of detail as the project evolves.

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Two forms of Progressive Elaboration
The PMBOK® Guide, 5th Edition mentions two forms of Progressive Elaboration
- Rolling Wave Planning and

- Prototypes.
What is Rolling Wave Planning?

Rolling Wave Planning is one of the techniques in the ‘Define Activities’ process under Project Time Management. In this
technique, detailed planning is done for activities in near term and high-level planning for activities to be performed
far away in the future. As the project progresses, and requirements become more clear, more detailed planning is done for
the work packages at lower levels of the WBS.
Example: Let’s say you want to visit India on vacation and your objective is to have fun and explore the country. However,
you’ve never been there before. You do however know some places of interest like The Taj Mahal.
Initially, you decide that you’ll leave on 20th May 2018 and return on 25th Jun 2018. You book your flight tickets and hotel
room in New Delhi (one of the cities with an International Airports).
Once you reach New Delhi, you talk to the locals and figure out all the places of interest. Then you plan your days, like when
you want to visit each place, how you are going to get there, where you’ll stay, what you’ll do there, etc. Your plans become
more detailed as days progress.
This is an example of Rolling Wave Planning.

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What are Prototypes?
Prototypes are a technique in the ‘Collect Requirements’ process under Project Scope
Management. Prototyping is a method of obtaining early feedback on requirements by providing
a “tangible” working model or a mock-up of the expected product before actually building it. It
gives stakeholders an opportunity to test and experiment with a model of their final product and
give them a way to ‘visualize’ their end product. Prototypes help to identify problems early in the
project and reduce project risks.
Let’s take an example again. Your company wants to build a commercially viable model of a
Hydrogen-powered car. Initially, your researchers build several working models (prototypes) of
the car, maybe of a smaller size, to conduct experiments and check the feasibility of the project.
Based upon the results of the feasibility studies, your company decides whether to move
forward with or kill the project.

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Chapter – 3
Project Management
Processes

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Project Management is management of set of related activities that need to be
accomplished on a specific date with a limited budget through application of
knowledge and skills and using relevant tools and techniques to achieve the project
objectives. Because of its nature, coordinating all these activities requires a process
approach.
A Process is a set of interrelated actions and activities performed to create a pre-

specified product, service or result.
Project management is an integrative undertaking. Project management integration

requires each project and product process to be appropriately aligned and connected
with the other processes to facilitate their coordination.
Each process is characterized by its Inputs, the Tools & Techniques that can be
applied, and the resulting Outputs.

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Project Processes – Two Categories : Project Management Processes and
Product Oriented Processes
•Project Management Processes - Ensure the effective flow of the project throughout its existence.
Encompass the tools and techniques involved in applying the skills and capabilities described in the knowledge areas.
Apply across all industry groups universally- though the adoption may vary from one to another.
Application of the project management processes is iterative, and many processes are repeated during the project.
Output of one process generally becomes an input to another process or is a deliverable of the project.
•Product Oriented Processes - Product-oriented processes specify and create the project's product. Product oriented processes are
typically defined by the project life cycle and vary by application area.
•Project management processes and product-oriented processes overlap and interact throughout the project.
•The Process Groups are not Project Life Cycle Phases. Project Phase is a grouping of project activities based on logic or
commonalities and all processes groups could be conducted within a phase.
For instance there may be a procurement phase, a testing phase, a pilot phase, a full implementation phase in a project and in each
phase there may be process groups like Initiating, Planning, Executing, Monitoring, and Closing.

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The Process Groups are not Project Phases.
Project Life-Cycle Process Groups
The PLC describes the steps (phases) from the start PG’s describe what happens within each step
of the project to the end. (phase) of the PLC.
Eg: Project Phases or Sub-Projects such as Process Groups (PG’s) are structured and named –
Feasibility Study, Concept Development, Design, Initiate, Plan, Execute, Monitor & Control, and
Prototype, Build, Test, etc Close. Process Group Processes would normally be
Repeated for Each Phase or Subproject
Eg.: In medical device development there’s going to As you enter each phase you start the Process
be a Design Process, Building a Prototype, Clinical Groups over from Initiate (the phase), to Plan (the
Trials, etc phase), all the way to Close (the phase).
PLC based on the steps necessary to get from Concept to Process groups have overlapping activities that occur
Release, and use those as the Project Life-Cycle phases. throughout the project life cycle. The output of one
Process Group is generally the input to another or a
deliverable of the project.
“What to do to Get the Work Done?” “What to do to Manage the Project?”
It Varies Industry Wise. Same Across Industries

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Project Process Groups
Project Management Processes are grouped into Five Project Management
Process Groups
Initiating Process, Planning process, Executing process, Monitoring and

controlling Process, Closing process

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Iterative nature of project management requires the Monitoring and Control
Process Group to interact with other process groups.

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Though the project management processes are presented as discrete
elements, they are seldom either discrete or onetime events; they are
overlapping activities that occur throughout the project with well-defined
interfaces.
If the project is divided into phases, the Process Groups interact within each
phase. In multi-phase projects, processes are repeated within each phase
until the criteria for phase completion have been satisfied
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Phase Activities
Initiating A set of processes performed to define a new project or a new phase of an existing
Process Group project by obtaining authorization to start the project or phase; Initial Scope is
defined, Financial Resources are committed; Stakeholders are identified, Project
boundaries are defined. Aligned project purposes with stakeholders’ expectations.
Key documents created: Project Charter and Stakeholder Register.

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Phase Activities
Planning Process A project management plan is a document that Guides Execution of the project. This is
Group essential in that it becomes an overriding governance document for the entire project. Those
processes required to establish the scope of the project, refine the objectives, and define the course
Twenty-Four of action required to attain the objectives that the project was undertaken to achieve.
discrete processes
are involved in It creates your Roadmap, your Path to Success. A significant concept in Planning is that the team
planning. is able to think the whole project through in advance. So they not only create a variety of plans but
also consider all the things that might go wrong (risks) and how they might respond to them.
The purpose of the project planning phase is to:

Establish Business Requirements
Establish Cost, Schedule, List of Deliverables, and Delivery Dates
Establish Resources Plans
Obtain Management Approval and Proceed to the Next Phase
Further we create baselines for scope, schedule and cost against which we can then (in Monitoring
and Controlling) track our progress. And we continue to plan for how we will manage and engage the
all-important stakeholders throughout the project life cycle.
Key documents created: Project Management Plan, Schedule, Risk Register

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Phase Activities
Planning Process The basic processes of project planning are:
Group
Scope Planning – specifying the in-scope requirements for the project to facilitate
Twenty-Four creating the work breakdown structure
discrete processes
Preparation of the work breakdown structure – spelling out the breakdown of the
are involved in
planning.
project into tasks and sub-tasks
Project Schedule Development – listing the entire schedule of the activities and
detailing their sequence of implementation
Resource Planning – indicating who will do what work, at which time, and if any special
skills are needed to accomplish the project tasks
Budget Planning – specifying the budgeted cost to be incurred at the completion of the
project
Procurement Planning – focusing on vendors outside your company and subcontracting
Risk Management – planning for possible risks and considering optional contingency
plans and mitigation strategies
Quality Planning – assessing quality criteria to be used for the project
Communication Planning – designing the communication strategy with all project
stakeholders

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Phase Activities
Executing Process Those processes performed to complete the work defined in the project management plan to satisfy
Group the project specifications.
Naturally, the next thing to do after Planning is to execute, to do the work. But what's important
here is that we now have a project management plan to which we can execute. It helps keep us on
track. Here is where the Project Team Starts Doing the Work of Creating the Deliverables while
the project manager coordinates those resources.
Since the project team is so important to successful execution, one must assume that Developing
the Team is important to that cause. So there is an assumption that the project manager will not only
acquire and manage the team, but also cultivate it by Performing Team-Building Exercises.
Likewise, the PM is not only Managing Communications but also Managing the Stakeholder
Engagement, Ensuring Project and Product Quality and – Involve in Procurement - Supporting
the Effort to Contract with a Vendor.
It is in this area of Executing that most of the budget will be spent and the deliverable of the
project will be produced. And it is likely here where we will begin to see stakeholder change
requests. While the project team can implement approved changes, only the change control
board can approve or reject these changes.
Key documents created: Project Progress Updates.

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Phase Activities
Monitoring and Processes that Ensures the Project Stays on Track. Those processes required to
Controlling track, review, and regulate the progress and performance of the project; identify any
Process Group areas in which changes to the plan are required; and initiate the corresponding
changes.
While the other process groups occur sequentially, Monitoring and Controlling hover
over the whole project and so, happen throughout the project and are not linear.
Some examples of areas one might control are scope, cost, and schedule. These all
have variations in regards to which tools and techniques you would use to control them.
Variances are found against baselines which were defined in planning. Since we're
tracking our progress against these baselines, Changes Requirements are invariably
occurs. Only the change control board can approve these changes.
Only constant vigilance, tracking and reporting will keep the project focused towards
meeting its objectives.
Key documents created: Updates – Change Requests.

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Phase Activities
Closing Those processes performed to finalize all activities across all Process
Process Groups to formally close the project or phase
Group
From its name, it should be pretty obvious what happens here. Not
only do you formally close the project but you also Get Sign-off and
Acceptance from the Customer. While this should be self-evident,
too often projects just fizzle out. People stop coming to the meetings
and everyone just shows up at the next one.
Best practice dictates that the rigor applied to the rest of the project
should be applied here as well. The project manager should
formally close the project by archiving records, holding a
lessons learned session, making final payments, closing
contracts and celebrating and releasing the team.
And the lessons learned along with other historical information

should be centrally archived to be used as input to future
projects to prevent reinventing the wheel.

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During a team meeting, a team member asks about the measurements that will be used on the project to
judge performance. The team member feels that some of the measures related to activities assigned him are
not valid measurements. The project is BEST considered in what part of the project management process?
A-) Initiating
B-) Executing
C-) Monitoring & Controlling
D-) Closing
Answer is B. Executing. Questions states that team member feels some of the measures on his activities
are not valid. Therefore, he must be working during the executing phase of the project where project
deliverables are produced and project members perform most of the work they should do.
Knowledge Area: Project Management Processes

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Baselines
1. Baseline - is the value or condition against which all future measurements will be compared. The
baseline is a point of reference. In project management commonly referred baselines are –
schedule baseline, cost baseline, scope baseline and quality baseline.
2. Performance Measurement Baseline - The combination of all three baselines - schedule
baseline, cost baseline and scope baseline.
3. Scope baseline - It is the approved version of a scope statement, Work Breakdown Structure
(WBS) and its associated WBS dictionary.
4. Schedule baseline – It is the approved version of a schedule model with baseline start dates
and baseline finish dates.
5. Cost / Budget Baseline – It is the approved version of the time-phased project budget,
excluding any management reserves.
6. Quality Baseline - It is the approved version of performing an analysis / study to identify perceived
quality problems; and to establish a baseline from which quality improvement objectives can be
established and improvements can be measured.
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Project or Phase Closure
At project or phase closure, the following may occur:

• Obtain Acceptance by the customer or sponsor,
• Conduct Post-Project or Phase-end Review,
• Record Impacts of Tailoring to any process,
• Document Lessons Learned,
• Apply appropriate updates to Organizational Process Assets,
• Archive all relevant Project Documents in the Project Management Information System (PMIS)
to be used as Historical Data, and
• Close out Procurements.
• Perform team member’s assessments and Release Project Resources

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Project Management Information System (PMIS)
Project Management Information System (PMIS) are system tools and techniques used in project
management to deliver information. A Project Management Information System (PMIS) is one or more
software tools used for a project’s information storage and distribution.
A project management information system (PMIS) can be a framework to guide the progress of a project
and help to increase its success rate. It brings accurate and relevant information to management within
the required time frame, and helps to speed up the decision-making process and any action necessary to
ensure that the project is on track in terms of time, budget and objectives.
The components of a project management information system are:
➢ Scheduling Where We Are?

Measurement
➢ Estimating
➢ Resources
➢ Project documents and data
➢ Portals and dashboards
➢ Collaborative work management tools
➢ Social media How can we get on Where We Planned
Track Again? to Be?
➢ Project control
(Correction) Evaluation
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Kill point
Phase exits, Phase gates, Decision gates, Stage gates, and Kill points are one and
the same.
It is the point in time during the execution phase of the project where the
stakeholders or the sponsor review the progress and decide on whether to
continue or kill the project.

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INITIATING
Develop Project Charter
with Defined Objectives
CLOSING
PLANNING
Complete Formalities,
Develop Detailed Project Plan
Contract Closure,
Archive Documents
MONITORING &
EXECUTING
CONTROLLING
Directing and Managing
Measuring & Taking Corrective
Project Execution
Measures
SN Panigrahi

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Project Knowledge
Areas As per PMBOK
6th Edition,
there are
5 Process
Groups
&
10 Knowledge
Areas
= Total 49
Processes
(No. of Processes)
SN Panigrahi
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Integration • Combine, Unify and Coordinate the various project management activities within the five process
Processes groups.
Scope • Ensure the project includes all the work required, and only the work required, to complete the project
Processes successfully
Schedule • Manage the Timely Completion of the Project

Processes
Cost • Plan, Estimate, Fund, Manage, and Control costs so the project can be completed within the approved
Processes budget
Quality • Incorporating the organization’s quality policy regarding planning, managing and controlling project
Processes and product quality requirements in order to meet stakeholders’ expectations.
Resource • Identify, acquire, and manage the resources needed for the successfully completion of the project.
Processes
Communications • Required to ensure the planning, creation, distribution, control and monitoring of project information's
Processes
Risk • Planning risk management, the identification, analysis, and monitoring of risks on a project, and the
Processes implementation of risk responses.
Procurement • Necessary to purchase or acquire products, services, or results needed from outside the project team.
Processes
Stakeholder • Required to identify stakeholders, to analyze their expectations and impact on the project, and to
develop management strategies for effectively engaging stakeholders in decisions that affect the
Processes project. SN Panigrahi, Essenpee Business Solutions,
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Process Groups & Processes
Process Groups No. of Processess

5th Edition 6th Edition
Initiating Process Groups 2 2
Planning Process Groups 24 24
Executing Process Groups 8 10
Monitoring & Controlling Process Groups 11 12
Closing Process Groups 2 1
Total 47 49

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Integration Mgt
Procurement Mgt
Stakeholder Mgt
Stakeholders
Unique Deliverables
Individuals Groups
Outcome
Organizations
Quality Communication
Mgt Mgt Sponsor
Team
Members
Vendors Customers
Cost Mgt Regulatory

Others - Impacted
Resource Mgt
Risk Mgt
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Initiating Process Group
ITTO Monitoring & Controlling Process Group
Knowledge Areas Planning Process Group Executing Process Group Closing Process Group
5.Monitor and Control Project Work

3.Direct and Manage Project Work
4. Project Integration Management 4.1 Develop Project Charter 4.2 Develop Project Management Plan 6.Perform Integrated Change 4.7 Close Project or Phase
4.Manage Project Knowledge
Control

4. Create WBS

6. Project Schedule Management 3. Sequence Activities 6.6 Control Schedule
5. Develop Schedule
1. Plan Cost Management

7. Project Cost Management
3. Determine Budget
8. Project Quality Management
8.1 Plan Quality Management 8.2 8.3 Control Quality
3. Acquire Resources
9. Project Resource Management 1. Plan Resource Management
4. Develop Team 9.6 Control Resources
2. Estimate Activity Resources
5. Manage Team
10. Project Communications
10.1 Plan Communications
Management 10.2 Manage Communications 10.3 Monitor Communications
Management

2.Identify Risks
3.Perform Qualitative Risk Analysis
11. Project Risk Management 4.Perform Quantitative Risk Analysis 11.6 Implement Risk Responses
11.7 Monitor Risks

12.1 Plan Procurement Management
13. Project Stakeholder 13.1 Identify Stakeholders 13.2 Plan Stakeholder Management 13.3 Manage Stakeholder Engagement 13.4Panigrahi,
SN Monitor Stakeholder Engagement
Essenpee Business Solutions,
Management
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1. You’re a project manager working on a software engineering project. The programmers
have started building the software, and the testers have started to create the test
environment. Which process group includes these activities?
A. Initiating
B. Planning
C. Executing
D. Closing
Ans : C. Executing
2. Which of the following is not a stakeholder?

A. The project manager who is responsible for building the project
B. A project team member who will work on the project
C. A customer who will use the final product
D. A competitor whose company will lose business because of the product
Ans
D. A competitor whose company will lose business because of the product
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3. A project manager runs into a problem with her project’s contractors, and she isn’t sure if
they’re abiding by the terms of the contract. Which knowledge area is the BEST source of
processes to help her deal with this problem?
A. Cost Management
B. Risk Management
C. Procurement Management
D. Communications Management
Ans : C. Procurement Management
4. You’re a project manager for a construction project. You’ve just finished creating a list of all of
the people who will be directly affected by the project. What process group are you in?
A. Initiating
B. Planning
C. Executing
D. Monitoring & Controlling
Ans : A. Initiating
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5. Which process group contains the Develop Project Charter process and the Identify
Stakeholders process?
A. Initiating
B. Executing
C. Monitoring and Controlling
D. Closing
Ans : A. Initiating
6. Which of the following is NOT a project?
A. Repairing a car
B. Building a highway overpass
C. Running an IT support department
D. Filming a motion picture
Ans : C. Running an IT support department

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7. A project manager is running a software project that is supposed to be delivered in phases.
She was planning on dividing the resources into two separate teams to do the work for two phases at
the same time, but one of her senior developers suggested that she use an Agile methodology instead,
and she agrees. Which of the following BEST describes the relationship between her project’s phases?
A. Sequential relationship
B. Iterative relationship
C. Constrained relationship
D. Overlapping relationship
B. Iterative relationship
8. Which of the following is NOT true about overlapping phases?

A. Each phase is typically done by a separate team
B. There’s an increased risk of delays when a later phase can’t start until an earlier one ends
C. There’s an increased risk to the project due to potential for rework
D. Every phase must go through all five process groups
B. There’s an increased risk of delays when a later phase can’t start until an earlier one ends

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9. You’re the project manager for an industrial design project. Your team members report to you, and
you’re responsible for creating the budget, building the schedule, and assigning the tasks. When the
project is complete, you release the team so they can work on other projects for the company. What kind
of organization do you work in?
A. Functional
B. Weak matrix
C. Strong matrix
D. Projectized
Ans : D. Projectized
10. You’re a project manager working in a weak matrix organization. Which of the following is NOT true?
A. Your team members report to functional managers
B. You are not in directly charge of resources
C. Functional managers make decisions that can affect your projects
D. You have sole responsibility for the success or failure of the project
Ans : D. You have sole responsibility for the success or failure of the project
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Which of these is not one of the constraints of a project?
a. Scope
b. Resources
c. Team
d. Budget
CORRECT: c. Projects constraints are - Scope, Resources, Quality, Schedule, Budget and Risk
Which of the following is not correct about initial phase of a project?

a. The cost associated at the beginning of the project is highest.
b. Stakeholders have maximum influence during this phase
c. The highest uncertainty is at this stage of the project.
d. All the above statements are correct.
CORRECT: a. There is minimum requirement of personnel and hence minimum cost at the
project initiation stage.
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Roger is a project manager on a database implementation project. This is a small
project and he has no experience of handling smaller projects. He is confused
about when the kick-off meeting should be scheduled. What should be your
advice to him?
A: At the beginning of the initiation stage

B: At the end of the planning stage
C: At the beginning of the planning stage
D: At the beginning of the execution stage
Ans : C

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Question: Thomas is a project manager on a construction project. The electrician is already in
the process of laying out the wiring, when the customer comes to him with a change request
that he needs additional outlets. Thomas thinks that this will increase the cost of the electrical
work. What is the first thing Thomas should do?
A: Refer to the Project Management plan to see how this change can be handled.
B: Refuse to make the change because increasing the cost of the project is making Thomas
project over budget.
C: Refer to the contract to see if there is any clause like this or not.
D: Make the change, since the customer has requested it.
Ans : A

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You are a project manager and you have just verified that all the work on your
project is complete. Which of these things would not be part of the closing
process?
A: Follow the project closure procedure.

B: Update the organization process assets by documenting the lessons learned.
C: Do the final transition of the deliverable, service etc.
D: Document the work performance information to show the deliverables that have
been completed by the team and record the lessons learned if any.
Ans : D

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Kat is a project manager in charge of an online education project. Phase 1 of
the project is complete and it is ready to be moved to the next phase. Which of
the following processes must be carried out first, for the next phase?
A: Identify Stakeholders
B: Define Scope
C: Develop Project Management Plan
D: Develop Project Charter
Ans : A

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Ans : D

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At which stage, does a typical project has maximum cost?
a. Initial stage
b. Middle stage
c. Final stage
d. Cost is same at all stages.
CORRECT: b. In the middle stages, the resources and cost usage is maximum.
At which stage, in a typical project do stakeholders have maximum influence?
a. Initial stage
b. Middle stage
c. Final stage
d. Shareholders have similar influence at all stages.
CORRECT: a. It is easy to make changes to project goals and approach at the initial stage. Stake
holders have maximum influence at this stage.
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You are the Project Managers of XYZ consultants. The Project team members are from Finance and HR
departments. The team members report to Finance and HR Managers respectively, and you have limited
control over them. What type of organizational hierarchy does XYZ consultants follow?
a. Matrix organization
b. Projectized organization
c. Functional organization
d. None of these.
CORRECT: c. The team members report to Functional Managers.
The Project Managers have maximum authority in which type of organization?
a. Weak Matrix organization
b. Balanced Matrix organization
c. Strong Matrix
d. Project Managers have same authority in the three types of organizations.
CORRECT: c. In strong matrix organization, Project Managers have more authority.

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Which organization is closest to Functional organization?
a. Weak Matrix organization
b. Balanced Matrix organization
c. Strong Matrix
d. Projectized organization
CORRECT: a. Weak matrix organizations have a similar characteristics to Functional organizations.
Which of the following is not a project?
a. Running an election campaign for a political candidate.
b. Building a bridge over a river.
c. Piloting aircraft for a United flight.
d. Writing a book on Project Management.
CORRECT: c. Projects must be a unique endeavor. Piloting a flight is a regular day-to-day
operation, and not a project.
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You have been asked to create user manuals for a call centers day to day tasks. What is this scenario
termed as
A) Project
B) Operation
C) Portfolio
D) Program
Ans :A
Which of the following is a project?

a. Sending a weekly status report
b. Improving the roads of Rio de Janeiro for 2016 Olympics
c. Getting ready for office every day
d. Selling toys in a toy store
CORRECT: b. Other operations are ongoing operations and not projects.SN Panigrahi, Essenpee Business Solutions,
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Ans : C

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Ans : B

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Ans : C

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The project team has been arguing about what should go into the project
management plan. They’ve built the same product over a hundred times before
and have always been bothered that the project management plan never seemed
to get completed. They were determined to get it done right this time. The team
has come to you for advice regarding the project management plan. The most
appropriate response you can give them is:
1. Use project phase concepts: initiate, plan, execute, monitor &control and
close
2. They need training in project management
3. The project is really operations
4. Tell them to take direction from PMO
Ans : 3 - They have done the same work many times earlier, so
it’s a repetitive work. Hence an Operation Process

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The team has completed all designwork and is ready to start creating a product of
the project. There are construction and IT elements in the project and the project
manager has leaned on the SME in the organisation for their technical expertise.
You have determined that some of the work needs to be contracted to an external
vendor who has the necessary expertise to deliver what is needed for the project.
You are in the process of selecting the vendor. What process group are you in?
1. Planning
2. Initiating
3. Monitoring and Controlling
4. Executing
Ans : 4 : Selecting sellers is at execution group

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Question: Recently on your project, a lot of stakeholders are approaching you with
changes. You have figured out that these changes would cost you more time and
money. The changes have been approved and the stakeholders have agreed to
provide you with additional time and budget. Now you have to incorporate the
approved changes into the project. What do you do next?
A: Use the PMIS to make sure the work is performed.

B: Update the project charter to include the approved changes.
C: Incorporate the approved changes into the baseline so that it can help you track the project
properly.
D: Make sure to track your changes against the projects baseline so that you know exactly that
how much they will eventually cost.
Ans : C

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Project Integration Management

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ITTO
Knowledge Areas Initiating Process Planning Process Group Executing Process Group Monitoring & Controlling Closing Process Group
Group Process Group
3.Direct and Manage 5.Monitor and Control
4. Project Integration 4.1 Develop Project 4.2 Develop Project Project Work 4.7 Close Project or
Project Work
Management Charter Management Plan 6.Perform Integrated Phase
4.Manage Project
4. Create WBS
6. Project Schedule
3. Sequence Activities 6.6 Control Schedule
Management
5. Develop Schedule
7. Project Cost Management 1. Plan Cost Management
3. Determine Budget
8. Project Quality Management 8.1 Plan Quality Management 8.2 8.3 Control Quality
9. Project Resource 1. Plan Resource Management 3. Acquire Resources 9.6 Control Resources
Management 2. Estimate Activity Resources 4. Develop Team
5. Manage Team
10. Project Communications 10.1 Plan Communications
Management Management 10.2 Manage Communications 10.3 Monitor Communications
2.Identify Risks
11. Project Risk Management 3.Perform Qualitative 11.6 Implement Risk Responses
Risk Analysis 11.7 Monitor Risks
4.Perform Quantitative
Risk Analysis
Management 12.1 Plan Procurement
13. Project Stakeholder 13.1 Identify 13.2 Plan Stakeholder 13.3 Manage Stakeholder SN13.4
Monitor Stakeholder
181
Management Stakeholders Management Engagement Engagement India
Objectives
•This chapter entails one to understand the various Integration aspects required to pull
together the project towards its success!
•Understand the different Integration Management Processes
The purpose of Integration Management is:

• To unify all the other processes in the project together
• You can think of Integration Management as the “conductor” in the
“orchestra”.
• It is the Knowledge Area that syncs all the other processes together to create
the final deliverable.
• Communications is the most important component of integration.
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• Project Integration Management is the integration of actions in a consolidated manner across
various processes to ensure the overall project still delivers on all intended aspects of the
project requirements.
• Processes and activities to identify, define, combine, unify and coordinate various processes
and project management activities within the Process groups
• Starts at the start of the project through completion

• Balance Competing Demands
• Manage Interdependencies
• Examine any Alternative Approach

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Integration management is an element of project management that integrates all aspects (knowledge
areas) of a project and also deals with
➢ Resource allocation
➢ Balancing complex demands
➢ Examining alternatives
➢ Tailoring processes to work within organization and project needs
➢ Managing the interdependencies among Project Management Knowledge Areas
Stakeholder
Procurement Scope
Risk Project Schedule

Integration Mgt.
Project Manager as a
Communications Project INTEGRATOR. Cost
Resource Quality
SN Panigrahi,
Planning
Processes
Enter phase/ Initiating Closing Exit phase/

Start project Processes Processes End project
Executing
Processes
Process Groups
Knowledge
Monitoring &
Area Initiating Planning Executing Closing
Control
Develop Project Develop Project Direct & Manage Monitor & Control Close Project
Integration
Charter Management Plan Project Work Project Work or Phase
Management
Manage Project Perform Integrated
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There are 7 Integration Management processes:
1.Develop Project Charter
•Develop a document called Project Charter to Formally Authorize the project and start
using organizational resources by Project Manager
2.Develop Project Management Plan

•The process of defining, preparing, and coordinating all subsidiary plans and
integrating them into a comprehensive project management plan
3.Direct and Manage Project Work

•The process of performing the work defined in the project management plan and
implementing approved changes to achieve the project’s objectives

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4. Manage Project Knowledge – The process of using existing knowledge and creating new
knowledge to achieve the project’s objectives and contribute to organizational learning
5. Monitor and Control Project Work

The process of tracking, reviewing, and reporting project progress against the performance
objectives defined in the project management plan.
6. Perform Integrated Change Control

The process of reviewing all change requests; approving changes and managing changes to
deliverables, organizational process assets, project documents, and the project management
plan; and communicating their disposition.
7. Close Project or Phase

The process of finalizing all activities across all of Project Management Process Groups to
formally complete the phase or project.

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(Initiating Process Group)
The process of developing a document that

a) formally authorizes a project and
(b) authorizes project manager to apply organizational resources to project activities.
(c’) Project charter has to be signed by a Sponsor
The key benefit of this process is a well-defined project start and project boundaries, creation of a
formal record of the project, and a direct way for senior management to formally accept and commit
to the project.
SNofPanigrahi,
Source: A Guide to the Project Management Body Knowledge.Essenpee
6th Edition;Business
2017 Solutions,
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➢ Establishes a partner between Performing and Requesting Organizations
➢ Projects are authorized by an external entity to the project such as sponsor, or program/project
management office, or portfolio governing body chair person
➢ The project charter can be created by them or delegated to project manager
➢ Project sponsor is a person(s) or an organization(s) that is in charge of driving the project towards
directions that will bring the project to successful realization of expected benefits.
➢ Project sponsor finances project initiatives and approved ideas, takes care of engagement
processes, facilitates the development of initial scope and the project charter, and participates in
processes of communications management.
➢ Provides the project with a defined start and established boundaries, Major Mile Stones,
Budgets, and senior management with the opportunity to formally accept and commit to the effort
➢ Facilitation techniques may be used to draft the charter. These include brainstorming, conflict
resolution, problem solving, meetings, etc.
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Project Charter
Formally Authorizes the Project Manager to Start the Project
Includes the business case Explaining why the Project is Necessary
Define the High-Level Scope & Major Milestones
Includes High-Level Budget
Includes Key Stakeholders
Includes Preliminary Risk Register
Signed off by the Project Sponsor / Initiator
•The project charter is NOT a Contract

•Project Management Office (PMO) can provide expert judgement on how to
structure the project charter SN Panigrahi, Essenpee Business Solutions,
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Business case
Business Case which provides the justification for the investment being made in the project. It includes
the business need and the cost-benefit analysis, as well as other information from a business standpoint
to select the project.
A business case is created because of project triggers like :
✓Market demand
✓Organizational need
✓Customer Request
✓Strategic opportunity / business need
✓Technological Advancement
✓Legal Requirement
✓Ecological Impacts
✓Social Need
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Business Case Composition
Most organisations will have a standard approach to a composing a business case. However, key elements usually include:
Reasons
Options (A Brief Description Of The Different Options Considered And Option Recommended)
Benefits Expected (Expressed In Measurable Terms Against Today’s Situation
Risks (Summary Of The Key Risks Of The Project)
Cost (Extracted From The Project Plan)
Time-Scales (Summary Of The Project Plan)
Investment Appraisal
The Business Case Includes:

• A detailed description of the problem or opportunity with headings such as Introduction, Business Objectives,
Problem/Opportunity Statement, Assumptions, and Constraints
• A list of the alternative solutions available
• An analysis of the business benefits, costs, risks, and issues
• A description of the preferred solution
• Main project requirements
• A summarized plan for implementation that includes a schedule and financial analysis
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Benefits Management Plan
Doc that describes how and when the benefits of the project will be delivered, and
describes the mechanisms that should be in place to measure those benefits
Few key elements :

✓ Target Benefits
✓ Strategic Alignment
✓ Timeframe for Realizing Benefits
✓ Benefits Owner
✓ Metrics
✓ Assumptions
✓ Risks

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Agreements
Agreements are used to define initial intentions for a project. Agreements may take the
form of :
✓ Contracts
✓ Memorandum of understanding
✓ Service level agreements
✓ Letter of Intent
✓ Verbal Agreements
✓ Email or other written agreements
For external customer a contract is used

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India 4
Develop Project Charter - Tools
Expert Judgment - To assess the inputs used to develop the project charter.
• Other units within the organization
• Consultants
• Stakeholders
• Professional and technical associations
• Industry groups
• SMEs
• PMO
Data Gathering Techniques
-
• Brainstorming
• Focus Groups
• Interviews
Interpersonal Skills
• Conflict Management
• Facilitation
• Meeting Management
Meetings 68
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Brainstorming Focus Group
Purpose Generate Large Number of Ideas Improve Existing Ideas
Trigger A need to solve a problem A need to study an existing idea, solution or process
Condition Problem Exist Idea, Solution or Process Exist
Setup
Number of participants 6-8 6 - 12
Participant types Heterogeneous Can be Homogeneous or Heterogeneous
Person running the show Facilitator Skilled moderator
Knowledge of topic of Not necessary In depth knowledge of topic of discussion
discussion
Guide Develop criteria for evaluating and rating Create a discussion guide and moderator scripts
ideas
Game Time
Ground rules Must have Nice to have
Duration Restrict time to produce ideas 1 – 2 hrs and sometimes over several days
1 – 2 hrs
Type of questions to ask Progressive closed-ended to generate and Can be open-ended to generate qualitative data or closed-ended
build on ideas to generate quantitative data
Observers No Yes
Result List of ideas combined to form themes Report of findings Could be
- bullet list of information learned
- comparative analysis between to solutions
- summary of response collected for each question
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Facilitation is the ability to effectively guide a group event to a successful decision,
solution, or conclusion. The goal of any facilitation technique, including facilitated
workshops is to bring key stakeholders together and to agree a course of action.
The facilitator ensures that

➢ There is effective participation
➢ Participants achieve a mutual understanding
➢ All contributions are considered
➢ Conclusions or results have full buy-in according to the decision
process established for the project and
➢ The actions and agreements achieved are appropriately dealt with
afterward.
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Facilitation Meeting
Meeting facilitation is a structured way to help people reach common understandings and solve problems. It's a skill,
a process, and an art. We all use this skill in some form or another in our daily lives.
Core responsibilities of a PMF span the scope of the end-to-end meeting process, and include:
1.Establishing and confirming Appropriate Meeting Objectives.

2.Translating those meeting objectives into a productive plan for accomplishing them (Designing the Agenda).
3.Communicating Effectively prior to the meeting to encourage participant readiness.
4.Ensuring that the Right People are in Attendance to accomplish the objectives.
5.Creating an environment that Encourages full Participation of meeting attendees.
6.Getting People Engaged and participating productively during the meeting to achieve meeting objectives.
7.Communicating Meeting Results, incorporating meeting outcomes and next steps to maintain project momentum.
8.Obtaining and incorporating Meeting Feedback to continuously improve the meeting process.

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The Project Charter Components :
• Project purpose or justification
• Measurable project objectives and related success criteria
• High-Level Requirements
• High-Level Project Description
• High-Level Risks
• Summary Milestone Schedule
• Summary Budget
• Project Approval Requirements
• Assigned Project Manager, Responsibility and Authority Level
• Name and Authority of the Sponsor or other Person(s) Authorizing
the Project Charter
Signature with Date of Sponsor SN Panigrahi, Essenpee Business Solutions,
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In which of the following processes is the project manager assigned his or her role in the project?
a.Initiating
b.Planning
c.Executing
d.Monitoring and Controlling
e.Closing
Ans : a Initiating
Who issues a Project Charter?
a.Customer
b.Project Manager
c.Any Stakeholder
d.Sponsor or initiator
Ans : d.Sponsor or initiator

The project charter should be issued by a project initiator or sponsor who formally authorizes the
project and provides the project manager with the authority to apply organizational resources to project
activities. The project charter should not be issued by the project manager, although, the project
manager can assist in its development.
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Key stakeholders disagree about the details in the project charter that describe how to deliver project
requirements.
What tool or technique should the project manager use to resolve this issue and obtain project charter
approval?
A. Expert judgement
B. Facilitation
C. Focus Groups
D. Decision making
Answer: B

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Milestone
A project milestone is a task of zero duration that shows Significant Achievement along a
project timeline.
The milestones should represent a clear sequence of events that incrementally build up until
your project is complete. ... They have zero duration because they symbolize an achievement, or a point
of time in a project.
Project Milestones are the most visible Indicators of Project Progress.
Milestones typically Mark Critical Decision Points, the completion of major project tasks and the ends
of various project phases.
Deliverable -
Deliverable -1 Deliverable -2 Deliverable -3
4
Milestone -1 Milestone -2 Milestone -3

Time Lines
Total Project Schedule

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Example:
Common Facility Center (CFC) Project
Project Project Placing Project Project

Financing
Planning Design Contracts Execution Handover
Deliverable -
Deliverable - Deliverable - Deliverable - Deliverable - Deliverable -
3
1 2 4 5 6
Milestone - 1
Overall Project
Milestones, Milestone -2 Milestone - 3 Milestone - 4 Milestone - 5 Milestone - 6
Timelines, Project Availability of Contract Project Work Project
Budgets etc Design Funds Finalization Completion Handover to
Finalized Ready by By By 1st Nov 15th Jan Customer
By 15th Sep 30th Sep 2nd Oct By 26th Jan
Starting of End of the

the Project Project
15th Aug 26th Jan
Time Lines
Total Project Schedule SN Panigrahi 203

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Deliverable
A deliverable is a Quantifiable tangible or intangible good or service produced as a result of a
project or part of a project that is intended to be delivered to a customer (either internal or
external).
A deliverable could be a Product, a Part, a Report, a Document, a Software Product, a Server

upgrade or any other building block of an overall project.
A work breakdown structure is based on these Deliverables.
Tangible
Quantifiable To be To a
Deliverable or
Results Delivered Customer
Intangible

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What is Needed ?
Project Management will be Essential for Business with Goal
Focused
What is Goal ? Example
Deliver 20% CTB
YOY Growth
Increase
New New Line
Retaining Business CTQ
of
Clients Clients from Existing
Business
Clients
Zero
Schedule New Service Adherence to
Defect KPS
Adherence Opportunities CTP
Delivery
SWOT
Survey for Benchmark
Analysis
New Industry
Business
Opportunities Best Practices Opportunities

205Solutions,
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What is Needed ?
 Project Management will be Essential for Business
 Project objectives define target status at the end of the project,
reaching of which is considered necessary for the achievement of

planned benefits. They can be formulated as SMART criteria
S Specific
M Measurable
A Achievable
R Realistic
T Time Bound
 Project need to be managed properly to avoid Risk of Cost Overruns
2
and Missing the Schedules and as a Result loosing the Opportunities.
SN Panigrahi, Essenpee
0 IndiaBusiness Solutions, 206
• Specific
• Avoid being vague and general.. Does the goal support the strategy of the organization?
S If the project goals are achieved, will the organization make significant progress towards
the company's mission, vision, values, and corporate goals?
• Measurable
M • Can the goal be measured in terms of cost, quality, quantity, and timeliness?
• Attainable
• Has the team worked together to define the goal? Can everyone support the
A goal & its Achievable
• Relevant & Realistic

• Whether Goals are Relevant & Realistic? Don't fall for the fallacy of stretch
R goals. Make sure the goals are relevant or results-oriented.
• Time Bound
• All goals should have a deadline. This adds a sense of urgency
T and keeps the team focused.
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What to Measure?
Metrics
M Measure
E Everything
T That
R Results
I In
C Customer
S Satisfaction
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Strategic planning involves determining long-term objectives, predicting
future trends, and projecting the need for new products and services
As part of strategic planning, organizations should:
• Identify potential projects
• Use realistic methods to select which projects to work on
• Formalize project initiation by issuing a project charter
There are many ways to select a project to be initiated from among many
possible projects
Project selection methods measure the value of what the

product, service, or result of the project will produce and how it will
benefit the organization.
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Project Selection
Screening models help managers pick winners from a pool
of projects. Screening models are numeric or nonnumeric
and should have:
Realism
Capability
Flexibility
Ease of use
Cost Effectiveness
Comparability
03-04
SN Panigrahi, Essenpee Business Solutions, India
Project Selection Methods
Non Numerical Models Numeric Models
Sacred Cow
Comparative Constrained
Approach Optimization Approach
Operating
Benefit Cost Ratio Linear programming
Necessity
Murder board Payback Period

Integer programming
Competitive
Net Present Value
Necessity Dynamic
programming
Internal Rate of
Return
There are generally two categories of Multi-objective
Programming
selection methods: Return on
Investment
➢ Non numerical Model
Scoring Model
➢ Numerical Model
Economic Value
Add SN Panigrahi, Essenpee Business Solutions,
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Common methods used in Project
Selection Decision
• Economic & Financial
• payback 68%
• cost-benefit 63%
• NPV / IRR 40%
• Multifactor
• Checklist- minimum acceptable level of
requirements 38%
• project profile- strength and weakness 26%
• scoring/rating models 26%
• multicriteria 11%
• Mathematical Programming- optimal
solution for projects 18%
• Expert Systems- systematic manner 6%
Screening & Selection Issues
• Risk – unpredictability to the firm
• Commercial – market potential
• Internal operating – changes in firm operations
• Additional – image, patent, fit, etc.
All models only partially reflect reality and have
both objective and subjective factors imbedded

Non Numerical Model
Sacred Cow :
Chosen by Chief Executive, so it is implemented
◦Suggested by a senior and powerful official in the organization
◦“Sacred” in the sense that it will be maintained until successfully concluded, or until
the boss personally recognizes the idea as a failure and terminates it.
Operating Necessity :
◦If the project is required in order to keep the system operating, the primary
question becomes: Is the system worth saving at the estimated cost of the project?
Competitive Necessity
◦The decision to undertake the project based on a desire to maintain the company‟s
competitive position in that market
Murder Board
◦A panel of people who try to shoot down a new project idea - it is meant to be
more of a “Project ‘Rejection” Process. This board usually comprises of senior
managers, subject matter experts and could even include the project sponsor.
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Project Selection Numerical Methods
Costs Benefits Cost Benefit Benefit Cost

Initial Project Investment Revenues from Product Ratio Ratio
Sales
= =
Development cost for the Revenue from other
Product or Service
Cost ÷ Benefit Benefit ÷ Cost
Sources
Marketing costs Ratio < 1 => Project Ratio > 1 => Project
Operational costs Good Good
Example:
Cost considered
Cost to produce the software and Total cost
the on-going support cost for a
$ 785,000
chosen period of 3 years
over 3 year period, potential Revenue Total Benefit
from the sale of the product $ 1643,000
Benefits are greater than the cost Get a go recommendation

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As the name suggests, this method refers to the period in which the proposal will generate cash to
recover the initial investment made. Through this method selection of a proposal is based on the earning
capacity of the project. With simple calculations, selection or rejection of the project can be done, with results
that will help gauge the risks involved. However, as the method is based on thumb rule, it does not consider
the importance of time value of money and so the relevant dimensions of profitability
Cash Outlay (investment)

Payback period =
Example: Annual Cash Inflow
Project A Project B
Cost 1,00,000 1,00,000
Expected future cash
flow
Year 1 50,000 1,00,000
Year 2 50,000 5,000
Year 3 1,10,000 5,000
Year 4 None None
TOTAL 2,10,000 1,10,000
Payback 2 years 1 year
Payback period of project B is shorter than A, hence, project B is superior to A.Essenpee Business216
SN Panigrahi, Solutions,
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Payback Period
Determines how long it takes for a project to reach a Breakeven Point.
Lower numbers are better (faster payback)
Example
A project requires an initial investment of $200,000 and will
generate cash savings of $75,000 each year for the next five
years. What is the payback period?
Year Cash Flow Cumulative Divide the cumulative amount by

the cash flow amount in the third
0 ($200,000) ($200,000) year and subtract from 3 to find
1 $75,000 ($125,000) out the moment the project breaks
2 $75,000 ($50,000) even.
3 $75,000 $25,000 25, 000

3− = 2.67 years Payback
75, 000 SN Panigrahi, EssenpeePeriod
Business Solutions,
217 India
•Discounted cash flow method:

The discounted cash flow technique calculates the cash inflow and outflow
through the life of an asset. These are then discounted through a
discounting factor. The discounted cash inflows and outflows are then
compared. This technique takes into account the interest factor and the
return after the payback period.
The discounted cash flow method includes the NPV Method, Profitability
Index Method and IRR.

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How much is the value today of a future cash flow? How much is a
project worth right now?
For example, if you will receive a future cash flow in 3 years of $1 million, what would
that be worth today if the interest rate is 5%?
 PV = FV / (1 + i)n
 PV = $1,000,000 / (1 + .05)3
 PV = $1,000,000 / (1.05)3
 PV = $1,000,000 / ((1.05)(1.05)(1.05))
 PV = $863,841
PV = Present value FV = Future value i = Interest rate )

n = numbers of years

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• $1000 with you today more than $1000 after 6 months
• Allows to calculate an accurate value for the project in today‟s
Value
• All future cash values are first evaluated in terms of what

they are worth today and summed up.
• This sum is deducted from Investment
• This is called discounted cash flow technique
Ft Note:
NPV = I o + 
(1 + r + pt )t •Projects with a positive NPV
where should be considered if financial
Ft = net cash flow for period t
value is a key criterion
R = required rate of return
I = initial cash investment Higher NPV values
Pt = inflation rate during period t are better!
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Project X ( year) Inflows PV Project Y ( year) Inflows PV
1 $ 10,000 $ 8929 1 $ 7,000 $ 6250

2 $ 15,000 $ 11,958
2 $ 13,000 $ 10,364
3 $ 5000 $ 3559
3 $ 10000 $ 7118
Total $ 30,000 $ 24,446 Total $ 30,000 $ 23,732
Less investment $ 24,000

Less investment $ 24,000
NPV $ 446 NPV < $ 268>
Project X has NPV greater than zero and should be accepted Project
Y has an NPV less than zero and should be rejected
Positive NPV means that the returns are equal or greater than the cost
of capital

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India 1
This is defined as the rate at which the net present value of the investment is zero. The discounted
cash inflow is equal to the discounted cash outflow.
This method also considers time value of money.

FV / (1 + i)n = Cash Out Flow (Investment)
 FV / (1 + i)n - Cash Out Flow (Investment) = 0; => NPV = 0
 IRR can be determined by solving the above equation

IRR, find what discount rate result in an NPV of zero for the project. There is no direct formula for
calculating IRR return. It is found using an iterative process using NPV. The closest thing to a
formula is the following:
If NPV=0 then IRR=discount rate used to calculate the NPV. So we calculate NPV with different
discount interest rates, zeroing in on NPV=0 to find the IRR.
Example If you have to choose between Project A with an IRR of 25% or Project B
with an IRR of 15%, the answer is Project A, as the IRR for Project A is better than
for Project B i.e. higher SN Panigrahi, Essenpee Business Solutions,
222
India
•Profitability Index (PI):
It is the ratio of the present value of future cash benefits, at the required rate of
return to the initial cash outflow of the investment. It may be gross or net, net being
simply gross minus one. The formula to calculate profitability index (PI) or benefit
cost (BC) ratio is as follows.
PI = PV Cash Inflows/Initial Cash Outlay (Investment),
PI = NPV (benefits) / NPV (Costs)
All projects with PI > 1.0 is accepted.
While Comparing Multiple Projects, Project with Higher Value of PI is Preferred.

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ROI Return on Investment
•Returns on Invested Value are calculated as a metric to compare

amongst several Projects or to make Investment decisions.
•ROI = Net Profit / Investment Value

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Project Selection Criteria:
•Highest NPV Wins!
•Highest IRR Wins!
•Highest ROI Wins!
•Lowest Payback Period Wins!

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Weighted Scoring Model / Analytic Hierarchy Process
The AHP is a four step process:

1. Construct a hierarchy of criteria and subcriteria
2. Allocate weights to criteria
3. Assign numerical values to evaluation dimensions
4. Scores determined by summing the products of numeric
evaluations and weights
Unlike the simple scoring model, these scores can be
compared!

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Weighted Scoring Model
Criteria Weight Project 1 Project2 project3
criteria1 25% 90 90 50
criteria2 30% 70 90 50
Criteria3 40% 50 80 60
Criteria4 5% 80 90 50
Weighted 100% 67.5 86 54
project score
Project with Highest Score shall be Selected

227 SN Panigrahi, Essenpee Business Solutions,
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Scoring Model Example
Selection of a Project
Weightage Assigned Score
Criteria (A) Value (B) (AXB)
Business Priority
Alignment with Corporate Strategies / Goals 5 4 20
Typical Values
Business Growth / Expansion / Capacity Building 10 4 40
Financial 5 Meets All Requirements &

Expected Revenue / Benefits / Profits 10 3 30 Offers Some Added Value
Investments Required / Returns on Investment 7 4 28 4 Meets All the
Cost Reduction 6 3 18 Requirements
7 4 28
Easing Working Capital Requirement 3 Generally Meets Critical
Marketing Requirements
7 5 35 2 Meets Some
Market Share Growth / Establishing New Markets
6 5 30
Requirements but a Few
Improvement to Brand Awareness / Customer Reach
Major Gaps or Issues
Improvement to Customer Satisfaction 8 5 40
8 4 32 1 Fails to Meet Overall
Counter Competitors Strategy
Requirements, Serious
Operational
Concerns
Improvement of Operational Metrics – Efficiency / Effectiveness / Cycle Times 12 4 48
0 Does not Meet
Regulatory / Legal
Requirements / Fail to
14 3 42 Answer / Irrelevant
Regulatory Requirement
Total 100 391
Over all Score ‘= 391 / 100

SN Panigrahi, Essenpee Business Solutions, India=3.91 228
Multi-criteria analysis
 Multi-Criteria Analysis (MCA) is a decision-making tool developed for complex problems.
 By using MCA the members don't have to agree on the relative importance of the Criteria or the rankings of the
alternatives. Each member enters his or her own judgment, and makes a distinct, identifiable contribution to a
jointly reached conclusion.
 SMART is a very simple means of quantitatively combining diverse sets of benefits by converting them all to an
abstract measure of value. (two factors here are weight and score)
 SMART Simple Multi-Attribute Theory
 identify criteria (risk, market share…)
 measure utilities of alternatives over each criterion
 elicit preference weights
◼ From the most important to the least important
value = S of weights times scores

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• Sunk Costs: Are expended costs, should not be considered when deciding
what projects to invest in or continue.
•Sunk costs are costs that have been incurred on a project but have not produced
value towards the project objectives. Think of sunk costs as spilled milk. If they are
unrecoverable, they are to be treated as if they are irrelevant. For instance, let's
assume that you hire a freelance developer to develop your website in Java. However,
after working on the job for some time, the developer quits for a personal reason.
When you hire another developer for the job, he convinces you that he could do a
better job using .NET technologies, and you follow his advice to develop the website
with NET. In such a case, the costs that you have incurred on the freelance Java
developer could be treated as sunk costs.

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Opportunity cost is the loss of potential future return from
the best alternative project when a choice is required for several mutually
exclusive projects.
It can also be defined as “the opportunity (potential return) that will NOT be realized for the second best project
not selected”. Since there are limited resources such as human, time, money, etc., we cannot work on infinite
number of projects at the same time. Opportunity cost is a concept to help you judge which project(s) to take and
which project(s) NOT to take based on the relative potential returns of the project(s).
For example:
•Project A has a potential return of $25,000
•Project B has a potential return of $20,000
•Project C has a potential return of $10,000
The opportunity cost for selecting Project A for completion over Project B and C will be $20,000 (the
“potential loss” of not completing the second best project).

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“Which definition best fits Opportunity Cost?”
a) The sum of all of the potential returns of projects not selected.

b) The potential return of the second best project that was not selected.
c) The difference between the potential return of the project selected and the potential return
of the second best option that was not selected.
d) The difference between the present value of cash inflows and the present value of cash
outflows.
The correct answer is B. Opportunity Cost is the potential return of the second best option that was
not selected. It is not the sum of all potential returns that were selected or the difference between
the potential return of the project selected and the second best option. It is also not the difference
between the present value of cash inflows and the present value of cash outflows as that is the
definition of net present value.

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You are part of a project selection team evaluating three proposed projects and you need to select the project
that would bring the best return for the organization. Project A has an NPV of $25,000 and an IRR of 1.5, Project B
has a NPV of $30,000 and an IRR of 1.25, and Project C has an NPV of $15,000 and an IRR of 1.5. What would be
the opportunity cost of selecting Project B over Project A?”
a) $15,000
b) $5,000
c) $25,000
d) $30,000
The correct answer is C. Opportunity Cost is the potential return of the project not selected. In this case we did
not select Project A, so it is $25,000 – Next Best.
There is extra unrelated information in this question; IRR is not relevant when evaluating opportunity cost. Once
all of the unnecessary information is filtered out the questions is simply asking what is the dollar value
associated with Project A.

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Chen is a Project Manager helping his company on selection of a new project. Tim is using Opportunity Cost
project selection method. Which one of the four projects should his company select?
Project A has a opportunity cost of $300K.

Project B has a opportunity cost of $400K.
Project C has a opportunity cost of $500K.
Project D has a opportunity cost of $600K.
CORRECT: a. A project with the smallest opportunity cost should be selected.

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Kumar is a Project Manager helping his company on selection of a new project. Kumar is using Payback
period project selection method. Which one of the four projects should his company select?
Project A has a Payback period of three years.

Project B has a Payback period of four years.
Project C has a Payback period of five years.
Project D has a Payback period of twentyfour months.
INCORRECT: d. Project d has the minimum payback period. The project manager should select the project
with the least payback period.
Jim is a Project Manager helping his company on selection of a new project. Jim is using Internal rate of
return project selection method. Which one of the four projects should his company select?
Project A has an internal rate of return of 5%.

Project B has an internal rate of return of 6%.
Project C has an internal rate of return of 7%.
Project D has an internal rate of return of 8%.
INCORRECT: d. The Project Manager should choose a project with highest internal rate of return.

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Samantha is a Project Manager of a Software product. The project required an initial investment of $100,000.
The project generated a revenue of $20,000 in the first year. There were operational cost of $5000 and tax
liability of another $5000. What is the return on invested capital?
5%
10%
20%
0%
INCORRECT: b. After tax profits of the project are $10000. Return on invested capital = $10000 divided by
$100000.
Which of the following is true about the project charter?
The project charter is signed by the Project Manager.

The project charter is generated as an output of Develop Project Management plan process.
The project charter includes the detailed schedule of the project.
Project charter includes a high level view of project requirements, budget and milestones.
INCORRECT: d. The project charter is signed by Senior Management/Project Sponsor. Hence option a is
incorrect. Project charter is the primary output of Develop Project Charter process. Hence option b is incorrect.
Project charter includes a high level schedule,
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There are 4 projects to be chosen from, Project A has NPV of $32500, Project B has NPV of $35000, Project
C has NPV of $45000 and Project D has NPV of $10000, which project should be chosen?
A. Project A
B. Project B
C. Project C
D. Project D
The answer is Project C as it has the highest NPV.

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Tony is a vice president of the organization that is initiating work on a new software
upgrade project. He is looking into the organization repository to get some information
on project charters that were used in some previous projects. Which of the following
is not true about the project charter?
A: The charter gives a summary of the milestone schedule.

B: The charter is given by the project sponsor.
C: The project charter gives authority to the project manager.
D: It is mandatory that the project manager be consulted while documenting the
project charter.
Ans : D

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Develop Project Management Plan is the process of defining, preparing, and
coordinating all subsidiary plans and integrating them into a comprehensive
project management plan.
The key benefit of this process is a central document that defines the basis of
all project work.

Source: A Guide to the Project Management Body of Knowledge. 6th Edition;
India 2017
239
Develop Project Management Plan (Planning Process Group)
•The Project Management Plan (PMP) is a formal written document that lies out how the
project will the executed, monitored, and controlled.
•The PM plan unifies all subsidiary management plans together, including scope, time,
cost, quality, HR, communications, risk, procurement, and stakeholders management plan.
•The project manager’s main task is to execute the project management plan
successfully.
•The PM plan is signed off by the key sponsors before execution begins.
•The PMP should be available to all project members as it can provide essential project
information and can be used to introduce project members to the project. The project
management plan is probably the main communication document for the project.
•Once the Project Management Plan is base lined, it may only be changed through the
Perform Integrated Change Control process. If a change needs to be made to the PM plan,
the change needs to be approved by the Change Control Board (CCB).
•However, the Project Management Plan is often updated with Outputs from other
processes

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Project Charter Vs Project Plan
A project charter is a short A project plan is a formal, approved
document that lists the scope, document that guides project
objectives, deliverables, and What is
execution and control. It explains in
stakeholders of a project, and the difference between detail how and when to fulfill the
delineates roles and responsibilities Project Charter and project objectives by showing the
of each member of the project Project Management major products, milestones, activities,
team. Plan? and resources required on the project.
Once the top management
approves the project charter, the project

The project charter is the first deliverable of the
manager prepares the project plan that shows
project, used to secure stakeholder approval for the
how to achieve the approved project goals and
project goals and terms, and establish authority for
objectives.
the project manager.

Project Planning
Develop Project Management Plan
At a minimum, a project plan answers
What is Project Management Plan? basic questions about the project
A project plan, according to the Project
Management Body of Knowledge (PMBOK), is:
"a formal, approved document used to guide both What?

project execution and project control. Why?
The primary uses of the project plan are to document
planning assumptions and decisions, facilitate When? Who?
communication among stakeholders,
and document approved scope, cost, and schedule
baselines.
A project plan may be summarized or detailed."
Purpose of Project Management Plan (PMP)
Who will be
Involved
How it will be
Measured &
How it is to be Reported & How
Achieved information will
be
Communicated
Provide a
Purpose of Used as a
Comprehensive
Reference for
Baseline of what Project any Decision &
has to be Management for Clarification of
achieved by the Plan (PMP) unclear areas
project
Used as a Reference throughout the project to

ensure that the management of the project is
carried out consistently and in line with policy and
procedures SN Panigrahi, Essenpee Business Solutions,
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Project Planning
Components of Project Management Plan
So what does
a project
management plan Comprehensive
include? Scope management plan
Schedule management plan
Unique Cost management plan
Quality management plan
Process management plan
Staffing management plan
Project
management Communication management plan
Unambiguous plan Risk management plan Procurement
Management Plan
Baselines of cost, quality and schedule
Risk Register
Always Resource Calendar
Current
Project Milestones
Authoritative
SUGGESTED CONTENTS OF THE PROJECT MANAGEMENT PLAN:
•Executive summary – This section should include a few paragraphs describing, at a high level, the key elements of
the project that are detailed throughout the project plan.
•Strategic/organisational alignment – It must be determined which organisational objectives will be supported by

undertaking the project. This section should also include the results of the project’s stakeholder analysis.
•Project scope definition – The purpose and objectives of the project should be stated in this section. There should
be definition as to the scope of the project as well as the major deliverables. The product breakdown structure
(PBS) and the work breakdown structure (WBS) will be determined here. Quality specifications will also be included
in this section, describing the product or service performance criteria from a customer perspective. Project
assumptions should also be included, clarifying grey areas in the project scope.
•Feasibility assessment and contingency plans – this section should evaluate the economic, technical, operational
and organisational feasibility of the project; identify and assess project risks; and provide contingency plans to
address high impact risk factors.
•Constraints – a list of any known constraints imposed by the environment or by management e.g. fixed budget,
limited resources etc

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•SUGGESTED CONTENTS OF THE PROJECT MANAGEMENT PLAN:
•Human resource requirements – Define the project team organisation, roles and responsibility requirements. Training
requirements will need to be identified here and the development of a project training plan should begin.
•Material/equipment requirements – this section should define space, hardware/software, and other resources needed
to complete the project successfully.
•Project schedule and milestones – The contents of this section will define the milestones and activity schedule of the
project, integrating three key elements: deliverables, due date or duration and critical dependencies.
•Budget/cost estimate – Estimates are required for the project duration. See here for our 12 Basic Rules for Estimating
your Project. Costs are typically divided into three types: capital items, expense items and labour.
•Risk Management – This section will detail the process to be employed on the project in order to manage risk. More
information may be found on risk management here.
•Project issues – issues are the things that have happened which are outside the authority of the project manager and
need to be escalated in order to achieve a resolution. This section should define the process to be used to manage
issues identified on the project.

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•SUGGESTED CONTENTS OF THE PROJECT MANAGEMENT PLAN:
•Change management – The change management process to be utilised on the project should be
described in this section.
•Communication management – In this part of the PMP there should be a description of the system
of communications and the project performance documentation that will be provided to the various
stakeholders.
•Related products and deliverables – This section should document known project dependencies,
with other groups within or outside of the organisation to ensure the project is not exposed by other
business processes.
•Approvals – This section will capture approval signatures from project stakeholders.
•Attachments – Included in this section will be pointers to pertinent documents such as the business
case, notes and related documents.

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Develop Project Management Plan (Planning Process Group)
•Baselines will be included in the PM plan, including scope, time and cost baselines.
The final deliverable will be measured against the initial baselines.
•The scope baseline includes 3 components: scope statement, Work Breakdown
Structure (WBS), and WBS dictionary.
•Baselines can change throughout the project as more information is known. Senior
management and sponsor need to approve the new baseline.
•The project manager has access to contingency reserves. S/he does not have
access to management reserves. The sponsor needs to approve the use of
management reserves.
•Configuration management systems documents all versions of the project
management plan and other project documents.

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Outputs from other Processes (Sample)
Collect Requirements Determine Develop Plan Quality
•Requirements Document
Budget Schedule •Quality Plan Resource
Management
•Requirement Management •Cost •Schedule Plan Management
Plan Performance Baseline •Process •Resources
Baseline
improvement •Plan
Plan
Enterprise /
Organization
•Organization Plan
Process Assets Communications
•Enterprise
Environmental •Communications
Factors Management Plan
Create WBS
Plan Risk
• Scope Baseline Management
Define Scope Develop •Risk Management
Plan
•Project Scope
Statement Project
Plan Stakeholder
Management Plan
Procurements
Management Plan •Procurement
•Stakeholder Management Plan
Management Plan
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The project management plan can be either summary level or detailed, and is
composed of subsidiary plans and other components. A Project Management
Plan includes:
• Ten Subsidiary Management Plans
Scope Mgt. plan; Requirements Mgt plan; Schedule Mgt plan;
Cost Mgt plan; Quality Mgt plan; Human Resource Mgt plan;
Communications Mgt plan; Risk Mgt plan; Procurement Mgt plan
and Stakeholder management plan
• Six other plans :
▪ Change management plan
▪ Configuration management plan
▪ Performance measurement baseline
▪ Project lifecycle
▪ Development approach
▪ Management reviews
• Baselines (schedule, scope, cost)
• Tailoring decisions taken for the project
• All appropriate / applicable PMP processes SN Panigrahi, Essenpee Business Solutions,
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Direct and Manage Project
work
Source: A Guide to the Project Management Body of Knowledge. 6th Edition; 2017
Direct and Manage Project Work is the process of leading and performing the
work defined in the project management plan and implementing approved
changes to achieve the project’s objectives.
The key benefit of this process is that it provides overall management of the
project work.
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Direct and Manage Project Work (Executing Process
Group)
•Creates the project deliverable

•Acquire/train/hire necessary people and other resources to complete the
project work
•Solicit, procure, and manage third-party vendors
•Collect project data (used in monitoring and controlling for reporting)
•Implement approved change requests from CCB
•There are three types of change requests: corrective action, preventative
action, and defect repair.
•PM should implement ALL of the work and ONLY the work outlined in the PM
plan.
•PM should avoid gold plating (adding extras for clients) and scope creep.
•Most of the time on the project is spent in execution.
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Direct and Manage Project work -
Inputs
Approved Change Requests
Approved change requests are an output of the Perform Integrated Change Control
process, and include those requests reviewed and approved for implementation by
the change control board (CCB).
The approved change request may be a corrective action, a preventative action, or

a defect repair. The approved change requests can also modify the policies, project
management plan, procedures, costs, or budgets or revise the schedules.
Corrective action—An intentional activity that realigns the

performance of the project work with the project management
plan;
Preventive action—An intentional activity that ensures the future

performance of the project work is aligned with the project
management plan;
Defect repair—An intentional activity to modify a nonconforming

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Direct and Manage Project work -
Tools
An important tool used in the Direct and Manage Project
Work process is the
Project management information systems (PMIS) usually

acquired by organizations as software packages are meant to
provide managers with the decision-making support needed in
planning, organizing, and controlling projects.
Project Management Information System (PMIS); for

example, the scheduling tool, the Configuration
Management System, and the Work Authorization
System.
Recall that the PMIS is an Enterprise Environmental

Factor
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Direct & Manage Project Work
Output:
Deliverables
Processes
Control Validate Close Project

Quality Scope or Phase
Input: Input: Input:
Deliverables Verified Accepted
Deliverables Deliverables
Output: Output: Output:

Verified Accepted Transitioned
Deliverables Deliverables Deliverables

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Work Performance Data
“…the raw observations and measurements identified during activities
being performed to carry out the project work.”
Passed on to the Monitor & Control processes for more
analysis.
Examples include:
• Work completed and performance indicators
• Technical performance measures, change requests
• Activity start and finish dates
• Defects and actual costs…

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▪ Process of using existing knowledge and creating new knowledge to
achieve the project‟s objectives and contribute to organizational learning
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Manage Project Knowledge
Manage Project Knowledge is the process of using existing knowledge

and creating new knowledge to achieve the project’s objectives and
contribute to organizational learning.
Knowledge sharing and integration from various areas are required when
reusing existing knowledge or creating new knowledge.
An environment of trust and safety is essential for knowledge sharing.

Knowledge management is best-done face to face, for example by
networking, discussion forums, workshops, work shadowing,
knowledge cafes, interactive training, interest group or communities.
Whereas information management requires the use of library services or

lessons learned register, web searching and reading articles.
Finally, knowledge must be kept up-to-date and should be used. Due to this,
project managers have to demonstrate leadership.

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Managing Project Knowledge
Projects benefit by leveraging existing organizational knowledge and

creating new knowledge in projects to improve project outcomes and
future phases of projects.
Knowledge is of two types:
•Explicit knowledge – this can be documented (codified) easily in words,

pictures, etc. But this cannot cover the knowledge for all contexts, for
example – all scenarios of one process. For this, we require tacit
knowledge.
•Tacit knowledge – this is in the minds of experts who understand how to

use knowledge for various contexts or situations. But this is difficult to
codify as it depends on experience and beliefs, etc.

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This process includes tracking, reviewing and regulating the progress to meet
the performance objectives defined in the project management plan
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• Comparing actual project performance against the project management plan
• Assessing performance to determine any corrective or preventive actions
are indicated
• Identifying new risks, analyzing , tracking and monitoring the existing

project risks (Risk KA)
• Maintaining an accurate and timely information base concerning project‟s

products and their associated documentation (Communication KA)
• Providing information to support status reporting, progress measurement

and forecasting
• Monitoring implementation of approved changes
• Providing appropriate reporting on project progress to program

management

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The process of reviewing all change requests, approving changes, and
managing changes to the deliverables, organizational process
assets, project documents and the project management plan and
communicating the decisions

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Perform Integrated Change Control (M & C Process
Group)
•During execution, the project team may discover new information that makes
it impossible for them to implement the PM plan. As a result, they issue a
change request to change the PM plan. The change request is reviewed by
the CCB. If the request is approved, the project team will implement the
change. If not, it is discarded.
•All changes should be tracked on the change log
•Changes arise for a number of reasons – e.g. missed requirements, poor
understanding of scope, change in project environment, unforeseen risks, etc.

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“The configuration management plan defines those items
that are configurable, those items that require formal
change control, and the process for controlling changes to
such items.”
Configuration Planning will tell us what all project items are

configurable (Configurable Items CIs), which all items (say
Scope Statement, WBS Dictionary) needs, formal change
control and what would be the process of controlling
changes to these items.

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• Ensures that the descriptions of the project‟s products are correct and
complete
• Involves identifying and controlling the functional and physical design

characteristics of products and their support documentation
• Some of the configuration management activities in the PICC:

▪ Identify Configuration Items – products and documents are
labeled, changes are maintained and accountability maintained
▪ Status Accounting – information is recorded and reported which

includes a listing of approved configuration identification, status of
proposed changes to the configuration, implementation status of
approved changes
▪ Verification and Audit - Ensure composition of project‟s

configuration items is correct, corresponding changes are
registered, assessed, approved, tracked and correctly implemented
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Your main focus is to make sure you complete the project
within schedule. When should someone use the Perform
Integrated Change Control process?
A: It should be only used when the project scope is clearly

defined.
B: It should be only used when somebody is closing the
project.
C: It should be only used when the project is completely
funded.
D: Throughout the entire project.
And : D

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The customer contacts you to add more scope on the project.
You tell the customer to provide you the details of the change
in writing. As project manager, what is your next step?
A: You need to make sure that your stakeholder

understands the impact of the change .
B: Ask the stakeholder if there are any more similar
changes expected.
C: It is very important to understand that why this change
was not discovered during the planning stages.
D: Complete integrated change control process.
And : D

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8 Steps of Change Management Process
Eliminate Root Cause of Changes
Identify the Change
Evaluate the Impacts
Submit the Change Request
Perform Integrated Change Control

Assess the change; Explore Various Options; Approve or Reject the Change;
Record the Change in the Change Control System (CCS)
Adjust the project management plan, project documents, and baselines
Manage Stakeholders’ Expectations by Communicating
Manage the Project to the Revised Project Management Plan and

Project Documents
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Your project is proceeding according to schedule. You have just learned that a new regulatory requirement will
cause a change in one of the project's performance specifications. To ensure that this change is incorporated
into the project management plan, you should______________.
•A. Call a meeting of the change control board

•B. Change the WBS, project schedule, and project plan to reflect the new requirement
•C. Prepare a change request
•D. Immediately inform all affected stakeholders of the new approach to take on the project
Correct Answer: C
The change request should detail the nature of the change and its effect on the project. Documentation is critical
to provide a record of the change and who approved it, in case differences of opinion arise later. A change
request is an output from the direct and manage project work process and an input to the perform integrated
change control process.

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Close Project or Phase is the process of finalizing all activities for
the project, phase, or contract
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What Triggers the Close Project Process?
There may be three reasons to trigger the project closure:
1.Project phase completion. If the project has several phases, there must be a
close phase process for the closure of each phase.
2.Project completion: When the project is completed successfully the close

project process should be implemented.
3.Project termination: Even if the project is terminated, a close project process

should be implemented.

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Close Project or Phase (Closing Process Group)
•This process formally ends the project or project phase.

•Ensure all procurement contracts are closed before the project is formally
closed.
•Give notice to the project team that the project is ending.
•Obtain formal sign off from project sponsors.
•Archive project documents for future projects.
•Document lessons learned.

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The client on a project tells Tom who is a project manager that
they have run out of money to pay for the project. What should
Tom do first?
A: Stop the work as there is no funding for the project.
B: Shift more work to a later phase in the schedule. It will
give some time to the customer to get the funds.
C: Start with close project or phase process.
D: Release your project team.
Ans : C

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You are a new project manager who has never managed a project
before. It would be BEST in this situation to rely on _____ during
planning in order to improve your chance of success.
A-) Your intuition and training

B-) Stakeholder analysis
C-) Historical information
D-) Configuration management
Answer is C. Historical information. First thing to explore before

starting a new project is the historical information about similar
projects in the organizational process assets library of the
organization.
Knowledge Area: Integration Management Knowledge Area
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Common Terminologies
A project charter establishes a partnership between the performing

Project organization and the requesting organization (or customer, in the
Charter case of external projects). The approved project charter formally
initiates the project.
Business Documentation to justify the project investment. Cost benefits

Case Analysis
Know the following two categories of project selection methods and their
subsets for the exam:
1.Benefit measurement method (comparative approach)
1. Murder Board – a panel of people who try to shoot down a new
project idea
2. Peer Review
3. Scoring Models
4. Economic models – the following are economic models for selecting a
Project
project:
Selection
1. Present value; 2. Net present value; 3. IRR; 4. Payback
period
5. Benefit-cost ratio
2.Constrained optimization methods (mathematical approach)
1. Linear programming
2. Integer programming India
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Straight line depreciation – the same amount of depreciation is taken each
year
Depreciation
Accelerated depreciation – product depreciates faster at the beginning.
There are two types: double declining balance and sum of years digits.
Description of the products or services being supplied along with the
Project business need, product scope description and strategic plan. External
SOW projects: SOW received from the customer. Internal projects: SOW provided
by the sponsor or initiator of the project.
Enterprise
Consider culture and structure, resources availability, project management
Environmen
systems available, stakeholder risk tolerances, and marketplace conditions.
tal Factors
Organizationa Lessons learned from previous projects, organization processes and

l Process procedures and corporate knowledge base containing historical data,
Assets issue and defect management database, financial information, etc.

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Takes results from other planning outputs to create a consistent document

Develop
to guide both execution and control of project. Documents planning
Project
assumptions, decisions regarding alternatives chosen, facilitates
Management
communications, define key management reviews. Baseline for progress
Plan
measurement and control.
Management plans are the strategy for managing the project and the
processes in each knowledge area. To reiterate to make sure we are all
on the same page, a management plan covers how you will:
Management
• Define
Plan
• Plan
• Manage
• Control

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A project management plan is an integration function – it

integrates all the knowledge area management plans into cohesive
whole. This plan also includes the baselines for the project. A
project management plan is a series of plans and baselines, rather
than just a schedule. The project management plan includes:
•The project management process that will be used on the

Project Management
project
Plan
•The management plans for scope, schedule, cost, quality, HR,
communications, risk, and procurements
•Scope, schedule, and cost baselines
•Requirements management plan
•Change management plan
•Configuration management plan
•Process improvement plan
The project management plan contains scope, schedule, and cost
baselines, against which the project manager will need to report
project performance. These baselines are created during planning.
Performance
Together these baselines are called the Performance Measurement
Measurement
Baseline
Baseline
•Scope baseline
•Schedule baseline SN Panigrahi, Essenpee Business Solutions,
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•Cost baseline India
Requirements A requirements management plan describes how requirements will be
management plan identified, managed, and controlled
The change management plan describes how changes will be managed

and controlled and may include:
•Change control procedures
•The approval levels for authorizing changes
•The creation of a change control board to approve changes
Change
•A plan outlining how changes will be managed and controlled
Management Plan
•Who should attend meetings regarding changes
•The organizational tools to use to track and control changes
There is a change management plan for the project as a whole. There
are also change management plans for each knowledge area, which
are described in the individual management plans.
The purpose of the configuration management plan is to make sure

everyone knows what version of the scope, schedule, and other
Configuration
components of the project management plan are the Latest and
Management Plan
Relevant. The configuration management plan defines how you will
manage changes to the deliverables and the resulting documentation.

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As part of planning, the project manager identifies existing
processes to use on the project and may create some of
Process
their own. Planning in efforts to improve these processes
improvement
is required part of project management, because good
plan
processes help the team complete work faster, cheaper,
and with higher quality
Change
A panel of stakeholders who are responsible for reviewing
Control
and deciding which changes should be made to a project.
Board
This is the integration part of the executing process group.

In Direct and Manage Project Execution, the project
Direct and
manager integrates all the executing processes into one
manage
coordinated effort to accomplish the project management
project
plan and product the deliverables. In addition, it involves
execution
requesting changes and completing the work
accompanying approved change requests.
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Things to Remember
You need to know the following about project charter for the exam:
•The project charter formally recognizes/authorizes the existence of the
project, or established the project. This means that a project does not exist
without a project charter
•It gives the project manager authority to spend money and commit corporate
1
resources. On the exam, this is the most commonly described benefit or use of
the project charter. In most project situations, the project team does not report to
the project manager in the corporate structure
•The project charter provides the high-level requirements for the project
•It links the project to the ongoing work of the organization
There are also the following management plans:
•Change management plan
2 •Configuration management plan
•Requirements management plan
•Process management plan
You need to understand the following: deviations from baseline are often due to
incomplete risk identification and risk management. Therefore, if the exam asks
3 what to do when a project deviates significantly from established baselines, the
correct answer is likely the one about reviewing the project’s risk management
process. SN Panigrahi, Essenpee Business Solutions,
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What is Project Integration Management?
•
Project Integration is the only area that has activities in all five of the PMI
process groups. The following six processes and the primary goals of
these processes
•Develop project charter. Goal: the project charter

•Develop project management plan. Goal: the project management plan
•Direct and Manage Project Work. Goal: deliverables
•Monitor and control project work. Goal: change requests, work
performance reports
•Perform integrated change control. Goal: approved change requests,
change log
•Close project or phase. Goal: Final product, service, or result transition

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Thomas is a project manager who is holding a formal,
approved document that defines how the project would be
executed, monitored, and controlled. What is Thomas
holding?
A: The performance measurement baseline
B: The Project Management plan
C: The project charter
D: The work authorization system document
Ans : B

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Question 1: The most critical activity of the project manager
on the project is to:
a. Manage the project team

b. Protect the Project from unnecessary changes
c. Perform Integration
d. Create the project management plan
Answer: C – All the answers are correct – a PM does all
these things. However the most critical aspect is the PM
functioning as an integrator: putting all the parts and pieces
of the project into an integrated whole

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Question 2: The project has been running smoothly; initiation phase is complete and the
team is working on all aspects of planning. You had meetings with stakeholders several
times to collect requirements and as a result, requirements documentation is almost
complete, as are high-level and detailed design documents. As construction begins on
the project, several stakeholders have indicated the need for changes to the
requirements set. They are claiming these elements were missed in the initial
requirements collection process, and they want you to add these elements to the project
immediately. You perform an impact assessment and get it back to them only to hear that
they are not going to allow any changes in the project budget or the timeline to complete
these additional elements. What is the most effective tool that you could use to prevent
this instance of scope creep?
a. Change control system

b. Configuration management system
c. Murder Board
d. Work Authorization System
Answer: D – One of the defined uses of a work authorization

system is for the control of scope creep
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Question 3: Which of the following is true about change requests
that result in corrective or preventive actions
a. They result in changes to scope

b. They result in changes to the project plan
c. They significantly increase risk
d. They do not usually affect project baselines
Answer: D – They do not normally affect the project

baselines.

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Question 4: The project you are managing involves 11 different teams scattered
geographically across the country. The project sponsor is worried about how the
work of 11 non-co-located teams is going to be coordinated for the project. You
assure the sponsor that all relevant documentation will be captured in the
corporate PMIS (project management information system). Within what key input
does the PMIS reside?
a. Project Management Plan

b. Enterprise Environmental Factors
c. Organizational Process Assets
d. Work Authorization System
Answer: B – The PMIS is an enterprise environmental factor

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Which of the following is not a process in the Project Integration
Management process group?
a. Develop project charter

b. Close project or phase
c. Identify Project Manager
d. Monitor and Control Project work
CORRECT: C. Identify Project Manager
Which of the following is not true about project charter?
a. Project charter is written by the Project Manager.

b. Project charter defines the purpose of the project
c. Identify and authorizes the Project Manager
d. Project charter is authorized by Executive Management
CORRECT: A

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1.You are given to choose between a Project ABC, with a payback period of 1 yr and
another Project XYZ with a payback period of 3 yrs, which one should you consider
choosing?
1. Project ABC
2. Project XYZ
3. Let the board members choose
4. None of the Above
Answer. 1
2.The PMO of your organization has received three project proposals. However, due to the
constraints of costs, only one project can be chosen. Project A would have a NPV
of US$200,000, Project B would have a NPV of US$220,000 while Project C would have a
NPV of US$50,000. What is the opportunity cost of choosing the project with the highest
NPV?
1. $220,000
2. $50,000
3. $200,000
4. $250,000
Answer. 3

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Which process formally authorizes the project?
a. Receive project approval

b. Identify Project Manager
c. Develop preliminary project statement
d. Develop project charter
Ans : d
Develop project charter is part of which process group?
a. Initiation
b. Planning
c. Executing
d. Monitoring and Control
Ans : a

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John Smith is a Project Manager for XYZ consultants. He has been asked to help
choose one of the four potential project candidates. The management used
Payback period technique for project selection. Which of the following projects
should John recommend to the management.
a. Building an apartment. Project involves making an investment of $200,000.

After six months, there will be monthly rental returns of $5000.
b. Building a bridge. Project involves making an investment of $1,000,000. After

two years, there will be monthly returns via toll for the bridge of $50,000.
c. Building a house. Project involves making an investment of $500,000. After one

year, there will be monthly rental returns of $10,000.
d. Building a school. Project involves making an investment of $500,000. After one

year, there will be monthly returns via school fees of $50,000.
CORRECT: D. For option A, 46 months is the payback period. For option B, 44

months is the payback period. For option C, 62 months is the payback period. For
option D, 22 months is the payback period. Building a school has the minimum
payback period.

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Alice Newland is a Project Manager for XYZ consultants. She has been
asked to help choose one of the four potential project candidates. The
management used internal rate of return technique for project selection.
Which of the following projects should Alice recommend to the
management.
a. Project A requires making an initial investment of $100,000 and will

give monthly return of $5,000.
b. Project B requires making an initial investment of $200,000 and will
give monthly return of $8,000.
c. Project C requires making an initial investment of $100,000 and will
give annual return of $40,000.
d. Project D requires making an initial investment of $200,000 and will
give annual return of $60,000.
CORRECT: A. Project A has best internal rate of return of $60K annually

for an investment of $100,000.

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XYZ Corporation is using weighted scoring model to select one project out of four projects.
The importance criteria as well as ratings of four projects are given below. Which of the
following projects will be selected?
a.Project A
b.Project B
c.Project C
d.Project D
Project weights
Project
Criteria Weight Project B Project C Project D
A
Time to Market 2 6 6 2 4
Availability of
3 7 4 1 4
resources
Sales potential 5 1 2 5 5
Fitment with other
4 5 3 6 5
products
CORRECT: D. A weighted average for all four projects is computed and one with
highest weighted average is selected. For project D, the weighted average is (4*2)
+ (4*3) + (5*5) + (5*4). Total score for project D is 65. This is highest across all
projects. SN Panigrahi, Essenpee Business Solutions,
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PQ Corporation is using Payback period to choose one project out of four
options. Which of these projects should be selected by the company?
a.Project A
b.Project B
c.Project C
d.Project D
Payback period
Project Name Initial investment Cash inflow per quarter

Project A $200,000 $10,000
Project B $100,000 $2,000
Project C $400,000 $80,000
Project D $500,000 $125,000
CORRECT: D. Project D requires four quarters to payback the

investments. This is the minimum time when compared to
other projects.
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Project A requires investment of $500,000. The project is expected to generate
$25K per quarter for first year and $100K per quarter after that.
What is the payback period

a. One year
b. Two years
c. Three years
d. Eight years
CORRECT: B. Payback period is eight quarters.

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8. A project is expected to result in $2 million in five
years. The current interest rate is 5%. What is the PV
of the project?
A. $1,359,252
B. $1,567,398
C. $1,784,972
D. $2 million
Ans
B. $1,567,398 – Get those PV & FV formulas on
your brain dump. Again, this is one of those
problems that may or may not surface on your
exam. It did for me! (But depreciation didn’t.)
Present Value = FV / [(1 + r)^n], where r is the rate
of return and n is the number of years = $2 million /
[(1 + .05)^5].
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9. You must select one and only one project to take
on for your company. The net present value (NPV)
for each project is as follows: Project A’s NPV is
$10K, Project B’s NPV is $20K, and Project C’s NPV is
$30K.
A. Project A
B. Project B
C. Project C
D. This problem cannot be solved without knowing
the interest rate for each project.
Ans
C. Project C – For project evaluation dealing with
internal rate of return (IRR), return on investment
(ROI), and net present value (NPV), simply pick the
greatest value. Easy!

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10. A new state-of-the-art computer for your project
costs $10K. You expect for it to last for four years
and to sell it for $1K for parts. How much should you
book in depreciation each year for the computer?
Assume you are using straight-line depreciation.
A. $1250
B. $2000
C. $2250
D. $2500
Ans
C. $2250 – (Asset Cost – Scrap Value) / Useful Life
= ($10K – $1K) / 4 = $2250 per year. It is possible,
though not certain, that you will encounter a
depreciation problem on your PMP exam, though I
happened not to encounter one. Add the formulas to
your brain dump anyway — a point is a point.
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11. Your organization is considering to run a project which will
entail an investment of $1,000,000. The product from the project
is forecasted to create revenues of$250,000 in the first year after
the end of the project and of $420,000 in each of the two
following years. What is true for the net present value of the
project over the three years cycle at a discount rate of 10%?
A The net present value is positive, which makes the project

attractive.
B The net present value is positive, which makes the project
unattractive.
C The net present value is negative, which makes the project
attractive.
D The net present value is negative, which makes the project
unattractive.

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Answer
Discount rate: 10%

Year Cash inflow, Cash inflow,
Future Value Present Value
Investment 0 - 1,000,000 - 1,000,000
Revenue
1 250,000 227,273
2 420,000 347,107
3 420,000 315,552
Revenues (3y) 1,090,000 889,932
Net Revenues (3y) 90,000
-110,068
Net Present Value

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A manager and the head of engineering discuss a change
to a major work package. After the meeting, the manager
contacts you and tells you to complete the paperwork to
make the change. This is an example of:
A-) Management attention to scope management.

B-) Management planning.
C-) A project expediter position.
D-) A change control system.
Answer is C. In this situation, project manager acts as the

secretary of the project and does the paper work. So this is
an example of project expediter position where project
manager does not have any authority and power. Project
manager does only paper work.

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Tom is a Project Manager helping his company on selection of a new project. Tom is using Payback period
project selection method. Which one of the four projects should his company select?
Project A requires an investment of one million dollars. After six months of investment, project will
generate profits of $50K per month.
Project B requires an investment of $100K dollars. It will yield returns of $5K per month.
Project C requires an investment of one million dollars. It will yield returns of $40K per month.
Project D requires an investment of $500K dollars. It will yield returns of $50K per month.
INCORRECT: d. Project D has minimum payback period of ten months.
Project A Project B Project C Project D

6months + 1000000 / 100000 / 5000 = 20 1000000 / 40000 = 25 500000 / 50000 = 10
50000 = 26

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Mary is a Project Manager helping her company on selection of a new project. Mary is using Benefit Cost ratio
project selection method. Which one of the four projects should her company select?
Project A has a construction cost of $1 million and a projected sale price of $1.2 million.
Project B has a construction cost of $2 million and a projected sale price of $2.5 million.
Project C has a construction cost of $5 million and a projected sale price of $6 million.
Project D has a construction cost of $10 million and a projected sale price of $11.5 million.
INCORRECT: b. Project B has benefit cost ratio of 1.25. This is the highest among the four projects.
Project A Project B Project C Project D

1.2 / 1 = 1.2 2.5 / 2 = 1.25 6 / 5 = 1.2 11.5 / 10 = 1.15

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Tim is a Project Manager helping his company on selection of a new project. Tim is using Net Present
Value project selection method. Which one of the four projects should his company select?
Project A has a net present value of $300K.

Project B has a net present value of $400K.
Project C has a net present value of $500K.
Project D has a net present value of $600K.
INCORRECT: d. Project with the highest net present value must be selected during project selection.

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During a team meeting, a team member asks about the measurements
that will be used on the project to judge performance. The team
member feels that some of the measures related to activities assigned
him are not valid measurements. The project is BEST considered in
what part of the project management process?
A-) Initiating
B-) Executing
C-) Monitoring & Controlling
D-) Closing
Answer is B. Executing. Questions states that team member feels some

of the measures on his activities are not valid. Therefore, he must be
working during the executing phase of the project where project
deliverables are produced and project members perform most of the
work they should do.

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You are a new project manager who has never managed a
project before. It would be BEST in this situation to rely on
_____ during planning in order to improve your chance of
success.
A-) Your intuition and training
B-) Stakeholder analysis
C-) Historical information
D-) Configuration management
Answer is C. Historical information. First thing to explore

before starting a new project is the historical information
about similar projects in the organizational process assets
library of the organization.

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A company has to make a choice between two projects, because the
available resources in money and kind are not sufficient to run both at
the same time. Each project would take 9 months and would cost
$250,000.The first project is a process optimization which would result
in a cost reduction of $120,000 per year. This benefit would be achieved
immediately after the end of the project.
The second project would be the development of a new product which

could produce the following net profits after the end of the project:
1. year: $ 15,000
2. year: $ 125,000
3. year: $ 220,000
Assumed is a discount rate of 5% per year. Looking at the present
values of the benefits of these projects in the first 3 years, what is
true?
a) Both projects are equally attractive.
b) The first project is more attractive by app. 7%.
c) The second project is more attractive by app. 5%.
d) The first project is more attractive by app. 3%.
Ans : d SN Panigrahi, Essenpee Business Solutions,
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Project Integration Summary
Let us summarize what we have covered in this lesson.
➢ Project Integration Management involves unification, consolidation,
articulation, and integrative actions that are crucial for successfully
completing the project.
➢ Integrating the project activities is the key role of a project manager; the
project team focuses on completing the project activities, and the project
sponsor warrants the team against unsolicited changes.
➢ Benefit measurement methods ascertain the costs and benefits of
undertaking the project while constrained optimization methods rely on
mathematical modeling to select the best projects that achieve business
objectives.
➢ Various Project Integration Management processes are Develop Project
Charter, Develop Project Management Plan, Direct and Manage Work,
Monitor and Control Project, Perform Integrated Change Control, and
Close Project or Phase.
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Project Scope Management

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This chapter entails one to understand the various Scope Management aspects
required to understand the customer needs, how they need to be approached and
finally brought to the satisfactory need of the customer – making the project
successful!
Objectives:
➢ Define Project Scope Management
➢ Differentiate between project scope and product scope
➢ Identify the key terms used in project scope management
➢ Explain work breakdown structure
➢ Describe the Project Scope Management processes
➢ Understand the different Scope Management Processes
➢ Their Inputs, Tools and Techniques, Outputs

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The main purpose of the scope definition is to clearly describe the boundaries of
the project – ie exclusions and inclusions are well defined in order to clearly
understand what will be the area under the project control and deliverables.
Project Scope Management is process that concerned with ensuring the inclusion
in the project all the work required and only the work required to complete the
project successfully.

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Monitoring &
Controlling Processes
Planning Processes

Executing
Processes
Process Groups
Knowledge Area Monitoring &
Initiating Planning Executing Closing
Control
•Plan Scope Management
Scope •Collect Requirements •Validate Scope
Management •Define Scope •Control Scope
•Create W.B.S SN Panigrahi, Essenpee Business
313 Solutions, 313
India
.
There are 6 Scope Management processes:
•Plan Scope Management— The process of creating a scope management plan that documents how the
project scope will be defined, validated, and controlled.
•Collect Requirements— The process of determining, documenting, and managing stakeholder needs and
requirements to meet project objectives.
•Define Scope— The process of developing a detailed description of the project and product.
•Create WBS— The process of subdividing project deliverables and project work into smaller, more manageable
components.
•Validate Scope— The process of formalizing acceptance of the completed project deliverables.
•Control Scope— The process of monitoring the status of the project and product scope and managing
changes to the scope baseline.

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Scope can be Broadly Categorized into:
Business Product scope Project scope
Scope
Set of The features and functions that are to be The work that must be done in order to deliver a
Market included in a product or service (Completion product with the specified features and functions
Needs at of product scope is measured against (Completion of project scope is measured
High Level requirements) against the project management plan)
Completion of the product scope is Completion of the project scope is measured
measured against the product requirements against the project management plan
Example
Lets say you have a plot of land and you want to build a house on it.
Product: House
House should have 3 storey's, 1000 sq. m of Hiring a building contractor, an architect and an
built up area, 4 bedrooms with attached interior designer, acquiring legal permits,
baths, 2 living room, a kitchen, basement estimating the cost, taking bank loan etc.
and a garage. Exteriors should be white.
Sometimes Product Scope is included in Project Scope.

•Base lined Scope is primary reference for project and further approved changes by CCB(Change Control
Board) are added to establish new scope baselines which are secondary references during project.
•Project Scope Completion marks Completion of Project. SN Panigrahi, Essenpee Business Solutions,
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Considerations for Agile / Adaptive Environments

In Predictive approach the scope is defined and agreed upon at the beginning
In Agile approach, the collect requirements, define scope and create WBS processes are done iteratively
to take care of changing scope and all the stakeholders are engaged in defining scope and validating
deliverables iteratively
In Agile / Adaptive environment, the scope is not understood at the beginning of the project and it evolves
during the project
Agile methodology spend less time to define and agree the scope in the early stages of the project and
spend more time establishing the process for its ongoing discovery and refinement
Agile build and review prototypes and release versions in order to refine the requirements
In Agile approaches, the requirements constitute the backlog

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Plan scope management is the process of creating a scope management plan that
documents how the project and product scope will be defined, validated and
controlled
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Plan Scope Management
1. Plan Scope Management is the process of creating a scope management
plan that documents how the project scope will be defined, validated and
controlled.
Plan Scope Management - Outout
1. Scope Management Plan documents how the scope will be defined,
developed, monitored, controlled and verified including how to prevent scope
creep, how to handle change requests, process for creating scope statement,
WBS, processing Change Requests and how the deliverables will be accepted.
The components of the Scope Management Plan can include:
•Process for preparing a detailed project scope statement;
•Process that enables the creation of the WBS from the detailed project scope
statement;
•Process that establishes how the WBS will be maintained and approved;
•Process that specifies how formal acceptance of the completed project
deliverables will be obtained; and
Process to control how requests for changes to the detailed project scope
statement will be processed.
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2. Requirements Management Plan describes how the requirements will be
managed, documented and analyzed, including how to process requirements,
address missed requirements, configuration management, prioritize requirements,
metrics (and rationale) for defining the product, define the traceability structure (in
RTM), authorization level for approving new requirements
The componenets of the Requirement Management Plan can include
•How requirements activities will be planned, tracked, and reported;

•Configuration management activities such as: how changes to the product will
be initiated, how impacts will be analyzed, how they will be traced, tracked,
and reported, as well as the authorization levels required to approve these
changes;
•Requirements prioritization process;
•Product metrics that will be used and the rationale for using them; and
•Traceability structure to reflect which requirement attributes will be captured on
the traceability matrix.

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1. Completion of Product Scope is measured against Product Requirements.
2. Completion of Project Scope is measured against Project Management Plan
3. Product scope description: The documented narrative description of the product scope
4. Project Scope Statement is the description of the project scope, major deliverables, acceptance
criteria, project exclusions, assumptions and constraints. Project Scope Statement documents
entire scope, including project and product scope.
5. Scope Baseline = scope statement + WBS + WBS dictionary
6. WBS includes only the deliverables/outcomes/results (not actions)

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1. WBS contains full project scope - all the work that must be completed - not only product scope or
delivery of tangible items.
2. WBS dictionary contains all information about activity: description, assignee, duration, cost, risk,
dependency, assumption, success criteria, due date
3. WBS dictionary and work authorization system prevents scope creep (uncontrolled changes).
4. WBS must be iterated after cost, schedule, time, risk, resources. Planning is iterative.
5. WBS dictionary can be part of work authorization system (include when to start a task).
6. WBS can be used to evaluate impact of other changes on project scope.
7. WBS can be used to see if the change request is within the project scope.
8. WBS can be structured as an outline, an organizational chart, a fishbone diagram, or other method.

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1. Baseline is changed only through formal Change Control Procedure
2. Scope Creep means additional requirements added without any proper control. It is UNMANAGED
changes to the Project Scope
3. Gold Plating – additional requirements to exceed expectation to impress the customer, and the
customer might not agree. It’s an undocumented scope creep. If a project was gold plated, it is
considered to be unsuccessful even if it met the objectives.
Prevent Scope Creep in real life

3 Effective Simple Techniques to prevent scope creep/pitfalls:
•Have crystal clear requirements defined where ever possible
•Have Change Control Board(CCB) in place without any exceptions
•Have a working CCB capable to make tough timely informed decisions. Any
incapacity of CCB should be immediately dealt with and ensured that CCB is not
defunct in Project

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Scope creep and gold plating both cause changes in scope, but in different and distinct ways.
Scope Creep refers to the uncontrolled changes in the project or product’s scope.
The causes for scope creep are as follows:

• Interference from the client.
• An incomplete scope statement.
• A poor change control system.
• Miscommunication among the team members.
Other reasons for scope creep can be external to the project, such as market conditions, regulatory requirements, and
technological advancements.
In scope creep, you make some changes without a proper review, which may create many problems in later stages. Then
you will have to implement many other changes to cover up the changes made in earlier stages.
Scope creep can cause delays and cost overrun; avoid it as best you can
Scope creep is also known as requirement creep.
Gold Plating is intentionally adding extra features to products which were not included in the original scope statement.
Although usually done by the project team or project manager to please the client, it often increases the input cost, risks,
and other unpleasant consequences.
Gold plating is very common in software programming.

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Collect Requirements is the process of determining, documenting, and
managing stakeholders needs or requirements to meet the
objectives

Source: A Guide to the Project Management Body of Knowledge. 6th Edition; 2017 324
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Collect Requirements
1. Collect Requirements is the process of determining, documenting and
managing stakeholder needs and requirements to meet project objectives.
2. The key benefit of this process is that it provides the basis for defining and
managing the project scope including product scope.
3. Requirement including quantified/documented needs, wants, expectation of the
sponsor/stakeholder/customer like
a. Business requirements – support business objectives of the company
b. Stakeholder requirements
c. Solution requirements - functional (product behavior) and nonfunctional
requirements (reliability, security, performance, safety, etc.)
d. Transitional requirements : temporary capability including data conversion /
tracking / training
e. Project requirements : actions / processes / conditions the project needs to
met
f. Quality requirements : quality criteria defined by stakeholders
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• Interviews: Formal or informal approach to elicit information from
stakeholders by talking to them directly.
• Focus groups: Prequalified stakeholders and subject matter experts are
brought together to learn about their expectations and attitudes about a
proposed service product or a result.
• Facilitated workshops: Focused sessions that bring cross-functional key
stakeholders together to define product requirements
▪ JAD (Joint application development) is used in software industry
▪ QFD (Quality function deployment) is used in manufacturing industry –
starts by collecting the customer needs (VOC- voice of the customer)
▪ User Stories (user stories) short, textual description of required
functionality

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Facilitated
Focus Groups
Workshops
Cross functional team members Discussion is focused around a

are involved to see the problem Specific Topic involving Subject
from all perspectives and Matter Experts (SMEs) to discuss
develop a consensus for the requirements, risks and issues of one
decision within all members. Well- Specific Function.
facilitated sessions can build trust,
foster relationships and consensus,
and improve communication
among the participants. Experts of
different function discuss cross
functional requirements, risks,
issues and integration.
Let’s take an example of Auto Manufacturing Unit. Such units normally have several experts.
For example – Engine Group, Rubber parts group, Fiber parts group, Chassis, Engineering,
Production etc.
When SMEs of Engine group come together to discuss matter related to developing engine for
a new vehicle, it is called Focus Group. When SMEs of Engine, Rubber, Chassis, Fiber and
Engineering come together to discuss assembly of the vehicle, it will be called Facilitated
Workshop. SN Panigrahi, Essenpee Business Solutions,
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Facilitated Workshops Focus Groups
1. Cross Functional Team Members are
1. Discussion is Focused Around a Topic.
involved
2. All are involved to take a decision for
2. Facilitator already knows what he wanted
the agenda items
to ask from each participants and develop a
3. Involvement of cross functional
discussion guide accordingly.
members helps to see the problem
3. Facilitator develops discussion guide based
from all perspective.
on experience of each participants with the
4. As decision is needed as a result of product.
outcome of the workshop, members are
selected who has knowledge and also 4. Based on discussion guided by discussion
decision making authority. members who guide product requirements are identified.
have knowledge and have knowledge can
be same or can also be different.
5. Person who have knowledge helps
decision makers to make decision based In summary if the goal is to identify product
on firm information. requirements, members are selected who
6. Objective of workshop is develop a have some level of experience for the product
consensus for the decision within all and based on their experience they contribute
members based on information for the in defining product requirements.
goal of the workshop.
In summary workshop can be conducted
to arrive to a consensus within all
participants based on information
discussed during the workshop.
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Examples Facilitated Workshops
Joint Application Development (or Design)
(JAD)
Joint Application Development (or Design) (JAD) sessions are used in the
software development industry. These facilitated sessions focus on
bringing users and the development team together to improve the
software development process.
Quality Function Deployment (QFD)
Used in the manufacturing industry, Quality Function Deployment (QFD) -

helps determine critical characteristics for new product development.
QFD starts by collecting customer needs – captures Voice of Customer
(VOC), translate customer needs into requirements and then objectively
sorts, prioritizes, and sets goals for those needs. QFD methodology
focuses on the most important product or service attributes or qualities.
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Voice of the Customer
The “voice of the customer” is a process used to capture customer's
requirements / feedback about their experiences with and
expectations, preferences and aversions from the customer (internal or
external) to provide the customers with the best in class service / product
quality.
This process is all about being proactive and constantly innovative to

capture the changing requirements of the customers with time.
The “voice of the customer” is the term used to describe the stated and
unstated needs or requirements of the customer. The voice of the customer
can be captured in a variety of ways: Direct discussion or interviews,
surveys, focus groups, customer specifications, observation, warranty data,
field reports, complaint logs, etc.

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Decision Making Techniques :
1) Voting: Is a collective decision-making technique and an
assessment process having multiple alternatives with an
expected outcome in the form of future actions
❑Autocratic : One individual makes the decision for the group

❑Unanimity :Everyone agrees on a single course of action
❑Majority : Support from more than 50% of the members of the
group
❑Plurality : The largest block in a group decides even if a majority
is not achieved

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A key tool and technique used in define scope is______________
•A. Templates, forms, and standards

•B. Decomposition
•C. Expert judgment
•D. Project management methodology
Correct Answer: C
Expert judgment is used to analyze the information needed to develop a project scope statement.
It is applied to any technical details.

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You are in the process of collecting requirements from stakeholders. The
requirements identification process involves a lot of stakeholders
including the VP of the sales and marketing team. While finalizing the
requirements, the team raises no objections to whatever the VP says.
What type of decision-making technique is being used in this scenario?
A: Autocratic Decision Making

B: Unanimity
C: Dictatorship
D: Plurality
Ans : A

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Question: You are collecting the project requirements and decide to meet each stakeholder
independently as the requirements contain sensitive and confidential information. Which tool
will help you in such a scenario?
A: Brainstorming
B: Interviews
C: Questionnaires and Surveys
D: Benchmarking
Ans : B
Refer to PMBOK ® Guide - Sixth Edition: Pg 142. Couple of keywords in the question like meeting
independently and then also discussing confidential information is part of interviewing technique.
Option C is the second best choice.

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Progressive elaboration of product characteristics on your project must be coordinated carefully with
the______________
•A. Proper project scope definition

•B. Project stakeholders
•C. Scope change control system
•D. Customer's strategic plan
Correct Answer: A
Progressive elaboration of a project's specification must be coordinated carefully with proper scope
definition, particularly when the project is performed under contract. When properly defined, the project
scope the work to be done should remain constant even when the product characteristics are elaborated
progressively.

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1. Facilitated workshops - consist of cross-functional stakeholders who can define cross-functional
requirements.
2. Group Creativity Techniques : Brainstorming, Nominal Group Technique (enhance Brainstorming by
voting process to rank the ideas), Idea / Mind Mapping, Affinity Diagram, Multi-criteria Decision Analysis
(with a decision matrix)
3. Idea / Mind Mapping is a great visual tool in brainstorming sessions - Ideas or key items for discussion
are outlined around a central node using branches and sub branches like a spider web.
4. Delphi technique is taking experts opinions, anonymously
One way to reach unanimity is this technique wherein selected group of experts answers
questionnaires and provides feedback regarding the responses from each round of requirements
gathering. The responses are available only to the facilitator to maintain anonymity
1. Context diagrams showing input/source and output, to show how people and systems related and
interact

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1. Prototyping involves creation of a working model or mock-up of the product to be developed
as part of the project. Prototypes support the concept of progressive elaboration in iterative
cycles of creation, experimentation, feedback and revision.
2. Benchmarking – involves comparing actual or planned practices to those comparable
organizations or standards to identify best practices, generate ideas for improvement and
provide basis for measuring performance.
3. Context Diagram – shows how people and other systems interact.
4. Progressive elaboration is a continuous iterative process of refining and further detailing the
product characteristics based on more detailed information.
5. Requirements traceability matrix is a grid that links product requirements from their origin to
the deliverables that satisfy them.
6. Requirements traceability matrix tracks the requirement through the project life cycle.
7. Work Authorization System facilitates authorizing the work for schedule activities, work
packages and/or control accounts.

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❑ Affinity diagrams: Allow large numbers of ideas to be classified
into groups for review and analysis
❑ Mind Mapping : Consolidates ideas created through brainstorming

sessions into single map to reflect commonality and differences in
understanding and to generate the new ideas.
Context Diagram: Visual representation of product scope. It shows inputs

to business system, actor(s) providing input, output from the business
system, and the actor(s) receiving output.

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Requirements documentation:
• Describes how individual requirements will meet the business need of
the project
• Requirements may start out at a high level and become progressively

more detailed as more about the requirements is known
• Requirements need to be unambiguous ( measurable and testable),

complete, consistent, correct and acceptable to key stakeholders
Requirements Traceability Matrix (RTM):

• Grid that links product requirements from their origin to the deliverables
that satisfy them
• Means to track requirements throughout the project lifecycle helping to

see that requirements approved in the requirements documentation are

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• Business requirements: High level needs of the organization as a whole such as
business issues or opportunities
• Stakeholder requirements: Need of stakeholder/stakeholder group
• Solution requirements :
▪ Functional requirements – The behavior of the product
▪ Non functional requirements – Supplements the functional
requirements gives environmental conditions or qualities required
like security, reliability etc.
• Transition requirements: Temporary capabilities like data
conversion, training etc.
• Project requirements: Actions , processes and other conditions the
project need to meet
• Quality requirements: Any condition or criteria needed to validate
the completion of the project
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Question:
You have been given a project to construct a small dam. Currently,
you are visiting your project stakeholders and asking about their
needs and expectations. You also have had many workshops and
brainstorming sessions with them. Which process is this?
(a) Identify stakeholders
(b) Collect requirements
(c) Define scope
(d) Control scope
Answer-4: b
Explanation: You are visiting stakeholders to discover their needs
and collect their
requirements. This process is known as collect requirements.
Reference: The PMBOK Guide, 6th Edition, Page: 138

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Requirements traceability matrix
Project
name:
Cost center
Project
Description
Requiremen Business Project WBS Product Test

Associ ts description needs/opportuniti objective deliverable Product developme case s
id ate id es s s design nt

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This is the process of developing a detailed description of the project and
product

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Project Scope Statement –
Includes :
• Project Scope Description [ progressively

elaborated ]
• Deliverables
• Acceptance Criteria
• Project Exclusions
• Assumptions
• Constraints

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Define Scope :
1. Define Scope describes the product, service or result boundaries with inclusions & exclusions
and create a project scope statement.
2. Project Scope Statement is the description of the project scope, major deliverables, exclusions and
inclusions, acceptance criteria, assumptions and constraints.
3. Product analysis includes techniques such as product breakdown, systems analysis, requirements
analysis, systems engineering, value engineering, and value analysis
4. Acceptance Criteria – a set of criteria, including performance requirements and essential conditions,
which must be met before project deliverables are accepted.
5. Acceptance Criteria - define the specific circumstances under which the user will accept the final
output of the project. They are criteria against which we can measure, achieve, and prove to our clients
that our work is complete.
6. Deliverable – any unique and verifiable product, result or capability to perform a service that an output
of a process, phase or project.
7. Assumptions are those things that we believe to be true or false, or that is supposed to happen or
not based on our knowledge, experience, and/or information provided by our team members or other
stakeholders.
8. Constraints are barriers or limitations or restrictions or regulations placed upon the project and
other related matters which will impact the Project.
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TEMPLATE: BROAD SCOPE DEFINITION
In Scope Out of Scope Assumptions Constraints
(Exclusions)
(These are items (These are items (Knowledge about (Known restrictions.
that you are that you are not the project that is These could include
definitely responsible for – the taken as any restrictions in
going to deliver / assumption is that being true or correct start/finish date,
manage) someone else will for the purposes of time,
do them. Exclusions project deliverable or
are planning. milestone dates,
things that don’t Assumptions are budget
form part of your circumstances and limitations,
project, events that need to resourcing limits,
but influence on occur for the project vendor
whether or not you to be restraints, etc.,
can successful, but are
successfully achieve outside the total
your objective.) control of
the project team)

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The process of subdividing project deliverables and project work into smaller,
more manageable components

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1. Create Work Breakdown Structure (WBS) is the process of subdividing project deliverables and
project work into smaller and more manageable components.
2. Decomposition is a technique used for dividing and subdividing the project scope and deliverables into
smaller and more manageable parts.
3. Work Package is the lowest level of each branch of a work breakdown structure and specifies either a
project deliverable or a work component.
4. Control account - Control points are generally assigned to various levels of the WBS – Control Account is
a higher level above a work package. It is a management control point where factors such as scope,
schedule budget and actual cost can be assigned and measured using earned value performance
measures.
5. WBS does not show dependencies between work packages, but a WBS dictionary does (WBS dictionary
clarifies WBS by adding additional information)

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1.100 percent rule – An important design principle for work breakdown structures.
The 100% rule states that the WBS includes 100% of the work (all the work and the only the
work required – no less & no extra) defined by the project scope and captures all
deliverables - internal, external, interim – in terms of the work to be completed, including
project management – that means the total of the work at the lowest levels should roll up
to the higher levels so that nothing is left out and no extra work is performed.
2. Providing extra functionalities which are not requested by customer is called "Gold
plating‟, this is not recommended by PMI

349Solutions,
India
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WBS - Example
GAS-STEAM COMBINED
POWER PLANT
level 0
MAIN FUNCTIONS OF PLANT

level 1 GAS – 1.0 STEAM – 2.0 INTERFACES – 3.0
(Control Accounts)
level 2 Major Planning Packages

TURBINE – 1.1 GENERATOR- 1.2 COMPRESSION STATION – 1.3
level 3
COMPRESSORS-1.3.1 GAS TREATMENT-1.3.2 ENCLOSURE-1.3.3
Planning Packages
level 4
COMPRESSOR 1 COMPRESSOR 2 FOUNDATIONS
1.3.1.1 1.3.1.2 1.3.1.3
level 5
DESIGN PROCUREMENT INSTALLATION
1.3.1.2.1 1.3.1.2.2 1.3.1.2.3 WORK PACKAGES

Level 0
Common Facility Centre (CFC)
Broad
Project
Conceptualization Bidding &

Design Procurement Construction Closure Level 1
of Project Contracting
2.0 4.0 5.0 6.0 Control Account
1.0 3.0
Marking of Ground Column Construction M & E Works

Drawing Foundation Roofing Miscellaneous Level 2
Layout Levelling 5.4
Casting of Walls Major Planning
5.1 5.2 5.7 Works
5.3 5.5 5.6 5.8 Packages
Compacting Footing Footing

PCC Shuttering Level 3
the Ground Reinforcement Concrete Work Packages
5.4,2 5.4.3 5.4.4
5.4.1 5.4.5
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Work Breakdown Structure (WBS)
Work Decomposition
Organizing Workshop
WBS Venue Event

Marketing Celebration
Preparation Management
Level-1
Control Account
Site Location Auditorium
WBS
Level-2
Planning Access / Guest Power /
Stage Infrastructure Amenities
Egress Facilities Utilities
Packages
Sound Recording
WBS Staging Rigging
Lighting Filming
Level-3
Work
Packages

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Essenpee
Residential Villa
1.0 2.0 3.0 4.0 5.0 6.0
1.1 3.1 5.1 6.1
2.1
5.1.1 6.1.1
1.1.1
2.1.1 3.1.1
5.1.1.1
1.1.1.1 6.1.1.1
5.1.1.1.1
1.1.1.1.1
5.1.1.1.1.1

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Work Breakdown Structure Guidelines
The following guidelines should be considered when creating
a work breakdown structure:
•The top level represents the final deliverable or project
•Sub-deliverables contain work packages that are assigned to a
organization’s department or unit
•All elements of the work breakdown structure don’t need to be
defined to the same level
•The work package defines the work, duration, and costs for the tasks
required to produce the sub-deliverable
•Work packages should be independent of other work packages in the
work breakdown structure
•Work packages are unique and should not be duplicated across the
work breakdown structure
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During project executing, a team member comes to the project manager
because he is not sure of what work he needs to accomplish on the project.
Which of the following documents contain detailed descriptions of work
packages?
A-) WBS Dictionary

B-) Activity List
C-) Project scope statement
D-) Scope management plan
Answer is A. WBS Dictionary. Work packages in a Work Breakdown

Structure contain only nouns or a couple of words regarding a work or
deliverable. Detailed information on what needs to be done, responsible,
prerequisites, successors, due date etc. are included in the Work Breakdown
Structure Dictionary.
Knowledge Area: Scope Management Knowledge Area
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The Work Breakdown Structure (WBS) defines a project's work in terms of deliverables and the process
phases appropriate to the organization and/or project.
In order to understand each deliverable requirement, each element must be complete, correct, precise,
consistent, relevant, feasible, manageable, traceable and free of too much design detail.
The WBS can be structured primarily as a deliverables hierarchy, with phases/process steps detailed within
it or vice versa.
• Deliverable oriented components can be either products or services.
• There is a general consensus that the naming convention should be nouns, especially at the highest levels
(usually 1st three). However, the project manager has the flexibility to use the verb-noun phrase structure
(usually at the lower/work assignment level).
• The project manager should have the flexibility to decompose the WBS to whatever level of detail he or
she requires to effectively plan and manage the project.
• Hierarchy can be shown in a variety of ways such as assigning a unique number to each element where
decimal points show the hierarchy relationships, using a spreadsheet where elements placed in different
columns denote hierarchy, or using a graphical display tool such as WBS Chart Pro from Critical Tools
Corporation.

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WBS Dictionary
• A dictionary comprised of an element index and element descriptions. It lists and

defines WBS elements.
The dictionary shows the hierarchical relationship of the WBS elements and required
resources and processes to produce this element. Each page should include the
following information: WBS title; element number; revision number, authorization and
description of changes; element task description; specification number and title;
contract line item; contract end item and quantity; cost content and description; and
contractor and subcontractor names.

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WBS Dictionary
The following information typically could be linked to each element in a WBS:

WBS Number—the hierarchal number assigned to each WBS element; example, 1.24.
WBS Name —the short name used in the WBS to describe the element/deliverable.
Description —a textual narrative describing what is in each WBS element; and it may also say what is not in an element, if
that is unclear. From the description any stakeholder should be able to understand what will and will not be delivered.
Deliverable Format —describe what it will look like; example, a Word document about 10 pages in length provided
electronically.
Completion Criteria —Describe the requirements for completion; example, the Program Management Executive. Team
will review the submitted document and formally accept it as complete during their weekly review meeting.
List of Stakeholder and Roles—Provide a list of the names of each key stakeholder and determine his or her role
(Accountable, Participant, Review Required, Input Required, Sign-off/Approval Required). This information can later be
used to create a Responsibility Assignment Matrix.
Activities/Tasks—a list of major activities/tasks/steps that need to be undertaken.
Assumptions/Risks—a list of assumptions and or risks that could impact the success of the deliverable.
Estimated Budget —a preliminary estimate with regard to effort, resource types and other material items needed for
consideration.
Project Phase or Life Cycle —optional, this item allows reporting flexibility and focus on certain deliverables when one has
incorporated a phased or life cycle approach into the WBS.

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WBS dictionary is the document that provides detailed
deliverable, activity, scheduling information about each
component in WBS.

158
WBS dictionary should include the following elements for
each component of the WBS:
• Code of accounts identifier
• Description of the work
• Assumption and constraints
• Responsible organization
• Schedule milestones
• Associated schedule activities
• Resources required
• Cost estimates
• Quality requirements
• Acceptance criteria
• Technical references
• Agreement information
362
You are examining multiple scope change requests on a project you were asked to take over because the
previous project manager decided to resign. To assess the degree to which the project scope will change,
you need to compare the requests to which project document?
•A. Preliminary scope statement

•B. WBS
•C. Change management plan
•D. Scope management plan
Correct Answer: B
The WBS, along with the detailed scope statement and the WBS dictionary, defines the project's scope
baseline, which provides the basis for any changes that may occur on the project.

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It is the process of formalizing acceptance of the completed project
deliverables
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• The verified deliverables obtained from quality control process are
reviewed with the customer or sponsor to ensure that they are completed
satisfactorily and receive the formal acceptance
• Validate scope process differs from control quality process that

▪ Validate scope process is primarily concerned with acceptance
of deliverables, while
▪ Control quality is concerned with the correctness of the

deliverables

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Verified Deliverables Vs Accepted Deliverable
** Verified Deliverables - have been completed and checked for correctness by
the Quality Control process.
** Accepted Deliverables - have been accepted through the Validate Scope process.
So, Verified Deliverables is output of Quality Control & a Verified Deliverable is

an input to the Validate Scope process, while an Accepted Deliverable, where formal
sign-off is obtained, is the key output of the Validate Scope process.
Input Process Output

Deliverables Quality Control Verified Deliverables
checked for correctness
Input
Process Output
Verified
Validate Scope Accepted Deliverable
Deliverables
formal sign-off is India
obtained 366
Correct Answer: A
Refer to PMBOK 6th Edition, Pg 163. This is the definition of the

validate scope process where you sit with the customer to validate
whether each and every requirement is met or not.

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The process of monitoring the status of the project and product scope
and managing changes to the scope baseline.
Source:Essenpee
SN Panigrahi, A Guide to Business
the ProjectSolutions,
Management Body of Knowledge. 6th Edition; 2017
India 368
368
• It allows scope baseline to be maintained throughout the project
• It ensures that all requested changes and recommended corrective and
preventive actions are processed through PICC process
Uncontrolled expansion to product or project scope without adjustments

to time, cost and resources is called Scope creep

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Question 1: The scope baseline consists of which of the
following elements?
a. Project management plan, WBS, scope statement

b. Scope statement, risk management plan, WBS
c. WBS dictionary, project management plan, scope statement
d. Scope statement, WBS, WBS dictionary
Answer: D – Scope statement + WBS + WBS dictionary is the

scope baseline

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Question 2: The WBS is used for all of the following with the
exception of:
a. Allowing for team buy-in of the project

b. Showing cross functional dependencies between work packages
c. A communication tool between stakeholders
d. Shows the team how their work fits into the overall project
Answer: B – The WBS does not show cross functional

dependencies between work packages

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Question 3: Your project team has come to you with an issue. It appears
that during the requirements elaboration process there was a disagreement
between the members of the technical team regarding what had to be built to
satisfy a user requirement. As a result, some of the technical team members
created features in the deliverable that the customer did not really ask for.
What would have specifically helped to avoid this situation?
a. Requirements management plan

b. Requirements traceability matrix
c. Scope statement
d. WBS
Answer: B – The requirements traceability matrix tracks each

feature and element in the deliverable back to a requirement.
This is a useful approach for preventing gold plating – giving
the customer something they did not request.
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What is Project Scope Management?
Project scope management focuses on the processes that are needed

to ensure that the work of the project, and only the work required, is
performed to deliver project success.
The following processes and the primary goals of project scope

management are defined below:
Collect requirements. Goal: requirements documentation

•Define scope. Goal: Project scope statement
•Create WBs. Goal: the WBS
•Verify Scope. Goal: accepted deliverables
•Control Scope. Goal: updates and change requests

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1. Which of the following is TRUE about a work breakdown structure?
A. It contains work packages that are described in a linear, unstructured list
B. Each item in the WBS represents a feature in the product scope
C. The WBS represents all of the work that must be done on the project
D. The WBS is created by the product sponsor and stakeholders
Ans : C. The WBS represents all of the work that must be done on the project
2. Which is NOT an output of a scope management process?

A. Business Case
B. WBS Dictionary
C. Change Requests
D. Accepted deliverables
Ans : A. Business Case

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During a meeting with some of the project stakeholders, the project manager is asked to add
work to the project scope. The project manager had access to correspondence about the project
before the project charter was signed and remembers that the project sponsor specifically denied
funding for the scope mentioned by these stakeholders. The BEST thing for the project manager
to do is to:
A-) Let the sponsor know of the stakeholders’ request.
B-) Evaluate the impact of adding the scope.
C-) Tell the stakeholders the scope cannot be added.
D-) Add the work if there is time available in the project Schedule
Answer is C. Tell the stakeholders the scope cannot be added. After the scope of a project is
finalized and scope baseline is determined, it can be changed only with the approved changed
requests. If there is not an approved change request, existing scope baseline must be valid and
project team must work on to deliver that scope only. In the scenario, scope is defined already
but some stakeholders ask to add new work to the scope. This cannot be done unless there is an
approved change request. Therefore, stakeholders must be informed that this new work cannot
be added.
Knowledge Area: Scope Management Knowledge Area

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3. Which of the following is NOT TRUE about a work breakdown structure?
A. It describes processes to define the scope, verify work, and manage scope
changes
B. It contains a graphical, hierarchical list of all work to be performed
C. It can be broken down by project phase or deliverable
D. It is an important element of the scope baseline
Ans : A. It describes processes to define the scope, verify work, and manage scope
changes
4. What is the correct order of the scope management processes?

A. Define Scope, Create WBS, Collect Requirements, Validate Scope
B. Collect Requirements, Control Scope, Create WBS, Validate Scope
C. Collect Requirements, Define Scope, Create WBS, Validate Scope
D. Collect Requirements, Scope Baseline, Define Scope, Control Scope
C. Collect Requirements, Define Scope, Create WBS, Validate Scope

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5. You are managing a software project. Your team has been
working for eight weeks, and so far the project is on track. The
lead programmer comes to you with a problem: there is a work
package that is causing trouble. Nobody seems to know who is
responsible for it, the accounting department does not know
what cost center to bill it against, and it’s not even clear exactly
what work should be performed. Which of the following would
BEST help this situation?
A. Alternatives Analysis
B. WBS Dictionary
C. Scope Management Plan
D. Validate Scope
Ans : B. WBS Dictionary

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6. The goal of Validate Scope is:
A. To inspect the scope statement for defects so that it is
correct
B. To gain formal acceptance of the project deliverables from
the sponsor and stakeholders
C. To get everyone in the project working together towards a
common goal
D. To verify that all PMBOK® Guide processes are complied
with
Ans ; B. To gain formal acceptance of the project deliverables

from the sponsor and
stakeholders

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7. _______________________ constitute the scope baseline?
A. Scope Statement, WBS, and Project Schedule

B. Scope Statement, Project Schedule, and WBS Dictionary
C. WBS Dictionary, Resource Calendars, and Project Schedule
D. Scope Statement, WBS, and WBS Dictionary
Ans : D. Scope Statement, WBS, and WBS Dictionary
Hint: The Scope Baseline should contain the scope and related work information.
8. You’ve taken over as a project manager on a highway construction project, and the
execution is already underway. Your sponsor tells you that moving forward, all asphalt
should be laid down with a 12” thickness. The scope statement and the WBS call for 9”
thick asphalt. What is the BEST course of action?
A. Look for a cheaper supplier so the cost impact is minimized
B. Tell the sponsor that the work is already underway, so you can’t accommodate
his request
C. Refuse to alter the plans until the change control system has been used
D. Tell the team to accommodate the request immediately
Ans : C. Refuse to alter the plans until the change control system has been used

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9. Which of the following BEST describes the purpose of a
traceability matrix?
A. It describes how WBS Dictionary entries are traced to work
packages, and how work packages are decomposed from
deliverables
B. It’s used to make sure that all of the sub-plans of the Project
Management Plan have been created
C. It helps you understand the source of each requirement, and
how that requirement was verified in a later deliverable
D. It’s used to trace the source of every change, so that you can
keep track of them through the entire Control Scope process
and verify that the change was properly implemented
Ans : C. It helps you understand the source of each

requirement, and how that requirement was verified in a later
deliverable
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10. It’s the end of execution for a large highway construction
project. The work has been done, and the workers are ready to
pack up their equipment. The project manager and project
sponsor have come by with specialists to check that each
requirement has been met, and that all of the work in the WBS has
been performed. What process is being done?
A. Control Scope
B. Validate Scope
C. Scope Testing
D. Define Scope
Ans : B. Validate Scope

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Your sponsor wants to be involved in each and every project-
related communication. He wants to know who is assigned a
specific work package, what control account will it be billed
against, and what is the work involved. What document would
you want him to refer to?
A: Scope Management plan

B: WBS
C: Scope statement
D: WBS dictionary
Ans : D
PMBOK 6th Edition; Pg 162 for the Definition of WBS

Dictionary

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You are in a workshop with the client. The objective of the
workshop is to prioritize scope for the first release. Since
this is a prestigious project, each client stakeholder wants
his/her scope items to be included in the first release.
What advise would you give the client stakeholders?
a) Prioritize based on business value

b) Prioritize based on business value and risk
c) Prioritize based on probability of completion
d) Prioritize based on risk and probability of completion
Ans : B; Two factors dictate scope prioritization. These

factors are risk and business value. Probability of completion
is very rarely, if ever, used as a parameter for prioritizing
scope.

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Completion of a product scope is measured against:
1. Product Management Plan
2. Project Management Plan
3. WBS & WBS Dictionary
4. Product Requirements
CORRECT: C.
All of the below are inputs to Define Scope process EXCEPT:

1. Project Charter
2. Requirements Document
3. Organizational process assets
4. Project Management Plan
CORRECT: A
Validated deliverables is an input to which of the following processes?
1. Collect Requirements
2. Define Scope
3. Create WBS
4. Validate Scope
CORRECT: D. Validated Deliverables are output of Perform Quality
Control process and acts as inputs to Validate Scope process.
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1.Project Charter is an input to all of the following processes EXCEPT:
a. Collect requirements
b. Define Scope
c. Create WBS
d. Develop Project Management Plan
CORRECT: C. Project Charter is input to all these processes except Create WBS.
1.Work Performance Measurement is an output of which process:

a. Define Scope
b. Create WBS
c. Validate Scope
d. Control Scope
CORRECT: D. Work performance measurement is an output of Control Scope
1.If the project is terminated early, the level and extent of completion should be documented.
This is done as a part of:
a. Define Scope
b. Create WBS
c. Validate Scope
d. Control Scope
CORRECT: C

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You are a project manager and you are frustrated with the
series of changes you are getting from stakeholders. How
can you control change within a project?
A: Each change should be approved or rejected through a
formal change control process only.
B: Only the project manager should be able to initiate
change.
C: Just freeze scope and do not allow any changes.
D: Each project member should ultimately control the
changes which are within their realm of the project without
a review process.
Ans : A

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During project executing, a team member comes to the
project manager because he is not sure of what work he needs
to accomplish on the project. Which of the following
documents contain detailed descriptions of work packages?
A-) WBS Dictionary
B-) Activity List
C-) Project scope statement
D-) Scope management plan
Answer is A. WBS Dictionary. Work packages in a Work

Breakdown Structure contain only nouns or a couple of words
regarding a work or deliverable. Detailed information on what
needs to be done, responsible, prerequisites, successors, due
date etc. are included in the Work Breakdown Structure
Dictionary.

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During a meeting with some of the project stakeholders, the project
manager is asked to add work to the project scope. The project manager
had access to correspondence about the project before the project charter
was signed and remembers that the project sponsor specifically denied
funding for the scope mentioned by these stakeholders. The BEST thing for
the project manager to do is to:
A-) Let the sponsor know of the stakeholders’ request.
B-) Evaluate the impact of adding the scope.
C-) Tell the stakeholders the scope cannot be added.
D-) Add the work if there is time available in the project
Schedule
Answer is C. Tell the stakeholders the scope cannot be added. After the
scope of a project is finalized and scope baseline is determined, it can be
changed only with the approved changed requests. If there is not an
approved change request, existing scope baseline must be valid and project
team must work on to deliver that scope only. In the scenario, scope is
defined already but some stakeholders ask to add new work to the scope.
This cannot be done unless there is an approved change request. Therefore,
stakeholders must be informed that this new work cannot be added.
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You are a certified PMP project manager and one of your colleagues
approaches you to understand the Work Breakdown Structure (WBS).
What would be your response to him/her?
A: It is a project plan which includes the resources, the effort and the
task completion dates.
B: It is not a task-oriented but a deliverable-oriented hierarchical
decomposition of the work to be carried out by the project team to
accomplish the objectives of the project.
C: It is a task-oriented decomposition of work that would identify
each task and the resources required to accomplish the task.
D: It is a Gantt chart which contains the project deliverables to be
completed by the project team.
Ans : B

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Which of the following Project Scope Management processes involves
subdividing the major project deliverables into smaller, more manageable
components?
a. Scope Planning
b. Scope Change Control
c. Scope Definition
d. Create WBS
Answer: d
Which of the following could be an appropriate WBS code for a work package
at the fourth level in a WBS where the top level code is 1.0?
a. 1.4
b. 1.2.3.4
c. a and c
d. Non
Ans : b

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The unique identifiers assigned to each item of a WBS are often
known collectively at very high level is:
a. The work package codes

b. The project identifiers
c. The code of accounts
d. The element accounts
Answer:C
A tool which links the project roles and responsibilities to the project
scope definition is called:
a) Scope Definition Matrix
b) Responsibility Assignment Matrix
c) Roles Assignment Matrix
d) Project Scope and Roles Matrix
Answer : b
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After delivering a release, the client is adamant that certain
features of the software do not provide any business value.
Which document can you share with the client to show how
the features directly correspond to business needs and
requirements stated at the being of the project?
a) Requirements Traceability Matrix
b) Project Charter
c) Scope Statement
d) Scope Baseline
Ans : A
The Requirements Traceability Matrix is critical to ensure that
the features that will be developed are directly linked to the
requirements. It ensures that whatever is built is directly related
to the requirements and business needs. The Traceability
Matrix is commonly used in Six-Sigma processes.
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You are a project manager and the project is to install ACs into hotel
rooms. You did project cost and time estimates and informed the
customer that the project estimates will be accurate if the
requirements such as wooden coating are met. This is an example of
which of the following?
1.Risk
2.Assumption
3.Constraint
4.Budget analysis
Correct Answers are : 2

Explanation :
B is the correct answer
This is an example of assumption because estimates provided

will be accurate if the rooms meet the requirements like
(wooden coated). A and C are incorrect because the scenario
did not describe a risk or constraint. SN Panigrahi, Essenpee Business Solutions,
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You conducted several brainstorming sessions with client
stakeholders and used the Delphi technique. You also
intend to conduct focus groups. Which process are you
most probably doing?
a) Plan Scope
b) Stakeholder Analysis
c) Collect Requirements
d) Develop Project Charter
Ans :C;
It is critical for you to know what sort of Tools and
Techniques are used in each process. This is an
example of a question that indirectly targets your
knowledge of the ITTOs.

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You are a project manager of a pharmaceutical company. A new
pharmaceutical regulation is passed that changes your project
scope. For the project to be in accordance with the new
regulation, what should be your next action?
1.Present the change to the Change Control Board (CCB)

2.Notify Management
3.Prepare a new baseline to reflect the changes
4.No need to do anything
Explanation :
You must present the
change to the Change
Control Board (CCB) for new
changes.
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Correct Answer : A
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Correct Answer : D
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Correct Answer : B
Correct Answer: B Refer to PMBOK 6th Edition, Pg 148-149. The requirements
traceability matrix will help you to trace each requirement to a specific business case, and
then this document can also be helpful in verifying the requirements with the deliverables
developed in the project.
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Correct Answer: B
Refer to PMBOK 6th Edition, Pg 154. The product acceptance
criteria is part of project scope statement. For questions like these,
please make sure to go through the constituents of all the important
documents. SN Panigrahi, Essenpee Business Solutions,
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400
Correct Answer: C
Refer to PMBOK 6th Edition, Pg 161. The description of the work package is clearly
defined in the WBS dictionary. WBS dictionary also tell you who is responsible for which
work package. Rolling Wave Planning is a tool, so it can be straightaway ruled out. Scope
management plan tells us HOW but not WHO. Scope statement can be the second-best
alternative but in this case, we have the best option which is WBS dictionary.
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Project Scope Management : Summary
Here is a quick recap of what was covered in this lesson:
➢ Project Scope Management includes the processes required to ensure that a project includes all and only the
work essential to complete the project successfully.
➢ Product scope refers to the features and functions that characterize a product, service, or result, while project
scope refers to the work that must be performed to deliver a product, service, or result with the specified
features and functions.
➢ Work Breakdown Structure breaks the project scope into smaller and more manageable pieces called work
packages which are easy to manage.
➢ WBS dictionary contains the explanation of the terms used in WBS.
➢ The six Project Scope Management processes are Plan Scope Management, Collect Requirements, Define Scope,
Create WBS, Validate Scope, and Control Scope.

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Project Schedule Management
This is the Process of identifying and scheduling different

components of the project and ensuring completion of the
project work in a timely manner.
Plan Sequence Estimate Estimate Develop Control

Define
Schedule Activity Activity Schedule
Activities Activities Schedule
Mgt Resources Duration
Shifted to Resource
Mgt in the Sixth
Edition
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Knowledge Area that
includes the
Monitoring & processes required to
Controlling accomplish timely
Processes
Planning completion of the
project.
Processes
Enter Exit
phase/ Initiating Closing phase/
Start Processe Processe End
project s s project
Executing Process
Knowledge Area Processes
Monitoring &
Control
•Plan Schedule Management

•Define Activities
•Sequence Activities
Schedule
•Estimate Activity Durations •Control Schedule
Management •Develop Schedule

404 Solutions, 404
India
The process of establishing the policies, procedures, and
documentation for planning, developing, managing,
executing, and controlling the project schedule
405 Solutions,
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Plan Schedule Management :
1. Plan Schedule Management is the process of establishing policies, procedures and
documentation for managing and controlling project schedule.
2. It provides guidance and direction on how the project schedule will be managed throughout the
project
3. It also defines how schedule contingencies will be reported and assessed.
4. Schedule model is a schedule network analysis tool primarily used during project execution to
manage and track the project schedule.

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Establishes the criteria and the activities for developing, monitoring and controlling the schedule
• Project schedule model development : The scheduling methodology and the tool to
be used.
• Release and iteration length: Adaptive lifecycle, the time-boxed periods for release
and iterations are specified.
• Level of accuracy : Acceptable range used in determining realistic activity duration

estimate
• Units of measure: Each unit used in measurements

• Project schedule model maintenance: The process used to update the status and
record the progress of the project in the schedule model
• Control thresholds: Variance thresholds for monitoring schedule performance

• Rules of performance measurement using EVA
• Reporting formats
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Involves identifying and documenting the specific actions to be performed to
produce the project deliverables
Rolling wave planning - An iterative planning technique in which work to be accomplished

in the near term is planned in detail, while work further in the future is planned at relatively
high levels.
408 India
Define Activities :
Define activities is a process that identifies and established the specific activities to be performed to
produce project deliverables.
1. Activity means a distinct, scheduled portion of work performed during the course of a project.
2. Activity types - level of efforts (support, measured in time period), discrete efforts or apportioned effort
(in direct proportion to another discrete effort)
3. Effort - the number of labor units required to complete a schedule activity or WBS component. Usually
expressed as staff hours, staff days, or staff weeks. (Requirements for effort estimation: The Expert
Judgment, Task Complexity, Skill Level, and Expectations).
4. Duration: the total number of work periods (not including holidays and non-working periods) required to
complete a schedule activity or WBS component. Usually expressed as work hours or workdays or
workweeks. (Requirements for Duration estimation: Resource Availability and Resource Capability).

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1. Rolling wave planning is a form of Progressive elaboration is a tool in define activities.
2. In Rolling wave planning, work to be done in near term is planned in detail, while work in future is
planned at higher level.
3. Activity List - is comprehensive list that includes all scheduled activities required on the project.
4. The activity list also includes the activity identifier and a scope of work description for each activity in
sufficient details.
5. Activity Attributes - are the various attributes associated with each activity. The attributes can be
codes, predecessor and successor activities, logical and other relationships, leads and lags, resource
requirements, target dates, constraints and assumptions.
6. Activities have durations while milestones do not (zero duration)
7. A Milestone is a significant point or event in a project
8. A Milestone List is a list identifying all project milestones and also indicates whether a milestone is a
mandatory.

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Process of identifying and documenting relationships among project activities
Source:Essenpee
India 411
411
After activity lists are created, they need to be logically sequenced to :
• Identify the optimal duration of the project

• Identify the critical path
• Plan resources and material for the project
Sequencing of activities can be done using :

• Manually
• Software – MS Project, Primavera
• A blended approach
Project network diagrams are the most convenient representations of project

activity sequencing

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NETWORK TECHIQUE
 Graphical portrayal of activities and event

 Shows dependency relationships between tasks/activities
in a project
 Clearly shows tasks that must precede (precedence) or
follow (succeeding) other tasks in a logical manner
 Clear representation of plan – a powerful tool for planning
and controlling project

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NETWORK TECHNIQUES
PERT CPM
-Program Evaluation and Critical Path Method
Review Technique Developed by El Dupont
- developed by the US for Chemical Plant
Navy with Booz Shutdown Project- about
Hamilton Lockheed same time as PERT
- on the Polaris
Missile/Submarine
program 1958
✓Both use same calculations, almost similar

✓Main difference is probabilistic and deterministic in time estimation
✓Gantt Chart also used in scheduling

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Comparison Between CPM and PERT
CPM PERT
1 Uses network, calculate float or
slack, identify critical path and Same as CPM
activities, guides to monitor and
controlling project
2 Uses one value of activity time Requires 3 estimates of activity
time
Calculates mean and variance of
time
3 Used where times can be Used where times cannot be
estimated with confidence, estimated with confidence.
familiar activities Unfamiliar or new activities
4 Minimizing cost is more important Meeting time target or estimating

percent completion is more
important
5 Example: construction projects, Example: Involving new activities
building one off machines, ships, or products, research and
etc development etc
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Sequence Activities:
•It is the process of identifying and documenting sequential relationships

among project activities.
•Every activity or milestone except the first and the last should be connected to at
least one predecessor with a finish-to-start or start-to-start logical relationship and
at least one successor with a finish-to-start or finish-to-finish relationship.
•Path Convergence: The merging or joining parallel schedule network paths into
the same node in a project schedule network diagram. Path convergence is
characterized by a schedule activity with more than one predecessor activity.

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•Path Divergence: Extending or generating parallel schedule network paths
from the same node in a project schedule network diagram. Path divergence is
characterized by a schedule activity with more than one successor activity.
1.Project schedule network diagram represents graphically the logical

relationships of a set of schedule activities on a network path ie it shows
dependencies, duration, and workflow and helps identifying critical paths.

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•There are two network diagram methods :
1.Precedence Diagramming Method (PDM) - activities are shown on nodes
also called Activity on Node (AON)
1.Arrow Diagram Method (ADM) - activities are represented as arrows also

called
Activity on Arrow (AOA)
•Precedence Diagramming Method (PDM) is most commonly used

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•PDM has four types of dependencies or logical relationships :
Finish-to-Start (most commonly used~95%) :
B can't start before A is finished, or in another words
Activity A must be completed before Activity B can
begin.
Ex: 1.Relay Race
2.Plastering can’t start unless brick wall is completed
Start-to-Start : B can't start before A starts or in another
words Activity B can start after Activity A has started
Ex: Level concrete (successor) cannot begin until pour
foundation (predecessor) begins.
Finish-to-Finish : B can't finish before A is finished or in
another words Activity A must be complete before Activity B
can finish
Ex : Shooting the film (predecessor) required to finish
before editing film (successor) to finish
Start-to-Finish (very rarely used)
B can't finish before A starts India
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1. Dependencies can be modified by leads, and lags. Both leads and lags can be
applied to all 4 types of dependencies.
2. Network Dependency Types (to be determined during Sequence Activities

Process):
a. Mandatory Dependency (hard logic): A must be completed before B
begins – “MUST HAVE” - legally or contractually or inherent in the nature of
work
b. Discretionary Dependency (preferred, soft logic): sequence preferred by
the organization. May be removed / altered if fast-tracking is required
c. External Dependency: dependency required by external organization
d. Internal Dependency: precedence relationship usually within the project
team’s control

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1.Leads: the amount of time whereby a successor activity can be advanced
with respect to a predecessor activity. In schedule compression (fast
tracking), successor activity begins before end of predecessor. A lead is
generally represented as a negative value. For example : FS-2 days, means
successor can start 2 days before predecessor finishes.
1.Lags: Waiting Time Between Two Activities - the amount of time whereby a
successor activity will be delayed with respect to a predecessor activity - imposed
delay to successor activity. A lag is generally represented as a positive value. For
example, wait 14 days for concrete to cure (FS +14 days)

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You are a project management subject matter expert in your
organization. Some of your team members share their project
network diagram with you. They know the definition of lead but
are confused about the definition of LAG. What should be your
response to them?
A: The amount of time an activity can be delayed without

delaying the late finish date of the successor activity.
B: The amount of time an activity can be delayed without
delaying the early start date of its successor activity.
C: The difference between early start and early finish of
the activity.
D: Waiting time
Ans : D

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1. Forward pass is a CPM technique used to determine the early start and early
finish for an activity. It involves moving forward through a network diagram to
calculate the activity duration.
2. Backward Pass is used to determine the Latest Start Time (LST) for each
activity. The latest start time represents the latest time an activity can begin
without delaying a project. To perform a Backward Pass, begin at the end of
the project and move backward.
3. Dummy Activity - An activity that consumes no time or resources and shows

only a dependency
4. Critical Path - is the longest path throughout the project and generally
determines the minimum duration to execute the project.
5. There can be more than one critical path, in the network. Then the project
become complex.
6. Critical activities (Activities on critical path) have zero float or negative float
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•Float (also called as Total float or slack or total slack) is the duration by
which an activity can be delayed without delaying the scheduled completion
date of the project.
•If the ES and LS are identical or LF and EF are identical, then the activity is on
the critical path.
•ie On a critical path, the total float is zero.
A float can be used by the project manager to:
•Effectively manage the project
•Achieve better allocation of resources
For example, if you have a new resource who is still learning and if you feel he will take
longer to complete the task, you can allocate him to the activity which has maximum float.
Thus, even if the activity is taking longer, it is less likely that the project will be delayed. The
amount of float also indicates the time flexibility the project members may have for each
activity.
Resources from Activities having Float can be Shifted to Critical Path Activities to Minimise
the Project Duration.
Total float = duration of the critical path – duration of SN

the non-critical
Panigrahi, path Solutions,
Essenpee Business
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India
Free Float (Free Slack) - refers to the amount of time an
activity can be delayed without delaying the early start date of
the successor activity.
Free Float = (ES of Successors) – (EF of Activity in Question)
1. Free float is usually less than or equal to total float.

2.Negative float indicates there will be a miss on the project time
3.Negative Float: problem with schedule, need schedule rework

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Total Float Free Float
“The amount of time that a schedule “The amount of time that a schedule
activity can be delayed or extended activity can be delayed without
from its early start date without delaying the early start date of any
delaying the project finish date or successor or violating a schedule
violating a schedule constraint.” constraint”
Calculated at path level of activities Calculated at the activity level
Defines flexibility of a path w.r.t project Define flexibility of activity w.r.t its
end date successor start
Formula LS-ES or LF-EF Formula ES (of successors) – EF of

current activity
Can come into existence if network Can come into existence if successor is
diagram has multiple path and there are having more than one activity
activities which are not there on Critical converging on it or the successor
Path activity is having a constraint applied

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1.Program Evaluation and Review Technique (PERT) - is a
method to analyze the involved tasks in completing a given
project, especially the time needed to complete each task, and
to identify the minimum time needed to complete the total
project.
It is commonly used in conjunction with the Critical Path
Method (CPM).

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0 5 5 5 8 13
A C
0 0 5 5 0 13
0 4 4 13 5 18
Start B E End
1 1 5 13 0 18
4 3 7
D
10 6 13
1.There are 3 paths ACE, BCE & BDE.
2.ACE will be the critical path with total float 0 and the critical path length 18
3.Activities A, C & E will be having even free float 0 (no kind of float/flexibility for critical path
activities)
4.Total float for B is 1 (LF-EF OR LS-ES) & activity D is 6
5.Out of B & D which activity can have free float? Activity B is not satisfying free float definition. I.e.
B can be delayed w.r.t C (5-4=1) but not w.r.t D (4-4=0). So if “ANY” part of the definition is not
satisfying i.e. B can’t be delayed without impacting ANY successor of it.
6.Free float for activity D = 13-7 = 6. This activity satisfies the definition along with point 4 and
also there is no dependency/constraint in example which can hinder activity D having
SN Panigrahi, flexibility.
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Activity Preceding Activity Estimate in Weeks
Start 0
D Start 4
A Start 6
F D,A 7
E D 8
G F,E 5
B F 5
H G 7
C H 8
End C,B 0
Find
1. Draw Network Diagram & find Different Paths
2. Find Time Lines of Early Start, Early Finnish, Late Start, Late Finnish for Each
Activity
3. Find Critical Path
4. Find Total Float on Paths AFGHC & DFGHC
5. Free Float on Activities E & F
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0 4 4 4 8 12
Activit Precedi Estima
D E y ng te in
1 1 5 5 1 13 Activity Weeks
13 5 18 18 7 25 25 8 33 Start 0
G H C D Start 4
0 0 6 7 13 13 0 18 18 0 25 25 0 33 A Start 6
Star F F D,A 7
0 t 0 6 0 13 E D 8
25 33 G F,E 5
13 5 18
0 6 6
End B F 5
B 25 33 H G 7
A 20 7 25
C H 8
0 0 6
End C,B 0
Answer : Network Diagram shown above
Paths Duration Critical Total Float on Activities E & F Free Float of an Activity Activities E & F
(Weeks) Path
DEGHC 32 Total Float for Activity E = LF-EF or LS-ES = Free Float for Activity E = ES of G
AFGHC 13-12 0r 5-4 =1 (Successor) – EF of E = 13-13 = 0
DFGHC 31 Having Means No Free Float
DFB 16 Longest
AFGHC 33 Duration Activity F is on Critical Path. Total Float is 0 (Total Activity F is on Critical Path. Free Float is 0 (Free
Float on Activities on Critical Path is Zero) Float on Activities on Critical Path is Zero)
AFB 18

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Example
Activity Duration Precedents
(weeks)
A Hardware selection 6
B Software design 4
C Install hardware 3 A
D Code & test software 2 B
E File take-on 3 B
F Write user manuals 10
G User training 3 E, F
H Install & test system 2 C,D
Find
1. Draw Network Diagram & find Different Paths
2. Find Time Lines of Early Start, Early Finnish, Late Start, Late Finnish for Each
Activity
3. Find Critical Path
4. Find Total Float on Paths AFGHC & DFGHC
5. Free Float on Activities E & F
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0 6 6 6 3 9 Activity Duratio Prece
n dents
A C 9 2 11 (weeks)
2 2 8 8 2 11 A Hardware 6
H selection
4 2 6 11 2 13
B Software 4
D design
9 5 11
13 C Install 3 A
0 4 4 4 3 7 hardware
End D Code & test 2 B
Star B E 13 software
t 3 3 7 7 3 10 10 3 13 E File take-on 3 B
0 10 10 G F Write user 10
10 0 13 manuals
F G User training 3 E, F
0 0 10
H Install & test 2 C,D
Answer : Network Diagram shown above system
Paths Duration Critical Total Float on Activities E & F Free Float of an Activity Activities E & F
(Weeks) Path
ACH 11 Total Float for Activity E = LF-EF or LS-ES = Free Float for Activity E = ES of G
FG 10-7= or 7-4 =3 (Successor) – EF of E = 10-7 = 3
BDH 8 Having Means Activity E can be Delayed by 3 weeks
BEG 10 Longest without Effecting Start of G
Duration
FG 13 Activity F is on Critical Path. Total Float is 0 (Total Activity F is on Critical Path. Free Float is 0 (Free
Float on Activities on Critical Path is Zero) Float on Activities on Critical Path is Zero)

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Activity Schedule - Example
Activity Earliest Latest Earliest Latest
start (ES) start (LS) finish (EF) finish (LF)
A 0 0 5 5
B 0 6 6 12
C 5 8 9 12
D 5 7 8 10
E 5 5 6 6
F 6 6 10 10
G 10 10 24 24
H 9 12 21 24
I 24 24 26 26
Find Activities on Critical Path
How long can non-critical activities be delayed before they cause a
delay in the project’s completion time? India
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Activity Schedule – Example - Answers
Activity Earliest Latest Earliest Latest Slack Critical
start (ES) start (LS) finish (EF) finish (LF) (LS-ES) path
A 0 0 5 5 0 Yes
B 0 6 6 12 6
C 5 8 9 12 3
D 5 7 8 10 2
E 5 5 6 6 0 Yes
F 6 6 10 10 0 Yes
G 10 10 24 24 0 Yes
H 9 12 21 24 3
I 24 24 26 26 0 Yes

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Importance of Float (Slack) and Critical Path
➢ Slack or Float shows how much allowance each activity has, i.e how long it can be delayed
without affecting completion date of project
➢ Critical path is a sequence of activities from start to finish with zero slack. Critical activities
are activities on the critical path.
➢ Critical path identifies the minimum time to complete project
➢ If any activity on the critical path is shortened or extended, project time will be shortened or
extended accordingly
➢ So, a lot of effort should be put in trying to control activities along this path, so that project
can meet due date. If any activity is lengthened, be aware that project will not meet deadline
and some action needs to be taken.
➢ 6. If can spend resources to speed up some activity, do so only for critical activities.
➢ 7. Don’t waste resources on non-critical activity, it will not shorten the project time.
➢ 8. If resources can be saved by lengthening some activities, do so for non-critical activities,
up to limit of float.
➢ 9. Total Float belongs to the path
435Solutions,
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1. You are the Project Manager on a merger and acquisition project. Activity A (3 days) and activity B (4 days) can
start immediately. Activity C (2 days) can start after A and B are complete. Activity D (5 days) can begin after
activity B is complete. Activity E (6 days) can begin after activity B is complete. Activity F (4 days) can begin after
activities C and D are complete. Activity G (5 days) can begin after activities D and E are complete. Activity H (4
days) can begin after activities F and G are complete. What is the slack of Activity D?
A. Two days
B. One day
C. Four days
D. Not enough information

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Path Duration Activity Slag
A 13
A-C-F-H 13 B 0 Critical Path
B-C-F-H 14 C 5
B-D-F-H D 1
17
E 0 Critical Path
B-D-G-H 18 F 2
B-E-G-H 19 Critical Path G 0 Critical Path
H 0 Critical Path
0 3 3 4 2 6
A C
0 0 6 9 9 11 9 4 13
Start F
0 0 0 4 4 4 5 9 11 15 15 4 19 0 0
B D H Finish
0 4 5 10 10 5 15 15 19 0
0
G
4 6 10 10 15
E
4 10
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6.4 Estimate Activity Durations
The process of estimating the number of work periods needed to complete individual
activities with estimated resources
Source:Essenpee
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Estimate Activity Durations:
1. Estimate activity durations is a process to determine the number of work periods necessary
to complete the project activities considering the resource estimates and other constraints.
2. Work Period is a unit of measurement used to reference and estimate activity durations.
They are generally in days and weeks, but for longer durations, months and years could
also be used.
3. Expert judgment can be used by using historical information to give duration estimates
from similar projects. It can also be used to reconcile different estimating methods.
4. Analogous Estimating: based on previous activity (historic data) from similar activity or
project with similar nature (a form of expert judgment) - used when little is known on very
similar scope - works well when project is small – rough estimation – generally less costly
and less time consuming, but less accurate. Analogous is a TOP DOWN estimating
method
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1. The Top-down Estimate method is also a analogous method. It is used to determine
Rough Order of Magnitude (ROM) estimates in the initiation phase of the project. The
method uses the actual durations, effort or costs from previous projects as a basis for
estimating the effort or costs for the current project.
2. Parametric Estimating is an estimation technique which utilizes the statistical
relationship that exists between a series of historical data and a particular delineated list
of other variables.
Examples : square footage in a contraction project, the number of lines or code that
exist in a software application, and other similar variables.
This information is them implemented for the purposes of calculating and
demonstrating an estimate for the entity of activity parameters.
Parametric is More Accurate. Bottom up is Accurate (When Parametric was not given)

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1. One-Point Estimating: based on expert judgment, but highly unreliable
2. Three-point estimates is an analytical technique to determine and improve the accuracy of
estimates of cost or duration, especially when there is uncertainty about the underlying
activity or cost component. The three estimates are the most likely estimate, optimistic
estimate, and a pessimistic estimate.
3. Optimistic time (TO): the minimum possible time required to accomplish a task, assuming
everything proceeds better than is normally expected
Pessimistic time (TP): the maximum possible time required to accomplish a task,
assuming everything goes wrong (but excluding major catastrophes).
Most likely time (TM): the best estimate of the time required to accomplish a task,
assuming everything proceeds as normal.

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Three-Point Estimates
Estimation distribution type Expected Duration (TE)

1 Triangular distribution TE = (TO+TM+TP) / 3
The triangular distribution is

simply the average or mean of
the three separate estimates
2 Beta distribution (PERT TE = (TO+4TM+TP) / 6

technique)
The beta distribution, based
on PERT, assumes a great
deal of confidence that the
most likely estimate TM is
accurate. It is a weighted
average method.

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1. In real world applications, the PERT (Program Evaluation and Review Technique) estimate
is processed using Monte Carlo analysis, tie specific confidence factors to the PERT
estimate.
2. Standard Deviation (sigma value - σ)- A measure of the dispersion of a set of data from its
mean - to specify the precision of measurement. The standard deviation measures how
concentrated the data are around the mean; the more concentrated, the smaller the
standard deviation. The more spread apart the data, the higher the deviation. Standard
deviation is calculated as the square root of variance.
SD (σ) = (Tp-T0) / 6

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1σ 68.2689% of the values will lie
between MEAN-1SD and
MEAN+1SD
2σ 95. 4499% of the values will

lie between MEAN-2SD and
MEAN+2SD

MEAN+3SD

MEAN+6SD

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1. Variance is a quantifiable deviation from a baseline and generally associated
with an identifier e.g cost variance, schedule variance.
Variance = (S.D)2
1. Activity with the highest variance has the highest risk.
2. Project Duration Range = PERT Estimation + / - S.D.
3. Accuracy is the conformance to target value.
4. Heuristics: use rule of thumb for estimating
5. Duration estimates may include contingency reserves, sometimes referred to
as time reserves or buffers to account for schedule uncertainties.
6. Contingency reserve: for known unknowns, owned by PM, may be updated,
part of schedule baseline.
7. Management reserve: for unknown unknowns, owned by management,
included in overall schedule requirements
8. Activity duration estimate may be in a range, don’t include lags.

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• Used where there is uncertainty in the duration of estimates
• PERT uses “Weighted Average” to calculate the project duration
• PERT Duration is based on Three Point Estimates viz. Optimistic,
Pessimistic and Most Likely
• The resulting estimates are stated in a range of plus and minus
estimate
PERT Duration: Standard Deviation of an √(Variance)2
(P+4M+O) Activity (SD)
= SD
6 P-O
6
Act O M P PERT Std. Dev. Variance Range
1 10 20 25 19.167 2.500 6.250 16.667 to 21.667 or 19.167+/-2.500
2 4 6 8 6.000 0.667 0.444 5.333 to 6.667 or 6 +/- 0.667
3 12 13 15 13.167 0.500 0.250 12.667 to 13.667 or 13.167 +/- 0.500

Activity PERT Variance Range
Project 38.334 6.944 31.390 to 45.278 Or 38.334 +/- 6.944

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You are managing a construction project. You have managed similar projects in the
past. Your manager wants you to take help of historical information on this project.
What is the best way to use this?
A: Use parametric estimation technique to calculate the average time it took to

complete a similar project.
B: The best way is to not use the previous projects artifacts because you want to
start from scratch and you don't want to repeat mistakes from past projects.
C: Use the organizational process assets for lessons learned and helpful
information from the past projects.
D: Only reuse the schedule and cost management plan as they are the most
important artifacts.
Ans : C

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Reserve Analysis:
• Contingency reserves are the estimated duration within the schedule
baseline which is allocated for unknown amount of rework or known
risks that are accepted and for which contingent or mitigation
responses are planned
• Contingency reserves are associated with “known unknowns”

• Contingency reserves may separated from individual activities and
grouped into buffers
• Management reserves are a special amount of project duration

withheld for management control purposes and are reserved for
unforeseen work that is within the scope of the project

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Duration Estimates: Activity duration estimates are quantitative assessments of
the likely number of time periods that are required to complete an activity.
•This is a quantitative measure usually expressed in hours, weeks, days, or

months.
•Duration estimates do not include any lags
•May include some indication of range of possible results
Example : 2 weeks +/-2 days shows activity will take at least 8 days and will not
go beyond 12 days OR 15% probability of exceeding 3 weeks shows high
probability 85% that the work will take 3 weeks or lesser

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Question
Rather than use Triangular Distribution while doing Three Point Estimation you choose
to use Beta Distribution.Based on your analysis and understanding you are confident
that the project would be completed with a total cost of 108,000 $.You also estimate that
a best case estimate would be 90000 $ while a worst case scenario would result in the
costs incurred to shoot up to 138000 USD. What would the Three point Cost estimate be
using Beta Distribution ?
A. 112000 $
B. 110000 $
C. 101000 $
D. None of the above
B is the correct answer.
The correct answer is B.The question states we should use Three point estimate using
Beta distribution. The formula for this estimation technique is 4a + b + c / 6 where a =
Most Likely estimate , b = Estimate based on Best case scenario and c = Estimate
based on Worst case scenario. So the Three point estimate using Beta distribution is (4
*108000) + 90000 + 138000 / 6 = 660000/6 = 110000 $

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Process of analyzing activity sequences, durations, resource
requirements and schedule constraints to create the project
schedule
Source:Essenpee
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451
Develop Schedule :
1. This is the process of analyzing activity sequences, durations, resource

requirements, and schedule constraints to create the project schedule
model.
2. Lead and Lags are NOT schedule constraints
3. Critical Path: the longest path that amount to shortest possible completion
time
Critical Path has zero Float, activities with mandatory dependency with
finish-to-start relationship, There can have more than one critical paths
(more risks),
Critical Paths may change - keep an eye on near-critical paths
1. Path with negative float = behind schedule, need compression to eliminate

negative float SN Panigrahi, Essenpee Business Solutions,
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452
•PERT (Program Evaluation and Review Technique) is also a NETWORK
DIAGRAM to analyze and represent the activity in a project, and to illustrate the
interdependencies and flow of events in a project. PERT is a method to evaluate
and estimate the time required to complete a task within deadlines.
•PERT is Superior to CPM

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•Critical Chain Method (CCM) – deal with scarce resources and uncertainties,
keep the resources levelly loaded by chaining all activities and grouping the
contingency and put at the end as project buffer, for activities running in parallel,
the contingency is called feeding buffer (expect 50% of activities to overrun)
•Critical chain is completed after determining critical path by entering

resource availability and the resulting schedule produces a resource-constrained
critical path, which is usually altered from the original. Critical chain focuses on
managing remaining buffer durations against the remaining durations of task
chains
1.Critical chain modifies the project schedule to account for limited

resources. The critical chain method adds duration buffers that are non-work
schedule activities to manage uncertainty. (FS only)
2.Buffer is determined by assessing the amount of uncertainties, human factors,
etc.
3.Critical Chain generally changes the critical path by combining deterministic
and probabilistic approaches and helps manage the uncertainties in the
SN Panigrahi, project.
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1. Resource Optimization Techniques : Resource leveling, or Resource
smoothing, is a method for developing a schedule that attempts to minimize
the fluctuations in requirements for resources. It levels the resources so that
they are applied as uniformly as possible without extending the project
schedule beyond its required completion time.
a) Resource Leveling : A technique in which start and finish dates are adjusted
based on resource constraints with the goal of balancing demand for
resources with the available supply.
• It can be used when (a) the shared or critically required resources are only
available at certain times or (b) in limited quantities or (c) over allocated such
when a resource has been assigned to two or more activities during the same
time period or (d) to keep resource usage at a constant level
• Resource leveling can cause the critical path to change usually to increase

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Resource Smoothing : A technique that adjusts the activities of a
schedule model such that the requirements for resources on the project
do not exceed certain predefined resource limits, but only optimized
within the float boundaries
•Technique that adjusts the activities of a schedule model such
that the requirements of resources on the project do not exceed
certain predefined resource limits
•Critical path is not changed and the completion date may not be
delayed
1. Resource Leveling often cause the original critical path to

change, generally increases the completion period
2.Resource smoothing will not lead to change in the critical path

and the completion period will not be delayed

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Resource Leveling
A resource-limited schedule is produced using resource leveling. If resources are limited,
leveling lengthens the schedule and increases the cost and other constraints.
“A technique in which start and finish dates are adjusted based on resource constraints with the
goal of balancing demand for resources with the available supply.” – PMBOK® Guide Sixth
Edition.
Resource Smoothing
“A technique that adjusts the activities of a schedule model such that the requirements for
resources on the project do not exceed certain predefined resource limits.”– PMBOK® Guide
Sixth Edition.
Resource Leveling Resource Smoothing

It applies the resource constraints to the project We apply resource smoothing after doing resource
and may result in change in project duration. leveling and we make use of slack, and will not
result in change of project duration.
Resource Leveling is primarily driven by resource Resource smoothing is more to do with desired
constraints, like you do not have more than 45 limits, like we do have 45 hours available for given
hours of the given resource for a week. resource but we wish that we allocate 38 hours per
week so we have some breathing space.
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Resource Leveling & Resource Smoothing
When we are developing the schedule, we sequence the activities and then we assign resources and estimate
duration. Now, while we are performing all these activities, our focus is generally to sequence activities based
on their dependencies (mandatory or discretionary). After this, we may end up developing a schedule where
some of the resources are over allocated. When we apply resource leveling, we apply resource constraints (like
we do not have more than 45 hours in a week) to our schedule, applying this resource constraint may result in
change of project schedule dependencies and it may result in change in project duration. In the image above
when we applied 45 hours constraint to 7 week project, then it became 9 week project schedule.
After applying resource leveling you have a resource

constrained schedule, but you may still have the
desired level of allocation in your project plan to keep
things well managed. Let’s say your desired level of
allocation per week is 38 hours, now by doing Resource
Smoothing you try to adjust activities in such a way
that you achieve this desired level of resource
allocation. You may not be able to do it for all the
S.N.Panigrahi
weeks since you do not think of changing the project
duration while applying this smoothing, so you do it
only wherever slack is available.

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Modeling Techniques : a) What if scenario analysis and b) Simulation
1. What if Scenario analysis is the process of evaluating scenarios in order to predict their effect on the
project objectives (positive or negative). Addresses feasibility / possibility of meeting project schedule,
useful in creating contingency plan.
In creating a finalized, realistic schedule, it is helpful to ask “What if a particular factor

changed on the project? Would that produce a shorter schedule?” The assumptions for
each activity can change and, therefore, the activity durations can also change. One of the
ways to calculate the effect of these changes is through a Monte Carlo Analysis.

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2. Simulations are typically performed using the Monte Carlo technique. In a simulation, the
project model is computed many times (iterated), with the input values randomized from a
probability distribution function (e.g., cost of project elements or duration of schedule
activities) chosen for each iteration from the probability distributions of each variable. A
probability distribution (e.g., total cost or completion date) is calculated

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3. Monte Carlo: Monte carlo method is a technique that simulates schedule and cost variables
multiple times to calculate a distribution of probable cost or duration results.
The outcome of the project is simulated by computer software in Monte Carlo analysis. It is based
on the three-point estimate (optimistic, pessimistic, and most likely) for each activity and network
diagram. Following are the benefits of the simulation:
It suggests the probability of completing the project on any specific day
It suggests the probability of completing the project for any specific amount of cost
It suggests the probability of any activity actually being on the critical path
It suggests the overall project risk
It is more accurate than other methods as it simulates the actual details of the project and
calculates probability.
Monte Carlo analysis help deal with “path convergence”, places in the network diagram where
multiple paths converge into one or more activities, thus adding risk to the project. Monte Carlo
analysis is also used as a risk management tool to quantitatively analyze risks.

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•Schedule Compression :
•Fast Tracking : activities are done in parallel (mainly critical path activities) or allowed overlapping of
activities to shorten the project duration. Fast tracking may result in rework and increases risk.
•Crashing : shorten the activities by adding resources to critical path activities to decrease their duration,
may result in team burnout. Crashing always may not bring out a viable alternative but may increase the
risk and / or cost.
•Schedule Compression may also can be achieved through Reducing Scope and / or cutting Quality,
however not accepted to compromise on scope and quality unless change request is accepted
1.While fast tracking, look at discretionary dependencies.
• CRASHING => MORE COST
• FAST TRACK => MORE RISK AND REWORK
•The schedule baseline is the approved and signed version of project schedule that is incorporated into the
PM plan
The schedule is calendar-based taking into accounts holidays/resource availability/vacations

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Different types of project phases are used on projects, and each phase culminates in the completion of at
least one deliverable. The high-level nature of these phases means they are an element of the project life
cycle. Some phases start before others complete. If this approach is followed, it may result
in______________.
•A. An increase in the number of issues

•B. Increasing the schedule
•C. The need for a CCB
•D. More rework
Correct Answer: D
The question is an example of an overlapping relationship between phases. It is used to compress the
schedule through fast tracking as an example. By overlapping phases more resources may be needed,
risks may increase, and more rework may result if a significant phase progresses before accurate
information is available from the previous phase.

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Your customer tells you that his competitor is launching the product one month
earlier than your product launch date. You are a certified PMP and you tell him
about the schedule compression technique and how it can be used to
compress your schedule. What did you tell him?
A: Crashing means to add resources to your project, however in fast tracking we do

activities in parallel.
B: Fast Tracking means to add resources to your project, however in crashing we do
activities in parallel.
C: Crashing will always shorten the duration of your project.
D: Fast Tracking will always shorten the duration of your project.
Ans : A

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Your project management plan results in a project schedule that is too long If the project network
diagram cannot change but you have extra personnel resources, what is the BEST thing to do?
A-) Fast track the project.
B-) Level the resources.
C-) Crash the project.
D-) Monte Carlo analysis.
The answer is C, crash the project. Because, in first sentence, it is mentioned that schedule is too
long, therefore the aim is making a shorter schedule. And in the second sentence it is mentioned
that you have extra personnel resources. If you have resources, you can put more resources in an
activity to complete it in a shorter time. And this is actually a description of crashing an activity or
crashing the project. If you look to the other options, fast tracking was performing activities in
parallel instead of series, therefore it is irrelevant. Leveling the resources was for fixing the over-
allocation of resources and distributing the tasks to all your resources uniformly. And Monte Carlo
analysis was another estimating tool which is irrelevant choice as well. Therefore, here the best
answer is C.
Knowledge Area: Schedule Management Knowledge Area

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An activity has an early start (ES) of day 3, a late start (LS) of day 13, an early finish (EF) of day 9,
and a late finish (LF) of day 19. The activity:
A-) Is on the critical path.

B-) Has a lag.
C-) Is progressing well.
D-) Is not on the critical path.
Answer is D. is not on the critical path. Because if you look to the early start and late start values of
the activity, you can find the float or the slack of activity’s time by subtracting early start, 3 days,
from the late start, 13 days. And it gives 10 days of float for this activity. You will find the same
result if you go through subtracting the early finish, 9 days, from the late finish, 19 days. Since the
float of activity or the slack of the activity is greater than zero, it’s not on the critical path.
Remember the critical path activities was having zero float, therefore the answer is D.
Knowledge Area: Schedule Management Knowledge Area

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•Bar Charts – also known as Gantt chart – in bar chart activities listed on the
vertical axis and dates are shown on the horizontal axis – activity durations are
shown as horizontal bars – easy representation to exhibit project progress.
1.WBS is better than BAR chart (GANTT chart) as it is a weak planning tool, but a good tool for
control (track progress) and reporting to the team as it doesn’t show dependency or resources.
2.Logic bar chart: time scaled schedule network diagram showing dependencies among
activities.
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1. Hammock activity – also a bar chart – shows higher-level summary activities between milestones
2. Milestone charts – These are similar to bar charts, but identifies only scheduled start or completion of
major deliverables events. Milestone chart is used for reporting to senior management.
3. Milestone Duration is ZERO
4. Parkinson’s Law: Work expands so as to fill the time available for its completion.
5. The Schedule Data includes schedule milestones, schedule activities, activities attributes, and
documentation of all assumptions and constraints, alternative schedules and scheduling of contingency
reserves.
6. The Project Calendars used to record the day-to-day activities of the project - identifies working days
only.
Master schedule refers to a project schedule at summary level depicting the key deliverables and
milestones. Milestone Schedule can also be called as Master Schedule.

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•Hammock Activity: Hammock activity is referred to as summary activity. These
are activities that are roughly related and are reported as a single activity. On a
Gantt chart a hammock activity is usually displayed as a thick black bar above a
grouping of lower level activities.

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The process of monitoring the status of project activities to update project progress and
manage changes to the schedule baseline to achieve the plan

206
Control Schedule
1. Control schedule is the process of monitoring, managing and

documenting changes to the schedule baseline. It provides means to
measure and recognize deviations from the plan and take corrective and
preventive measures and thus minimize risk.
2. Performance Review includes: Trend Analysis, CPM, CCM, Earned Value

Management.
3. Schedule Forecasts are estimates or predictions of conditions and events in

the projects future based on information and knowledge available at the time of
the forecast.

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What is Project Schedule Management?
Project Time Management includes all the activities necessary to complete the project in a
timely fashion. Project time management includes the following:
•Plan Schedule Management. Goal: Schedule Management Plan

•Define activities. Goal: activity list
•Sequence activities. Goal: project schedule network diagrams
•Estimate activity resources. Goal: activity resource requirements
•Estimate activity duration. Goal: activity duration estimates
•Develop schedule. Goal: schedule baseline
•Control schedule. Goal: schedule forecasts

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Question 1: Management from the customer side wants to bring in a project one month
earlier than they had originally planned. Based on the current project timeline, product
testing will have to be cut short. You have reviewed several options with the customer;
they have decided that crashing the schedule would be the best approach to bringing in
the project earlier. As a result of customer’s decision, what is your biggest concern using
this approach?
a. Additional expense
b. Availability of additional resources to perform testing in a shorter time frame
c. Customer buy-in
d. Developing an adequate reward system to address the overtime that will be needed
to bring in this project one month early
Answer: B – Since the customer has decided that crashing is an option,

answer ‘A’ has already been taken into consideration as well as answer
‘C’. Answer ‘D’ is a complete unknown at this point. Of the four answers,
the biggest concern is whether the testing resources are actually
available to do the job.

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Question 2: The blueprints for the new construction projects have been
completed and construction is ready to begin. While the organization was
thinking about erecting a modular structure, they decided on a more traditional
approach. The foundation will be poured and cured before the framing begins.
This is an example of:
a. Discretionary dependency
b. Mandatory dependency
c. External dependency
d. Internal dependency
Answer: B - This is a clear example of a mandatory dependency; The

foundation must set before you can start erecting the walls of the
structure.

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Question 3: Your project is experiencing resource constraints at certain times
in the project timeline, requiring you to adjust start and finish dates on the
schedule. What tool is best to use in this situation?
a. Resource leveling
b. Feeding buffer
c. Critical Path method
d. Resource smoothing
Answer: A – Resource leveling is the tool that is used in this situation

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What is Project Schedule Management?
Project Schedule Management includes all the activities necessary to complete the project in a timely
fashion. Project time management includes the following:
•Plan Schedule Management. Goal: Schedule Management Plan

•Define activities. Goal: activity list
•Sequence activities. Goal: project schedule network diagrams
•Estimate activity resources. Goal: activity resource requirements
•Estimate activity duration. Goal: activity duration estimates
•Develop schedule. Goal: schedule baseline
•Control schedule. Goal: schedule forecasts

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You are managing a mobility project. Your team tells you that
the testing of individual modules cannot begin until you
complete the development of the entire requirements. What
type of relationship is your team referring to?
A: Finish-to-Start (FS)
B: Start-to-Finish (SF)
C: Start-to-Start (SS)
D: Finish-to-Finish (FF)
Ans : A

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Activity Definition is typically performed by which of the following:
1. Project Manager who created the WBS
2. Project Team Members responsible for the work package
3. Project Officer
4. Project Stakeholder
CORRECT: Answer: B
Which of the following is not an activity attribute:

1. Person responsible for the activity
2. Location where to perform the activity
3. Time when to perform the activity
4. Leads and Lags
CORRECT: Answer: C Activity attributes are an input for project schedule development; therefore, the
scheduling information is not a part of the activity attribute.
Which of the following does NOT generate changes to the Project documents:
2. Sequence Activities
CORRECT: Answer: A. Project document updates is an output to all processes in Project Time
Management process area except Define Activities.
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You're working on a software project. You are in the time management
process where your client has asked for a duration estimate for each
activity. How would you describe to him/her what you are doing?
A: Evaluating the activities to determine the number of person hours

each activity will take.
B: Evaluating the activities to determine the amount of effort each
activity will take.
C: Evaluating the activities to determine the number of resources each
activity will take.
D: Evaluating the activities to determine the amount of time each
activity will take.
Ans : D

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1.Which of the following may generate a milestone list:
CORRECT: Answer: A
1.In PDM, which of the following relationships is rarely used:

1. Finish-to-Start
2. Start-to-Finish
3. Start-to-Start
4. Finish-to-Finish
CORRECT: Answer: B
1.A schedule activity may begin 10 days before the predecessor activity
finishes. This is an example of:
1. Finish-to-Start
2. Start-to-Finish
3. Start-to-Start
4. Finish-to-Finish
CORRECT: Answer: A
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A schedule activity may begin 10 days before the predecessor activity finishes. This is an example of:
1. ADM
2. PDM
3. A dependency with lag
4. A dependency with lead
CORRECT: Answer: D Note that this dependency can be represented by both ADM and PDM techniques.
The following BEST describes a subnetwork:

1. Precedence Diagramming Method [PDM]
2. Arrow Diagramming Method [ADM]
3. Fragment Network
4. Activity-On-Node [AON]
CORRECT: Answer: C
A Project Manager in-charge of a Software Development projects is creating a project schedule network diagram for the
code development component of the project. This is an example of:
3. Fragment Network
4. Activity-On-Node [AON]
CORRECT: Answer: C It is not clear what Activity Sequencing technique is the Project Manager using; however, it is
evident that she is developing a schedule network diagram for only part of the project (not the entire project)

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What-if scenario analysis is done as a part of which process:
3. Develop Schedule
4. Control Schedule
CORRECT: Answer: C
AON refers to:

3. Fragment Network
4. Mandatory Dependencies
CORRECT: Answer: A
AOA refers to:

3. Fragment Network
CORRECT: Answer: B

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Activity Resource Requirements is an input to which of the following processes:
2. Control Schedule
CORRECT: Answer: A One of the outputs of Estimate activity resources is Activity Resource Requirements.
Sequence Activities establishes logical dependencies between activities. Activity Resource requirements do
not play an important role in determining the seq
Dummy relationships or dummy activities can be used in which of the following Activity Sequencing
techniques:
3. Fragment Network
4. Schedule Network Templates
CORRECT: Answer: B
Which of the following is NOT an input to the Sequence Activities process:

1. Project Scope Statement
2. Activity Attributes
3. Activity List
4. Change Requests
CORRECT: Answer: D Approved Change Requests is not a valid input to Sequence Activities process.
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If your customer is pushing you to complete the project a week before the original
scheduled completion date, then what is the best thing to do?
A: Talk to the customer and say that it cannot be completed because the
activities are on the critical path.
B: Look for options to crash or fast track the project.
C: Talk to your senior manager.
D: Continue at the same speed you are working and determine the same at a
later stage.
Ans : B

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Which of the following is a technique for Sequence Activities:
3. Rolling Wave Planning
CORRECT: Answer: A
Reserve Analysis is a technique for:

1. Define Schedule
CORRECT: Answer: D
Resource Leveling is a technique for:

1. Develop Schedule
CORRECT: Answer: A

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Following can be BEST described as a kind of dependency that can create arbitrary float values
and limit scheduling options:
1. Mandatory dependency
2. Discretionary dependency
3. Start-to-Finish dependency
4. External dependency
CORRECT: Answer: B
Critical path method is used in which of the following processes:

3. Develop Schedule
CORRECT: Answer: C
Parametric Estimating is done as a part of which process:

2. Develop Schedule
CORRECT: Answer: D SN Panigrahi, Essenpee Business Solutions,
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Identification of Mandatory Dependencies is BEST done during which process:
2. Develop Schedule
4. Estimate Activity Duration
CORRECT: Answer: A
Resource reallocation from non-critical to critical activities is an example of which Project Scheduling
technique:
1. Critical Path Method
2. Schedule Compression
3. What-if Analysis
4. Resource Leveling
CORRECT: Answer: D
Knowledge of best practices in a particular area is MOST likely to give rise to which of the following
dependencies:
1. Finish-to-Start dependency
2. Soft Logic
3. Mandatory dependency
4. External dependency
CORRECT: Answer: B Discretionary dependencies often result from best practices. This kind of
dependency is also known as Soft Logic, Preferential Logic, or Preferred Logic.
A Project Manager is preparing a Project Schedule network diagram. During the
diagram development, she removes a dependency between two tasks that was
defined in an earlier stage. After the network diagram is completed, she updates
activity attributes for the two tasks. This is an example of:
3. Develop Schedule
4. Lack of change control
CORRECT: Answer: D The Project manager is preparing the project schedule
network diagram which implies she is in the Activity scheduling process. This
process can generate changes to the Activity definition and Activity Attributes;
however, such changes should
Reserve Analysis involves:

1. Estimating by multiplying the quantity of work by productivity rate
2. Incorporating time buffers into the activity duration estimates
3. Developing project schedule with contingency reserves as a recognition of
the schedule risk
4. Adding resource reserves to the activity resource estimates
CORRECT: Answer: B Answer C might seem more likely, but note the fine difference
that

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The project is behind schedule by 3 days and your
customer wants you to get back on track as soon as
possible. You don't have money to get additional resources
for your project as this is a strict no from the customer.
Under these circumstances, what should you do?
A: Use fast tracking.

B: Use crashing.
C: Remove some activities.
D: Ask the management to provide you with additional
fund.
Ans : A

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One of your colleagues, who is also a project manager, is leaving the organization.
Your PMO director has asked you to take over the project from him. You want to
know how the previous project manager was managing changes to the schedule.
Which document should you refer to?
A: Change control board (CCB)
B: Schedule Management Plan
C: Project reports
D: Resource management plan
Ans : B
Schedule Management Plan includes How to select a scheduling methodology, a scheduling

tool, and sets the format and establishes criteria for developing and controlling the project
schedule. The Plan also includes How a Change is Managed.

490Solutions,
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Which of the following is not used to determine the duration
estimate of each activity?
A: Milestone list
B: Activity list
C: Activity attributes
D: Basis of estimate
Ans : D

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Your Team Drawn Network Diagram as Follows. What is
the Critical Path
A: Path ACEFIJ
B: Path ABEIJ
C: Path ADGFHJ
D: Can’t be worked out from the Diagram
Ans : C SN Panigrahi, Essenpee Business Solutions,

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Question: Due to some recent changes in the project schedule, you decide to setup a new baseline as
one of the scope related change has pushed your project back by 2 months. Since you have to re-analyze
the project schedule, you are trying to predict the impact on the activities that have least amount of
flexibility. Which technique did you used?
A: Resource Optimization
B: Precedence Diagramming Method
C: Critical Path Method
D: Schedule Network Analysis
Ans
C: Critical Path Method

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Reserve Analysis is purely a technique of determining activity duration, not a schedule
development technique.
Which of the following is not true for Resource Leveling:
1. Project schedule is build with resource buffers to prevent schedule slippage
2. Project’s Critical path may be altered
3. Resource based scheduling method
4. Reverse resource allocation scheduling
CORRECT: Answer: A Resource leveling involves creating a resource constrained project

schedule.

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Your project management plan results in a project schedule that is too long If the
project network diagram cannot change but you have extra personnel resources,
what is the BEST thing to do?
A-) Fast track the project.
B-) Level the resources.
C-) Crash the project.
D-) Monte Carlo analysis.
The answer is C, crash the project. Because, in first sentence, it is mentioned that
schedule is too long, therefore the aim is making a shorter schedule. And in the
second sentence it is mentioned that you have extra personnel resources. If you have
resources, you can put more resources in an activity to complete it in a shorter time.
And this is actually a description of crashing an activity or crashing the project. If you
look to the other options, fast tracking was performing activities in parallel instead of
series, therefore it is irrelevant. Leveling the resources was for fixing the over-
allocation of resources and distributing the tasks to all your resources uniformly. And
Monte Carlo analysis was another estimating tool which is irrelevant choice as well.
Therefore, here the best answer is C.

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An activity has an early start (ES) of day 3, a late start (LS) of day 13, an early
finish (EF) of day 9, and a late finish (LF) of day 19. The activity:
A-) Is on the critical path.
B-) Has a lag.
C-) Is progressing well.
D-) Is not on the critical path.
Answer is D. is not on the critical path. Because if you look to the early
start and late start values of the activity, you can find the float or the slack
of activity’s time by subtracting early start, 3 days, from the late start, 13
days. And it gives 10 days of float for this activity. You will find the same
result if you go through subtracting the early finish, 9 days, from the late
finish, 19 days. Since the float of activity or the slack of the activity is greater
than zero, it’s not on the critical path. Remember the critical path activities
was having zero float, therefore the answer is D.

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While working on a project as project manager, you want to
make sure that some of the activities on your schedule do not
slip. What are those activities?
A: The ones with the biggest difference between LS and LF

B: The ones with the biggest difference between ES and EF
C: Critical path activities
D: The activities with the most lead and lag times
Ans : C

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4. You want to estimate the duration of an activity on your
project. Your pessimistic estimate is 10 days, your most likely
estimate is 5 days, and your optimistic estimate is 3 days.
Using a triangular PERT distribution, what is your duration
estimate?
A. 4.6 days
B. 5 days
C. 6 days
D. 9.3 days
Ans :
C. 6 days – Your typical PERT estimate is shown by
the formula (P + 4L + O)/6, but this problem wants
you to use the triangular PERT estimate instead.
(P + L + O)/3 = (10 + 5 + 3)/3 = 18/3 = 6 days.

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You are planning to complete a project in 30 days. However, if you add another
resource, you can complete the same work in 26 days. Unfortunately, one of
your critical resources takes an unplanned leave, and results in the same work
being completed in 40 days. Calculate the three-point estimates using Beta and
Triangular Distribution.
A: Beta Distribution = 32 Days and Triangular Distribution= 31 days

B: Beta Distribution = 33 Days and Triangular Distribution= 34 days
C: Beta Distribution = 31 Days and Triangular Distribution= 32 days
D: Beta Distribution = 34 Days and Triangular Distribution= 33 days
Ans : C: Beta Distribution = 31 Days and Triangular Distribution= 32 days

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7. Activity X takes 4 days and is followed by Activity Y, which takes 3 days. The
early start of Activity X is day 20, and the early start of Activity Y is day 27.
What is the free float of Activity X?
A. 0
B. 3
C. 7
D. 10
Ans
B. 3 – Network diagram math questions can be tricky, because they are almost like
logic questions rather than math. For this one, know that free float (which is float
on an activity) = ES of following activity – ES of present activity – present activity
duration. We are determining the free float for Activity X. ES of following is easy
because it is stated as 27. The duration of Activity X is also stated as four days.
You need to use the ES information (day 20) and the duration (4 days). So since
free float = ES of following activity – ES of present activity – present activity
duration = 27 – 20 – 4 = 3.

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7. Project Cost Management
• Project cost management includes the processes involved in planning, estimating,
budgeting, financing, funding, managing and controlling costs so that the project can be
completed within the approved budget .

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Project Cost Management
Monitoring &
Planning
Processes

Executing
Processes
Process Groups
Control
•
Cost •Plan Cost Management
Management •Estimate Costs
•Determine Budget •Control Costs 215 502
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7.1 Plan Cost Management
The process of defining how the project cost will be estimated,
budgeted, managed, monitored and controlled
Source: A Guide to the Project Management Body of Knowledge. 6th Editio n ; 2017
2 16
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Plan Cost Management
1. The Plan Cost Management process establishes policies, procedures and documentation for planning,
managing and controlling project cost and provides guidance and direction on how the project costs will
be managed.
2. Cost management plan, a subsidiary of the project management plan describes how costs will be managed,
controlled and details the management and approval procedure for changes to the cost baseline.
3. Cost management plan may establish : unit of measure, level of precision, level of accuracy, organizational
procedure links, control threshold, rules of performance measurement, reporting formats, process descriptions etc

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7.1 Plan Cost Management - Output
• Cost management plan can include the following:

• Units of measure
• Level of precision
• Level of accuracy – the acceptable range
• Organizational procedure links: The WBS component used for project cost accounting is called control
account.
• Control thresholds: variance thresholds for monitoring cost performance
• Rules of performance measurement
• Description of strategic funding choices
• Procedure to account for fluctuations in currency exchange
• Procedure for project cost recording

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1
8
Plan Cost Management -Types of Cost

Variable cost
•Costs that change with the amount of production or the amount of work (raw
material, wages, utility, electricity, sales commission, inventory, packaging supplies, shipping costs,
etc.)
Fixed cost
•Costs that do not change as production changes
(setup, rent, insurance, depreciation, advertising, dues and subscription, equipment leases,
payments on loans, management salaries, etc.)
Direct cost
•Costs that are directly attributable to the work on the project (Cost of material, travel, recognition,
cost of hardware & software purchased , etc.)
Indirect Cost
•Overhead costs incurred for the benefit of more than one project. (fringe benefits, perks,
supervisor’s salaries, indirect labor, factory supplies used, taxes, utilities, depreciation on building
and equipment, factory rent, tools expense, patent expense, internet, etc.)
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Direct & Indirect Costs : Major Cost Elements
Direct Costs In-direct Costs
Costs which can be accurately traced & Costs which cannot be accurately attributed
Assigned to a Cost Object. to specific cost objects (incurred for
Cost Object may be a product, a department, common or joint objectives) are called Indirect
a project etc. Costs.
Examples: Cost of gravel, sand, cement and Examples: Cost of depreciation, insurance,
Wages incurred on production of concrete. power, salaries of supervisors incurred in a
concrete plant.
Direct Labor Cost

Labor Categories Indirect Costs
Labor Rates Material Handling
Labor Hours Fringe Benefits
Direct Material Cost Overhead (or burden)
The Actual Materials Cost of interest / Depreciation
Raw material Office Supplies
Purchased parts and/or Cost of Common Utilities
assemblies Salaries of Supporting Personnel
Consumables G&A Expenses
Subcontracts Indirect material costs = cost of
Miscellaneous material materials that cannot readily be traced
to outputs (e.g., rags, lubricants, and
Discounts, Scrap, Inventory small tools)
S.N.Panigrahi
Shrinkage, & Freight-in
Indirect labor costs = labor costs that
Other Direct Costs (expenses) cannot be readily traced to outputs (i.e.,
Nonrecurring costs they are manufacturing support costs)
Subcontracts / consulting services,
Travel India
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Cost Behaviours
Fixed Costs
Fixed costs are those that do not change throughout the life-cycle of a project.
Examples : Overhead, Depreciation, cost of departments such as maintenance,

tooling, production control, purchasing, quality control, storage and handling,
plant supervision and engineering
Other Examples, if you are constructing a road, the excavators and bulldozers
are fixed costs. For software development projects, the physical development
space and development computers are fixed costs to the project. Usually rents,
leases, licenses, salaries, and fixed fees Life Cycle Costing are fixed costs.
Variable Costs
as the name suggests, are costs that change during the project life-cycle.
Variable cost is a cost that varies, in total, in direct proportion to changes in the
level of activity. But variable cost per unit remains constant.
Examples : costs of goods sold, raw materials, labour, sales commissions,

delivery charges, shipping charges, wages to temporary or part-time
employees, and bonuses to employees.
S.N.Panigrahi
For example if cost of laying concrete road is X / Km, then cost of laying 10
kms is 10 X and as the work progresses and completes 100 Kms, the cost
varies to reach 100 X
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Cost Behaviours
Semifixed Costs / Step Cost
A cost that increases in steps as the amount of the cost driver volume increases.
Costs stay fixed over a small range of activity called the “relevant range”. As
activity increases to the next “relevant range,” costs step up to the next level.
Example : 1 person can make 50 deliveries per day. Anything more than 50
requires an additional delivery person
Semivariable Costs
A semivariable cost is one that has both a fixed and a variable component.
For example, a cellular phone plan that charges a fixed amount for the first 60
minutes and a per minute charge thereafter.
S.N.Panigrahi
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1. Direct Costs - the costs that are accurately traced and directly attributable to the object such as the costs of materials,
labour, equipment, etc., and all directly involved efforts or expenses for the cost object.
Eg : Cost of gravel, sand, cement and wages incurred on production of concrete; raw materials, costs of salaries, wages
of direct labour
1. Indirect Costs - Costs which cannot be accurately attributed to specific cost objects are called indirect costs. These
typically benefit multiple cost objects and it is impracticable to accurately trace them to individual products, activities or
departments etc.
Eg. : Cost of depreciation, insurance, power, salaries of supervisors incurred in a concrete plant, cost of utilities, office
supplies, communications infrastructure, administrative costs
Fringe benefits are included in overhead and are part of indirect costs.
1. Fixed Costs - Fixed costs are those that do not change throughout the life-cycle of a project.
2. Variable costs - as the name suggests, are costs that change during the project life-cycle. Variable cost is a cost that
varies, in total, in direct proportion to changes in the level of activity. But variable cost per unit remains constant.
For example if cost of laying concrete road is X / Km, then cost of laying 10 kms is 10 X and as the work progresses and
completes 100 Kms, the cost varies to reach 100 X

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Fixed Cost Curves
Fixed Cost Fixed Cost per Unit

Your monthly contract fee for your cell Within the monthly contract
phone is fixed for the number of allotment, the average fixed
monthly minutes in your contract. cost per cell phone call
The monthly contract fee does not made decreases as more
change based on the number of calls are made.
calls you make.
Monthly Cell Phone
Monthly Cell Phone

Contract Fee
Fee per Unit
S.N.Panigrahi
Number of Minutes Used Number of Minutes Used
Within Monthly Plan Within Monthly India Plan 512
Variable Cost Curves
Variable Cost Variable Cost per Unit

Your mobile charge varies as Variable cost per call minute
per your usage. More remains the same
number of calls or minitutes irrespective of number of
you make, more amount is call minutes
payable.
Charge per Call Minute

Amount Charged
S.N.Panigrahi
Number of Calls / Minutes Number of Minutes Used
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1) John works as a project manager with ABD Consultants Pvt. Ltd. He felt a need to arrange special
skills training for his team members for this project. What type of cost will he incur on the project for this
training?
A.Direct
B.NPV
C.Indirect
D.Fixed
Answer: A. The skills training to upgrade their skillsets is directly related to this specific project, so it is
considered a direct cost.
2) Bob needs to analyze project costing to find ways to decrease overall costs for a project. It would be
advantageous for Bob to focus on:
A. Variable Cost and Fixed Cost
B. Fixed Costs and Indirect Costs
C. Direct Costs and Variable Costs
D. Indirect Cost and Direct Costs
Answer: C. Direct costs and variable costs are costs that are directly attributable to the project or those
that vary with the amount of work accomplished. Therefore Bob could analyze these costs to find ways
to be more efficient and reduce them.

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3) Various rooms in a building are being rented out to accommodate a group of workers during a
project. These room rental costs are an example of:
A. Variable Costs
B. Fixed Costs
C. Overhead Costs
D. Opportunity Costs
Answer: B. Costs incurred on room rental are considered fixed costs.

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You are a project manager and your team lead is asking for PMP® training so
that he can manage the projects better. You refer to the company policies and
approve his request. Which type of cost is team training?
A: Direct
B: Indirect
C: Sunk
D: Fixed
Ans : A

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7.2 Estimate Costs
Developing an approximation of the cost of resources needed to complete

project work
2 19
Estimate Costs :
1. This process is to assess and determine the cost of resources required for each activity to complete and
the total amount of cost required to complete the entire project
2. Cost estimates are generally expressed in some currency like Rupee. Dollar. Euro etc and also some other unit
of measure such as staff hours or days
3. Activity cost estimates include labour, material, equipment, services, facilities, information technologies, cost of
finance (including interest cost), inflation allowance, exchange rates, and cost of contingency reserve
4. Reserve Analysis : Cost estimates may include Contingency Reserves and Management Reserves
5. Contingency Reserves (also called contingency allowance) are to account for cost uncertainties to address due
to risks of “Known-Unknown”. Contingency Reserves are with in Cost Baseline
6. Management Reserves are the amount within the Project Budget (but not in the Cost Baseline) withhold
by management intended to address risks of “Unknown-Unknown”
7. When an amount of Management Reserves is used to fund unforeseen work, the amount of Management
Reserve used is added to the Cost Baseline and thus needs an approved change to cost baseline.

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•Rough Order of Magnitude (ROM) Estimate: the differences between
estimates and actual figures may be as large as 75% more or 25% less
• used in early stage of the project when things are not very solid/clear
and/or for projects that span a lengthy period
•Definitive Estimate: the differences between estimates and actual figures

may be within the range of -5% to + 10% (more or less)
• used in latter stage of the project and/or the project is simple to estimate
In addition to the ROM Estimate and Definitive Estimate, there

are some more estimation ranges:
•Preliminary estimate: within the range of -15% to +50%
•Budget estimate: within the range of -10% to +25%
•Final estimate: 100% accurate
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Estimate Costs - Tools & Techniques
▪ Analogous Estimating : Techniques that uses analogy to arrive at the

estimate
▪ Bottom-up Estimating : Estimate is arrived by estimating the cost of work
packages and rolling them up
▪ Parametric Estimating : statistical relationship between historical
information and other data
▪ Three Point Estimates : PERT formula
▪ Reserve Analysis : Providing contingencies
▪ Cost of quality (COQ) : preventive cost + appraisal cost + corrective cost

Expert Expert judgment uses the experience and knowledge of experts to estimate the cost of the project.
Judgment This technique can take into account unique factors specific to the project. However, it can also be
biased.
Analogous Analogous estimating uses historical data from similar projects and expert judgment as a basis for the
Estimating cost estimate. The estimate can be adjusted for known differences between the projects. The estimate is
frequently used when there is limited amount of detailed information is available about the project specially in
the early stages of the project and is less costly and less time consuming, but less accurate. It is a Top-
Down Estimating.
Parametric Parametric estimating uses a statistical relationship between relevant historical data and other
Estimating variables like cost per unit – eg. Per square feet, per man days etc; e.g. cost of painting of wall per
square foot
It is most accurate estimating method.
Bottom-Up Bottom-up estimating uses the estimates of individual work packages which are then summarized or
Estimating "rolled up" to determine an overall cost estimate for the project. This type of estimate is generally more
accurate than other methods since it is looking at costs from a more granular perspective. However it is more
costly & time consuming.
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Three-Point Three-point estimates originated with the Program Evaluation and Review Technique
Estimates (PERT). This method uses three estimates to define an approximate range for an
activities cost: Most Likely (Cm), Optimistic (Co), and Pessimistic (Cp). The cost estimate
is calculated using a weighted average:
Cost Estimate = (Co + 4Cm + Cp) / 6
Reserve Reserve analysis is used to determine how much contingency reserve, if any, should be
Analysis allocated to the project. This funding is used to account for cost uncertainty.
Cost of Cost of Quality (COQ) includes money spent during the project to avoid failures and money
Quality spent during and after the project due to failures. During cost estimation, assumptions about the
COQ can be included in the project cost estimate.
Project Project management estimating software includes cost estimating software applications,
Management spreadsheets, simulation applications, and statistical software tools. This type of software is
Estimating especially useful for looking at cost estimation alternatives.
Software
Vendor Bid Vendor analysis can be used to estimate what the project should cost by comparing the
Analysis responsive bids submitted by multiple qualified vendors. SN Panigrahi, Essenpee Business Solutions,
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Estimate Costs - Outputs
▪ The output of estimate costs is the activity cost estimates Cost Estimates of the
resources required to complete the project work.
▪ Costs are estimated for all resources that are applied to the activity cost estimate.
▪ Direct labor
▪ Material costs
▪ Equipment
▪ Services
▪ Facilities
▪ Travel costs
▪ Hardware costs
▪ Software costs
▪ Special categories (inflation, cost reserve, and so on)

▪ Basis of estimates
▪ Once the estimates have been completed, supporting documentation should
provide a clear and complete of how the estimates were derived.
▪ It may include :
▪ Documentation of the basis of the estimate
▪ Documentation of all assumptions made
▪ Documentation of any constraints
▪ Indication of range of possible estimates
▪ Indication of confidence of the final estimate

• Cost trade-offs and risks should be considered – make versus buy, buy versus
lease and sharing of resources to achieve optimal costs for the project
• The accuracy of the project estimate will increase as the project progresses
through the project life cycle -
Case : A project in the initiation phase may have a rough order of magnitude (ROM)
estimate in the range of -25% to +75%. Later in the project, as more information is
known, definitive estimates could narrow the range of accuracy to -5% to +10%

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7.3 Determine Budget
▪ The process of aggregating the estimated costs of individual activities or work
packages to establish an authorized cost baseline
▪ It determines the cost baseline (CBL) against which project performance can
be monitored and controlled
225

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Determine Budget
1. This is the process of aggregating the estimated costs of individual activities or

work packages to establish an authorized cost baseline.
2. Once you've estimated the costs for all of the project activities, you will have
the information you need to create your project's cost baseline.
3. The cost baseline for your project is made by combining the cost estimates of
the individual activities over the life of the project..
4. Cost Baseline is the approved version of the time phased project budget,
but excludes management reserves.
5. The approved cost baseline forms the budget for your project. Project Cost
Budget provides cost baseline against which project performance can be
monitored and controlled.
6. Project's expenditures will be measured against the Cost Baseline
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Determine Budget – Budget Components
Project Management
budget reserve
Cost baseline Control
accounts Contingency reserve
Work package cost Activity
estimates contingency
Total Amount
reserve
Activity cost
estimates
Project budget component
1. Work Package Cost Estimate = Activity Cost Estimates + Activity Contingency Reserve
2. Control Accounts = Cost Baseline = Work Package Cost Estimate + Contingency Reserve
3. Project Budget = Cost Baseline + Management Reserve

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1. Cost Aggregation – Cost estimates are aggregated by work packages in accordance with
the WBS. The work package cost estimates are then aggregated for the higher component
levels of the WBS (such as control accounts) and ultimately for the entire project.
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Determine Budget: Tool & Technique
▪ Funding Limit Reconciliation :
▪ The expenditure of funds should be reconciled with any funding limits on the commitment of funds for the
project
▪ A variance between funding limits and the planned expenditures may necessitate the rescheduling of work to
level out the rate of expenditures
▪ This is accomplished by placing imposed date constraints for work
Funding limit reconciliation concerns reconciling the funds to be spent on the project with funding limits placed on the
funding commitments for the project.
Funding limit reconciliation most likely will affect the project schedule, since work will need to be moved to when
funds will be available.
Funding limit reconciliation occurs after fast tracking the project.
▪ Financing
▪ Acquiring funding for projects.
▪ External sources of funds
Total Funding requirements and periodic funding requirements (quarterly, annual etc) are derived from the cost baseline.
Funding often happens in incremental amounts as per work progress and not continuous
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1.Working capital - the capital of a business which is used in its day-to-day trading operations - amount of
money available for a company to invest
Working Capital = Current Assets - Current Liabilities.
current assets = generally cash and cash equivalents, inventories and debtors
Examples of current assets are:
Cash, including foreign currency
Investments, except for investments that cannot be easily liquidated
Prepaid expenses
Accounts receivable
Inventory
Examples of Current Liabilities
The following are common examples of current liabilities:
• Accounts payable.
• Taxes payable.
• Payroll payable.
• Interest payable.
• Bank account overdrafts..
• Accrued expenses.
• Customer deposits.
• Dividends declared.
• Short-term loans.
• Current maturities of long-term debt. SN Panigrahi, Essenpee Business
532 Solutions,
India
An increase in net working capital indicates that the business has either increased current assets (that it has
increased its receivables, or other current assets) or has decreased current liabilities—for example has paid off
some short-term creditors, or a combination of both.
A positive working capital cycle balances incoming and outgoing payments to minimize net working capital
and maximize free cash flow.
For example, a company that pays its suppliers in 30 days but takes 60 days to collect its receivables has a
working capital cycle of 30 days. This 30-day cycle usually needs to be funded through a bank operating line,
and the interest on this financing is a carrying cost that reduces the company's profitability.
The aggregate amount of current liabilities is a key component of several measures of the short-term liquidity of a
business, including:
•Current ratio. This is current assets divided by current liabilities.

•Quick ratio. This is current assets minus inventory, divided by current liabilities.
•Cash ratio. This is cash and cash equivalents, divided by current liabilities.

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HOW IT WORKS (EXAMPLE):
Here is some balance sheet information about XYZ Company
Working capital is a common measure of a company's liquidity, efficiency, and overall health. Because it
includes cash, inventory, accounts receivable, accounts payable, the portion of debt due within one year, and
other short-term accounts, a company's working capital reflects the results of a host of company activities,
including inventory management, debt management, revenue collection, and payments to suppliers.
Positive working capital generally indicates that a company is able to pay off its short-term liabilities almost
immediately. Negative working capital generally indicates a company is unable to do so.

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Cost Baseline .. Output
• Is the authorized time-phased Budget At Completion (BAC) used to

measure, monitor and control overall cost performance on the project
• Is developed as the summation of the approved budgets by time period and

is typically displayed in the form of an S-curve (please refer next slide)
Note:
In the Earned Value Management (EVM) technique the CBL is referred to as
Performance Measurement Baseline (PMB)

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Some terminologies you need to know ..
Purchase Value
•The initial cost to purchase the resources (or equipment)
Salvage Value
•The scrap value of the resources (or equipment) at the end of the project
Depreciation
•Large assets purchased by the company lose value over time (Purchase Value –
Salvage Value)
▪ Straight Line Depreciation
❖ The same amount of depreciation is provided for every year, so a car with a price tag of $10,000
and a useful life of 10 years, is depreciated by $1000 per year.
▪ Accelerated Depreciation
❖ The asset depreciates faster than the straight line depreciation, so a car with a price tag of
$10,000 depreciates $3000 the first year, $1500 next year, $1000 the third year and so on…. (also
called as Double-Declining or Sum of Year Digits)

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7.4 Control Costs
▪ It is the process of monitoring the status of the project to update the project costs and
managing changes to the cost baseline
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Control Costs
Control cost includes :
▪Influencing factors that create changes to the authorized cost baseline

▪Ensuring that all the change requests are acted on in a timely manner
▪Managing the actual changes as and when they occur
▪Ensuring cost expenditures do not exceed the authorized funding by period, by WBS component, by activity
and in total for the project.
▪Monitoring cost performance to isolate and understand variances from
the approved cost baseline
▪Monitoring work performances against funds expended
▪Preventing unapproved changes from included in the reported cost
▪Informing all the stakeholders of all approved changes and the associated
cost
▪Bringing expected cost overruns within acceptable limits

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Earned Value Management System

Control Costs – T & T
• What is Earned Value Management System ?
• Earned Value Management System (EVMS) is a very effective and a

commonly used project performance measurement tool
• In a typical and conventional project management methodology, project progress comprising of

thousands of activities is measured against schedule and cost as two different scales
• The technique of Earned Value Analysis (EVA) integrates cost and schedule performance in one
report unlike traditional reports in which cost and schedule are reported separately
• Note : Examining the cost and schedule variances concurrently, it is possible to get a holistic and a
much more realistic view of the project's progress

Control Costs – T & T
▪ Planned Value (PV) (also termed as Budgeted Cost of Work Scheduled [BCWS]) is
that total budgeted planned amount to be spent on an activity up to a given point
in time i.e. How much of your budget you planned on using so far
▪ Earned Value (EV) (also termed as Budgeted Cost of Work Performed [BCWP]) is
the budgeted amount for the work actually performed i.e. How much your project
actually earned
▪ Actual Cost (AC) (also termed as Actual Cost of Work Performed [ACWP]) is the
total cost incurred in accomplishing work on the activity during a given period
Budget At Completion (BAC) The Budgeted amount for the total work
▪ Budget At Completion (BAC) The Budgeted amount for the total work

Budget At Completion (BAC) – Say 100
A B C D E
Earned Value (EV) - 50
Planned Value (PV) - 60
EV = 50
PV = 60
AC = 70
BAC = 100

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Control Costs
1. This the process of monitoring the status of the project, assess variances and manage changes to the cost baseline
2. Any change to the authorized budget can only be approved through Perform Integrated Change Control Process
3. Earned Value Management (EVM) – is a methodology that combines scope, schedule, and resource measurements to
assess project performance and progress.
4. Schedule Variance - is a measure of the schedule performance of a project - gives information about how far - behind or
ahead of schedule the project is.
SV = EV – PV
If SV > 0 - ahead of schedule
If SV = 0 – as per schedule
If SV < 0 – behind schedule
When the project is completed, Schedule Variance becomes zero (SV=0) because at the end of the project, all
the Planned Value has been earned (PV = EV)
In case after a project completion, if SV doesn’t equal to 0, that means project is terminated.
When activity is completed even if completed one month later, then PV=EV, SPI =1, SV = 0
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1. Cost Variance - is a measure of cost performance of a project
(CV) = EV- AC
If CV > 0 – Below Budget
If CV = 0 – as per Budget
If CV < 0 – Above Budget
Cost variance (CV) and schedule variance (SV) are negative, but in case the cost variance is lower than the
schedule variance (CV < SV), it means that the project under spent because all work was not completed, but
overspent for work that was done.

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Cost Performance Index (CPI) - Measure of the financial effectiveness and efficiency of a project. It
represents the amount of completed work for every unit of cost spent.
CPI = EV/AC
If CPI > 1 – Below Budget
If CPI = 1 – as per Budget
If CPI < 1 – Above Budget
CV < 0 or CPI < 1, indicates Cost risk – that means project costs could go higher than planned.
Scheduling Performance Index (SPI) - Measures scheduling efficiency - is a measure of how close
the project is to being completed compared to the schedule.
SPI = EV/PV
If SPI > 1 - ahead of schedule
If SPI = 1 – as per schedule
If SPI < 1 – behind schedule
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A B C D E
EV = 50 SV = EV – PV CV = EV – AC
PV = 60 = 50 – 60 = 50 – 70
AC = 70 = - 10 = - 20
BAC = 100
SPI = EV/PV CPI = EV/AC
= 50/60 = 50/70
= 0.83 = 0.71
Behind Schedule Over Budget

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Cost & Schedule Performance Measure
Percent Complete Indexes - Indicates how much of the work accomplished

represents of the total budgeted (BAC) and actual (AC) dollars to date.
% Complete = EV/BAC X 100
% Spent = AC/BAC x 100
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1. Estimate at Completion (EAC) - the forecasted value of the project when it is complete. It tells how much may have
to spend to complete the project. There are 4 types of situations depending on assumptions and accordingly 4 types
of calculations
a) EAC = BAC/CPI – assumption : future performance will be same as the past performance; i.e. project will continue at
the same rate of spending as in the past - the CPI will remain the same for the rest of the project. ((SPI at 100%)
b) EAC = AC + (BAC – EV) – assumption : past performance deviated from budget estimate; however, from now onwards
the remaining work is expected to be completed (Future work) at the planned rate (SPI at 100% and CPI at 100%)
- atypical of future.
c) EAC = AC + (BAC – EV)/(CPI*SPI) – assumption : past performance deviated from both budget estimate (over budget)
and schedule (behind schedule), current variances are thought to be typical of future. ie both CPI & SPI influence
remaining work.
EAC = AC + Bottom up Estimate to Complete – assumption : initial cost estimate was fundamentally flawed, and
needs to re-calculate the new cost estimate for the remaining work for the project.

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A B C D E
Estimate at Completion (EAC)

Assumption : Future Assumption : past Assumption : past Assumption : initial cost
EV = 50 Performance will be same as performance deviated from performance deviated from estimate was fundamentally
the past performance budget estimate; however, both budget estimate (over flawed, and needs to re-
PV = 60 from now onwards the budget) and schedule (behind calculate the new cost
AC = 70 remaining work is expected schedule), current variances estimate for the remaining
BAC = 100 to be completed (Future are thought to be typical of work for the project.
work) at the planned rate future. ie both CPI & SPI
influence remaining work.
EAC = BAC/CPI EAC EAC = AC + (BAC – EAC = AC + Bottom up
= AC + (BAC – EV) EV)/(CPI*SPI) Estimate to Complete
= 100 / 0.71 = 140.84 = 70 + (100-50) = 120 70 + (100-50) / 0.71*0.83
= 154.85 SN Panigrahi, Essenpee Business Solutions,
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1. Estimate to Complete (ETC) – indicates how much money will be required
to complete the remaining task. There are 2 types of situations depending
on assumptions and accordingly 2 types of calculations.
a) ETC = EAC – AC – assumption : work is proceeding as per plan
b) ETC = Re-estimate – assumption : A more accurate way is to re-
estimate cost of the remaining work from the bottom-up.

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A B C D E
Estimate to Complete (ETC)

Assumption : work is proceeding as per Assumption : initial cost estimate was
EV = 50 plan fundamentally flawed
PV = 60 ETC = EAC – AC ETC = Re-estimate
AC = 70 Assumption Assumption Assumption
BAC = 100 -1 -2 -3
=140.84 – =120 - 70 =154.85 –

70 = 70.84 = 50 70 =
84.85

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Variance at Completion (VAC) - is a comparison of the original budget at
completion (BAC) and the revised forecast (EAC).
VAC = BAC – EAC
A negative VAC (<0) is an indicator that the project may exceed the BAC –
project cannot be completed with the approved budget - may require
either an additional funding allocation or the elimination of some of the project
scope.
A positive VAC (>0) indicates the project will be completed in less than the
budget - not utilize the allocated budget – budget funds remain excess.

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To Complete Performance Index (TCPI) - defined as the ratio of work remaining to be accomplished
and the amount of unspent or remaining funds.
TCPI = (Remaining Work)/(Remaining Funds)
TCPIBAC = (BAC – EV) / (BAC – AC) - If the project is under budget
TCPIEAC = (BAC – EV) / (EAC – AC) - If the project is over budget
TCPI < 1 : indicates that to accomplish efficiency can be less than the efficiency at which the
work that has been completed -project is in good shape
TCPI > 1 : need to perform with better cost performance efficiency than the efficiency at
which the work that has been completed – project is not in good shape
TCPI = 1 : project may continue to work with same cost performance efficiency as in the past -
Project is OK

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Sample PMP Earned Value Questions
Given a project with the following characteristics, answer the

following questions:
•You are the project manager of a project to build fancy

birdhouses.
•You are to build two birdhouses a month for 12 months.
•Each birdhouse is planned to cost $100.
•Your project is scheduled to last for 12 months.
•It is the beginning of month 10.
•You have built 20 birdhouses and your CPI is .9091.

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1. How is the project performing?
A. Over budget and ahead of schedule

B. Under budget and ahead of schedule
C. Over budget and behind schedule
D. Under budget and behind schedule.
A – Over budget & ahead of schedule. The problem tells you

that your CPI is .9091, and we know that CPI = EV/AC. Applying
that, a CPI less than 1 means that we aren’t getting enough value
for each dollar that we put into our project, so it is over budget.
However, the project is ahead of schedule because we have built 20

birdhouses and after 9 months, we had expected to build only 2
birdhouses per month * 9 months = 18 birdhouses.

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2. What is the actual cost of the project right now?
A. $1800
B. $2000
C. $2200
D. $2400
2. C – $2200. If you weren’t quite sure whether the project was over
budget in the last question, you can use this problem to strengthen
your knowledge. In this problem, we need to determine the AC. In the
body of the problem, you are given the CPI and can determine the EV,
so you can use the CPI formula to back out the AC. EV = 20 birdhouse
& $100 per birdhouse = $2000.
•CPI = EV/AC
•.9091 = 2000/AC, so multiply both sides by AC
•AC(.9091) = 2000, so divide both side by .9091
•AC = 2200

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3. Assuming that the COST variance experienced so
far in the project will continue, how much more
money will it take to complete the project?
A. $400
B. $440
C. $2800
D. $2840
3. B – $440. First, use the context of the problem to determine that you need
the ETC when a variance exists and it is continuing. Based on that information,
we know to use ETC = BAC/CPI – AC. We already know the CPI from the
problem and AC from the solution to #2, so let’s find BAC.
•BAC = 2 birdhouses per month * 12 months * $100 per birdhouse
•BAC = $2400
•ETC = BAC/CPI – AC
•ETC = 2400/.9091 – 2200
•ETC = 440

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4. If the variance experienced so far were to stop,
what is the project’s estimate at completion?
A. $2400
B. $2440
C. $2600
D. $2800
4. C – $2600. A few of the EMV questions you

encounter on the PMP exam will be fairly
straightforward. This question is asking you for the EAC
if a variance that was encountered on a project is
expected to stop, so use EAC = AC + BAC – EV.
•EAC = 2200 + 2400 – 2000
•EAC = $2600

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5. What is the project’s TCPI using the project’s
budget at completion?
A. .5
B. 1
C. 1.5
D. 2
5. D – 2. Fortunately, PMI has to tell you which TCPI

formula to use. This one says use BAC, so TCPI = (BAC –
EV)/(BAC – AC) = (2400 – 2000) / (2400 – 2200) =
400/200 = 2.

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6. Senior management wants to the percentage of the project
that is complete. What should you report?
A. 75%
B. 83%
C. 92%
D. 95%
6. B – 83%. If you have the percent complete formula in front of

you, then this problem is really easy. Just plug EV & BAC into
(EV/BAC)*100%, and you’re all set. If you got this problem
wrong, then review this article on EV, PV, and AC.

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7. Imagine if instead of 10 months and costing $2200, the project
was in month three and costing $4000. What formula might you
use for BAC?
A. [(BAC – EV) / (CPI * SPI)] + AC
B. new bottom-up estimate
C. AC + new ETC
D. AC + BAC – EV
7. C – AC + new ETC. It may be tempting to pick A, but remember

that the EAC formula is for when a project is past due. If you find
that your estimates are wildly wrong at the beginning of a project, it
is best to develop a bottom-up estimate to complete and then add
that to your actual costs.

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Your project has a budget of $240,000 and is expect to last for 1 year, with the work and budget spread
evenly across all months. The project is now at end of the fourth month, the work is on schedule, but
you have already spent $120,000 of the project budget. What is your COST Variance in this case?
1.-$40,000
2.$40,000
3.$240,000
4.$56,000

Explanation :
A is the correct answer. The project is now in the fourth month, the work is on
schedule means , percentage of work completed = (4/12)*100
Cost Variance = Earn Value - Actual Cost Earn Value = total cost *
percentage of work actually completed = $240,000 * (4/12)=$80,000 CV =
$80,000 - $120,000 = -$40,000

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One More Sample PMP Earned Value Questions Scenario:
You are managing a software project with an initial budget estimate of 2

million USD. During interim cost and schedule performance analysis, you
figured out that:
•You should have spent $500.000 till now based on your initial plans and
1000 man/days of schedule activities
•You spent $600.000 till now and completed 1100 man/days of schedule
activities which should have cost $450.000 based on your initial plans.
•You re-estimated the budget required for the remaining work to be done
as $1.500.000.

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First, it is better to note the EVM values defined in the scenario:
•BAC (Budget at Completion)= 2 million USD ("initial budget estimate of 2 million USD" referred in the
scenario)
•PV (Planned Value) = $500.000 for cost related EVM calculations, PV=1000 man/days for schedule
related EVM calculations ("You should have spent $500.000 till now based on your initial plans and 1000
man/days of schedule activities" referred in the scenario)
•AC (Actual Cost) = $600.000 ("You spent $600.000 till now" referred in the scenario)
•EV (Earned Value)= 1100 man/days for schedule related EVM calculations, EV = $450.000 for cost related
EVM calculations. ("completed 1100 man/days of schedule activities which should have cost $450.000 based
on your initial plans" referred in the scenario)
•ETC (Estimate to Complete) = $1.5 million USD ("You re-estimated the budget required for the remaining
work to be done as $1.500.000." referred in the scenario)

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Question 1-) What is the CPI and SPI of the project respectively?
A-) CPI=0,9 and SPI=1,2
B-) CPI=1,2 and SPI=0,9
C-) CPI=0,75 and SPI=1,1
D-) CPI=1,1 and SPI=0,75
•CPI = EV/AC = $450.000/$600.000 = 0.75

•SPI = EV/PV = 1100/1000 = 1.10
Answer: C

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Question 2-) What is the CV and SV of the project
respectively?
A-) CV= -$150.000 and SV=100 man/days
B-) CV= $150.000 and SV= -100 man/days
C-) CV= -$100.000 and SV= -100 man/days
D-) CV= $100.000 and SV=100 man/days
•CV = EV - AC = $450.000 - $600.000 = -$150.000

•SV = EV - PV = 1100 man/days - 1000 man/days = 100
man/days
Answer: A

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Question 3-) What is the Variance at Completion?
A-) -$100.000
B-) $100.000
C-) $-50.000
D-) $50.000
•VAC (Variance at Completion) = BAC - EAC = 2 million USD - EAC

•EAC (Estimate at Completion) = AC + ETC = $600.000 + $1.500.000
= $2.100.000
•VAC = $2.000.000 - $2.100.000 = -$100.000
Answer: A

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Question 4-) What is the TCPI based on your new Estimate at
Completion value?
A-) 1.11
B-) 0.90
C-) 1.03
D-) 0.97
TCPI based on EAC is calculated as below:

•TCPI = [BAC-EV]/[EAC-AC] = [$2.000.000-$450.000]/[$2.100.000-
$600.000]
•TCPI (based on EAC) = 1.03
Answer: C

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Question 5-) What is the status of your project?
A-) Project is ahead of schedule, under budget, and it is easier to complete the project on new EAC
B-) Project is behind schedule, over budget, and it is harder to complete the project on new EAC
C-) Project is ahead of schedule, over budget, and it is easier to complete the project on new EAC
D-) Project is ahead of schedule, over budget, and it is harder to complete the project on new EAC
•CPI<1 and CV is negative, therefore project is over budget

•SPI>1 and SV is positive, therefore project is ahead of schedule
•TCPI>1, therefore project is harder to complete in new EAC value based on
current project performance.
Answer: D
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Early in the life of your project, you are having a discussion
with the sponsor about what estimating techniques should
be used. You want a form of expert judgment, but the
sponsor argues for analogous estimating. It would be BEST
to:
A-) Agree to analogous estimating, as it is a form of expert
judgment
B-) Suggest life cycle costing
C-) Determine why the sponsor wants such an accurate
estimate
D-) Try to convince the sponsor to allow expert judgment
because it is typically more accurate.
Answer is A. Agree to analogous estimating, as it is a form of

expert judgment. Since analogous estimating is a type of
expert judgment you can accept it. This is a tricky question.
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A schedule performance index, SPI, of 0.75 means:
A-) Project is over budget.
B-) Project is ahead of schedule.
C-) Project is progressing at 75% of the rate originally planned
D-) Project is progressing at 25% of the rate originally planned
Answer is C, project is progressing at 75% of the rate originally planned.

A, is irrelevant because SPI is a schedule performance index. We cannot
derive any conclusion about budget performance of the project with this
index. B, is not correct because SPI is less than one, therefore, the project
is behind schedule. And D, says that you have completed 25% of the
work that you have originally planned, so it’s not correct. The correct
answer here is C, because SPI 0.75 means, you have completed 75% of
your work that you have originally planned.

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Suppose you have a budgeted cost of a project at $900,000. The project is to be completed in 9
months. After a month, you have completed 10 percent of the project at a total expense of
$100,000. The planned completion should have been 15 percent. Explain how healthy the project
is by computing the CPI and SPI.
From the scenario, you can extract the following:

BAC = $900,000
AC = $100,000
The Planned Value (PV) and Earned Value (EV) can then be computed as follows:
Planned Value = Planned Completion (%) * BAC = 15% * $ 900,000 = $ 135,000
Earned Value = Actual Completion (%) * BAC = 10% * $ 900,000 = $ 90,000
Compute the earned value variances:
Cost Performance Index (CPI) = EV / AC = $90,000 / $100,000 = 0.90. This means for every $1 spent,
the project is producing only 90 cents in work.
Schedule Performance Index (SPI) = EV / PV = $90,000 / $135,000 = 0.67. This means for every
estimated hour of work, the project team is completing only 0.67 hours (approximately 40 minutes).
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Suppose you are managing a software development project. The project is expected to be completed in 8 months at a
cost of $10,000 per month. After 2 months, you realize that the project is 30 percent completed at a cost of $40,000.
You need to determine whether the project is on-time and on-budget after 2 months.
Step 1: Calculate the Planned Value (PV) and Earned Value (EV)
From the scenario,

•Budget at Completion (BAC) = $10,000 * 8 = $80,000
•Actual Cost (AC) = $40,000
•Planned Completion = 2/8 = 25%
•Actual Completion = 30%
Therefore,
•Planned Value = Planned Completion (%) * BAC = 25% * $ 80,000 = $ 20,000

•Earned Value = Actual Completion (%) * BAC = 30% * $ 80,000 = $ 24,000
Step 2: Compute the Cost Performance Index (CPI) and Schedule Performance Index (SPI)
•Cost Performance Index (CPI) = EV / AC = $24,000 / $40,000 = 0.6
•Schedule Performance Index (SPI) = EV / PV = $24,000 / $20,000 = 1.2
Interpretation: Since Cost Performance Index (CPI) is less than one, this means the project is over budget. For every
dollar spent we are getting 60 cents' worth of performance. Since Schedule Performance Index (SPI) is more than one,
the project is ahead of schedule. However, this has come at a cost of going over budget. If work is continued at this
rate, the project will be delivered ahead of schedule and over budget. Therefore, corrective action should be taken.

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1. S Curve - it is used in project management as a tool for monitoring the
growth, progress and performance of ongoing projects by tracking project
progress visually over time, and form a historical record of what has
happened to date. Analyses of S-curves allow project managers to quickly
identify project growth, slippage, and potential problems that could adversely
impact the project if no remedial action is taken.
2. The graph describes the typical growth of earned value during the course of the
project.

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S-Curve shows cumulative costs expended over time for the duration of the project:
‘S’ shape - flatter at the start, steeper in the middle, and flattening off again towards
the end.
This shape is typical for most projects as they start slowly, ramp up during the main
execution phase, and then wind down again towards the project’s completion, as
work runs out.
Costs versus Time S-curve

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While looking at the project cost baseline graph shown below, a project manager sees that the stair-step line’s last
point is higher than the estimate at completion (EAC). What does this relationship mean for the project?
The project is running over budget

The management reserve is too large
Total funding for the project exceeds the project's anticipated needs
The project is behind schedule

Ans : C
Total funding for the project exceeds the project's anticipated needs
Explanation: The project cost baseline graph displays a time-phased view of the cost baseline along
with funding requirements and expenditures. The stair-stepped line on the graph represents the funding
requirements, which includes the cost baseline and the management reserve. The project budget is
represented by the last point of the stair-step line. The question states that EAC (estimate at
completion) is less than the project budget (the top stair step). Therefore, in this scenario, total funding
for the project exceeds the project's anticipated needs.
3
3
Some terminologies you need to know ..

Purchase Value
•The initial cost to purchase the resources (or equipment)
Salvage Value
•The scrap value of the resources (or equipment) at the end of the project
Depreciation
•Large assets purchased by the company lose value over time (Purchase Value –
Salvage Value)
▪ Straight Line Depreciation
❖ The same amount of depreciation is provided for every year, so a car with a
price tag of $10,000 and a useful life of 10 years, is depreciated by $1000
per year.
▪ Accelerated Depreciation
❖ The asset depreciates faster than the straight line depreciation, so a car
with a price tag of $10,000 depreciates $3000 the first year, $1500 next
year, $1000 the third year and so on…. (also called as Double-Declining or
Sum of Year Digits)

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579
1. Rules for Placing Costs in Baselines - Costs are placed exactly as they are expected to be
“earned” in order to track them to their point of origin.
2. Percent Complete Rule - Costs are periodically assigned to a baseline as units of work are
completed over the duration of a work package.
3. Rules applied to short-duration activities and/or small-cost activities
0/100 percent rule - Assumes 100 % of budget credit (EV = 100%) is earned at once and only
when the work is completed – before that 0% credit.
50/50 rule - Allows for 50% of the value (EV= 50%) of the work package budget to be earned when
it is started and balance 50% to be earned when the package is completed.
0 / 50 /100 rule – EV = 0 if the work has not yet been started or just started; EV = 50% if work is
underway and completed 50% of the work ; EV=100% if work is complete
1. Percent complete with weighted monitoring gates - Uses subjective estimated percent complete
in combination with hard, tangible monitoring points.
2. Except when the 0/100 rule or 50/50 or 0/50/100 rule is used, baseline values will be assigned
linearly, unless stated differently.
3. Sunk costs: cost that has already been incurred and thus cannot be recovered or reversed
irrespective to future events. (should not be considered when deciding whether to continue on a
project or not).
4. The cost expanded at the completion of phase / project is sunk cost
India
580
You have just started a project. The project team member
reported that 20 percent of the project is done. You agree with
their completion status, but do not change any of the progress
in your report to the customer. This is an example of which one
of the following?
1.0/100 Rule
2.50/50 Rule
3.Percent Complete Rule
4.20/20 rule

Explanation :
The 0/100 Rule allows for zero percent credit on an activity
until it is 100 percent complete. B is wrong (50/50 rule): 50
percent completion when the work begins and 50 percent
when the work is completed. SN Panigrahi, Essenpee Business Solutions,
India
581
Practice test 1
• You provide a project cost estimate to the project sponsor. He is unhappy
with the estimate, because he thinks the price should be lower. He asks
you to cut 15 percent off the project estimate. What should you do?
A. Start the project and constantly look for cost savings

B. Tell all the team members to cut 15 percent from their estimates
C. Inform the sponsor of the activities to be cut
D. Add additional resources with low hourly rates

Practice test 1- Answer
• Answer is C
• Explanation: You must first realize that it is never appropriate for a project
manager to just cut estimates across the board (choice B). The project
manager should have created an estimate with realistic work package
estimates that do not include padding. Then, if cost must be decreased,
the project manager can look to cut quality, decrease risk, cut scope or
use cheaper resource (and at the same time closely monitoring the
impact of change on the project schedule).
• One of the worst things the project manager can do is to start a project
while knowing that the time or cost for the project is unrealistic.
Therefore, choice A cannot be best. Notice that choice D suggests adding
additional resources. That would cost more.
• Choice C involves evaluating, looking for alternatives and then going to

the sponsor to tell him the impact of the cost cutting.
•
Practice test 2
Early in the life of your project. You are having a discussion with the sponsor
about what estimating techniques should be used. You want a form of
expert judgment, but the sponsor argues for analogous estimating. If
would be BEST to:
A. Agree to analogous estimating as it is a form of expert judgment.

B. Suggest life cycle costing as a compromise.
C. Determine why the sponsor wants such an accurate estimate.
D. Try to convince the sponsor to allow expert judgment because it is
typically used in such projects

Answer is A
Explanation: This is a tricky question. In order to pick the best answer,
you need to realize that analogous estimating is a form of expert
judgment. Notice choice C, “determine why,” sounds like a good idea,
but look at the rest of the sentence. Analogous
estimates are not accurate. Reading every word of this choice helps
eliminate it.

Question: You have been assigned as project manager to a
software development project. The cost estimate for the project
is $100,000. However you feel that you cannot complete the
project within this budget. As per your analysis, the estimate
should be at least $125,000. Your sponsor is willing to start the
project with another project manager if you don't accept it.
What should you do in such a scenario?
A: Stop the work until your sponsor accepts your estimate.
B: Ask the sponsor to assign this project to some other
project manager.
C: Submit detailed facts supporting your estimate and then
let the sponsor take the decision.
D: Document limited budget as a constraint and continue
working on the project.
Ans : C
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586
Question: You are an influential project manager in your
organization. You often use your influence on team
members to help guide the factors that can change the
cost of the project. Which process are you using to do
the same?
A: Negotiate Costs
B: Control Costs
C: Estimate Costs
D: Determine Budget
Ans : B: Control Costs

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587
Question - 26
You are in charge of a software project and you are almost 40% complete. The
project stakeholders want a [performance report to date. You had planned to use
Earned Value Management methodology. You come up with the following numbers:
EV = 100 AC = 300 PV = 150 BAC = 600 You and your team have faced numerous
issues till now . However you choose to ignore the current work performance and
decide to go with what was originally planned. Based on this information what
would be the EAC for the project ?
A. 800
B. 200
C. 600
D. 1800
A is the correct answer.
The correct answer is A - this is because here it is stated that whatever issues or lack
of them experienced in the project were ignored - so here the past performance is
not considered while the planned values are considered.So the formula : EAC = AC
+ ( BAC - EV ) = 300 + ( 600 - 100 ) EAC = 800
588
India
Which of the following processes is the process of aggregating the
estimated costs of individual activities or work packages to
establish an authorized cost baseline?
•1. Estimate costs
•2. Control costs
•3. Determine budget
•4. Cost management
Ans : 3. Determine budget
What are the three points considered in three-point estimating

technique?
•1. Historical, Actual, Planned
•2. Optimistic, Pessimistic, Actual
•3. Planned, Actual, Approximate
•4. Optimistic, Pessimistic, Most likely
•Ans : 4. Optimistic, Pessimistic, Most likely

India
589
If CPI is greater than 1 and SPI is less than 1, then what is the status of the project?
•1. Project is under the budget and behind the schedule

•2. Project will be over-budget
•3. Project will not meet projected deadline
•4. Project is over budget and ahead of schedule
•Ans : 1. Project is under the budget and behind the schedule
You are working as a project manager on a project. The project is now 50%
completed. You used earned value technique to check overall health of the
project. Based on the calculations, you realize that the initial project pan is no
longer valid. Still, you need to provide Estimate At Completion. In such situation,
which formula will you use to calculate EAC?
•1. EAC = AC + BAC - EV
•2. EAC = AC + bottom-up estimate
•3. EAC = BAC / CPI
•4. EAC = AC + [(BAC - EV) / (CPI * SPI)]
•Ans : 2. EAC = AC + bottom-up estimate

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590
If earned value=100, planned value=110 and actual cost=120, the
cost performance index is:
•1. 20
•2. -20
•3. 0.833
•4. 1.2
•Ans : 3. 0.833
While performing calculations of a project using earned value

technique, the manager identified that earned value is equal to
actual cost. What does it mean?
•1. Project is under budget and on schedule
•2. There is no cost variance
•3. There is no schedule variance
•4. Cost performance index is 0
•Ans : 2. There is no cost variance SN Panigrahi, Essenpee Business Solutions,

India
591
Analogous estimating is a :
A. ”Bottom-up” estimating technique.
B. ”Drop-down” estimating technique.
C. more costly and more accurately estimating technique.
D. technique used when you have no subject matter experts
available.
Ans : B
Cost Estimates:
A. are usually presented at a detailed level to Top Mgt only.
B. can be presented in summary of detail.
C. are summarized for senior management.
D. are provided in detail for senior management.
Ans : B

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592
The authorized budget assigned to scheduled work is called as:
•1. Planned value
•2. Earned value
•3. Budget at Completion
•4. None of the above
•Ans : 1. Planned value
Which of the following is not a technique of Control Costs process?

•1. Reserve analysis
•2. To-complete performance index
•3. Expert judgment
•4. Performance reviews
•Ans : 3. Expert judgment

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593
Which of the following is not a part of cost baseline?
•1. Contingency reserves
•2. Work package costs
•3. Contingency reserves and management reserves
•4. Management reserves
•Ans : 4. Management reserves
Which of the following is the correct formula for calculating

schedule variance?
•1. SV = EV – AC
•2. SV = EV – PV
•3. SV = EV / AC
•4. SV = EV / PV
•Ans : 2. SV = EV – PV

India
594
You are a sponsor on a website development project. Your
project manager has reached out to you stating that the TCPI
is greater than 1. What is the BEST thing you can do now?
A: Relax and do nothing as you're under budget.

B: Manage costs aggressively.
C: Create a new schedule as TCPI greater than 1 is not
good.
D: Create a new budget as TCPI greater than 1 is not
good.
Ans : B

India
595
If the CPI of a project is 1.15 and the SPI is 0.7, which of the
following techniques would probably help you bring the SPI
closer to 1?
A) Rolling Wave Planning

B) Reserve Analysis
C) Crashing
D) Funding Limit Reconciliation
Since the CPI is over one and SPI is less than one, it means that the project
is currently not over budget, but is behind schedule. Rolling Wave
planning does not impact the schedule. It is a type of planning used when
there isn’t enough clarity to plan for the complete project. Options B and D
are techniques used in the Determine Budget process. Option C, Crashing,
is used to accelerate project progress at the expense of increased cost and
risk..

India
596
The amount of work you have actually completed is equivalent
to $10,000 and amount you have actually spent is $12,000.
What does this mean?
A: The project is under budget.

B: The project is over budget.
C: The project is ahead of schedule.
D: The project is behind schedule.
Ans : B

India
597
Suppose you have a budgeted cost of a project at $900,000. The project is to
be completed in 9 months. After a month, you have completed 10% of the
project at a total expense of $100,000. The planned completion should have
been 15%. At the current progress rate, how much more money is required to
complete the project?
A) $ 800,000
B) $ 900,000
C) $ 1,000,000
D) $ 1,100,000
The question is indirectly asking you to compute the Estimate to Complete (ETC).
From the scenario, you can extract the following project performance parameters:
BAC = $900,000
AC = $100,000
The project performance in terms of Planned Value and Earned Value can then be computed as
follows:
Planned Value = Planned Completion (%) * BAC = 15% * $900,000 = $135,000
Earned Value = Actual Completion (%) * BAC = 10% * $900,000 = $90,000

India
598
For you project, you have hired a freelancer to develop a
website in .NET. After a month, you decide that the
freelancer isn’t doing a good job and reach out to another
freelancer. The second freelancer convinces you that your
website project would be better off based on the Java
platform. The costs associated with the .NET developer
are:
A) Variable
B) Direct
C) Indirect
D) Sunk
Since you have been convinced to go with the Java platform,
all of the .NET related code cannot be used. Therefore, this
is an example of sunk costs

India
599
If you use the Funding Limit Reconciliation technique while
performing the Determine Budget process, which of the
following will NOT change?
A) Activity Cost Estimates

B) Schedule
C) Resources required during an Iteration
D) Planned scope to be delivered in a Sprint
Funding Limit Reconciliation can lead to changes in schedule

and resources required. As schedule is being changed so can
the expected scope in an Iteration. Activity Cost Estimates are
NOT based on Funding Limits. Therefore, Option A is the only
valid answer.

India
600
What is the S-curve in project management?
A. A graph that is generated if a normal curve is integrated.

B. A graph that is to be integrated to generate a normal curve.
C. A metaphoric description of the short term uncertainties
that are present in every project.
D. The graph that describes the typical growth of earned value
during the course of the project.
Ans : D

India
601
Suppose you are managing a software development project.
The project is expected to be completed in 8 months at a cost of
$10000 per month. After 2 months, you realize that the project
is 30% completed at a cost of $40,000. What is the Earned
Value (EV) and the Cost Variance (CV)?
A) EV = $24,000; CV= ($16,000)

B) EV = ($20,000); CV= $16,000
C) EV = $16,000; CV= ($4,000)
D) EV = ($16,000) ; CV= $4,000

India
602
At present, your project has an SPI of 0.52 and a CPI of 1.4.
Is it good or bad? Which of the following BEST describes your
project?
A: Your project is ahead of schedule and under budget.

B: Your project is behind schedule and over budget.
C: Your project is behind schedule and under budget.
D: Your project is ahead of schedule and over budget.
Ans : C

India
603
To protect your project from cost overruns, which of the following can you do
in the planning phase of the project?
A) Pad high risk activities with extra cost buffer
B) Provide extra time for each activity in the schedule
C) Monitor each activity closely
D) Apply Earned Value Forecasting Formulae, such EAC and ETC
This question assesses whether you know how to implement

Reserve Analysis in a project. Option B does not protect
against cost overrun, rather it is a schedule buffer. Option C is
not a planning activity. Option D is not a planning activity.
Therefore, Option A is the only valid answer.

India
604
When a product is recalled, the ____ increases.
A) Activity Cost
B) Cost of Quality
C) Product Quality
D) Product Maintenance Cost
The question is related to Cost of Quality (CoQ).

India
605
You are the project manager of a project. You want to use a
cost estimating tool. One of your PMP® certified colleagues
points you towards the parametric estimating technique.
Which of the following is an example of a parametric estimate?
A: Dollar per phase

B: Top Down estimating
C: Bottom-up estimating
D: Optimistic Time is 12 days and Most Likely Time is 8
days
Ans : A

India
606
During a project, earned value analysis is performed,
resulting in the following numbers:EV: 523,000; PV:
623,000; AC: 643,000
Which results are correct?
a) CV: +120,000; SV: +100,000

b) CV: +100,000; SV: +120,000
c) CV: -100,000; SV: -120,000
d) CV: -120,000; SV: -100,000
Ans : d)

India
607
You found the following earned value analysis
information for a project that was recently closed-
out:
SPI = 0.7, CPI = 1.0
a) The project has been cancelled while it was

executed. At that time the project was behind
schedule and on budget
b) The project's deliverables have all been finished. The project
came in behind schedule but on budget.
c) The project's deliverables have all been finished. The project
came in ahead of schedule but on budget.
d) The project's deliverables have all been finished. The project
came in on schedule but over budget.
Ans : A
India
608
You are assigned as the project manager to a project
which had a one-time cost variance in the past
caused by unexpected rework which has meanwhile
been finished.
You perform earned value analysis and get the
following results:
EV: 250,000;
PV: 200,000;
AC 275,000,
BAC is 500,000.
What is right?
a) EAC = 550,000
b) EAC = 525,000
c) EAC = 500,000
d) EAC = 425,000
Ans : b SN Panigrahi, Essenpee Business Solutions,
India
609
For a project, the following earned value data have been assessed:
AC: $ 4,000,000
CV: $ -500,000
SPI: 1.12
BaC: $ 9,650,000
What is the earned value of the project?
a) $3,000,000
b) $3,500,000
c) $4,480,000
d) $5,650,000
Ans : b

India
610
Your project exceeded costs in the past caused by an
underestimation of resource costs in the cost baseline:
PV: $1,200,000,
EV: $1,000,000,
AC: $1,200,000
You expect the underestimation to influence the future as much as
it did in the past.
If the value of the remaining work (BAC – EV) is at $1,000,000,
what should be your new EAC (estimate at completion)?
a) $1,800,000
b) $2,000,000
c) $2,200,000
d) $2,400,000
Ans : d
“EAC forecast for ETC work considering both SPI and CPI factors”
India
611
The project is working into 3/4 of project duration and the
final component is to be built to improve the accuracy of the
system. The project manager is updating the cost of the whole
system. What is the degree of accuracy of the estimate?
1. Preliminary Estimate
2. Rough Order of Magnitude Estimate
3. Budget Estimate
4. Definitive Estimate
Ans : D - Definitive Estimate

India
612
Which statement describes best the meaning of the term cost baseline?
a) A cost baseline is always created by translating time-phased cost information

into cost data on activity or work-package level.
b) A cost baseline is an approved time-phased budget that will be used to measure
and monitor cost performance on the project.
c) Data to draw a cost baseline can be easily generated and updated as necessary
from information related to actual project cost.
d) A cost baseline is usually displayed in the form of an inverse S-curve drawn from
the beginning of the project until data date.
Ans : b

India
613
You monitored figures on cost and planned/earned value for
each individual project week until the data date at the end of the
sixth week. What is the status of this project at this date?
Project week Actual costs Earned value Planned value
1 $65,000 $61,000 $67,000
2 $85,000 $79,000 $89,000
3 $100,000 $102,000 $110,000
4 $125,000 $124,000 $121,000
5 $135,000 $133,000 $139,000
6 $125,000 $120,000 $131,000
a) The project is ahead of schedule and over budget.

b) The project is ahead of schedule and under budget.
c) The project is behind schedule and over budget.
d) The project is behind schedule and under budget.

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614
Answer: c
Project week Actual costs Earned value Planned value

1 $65,000 $61,000 $67,000
2 $85,000 $79,000 $89,000
3 $100,000 $102,000 $110,000
4 $125,000 $124,000 $121,000
5 $135,000 $133,000 $139,000
6 $125,000 $120,000 $131,000
At data date $635,000 $619,000 $657,000
SV = EV – PV = -$38,000 (behind schedule)

CV = EV – AC = -$16,000 (over budget)

India
615
For a project, the following earned value data have been assessed:
AC: $ 4,000,000
CV: $ -500,000
SPI: 1.12
BAC: $ 9,650,000
What is the earned value of the project?
a) $3,000,000
b) $3,500,000
c) $4,480,000
d) $5,650,000
Ans : b
CV = EV – AC => EV = CV+AC
= $ -500,000 + $ 4,000,000
= $3,500,000

India
616
The cost performance baseline is a time phased funding of your
project and you measure, monitor, and compare your project
performance against it. In which of the following forms do you
usually represent it?
(a)P-curve
(b)Pie curve
(c)S-curve
(d)Symmetric curve
Ans : C

India
617
In cost monitoring, the s-curve depicts the relation between:
A. Schedule completion and time.
B. Cumulative value and time.
C. Schedule completion and value resources.
D. resources and time
Ans : B
In order to produce a cost base line, the project manager requires

A. Work packages, work breakdown structure and project schedule
B. cost estimates, work breakdown structure and the project schedule.
C. cost estimates, work packages ànd project schedule.
D. cost estimates, work packages and work breakdown structure.
Ans : B

India
618
Which of the following is an indirect cost?
A. Units of Production.
B. Lights in the Project War Room.
C. Tax cost of Salary of project developers.
D. Paper purchased by the project.
Ans : A
Which of the following method is not a depreciation method?

A. Units of production.
B. Some of year’s digits
C. Declining balance
D. Straight line
Ans : B

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619
An order of magnitude estimate is not also known as
A. a control estimate.
B. a ball park estimate.
C. a conceptual estimate
D. a preliminary estimate.
Ans : A
When the expected cash flow s –curve is above the cost performance base line
the project manager should
A. investigate the variance to determine if corrective reaction is
required.
B. bring the situation to the attention of senior management for
action.
C. adjust the cost baseline to reflect the actual cost to this point.
D. do nothing since the project is performing above plan
Ans : A

India
620
Cost estimates may also be expressed in hour’s days etc., as
long as
A. it does not result in a misstatement of project cost.
B. the program manager agrees.
C. the unit of measure is consistent within the project.
D. the project manager agrees.
Ans : A

India
621
You are a software developer and you're shadowing your
project manager for creating the project budget. Your project
manager is using contingency reserve and management
reserve for the determination of the project budget. Which of
the following is true about contingency reserve?
A: It is hidden from the management and is rarely used.

B: We use it when we have to reduce the duration of the
critical path.
C: If the cost of your project rises too much, then you use
contingency reserve to bring it back on track.
D: It is added to the costs of the project to account for risks
which are known.
Ans : D

India
622
An estimation has been made that the construction of
a residential home will cost a certain amount per
square foot of living area. This is an example of what
type of estimating?
a) Analogous estimating
b) Bottom-up estimating
c) Top-down estimating
d) Parametric estimating
Ans : d

India
623
You are performing earned value technique on your project.
After budget approval, an additional and unexpected cost item
has been identified, which made the project more expensive
some weeks ago.
The item has meanwhile been paid by the project team, and it is
expected that for the remaining duration of the project, costs
will be as budgeted.
In this case, which is the best formula to calculate EaC (Estimate

at Completion)?
a) EaC = BaC – CV
b) EaC = BaC / CPI
c) EaC = AC + BtC / CV
d) You can not compute the EaC.
Ans : a

India
624
Based on the table below, which of these statements is correct?
(a) The project is ahead of schedule

(b) The project is behind schedule
(c) CPI is 0.98
(d) Not sufficient data
Answer : b
Explanation: Since activity A is 100% complete, EV of A = 5,000
Since activity B is 80% complete, EV of B = 0.8 * 15,000 = 12,000
Since activity C is 70% completed, EV of C = 0.7 * 18,000 = 12,600
Now,
EV of the project = 5,000 + 12,000 + 12,600 = 29,600 USD
PV of the project = 5,000 + 10,000 + 15,000 = 30,000
SPI = EV / PV = 29,600 / 30,000 = 0.98
Therefore, the project is behind schedule.
AC = 5,500 + 11,000 + 13,000 = 29,500
CPI = EV / AC = 29,600 / 29,500 = 1.003
India
625
You have been given $100,000 USD to complete the project.
$60,000 USD has been spent, though as per the schedule,
$55,000 USD should have been spent to complete the same
work. What is the Budget at Completion (BAC)?
(a) $55,000 USD
(b) $100,000 USD
(c) $60,000 USD
(d) $105,000 USD
Answer- 20: b
Explanation: BAC is the total budget assigned to your
project.

India
626
The budget of your project is 350,000 USD and you have
spent 200,000 USD. However, upon analyzing the project’s
performance you find that you are over budget and may need
200,000 USD to complete the remaining work. This 200,000
USD is known as:
(a)BAC
(b)ETC
(c)TCPI
(d)EAC
Answer-281: b Explanation: Estimate to Complete (ETC) is the

cost required to complete the remaining work.
Reference: The PMBOK Guide, 6th Edition, Page: 264, 265

India
627
Due to an improper cost management plan, you are over budget and
a new estimate is required to complete the project. Management
asks you what the new estimate for the project will be. Which of the
following formulas is not used to find this new estimate?
(a)BAC / CPI
(b)AC + (BAC – PV)
(c)AC + (BAC – EV)
(d)AC + (BAC – EV) / (CPI * SPI)
Answer: b
Explanation: Management is asking you to calculate the estimate at

completion (EAC). All options except EAC = AC + (BAC – PV) are
correct formulas to calculate the EAC in different scenarios.
Reference: The PMBOK Guide, 6th Edition, Page: 263, 264, & 265
India
628
A project has a BAC of $100,000 with a timeline of 100 days.
After 50 days, the project manager finds that 50% of the
project is complete and actual costs are $100,000. What is
the Cost Performance Index (CPI) ?
A: The CPI is 1
B: The CPI is 1.5
C: The CPI is 0
D: The CPI is 0.5
Ans : D

India
629
You are reviewing a chart which looks like an S-Curve during the
execution phase of your project. What kind of chart is this?
(a)Cause and effect diagram

(b)Pareto diagram
(c)Cost baseline
(d)Sensitivity diagram
Ans : C

India
630
Which of the following indicates that a project has a CPI of 1.2?
A. PV = 4000, EV = 4800
B. AC = 4000, EV = 4800
C. AC = 4800, EV = 4000
D. PV = 4800, EV = 4000
Ans : B

631
India
Project Quality Management
This is the process of determining quality policies, objectives, and

responsibilities within the projects context and organization’s quality
management system to manage and ensure that project requirements
including product requirement are met and validated.
Project Quality Management applies to all projects, regardless of nature

of their deliverables, though quality measures and techniques are
specific to the type of deliverables being produced by the project.

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1. Quality and Grade are not the same concept.
As per ISO-9000, Quality is defined as the degree to which a set of inherent characteristics fulfill
requirements. Quality is delivered performance or result.
Quality is “the totality of characteristics of an entity that bear on its ability to satisfy stated or
implied needs”
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Other experts define quality based on:
Conformance to requirements - meeting written specifications
AND
Fit for use - ensuring a product can be used as it was intended
Quality Examples
• Car Quality
▪ Ride, Reliability, Fit & Furnish, Audio System ?
• Food Quality
▪ Taste, Smell, Colour, Texture, Freshness ?
• Shoe Quality
▪ Fit, Stitching, Comfort, Wear?
• Baby Furniture
▪ Safety, Reputable, Durability, Easy to Assemble ?

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Project Quality Management Processes
Monitoring &
Planning
Processes

Executing
Processes
Process Groups
Knowledge Area
Monitoring &
Control
Project Quality Plan Quality

Manage Quality Control Quality
Management Management

Project
Quality
Management
Quality Manage Control

Planning Quality Quality
Prevention Inspection
Criteria Driven
Driven Driven
Manage Quality is about

Quality planning is the Quality Control is about
utilizing all the elements
stage used to identify the ensuring that the products
defined in quality
quality criteria that are and services of the project
planning that are needed
relevant to the project and comply with relevant
to meet the customer’s
to plan how to satisfy quality standards and
requirements.
them. about eliminating the
It is a continuous process
causes of unsatisfactory
improvement.
It lays out the roles and performance.
responsibilities, resources, It involves managing the
procedures, and It is the ongoing quality
quality of the project
processes to be utilized for management and review
deliverables. It refers to
quality control and quality of the process of doing the
the actual testing of
assurance. work of the project during
product components and
its life cycle
the entire product before SN Panigrahi, Essenpee Business Solutions,
and during delivery. 636
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Project Quality Management processes, which include:
Plan Quality Management— The process of identifying quality requirements

and/or standards for the project and its deliverables and documenting how the
project will demonstrate compliance with quality requirements.
Manage Quality — The process of translating the quality management plan into
executable quality activities that incorporate the organization’s quality policies
into the project.
Control Quality— The process of monitoring and recording results of executing

the quality management activities to assess performance and ensure the project
outputs are complete, correct and meet customer expectations

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Quality Grade
Quality is Conformance to the Grade is a Categorization of the
Requirements. product based on its
Quality is referred to Functions. Characteristics.
There is a big difference between the quality and grade. A product can be a high grade (high-end)
or a low grade (low-end), it is perfectly acceptable and there is no problem with it as long as it fulfills
its stated requirements.
On the other hand, a low-quality product is never acceptable and it is always a problem. Every
product must be of high quality regardless of its grade. A low-quality product is never desired.
Example : A camera with lots of functions is high grade and a camera which takes bad pictures is
low quality.
The project manager and the project management team are responsible for managing the
trade-offs associated with delivering the required levels of both quality and grade
Low Grade is not a problem – low quality is a problem

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Quality & Grade
Example
Let’s say you buy a low cost, basic model (low grade) cell phone for yourself. It doesn’t have any advanced
features, but it works. It never gives you any trouble, always works flawlessly, and it is defect free—No
problem at all.
So, you can say that this is a high-quality product. Although it is a low-grade product, it keeps you happy and
satisfied at all times.
Now suppose you buy another costly premium model (high grade) cell phone. This cell phone has all the
advanced features: e.g. touch screen, Wi-Fi, Bluetooth, camera, voice recognition, face recognition, etc.
But how would you feel if the product is not performing well? For example:
The touch screen froze while you are navigating the phone.
The camera is not giving you good quality and stable pictures.
The voice recognition system does not recognize you most of the time.
Obviously, you will be frustrated because you bought a high-grade product that does not perform as it should.
This means the quality of this cell phone is poor, and that is not acceptable.
A low grade is never a problem, because when you buy a low-grade product, you know that you are paying
for a low-grade product and expect the features as per its category. You never buy a low-grade product and
expect it to perform like a high grade one. For example, if you buy a cell phone with no camera feature, you
will not expect it to take a photo
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Quality & Grade
Keep the following points in your mind:

•Low quality does not equal to low grade, and high quality does not mean
high grade.
•Low grade is not a problem and it is acceptable, while a low-quality

product is always a problem and is never acceptable.
•A product or service, regardless of its grade, must be of high quality.
•Quality is about keeping your promise that the product will perform with a
certain behavior, and grade is a category of the product.

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Quality Grade
Quality is conformance to the product’s and customer’s the The PMBOK Guide defines the word grade as “a category assigned to
requirements and fitness for use. Requirements include product’s and deliverables having the same functional use but different technical
customer’s requirements. characteristics.”
ISO 9000 defines quality as “the degree to which a set of inherent Grade is a category assigned to the product based on its technical
characteristics fulfils the requirements.” configuration. This means products with different configurations are in
different grades.
Quality is the degree to which a product fulfills the requirements, and

grade is the item’s classification based on its technical characteristics.
A product can be a high-grade (high-end) or a low-grade (low-end) and

still be perfectly acceptable. There is no problem as long as it fulfills its
stated requirements.
On the other hand, a low-quality product is always a problem and never

acceptable. Every product must be of high-quality, regardless of its
grade. No one wants a low-quality product.

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Precision & Accuracy
1. Precision - Consistency in value of repeated measurements having fine cluster and
little scatter.
A Measure of exactness - degree of cluster - process will repeat the same value
Precision is Consistency in value of repeated measurements having fine cluster
and little scatter
Precision => Repeated Value
Accuracy - is a correctness of how close is measured value to true value.
Accuracy => True Value,
Precision is measured by standard deviation in a chart - how far from mean, not how far
from a true value.
Precise measurements are not necessarily Accurate measurements and Accurate

measurements are not necessarily Precise measurements. SN Panigrahi, Essenpee Business Solutions,
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Precision & Accuracy
Project management team should determine the appropriate levels of accuracy and
precision for use in the quality management plan

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ISO Quality Standards
• Compatibility with ISO Quality Standards should be a major consideration:

▪ Minimize variation
▪ Deliver results that meet requirements
• To that end, PMI places emphasis on:
▪ Voice of the Customer (VOC) refers to a technique for capturing all

customer requirements
▪ Customer Satisfaction (meeting customer’s requirements)
▪ Prevention over Inspection (doing it right first time)
▪ Continuous Improvement (PDCA)
▪ Management Responsibility (driven by management by providing right
resources
▪ Cost of Quality (COQ - conformance
SN Panigrahi, costSolutions,
Essenpee Business + non-conformance
India cost) 644
Key contributions from Quality Gurus:
Guru Contribution
Deming -14 steps to Total Quality Management
- 7 deadly sins and diseases,
- the theory of variance,
- PDCA (Plan, Do, Check & Act) cycle
Dr. Joseph Juran - Wrote Quality control hand book, called ‘Bible of quality’
- Habit of quality, Quality Triology (Quality Planning, Quality Control,
Quality Improvement).
- Define ‘quality’ as ‘Fitness of use’
- Categorised the cost of the quality
Philip Crosby - 14 steps for quality improvement
- Concept of ‘ Zero defects’
- Written book ‘ Quality is free’
Massaki Imai - Kaizen
Ishikawa - Cause and effect diagram
- Quality circle
Taguchi - Loss Function
Feigenbaum - Quality defines by the customers

William Shewart - PDSA (Plan, Do, Study & Act) , StatisticalSNControl
Panigrahi,Chart
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Deming’s 14 Points on Total Quality Management:
1.Create constancy of purpose for improving products and services.
2.Adopt the new philosophy.
3.Cease dependence on inspection to achieve quality.
4.End the practice of awarding business on price alone; instead, minimize
total cost by working with a single supplier.
5.Improve constantly and forever every process for planning, production
and service.
6.Institute training on the job.
7.Adopt and institute leadership.
8.Drive out fear.
9.Break down barriers between staff areas.
10.Eliminate slogans, exhortations and targets for the workforce.
11.Eliminate numerical quotas for the workforce and numerical goals for
management.
12.Remove barriers that rob people of pride of workmanship, and
eliminate the annual rating or merit system.
13.Institute a vigorous program of education and self-improvement for
everyone.
14.Put everybody in the company to work accomplishing the
transformation. SN Panigrahi, Essenpee Business Solutions,
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Deming’s Seven Deadly Diseases
1. Lack of constancy of Without constancy of purpose, management does not think beyond the next
purpose quarter and has no long-range plans for staying in business
2. Emphasis on short-term Todays organizations are often controlled by financial people who manipulate
profits figures but do not make substantial changes to production and quality. It is
common for companies to ship products (or take other actions) on the last day of
the month, without regard to quality, merely to inflate the figures.
3. Evaluation of Management by objective (MBO) programmes and management by the numbers
performance, merit rating, fall in this category. Management by fear would be a better name, suggests Dr
or annual review Deming.
The effects are devastating.
First, performance evaluation encourages short-term performance at the expense
of long-term planning.
It discourages risk-taking, builds fear, undermines teamwork, and pits people
against each other for the same rewards. Such evaluations, Dr Deming says,
leave people bitter, despondent, dejected, some even depressed.
4. Mobility of top How can a manager be committed to long-term change when he is constantly
management building up his curriculum vitae? How can a manager really know a company
when he is there for only two or three years? Mobility from one company to
another creates prima donnas for quick results. People require time to learn to
work together.
5. Running a company on
visible figures alone
(counting the money)
6. Excessive medical costs SN Panigrahi, Essenpee Business Solutions,
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Crosby’s The 14 Steps to Quality Improvement:
•Step 1: Management Commitment

•Step 2: Quality Improvement Team
•Step 3: Quality Measurement
•Step 4: Cost of Quality Evaluation
•Step 5: Quality Awareness
•Step 6: Corrective Action
•Step 7: Establish an Ad Hoc Committee for the Zero Defects Program
•Step 8: Supervisor Training
•Step 9: Zero Defects Day
•Step 10: Goal Setting
•Step 11: Error Cause Removal
•Step 12: Recognition
•Step 13: Quality Councils
•Step 14: Do It Over Again

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8.1 Plan Quality Management
• Process of (a) identifying quality requirements and/or standards for the project and its
deliverables and (b) documenting how the project will demonstrate compliance with
relevant quality requirements and/or standards

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Plan Quality Management (Tools & Techniques)
Data Analysis : Benefit/Cost Analysis
•Financial analysis tool, helps to determine if quality activities are cost effective
•Compares the cost of the quality activity to the expected benefit

•Such benefits might include less rework, lower overall costs, higher productivity,
increased customer satisfaction and increased profitability
Data Analysis: Cost of Quality ( COQ)
•Conformance Costs - Costs incurred during the project in either (a) appraising the
deliverable to ensure compliance with requirements or (b) preventing non-compliance
•Non-Conformance Costs - Costs incurred during the project or after release of the
deliverable because it has failed to comply with requirements
•Joseph Juran: Quality means : Fitness-for-use, Juran Trilogy (Quality of Design, Quality
of Conformance, and Quality Characteristics), Juran Trilogy approach Plan-Improve-
Control. Jurans Quality Triology = Quality PLANNING Quality IMPROVEMENT Quality
CONTROL. SN Panigrahi, Essenpee Business Solutions,
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Cost of Quality
Cost of Assurance
(Ensure Confidence in the System - Process Capability;
Robust Product Design; Employee Training; Supplier Rating /
Cost of Supplier Certification Quality Audits )
Conformance
(Cost of Attaining
Quality / Cost of Cost of Prevention
Good Quality) (Costs incurred to Prevent Poor Quality - prevent errors to
happen and to do the job right the first time. Costs of
Verifications – Inspection / Checking of Incoming Material;
Preventive Maintenance; Calibration of Measuring and
Cost of Testing Equipment etc)
Quality
Cost of Appraisal (Post Production)
(Cost of Detection : Inspection - inspection of finished
goods, field testing, pre-dispatch inspection, checking the
Cost of Non- shipping documents before dispatch etc)
Conformance
(Cost of Poor
Quality) Cost of Failure
(Internal Failure Cost - Found before Delivery : Rework,
Waste, Scrap, Failure Analysis
External Failure Cost – Found After Delivery – Liabilities,
SN Panigrahi,ofEssenpee 6
Business Solutions,
Warrantee Costs, Repairs, Returns,Loss Business)
S.N.Panigrahi 5
India 1
Preventing Poor Quality Pays
Prevention Costs
Benefit
Appraisal Costs
$ Repair Costs Prevention Costs
Appraisal Costs
Failure Costs
• Internal Repair Costs
• External
Failure Costs
Before Quality After Quality

Cost Alignment Cost Alignment

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Cost of conformance Cost of nonconformance
Prevention costs (build a quality product) Internal failure costs (failures found by
the project)
Quality training Rework; scrap
Document processes & equipment External failure costs (failure found by the
customer)
Appraisal cost (assesses the quality) liabilities
Testing; Destructive testing loss Warranty work
Inspections of Incoming Material Lost business
Money spent during the project to avoid Money spent during and after the project
failures because of failures

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1. Edward Deming – Quality Improvement – “14 steps to TQM” and Deming Cycle
(defined by Shewhart and modified by Deming) – PDCA (Plan- Do-Check-Act) is
a continuous process improvement.
The generic steps of PDCA are:
Plan – Identify the Problem /

Opportunity & its Impact. Gather &
Understand the Facts, Define & Find the
Root Causes.
Do – Implement the Corrective Action /

Improvement and test.
Check – Check the Data After Correction

and ensure it’s worked
Act – If it’s worked, standardize the

Process improvement. Recognize and
Provide Positive Feedback. If not worked,
tackle the next problem and repeat
PDCA again.
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1. Deming said that quality is 85 % of time due to management problem
2. Malcolm Baldrige continuous improvement; Quality Excellence Award;
Quality Improvement Model
3. Philip Corsby – said QUALITY IS FREE
If you have to look/refer any plan – to respond regarding improving
customer satisfaction – you need to look at QUALITY PLAN
4. The cost of NON QUALITY is estimated to be 12 to 20% of the sales
5. Quality Improvement Management Methodologies (TQM, Lean Six
Sigma, QFD, CMMI).

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'Loss Function’
Dr. Genichi Taguchi developed the concept of 'Loss
Function' - when variation from target increase, loss also
increase.
Developed by Genichi Taguchi, it is a graphical representation of

how an increase in variation within specification limits leads to an
exponential increase in customer dissatisfaction

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Crosby Zero Defects
Quality is built in to the processes, therefore identify processes to remove
defects. Zero Defects was first introduced by American businessman,
Philip Crosby, in his "14 Step Quality Improvement Process". The aim
of zero defects is to minimize the number of defects in manufactured
products and service as much as possible.
The Principles of Zero Defects are:
•Quality is defined as conformance to the requirements
•Defects prevention is better than quality inspection and correction
•Quality standard means zero defects
•Quality is measured in terms of money (i.e. the price of non-conformance:
PONC)
Attaining zero defects is technically not possible in any sizable or

complex manufacturing project. According to the Six Sigma standard,
the definition of zero defects is defined as 3.4 defects per million
opportunities (DPMO).
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Capability Maturity Model Integration (CMMI)
The Capability Maturity Model Integration (CMMI) is a capability maturity model
developed by the Software Engineering Institute, part of Carnegie Mellon
University in Pittsburgh, USA. The CMMI principal is that “the quality of a system
or product is highly influenced by the process used to develop and maintain it”.
CMMI can be used to guide process improvement across a project, a division, or
an entire organization.
CMMI Maturity Levels
There are five CMMI maturity levels. However, maturity level ratings are only
awarded for levels 2 through 5.
CMMI Maturity Level 2 – Managed CMMI Maturity Level 3 – Defined
•CM – Configuration Management •DAR – Decision Analysis and Resolution
•MA – Measurement and Analysis •IPM – Integrated Project Management +IPPD
•PMC – Project Monitoring and Control •OPD – Organizational Process Definition +IPPD
•PP – Project Planning •OPF – Organizational Process Focus
•PPQA – Process and Product Quality Assurance •OT – Organizational Training
•REQM – Requirements Management •PI – Product Integration
•SAM – Supplier Agreement Management •RD – Requirements Development
•RSKM – Risk Management
CMMI Maturity Level 4 – Quantitatively Managed •TS – Technical Solution
•QPM – Quantitative Project Management •VAL – Validation
•OPP – Organizational Process Performance •VER – Verification
CMMI Maturity Level 5 – Optimizing
•CAR – Causal Analysis and Resolution
•OID – Organizational Innovation and Deployment
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1. Total Quality Management (TQM) - An administrative approach centered
around consistent customer satisfaction and continuous improvement of
product quality. Under TQM, quality becomes the focus of the design, creation,
marketing, and maintenance of each product.
2. Six Sigma - A quality-control program developed in 1986 by Motorola. It
emphasized cycle-time improvement and reducing manufacturing defects to a
level of no more than 3.4 per million (99.999%) using DMAIC (Define,
Measure, Analyze, Implement, Control) or [Design for Six Sigma] DMADV
(Define, Measure, Analyze, Design, Validate) approach, refine the process to
get rid of human error and outside influences with precise measurements,
variations are random in nature
3. Kaizen: Continuous and incremental improvement, to reduce costs, cycle
time, drive customer satisfaction using PDCA (Plan Do Check Act)

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1. Just In Time: Eliminate buildup of inventory (Zero Inventory)
2. Poka Yoke - is a Japanese term that means "mistake-proofing" in all aspects of
manufacturing, customer service, procurement etc. It employs visual signals that make
mistakes clearly stand out from the rest.
3. Zero Quality Control - eliminating the need for inspection of results. A combination of
source inspection and Poka Yoke (mistake-proofing) are the methods to achieve zero
defects
4. Capability Maturity Model Integrated (CMMI) - is a process improvement approach
that provides organizations with the essential elements of effective processes. With five
“Maturity Levels” or three “Capability Levels,” the CMMI defines the most important
elements that are required to build great products, or deliver great services, and wraps
them all up in a comprehensive model.
5. Quality Function Deployment (QFD) is a “method to transform qualitative user
demands into quantitative parameters, to deploy the functions forming quality, and to
deploy methods for achieving the design quality into subsystems and component parts,
and ultimately to specific elements of the manufacturing process
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Capability Maturity Model Integrated (CMMI)
The Capability Maturity Model Integration, or CMMI, is a process model that provides a clear
definition of what an organization should do to promote behaviors that lead to improved
performance. With five “Maturity Levels” or three “Capability Levels,” the CMMI defines the
most important elements that are required to build great products, or deliver great services,
and wraps them all up in a comprehensive model.
Five Maturity Levels in the CMMI
Appraisals
The Standard CMMI Appraisal Method for Process Improvement (SCAMPI) is the appraisal method that is
employed by a Certified SCAMPI Lead Appraiser to help your team “achieve a level.” There are three different
types of appraisals, called “Classes” and they are SCAMPI A, SCAMPI B, or SCAMPI C. The SCAMPI A is the
only appraisal method that results in a Maturity or Capability Level Rating. A SCAMPI C is typically used as a
gap analysis and data collection tool, and the SCAMPI B is often employed as a User Acceptance or “test”
appraisal. 661
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Quality Function Deployment (QFD)
Quality Function Deployment (QFD) is a process and set of tools used to effectively define
customer requirements and convert them into detailed engineering specifications and plans to
produce the products that fulfill those requirements. QFD is used to translate customer
requirements (or VOC) into measureable design targets and drive them from the assembly
level down through the sub-assembly, component and production process levels. QFD
methodology provides a defined set of matrices utilized to facilitate this progression.
Beginning with the

initial matrix,
commonly termed
the house of
quality, depicted in
Figure 1, the QFD
methodology
focuses on the most
important product or
service attributes or
qualities. These are
composed of
customer wows,
wants, and musts.
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Project Quality
Management
Tailoring Guidelines
•Policy compliance and auditing
•Standards and regulatory compliance
•Continuous improvement
•Stakeholder engagement
Considerations for adaptive/ agile environment
•Recurring retrospectives regularly check on the effectiveness of the quality

processes.
•They look for the root cause of issues then suggest trials of new approaches
to improve quality.
•Subsequent retrospectives evaluate any trial processes to determine if they
are working and should be continued or new adjusting or should be dropped
from use.
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Seven Quality Tools
1.Cause-and-effect diagram (also called Ishikawa or fishbone chart): Identifies
many possible causes for an effect or problem and sorts ideas into useful categories.
2.Check sheet: A structured, prepared form for collecting and analyzing data; a
generic tool that can be adapted for a wide variety of purposes.
3.Control charts: Graphs used to study how a process changes over time.
4.Histogram: The most commonly used graph for showing frequency distributions,
or how often each different value in a set of data occurs.
5.Pareto chart: Shows on a bar graph which factors are more significant.
6.Scatter diagram: Graphs pairs of numerical data, one variable on each axis, to
look for a relationship.
7.Stratification: A technique that separates data gathered from a variety of sources
so that patterns can be seen (some lists replace “stratification” with “flowchart” or
“run chart”).

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Cause and effect diagrams
• Also known as Ishikawa or fishbone diagram
• The problem statement placed at the head of the fishbone is used as a starting point to
trace the problem’s source back to its actionable root cause
• It proves useful in linking the undesirable effects seen as special

variation to the assignable cause upon which project teams should implement
corrective actions to eliminate the special variation detected in a control chart

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Ishikawa Diagram
Cause & Effect Diagram - Also called Ishikawa, or
fishbone diagrams
Policy Manpower Material

Inventory
Buffer Reduced Inadequate Training Inventory Stock out
Employer Breaks Policy New Machine Operators Obsolete

Inventory
Tight Tolerance
Late Delivery
To Customer
Incorrect M/C Setup Assembly Difficulty
Winter Driving Conditions
Preventive Maintenance Broken Packages
S.N.Panigrahi
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Data Analysis
Flow Charts - A flowchart is a type of diagram that represents
an algorithm, workflow or process, showing the steps as boxes
of various kinds, and their order by connecting them with
arrows.
•Also called process maps as they display the sequence of steps and the branching
possibilities that exist for a process that transforms one or more inputs into one or more
outputs
•A flowchart is a graphical representation of a process
•Useful in understanding and estimating the cost of quality in a process
•Obtained by using the workflow branching logic to estimate EMV for the conformance and
non-conformance work required to deliver the expected conforming output

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Check Sheets - A simple data collection form consisting of
multiple categories to facilitate the collection and analysis of
data.

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Control Charts also known as Shewhart Charts (after Walter A. Shewhart) - The control
chart is a graph used to study how a process changes over time. Data are plotted in time
order. A control chart always has a central line (Mean Value) for the average, an upper
line (+3 sigma) for the Upper Control Limit (UCL) and a lower line (-3 sigma) for the
Lower Control Limit (LCL).
If the process is in control (and the process statistic is normal), 99.7300% (3 Sigma value) of
all the points will fall between the control limits

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Histograms - A graphical representation, similar to a bar
chart in structure, that organizes a group of data points into
user-specified ranges. The histogram condenses a data
series into an easily interpreted visual by taking many data
points and grouping them into logical ranges or bins.

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Pareto Diagram - The Pareto Chart and the 80:20 rule are useful tools to
drive continuous process improvement. The 80:20 rule can help you
identify the 20% of the causes that create 80% of the effect allowing you to
focus on those vital 20% for maximum benefit rather than wasting your
resources tackling the other 80% of the causes for minimal benefit.

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Scatter Diagram - A scatter diagram is a tool for analyzing relationships
between two variables. One variable is plotted on the horizontal axis and
the other is plotted on the vertical axis. The pattern of their intersecting
points can graphically show relationship patterns. Most often a scatter
diagram is used to prove or disprove cause-and-effect relationships

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Stratification Diagrams
Stratification is a technique used in combination with other data analysis tools. When data
from a variety of sources or categories have been lumped together, the meaning of the data
can be impossible to see. This technique separates the data so that patterns can be seen..
Stratification Procedure
When plotting or graphing the collected data on a scatter diagram, control chart, histogram
or other analysis tool, use different marks or colors to distinguish data from various
sources. Data that are distinguished in this way are said to be “stratified.”
Analyze the subsets of stratified data separately. For example, on a scatter diagram where
data are stratified into data from source 1 and data from source 2, draw quadrants, count
points and determine the critical value only for the data from source 1, then only for the
data from source 2.
By using unique symbols

for each source, you can
view data sets
independently or in
correlation to other data
sets.
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1. Benchmarking – Benchmarking involves comparing actual or planned
project practices to those of other projects in order to generate ideas for
improvement and to provide a standard by which to measure performance.
The other projects may be within the performing organization or outside of
it, and may be within the same application area or in another.
2. Design of Experiments (DOE) - Design of experiments is an analytical
technique which helps identify which variables have the most
influence on the overall outcome. The technique is applied most
frequently to product of the project issues or in development stage. An
appropriately designed “experiment” will often allow determination of an
optimal solution from a relatively limited number of cases.
3. Statistical Sampling - Statistical sampling involves choosing part of a
population of interest for inspection (e.g., selecting ten items at random
from a list of 100). Appropriate sampling can often reduce the cost of
quality control.
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Design of Experiments (DOE)
Design of experiments (DOE) is a systematic method to determine the relationship
between factors affecting a process and the output of that process. In other words, it
is used to find cause-and-effect relationships. This information is needed to manage
process inputs in order to optimize the output.
Common DOE Terms and Concepts
The most commonly used terms in the DOE methodology include: controllable and
uncontrollable input factors, responses, hypothesis testing, blocking, replication and
interaction.
•Controllable input factors, or x factors, are those input parameters that can be modified
in an experiment or process. For example, in cooking rice, these factors include the quantity
and quality of the rice and the quantity of water used for boiling.
•Uncontrollable input factors are those parameters that cannot be changed. In the rice-
cooking example, this may be the temperature in the kitchen. These factors need to be
recognized to understand how they may affect the response.
•Responses, or output measures, are the elements of the process outcome that gage the
desired effect. In the cooking example, the taste and texture of the rice are the responses.
Process Factors and Responses

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•Hypothesis testing helps determine the significant factors using statistical
methods. There are two possibilities in a hypothesis statement: the null and the
alternative. The null hypothesis is valid if the status quo is true. The alternative
hypothesis is true if the status quo is not valid. Testing is done at a level of
significance, which is based on a probability.
•Blocking and replication: Blocking is an experimental technique to avoid any

unwanted variations in the input or experimental process. For example, an
experiment may be conducted with the same equipment to avoid any equipment
variations. Practitioners also replicate experiments, performing the same
combination run more than once, in order to get an estimate for the amount of
random error that could be part of the process.
•Interaction: When an experiment has three or more variables, an interaction is a

situation in which the simultaneous influence of two variables on a third is not
additive.
What is Design of Experiments in PMP?
Design of Experiments (DOEs) refers to a structured, planned method, which
is used to find the relationship between different factors (let's say, X variables)
that affect a project and the different outcomes of a project (let's say, Y
variables). SN Panigrahi, Essenpee Business
680Solutions,
India
DOE also plays a role in optimizing products or processes. DOE

is used to reduce the sensitivity of product
performance to sources of variations caused by environmental
or manufacturing differences. One important aspect
of this technique is that it provides a statistical framework for
systematically changing all of the important factors,
rather than changing the factors one at a time. Analysis of the
experimental data should provide the optimal
conditions for the product or process, highlight the factors that
influence the results, and reveal the presence of
interactions and synergy among the factors. For example,
automotive designers use this technique to determine
which combination of suspension and tires will produce the
most desirable ride characteristics at a reasonable cost.
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Additional Quality Planning Tools
1 Brainstorming Brainstorming popularized by Alex Faickney Osborn in the 1953 in his book
“Applied Imagination”, involves spontaneous contribution of ideas by the
group members around a specific issue, problem or requirement. The
objective is to stimulate fresh ideas generation leading to an increase in
overall creativity of the group.
2 Force Field The principle, developed by Kurt Lewin It provides a framework for looking at the
Analysis factors (forces) that influence a situation, originally social situations. It looks at
forces that are either driving movement toward a goal (helping forces) or blocking
movement toward a goal (hindering forces).

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Additional Quality Planning Tools
3 Nominal Group Nominal group technique is an enhanced brainstorming technique and
Technique involves voting to rank and filter ideas for selection based on priority or for
further brainstorming exercises
4 Quality These are used in Perform Manage Qualitylike Affinity Diagram, Process
Management & Decision Program Charts (PDPC), Interrelationship Diagraphs, Tree
Control Tools Diagram, Prioritation Matrix, Activity Network Diagram (AON & AOA;
PERT & CPM), Matrix Diagram

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Data Representation
Logical Data Model:
• Visual representation of an organization’s data

• Useful to identify where data integrity or other quality issues can arise

http://databaseanswers.org/data_models/customers_and_addresses/index.h2t6m6 684
Data Representation
267 Matrix Diagram :
•Useful for finding the strength of relationships among different factors, causes and
objectives between rows and columns that form a matrix , Helps in identifying the key
quality metrics important for project success

Data Representation
SIPOC Model:
• In six sigma, SIPOC is often used in the "Define" phase of DMAIC steps,
• Helps clearly understand the purpose and the scope of a process.
• SIPOC shorts for suppliers, inputs, process, outputs and customers.

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Plan Quality Management - Outputs
▪ Quality Management Plan
▪ Quality standards to be used by the project
▪ Quality objectives of the project
▪ Quality roles and responsibilities
▪ Project deliverables and processes to quality review
▪ Quality control and management activities
▪ Quality tools, major procedures – dealing with
nonconformance, corrective actions and continuous improvement
procedures
▪ Quality Metrics
▪ Quality metrics are used in and control quality processes
e.g. on-time performance, cost control, defect frequency, failure rate,
availability, etc.
▪ It is an operational definition,
describes in very specific terms, what 270 687
Plan Quality Management -
Outputs
•Quality Management Plan describes how the quality requirements for

the project will be met, including how the team will enforce the
organization's quality policy.
•Quality Metrics describe specific details of project or product attributes

and how the quality assurance and control processes will measure them.
Quality Metrics might be used to measure such things as schedule and

cost performance, defect frequency, and failure rate (e.g., metrics used
to ensure that the project is within 10% of budget).
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8.2 Manage Quality
is the process of translating the quality management plan into executable

quality activities to incorporate organization’s quality policies into project

Source: A Guide to the Project Management Body of Knowledge. 6th Editio2n7;12017
Manage Quality-
Tools
Data Gathering
•Checklists
Data Analysis
•Alternate Analysis
•Document Analysis
•Root cause Analysis
•Process Analysis identifies needed improvements by examining problems, constraints, and non-value added
activities during process operation.
Decision Making
Multicriteria Decision Analysis
Data Representation:
•Affinity Diagrams are used to visually identify logical groupings based on natural relationships to generate ideas.
•Matrix Diagrams are used to perform data analysis within the structure of the matrix. They show the strength of
relationships for the various factors, causes, and objectives in the rows and columns of the matrix.
•Flowcharts
•Histograms
•Scatter plots
•Cause and Effect Diagrams
Audit is a structured, independent process to determine if project activities comply with organizational and project
policies, processes, and procedures. The Quality Audit is a very important tool usedSNfor quality assurance.
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Data Representation
Affinity Diagram
•Similar to mind mapping techniques used to generate ideas that can be used to form
organized patterns of thought about a problem
Cause and effect diagrams
•Used to understand a goal in relation to the steps for getting to the goal
•It is used as a tool for contingency planning
•It aids in anticipating intermediate steps that could derail the achievement of the goal
Histograms
•An adaptation of relationship diagrams
•Provides a process for creative problem solving in moderately complex scenarios that
possess intertwined logical relationships for up to 50 relevant items
8.3 Control Quality
Control quality is the process of monitoring and recording the results of executing the quality
activities to assess performance and recommend necessary changes
Source: A Guide to the Project Management Body of Knowledge. 6th Editio2n8;02017

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8.3 Control Quality
Checksheets
▪are also known as tally sheets

▪may be used as a checklist when gathering data
▪are used to organize facts to facilitate the effective collection of
useful data about a potential quality problem
▪They are especially useful for gathering attributes data while
performing inspections to identify defects
▪ Example : data about the frequencies or consequences of defects

collected in checksheets are often displayed using Pareto diagrams

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8.3 Control Quality T&T
Control Chart
•It determines whether or not a process is stable or has predictable performance
•Control limits are calculated by standard statistical calculations and principles to establish
the natural capability for a stable process
•PM and stakeholders will use control limits as the points at which corrective action will be
taken to prevent unnatural performance
•Control charts most frequently used to track repetitive activities required for producing
manufactured lots
•They are also used to monitor cost and schedule variances, volume and frequency of
scope changes and other management results to help determine if the process is in control

Control Quality Tools
Example of Control Chart
UCL is drawn above the centerline and called as +3 sigma line. LCL is drawn
below the centerline and called as -3 sigma line.
The centerline is the mean value of the data set. The process is considered
to be in control if data points fall within three standard deviations of the mean.
Specification limits are limits between which a

product or process must operate to rate it as
acceptable. Specification limits are usually
defined by customers.
Control limits also known as natural process

limits are ,however, calculated from process
output measurements and used in control
charts to detect any out of control situation.
Specification Limits Control Limits

Voice of the Customer Voice of the Process
Values defined by user Values calculated by Process
Apply to subgroups Apply to individual items SN Panigrahi, Essenpee Business Solutions,
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1. Common causes, also called Natural patterns or random causes, are the
usual, historical, quantifiable normal process variation in a system, which
are generally acceptable. Symptoms : Chance cause, Non-assignable cause,
Natural pattern
2. Special causes are unusual, not previously observed, non-quantifiable
variation and are preventable by process improvement. Symptoms :
Assignable cause, Unnatural pattern
3. Rule of Seven: If seven or more consecutive data points fall on one side of
the mean (even if the seven data points are within control limits), they should
be investigated.

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Rule of Seven is used to filter out the random variation in a production process. shows
the ‘trends’ that are caused by the ‘assignable causes’ or non-random causes that
required investigation and possible corrective action to be taken.
Rule of Seven pattern:

seven points above mean value;
seven points below mean value;
seven points or all increasing ; or
seven points all decreasing
the patterns are indicators of non-random problems which can be symptom of process out
of control.

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Seven Management and Planning
Tools
Affinity Diagram (KJ Method)

Interrelationship Diagram (ID)
Tree Diagram
Seven
Management Prioritization Matrix
and Planning
Tools
Matrix Diagram or quality table

Process Decision Program Chart (PDPC)
Activity Network Diagram
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Affinity Diagram
An affinity diagram is the organized output from a brainstorming session - affinity
diagram is to generate, organize, and consolidate information concerning a
product, process, complex issue, or problem with common themes.
Affinity diagrams are a special kind of brainstorming tool that organize large
amounts of disorganized data and information into groupings based on
natural relationships.
It was created in the 1960s by the Japanese anthropologist Jiro Kawakita. It
is also known as KJ diagram, after Jiro Kawakita. An Affinity Diagram is
used when:
1) You are confronted with many facts or ideas in apparent chaos.

2) Issues seem too large and complex to grasp.
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Affinity Diagram is a tool that gathers large amounts
of data (ideas, opinions, issues) and organizes them into
groupings based on their natural relationships.
Creating an Affinity Diagram

Step 1 - Generate ideas
Step 2 - Display ideas
Step 3 - Sort ideas into groups
Step 4 - Create header cards
Step 5 - Draw finished diagram

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Step 1 - Generate ideas. Use the Brainstorming tool to generate a
list of ideas. The rest of the steps in the Affinity process will be
easier if these ideas are written on post-its .
Step 2 - Display the ideas. Post the ideas on a chartpack, a wall, or
a table in a random manner.
Step 3 - Sort the ideas into related groups. The team members
physically sort the cards into groupings, without talking
Step 4 - Create header cards for the groups. A header is an idea that
captures the essential link among the ideas contained in a group of
cards
Step 5 - Draw the finished Affinity Diagram. !Write a problem

statement at the top of the diagram. !Place header and superheader
cards above the groups of ideas. !Review and clarify the ideas and
groupings. !Document the finished Affinity Diagram
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Interrelationshi An interrelationship digraph
p Diagraphs is a visual display that maps
out the cause and effect links
among complex,
multivariable problems or
desired outcomes. This is a
tool to identify relationship
amongst a group of issues.
This tool displays all the interrelated cause-and

effect relationships and factors involved in a complex
problem and describes desired outcomes. The process of
creating an interrelationship diagram helps a group analyze
the natural links between different aspects of a complex
situation. SN Panigrahi, Essenpee Business Solutions,
703
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Tree This tool is used to break down broad categories into finer
Diagrams and finer levels of detail. It can map levels of details of tasks
that are required to accomplish a goal or solution or task.

Developing a tree diagram directs concentration from
generalities to specifics.

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Prioritization This is used to list issues, identify alternative solutions,
Matrices decide on the criteria to evaluate alternatives, prioritize
them and apply to alternatives to arrive at rankings that
represent priorities.
This tool is used to prioritize items and describe them in terms
of weighted criteria. It uses a combination of tree and matrix
diagramming techniques to do a pair-wise evaluation of
items and to narrow down options to the most desired or most
effective. Popular applications for the Prioritization Matrix
include return on investment (ROI) or Cost–benefit
analysis (investment vs. return), time management
matrix (urgency vs. importance), etc.

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Matrix Matrix Diagram shows
Diagrams the relationships
between factors,
causes, and
objectives that exist
between the rows and
columns that form a
This tool shows thematrix.

relationship between two or more sets of elements. At each
intersection a relationship is either absent or present. It then gives information
about the relationship, such as its strength, the roles played by various individuals
or measurements. The matrix diagram enables you to analyze relatively complex
situations by exposing interactions and dependencies between things. Six
differently shaped matrices are possible: L, T, Y, X, C, R and roof-shaped,
depending on how many groups must be compared.
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Process The Process Decision Program Chart (PDPC) In this Technique the goal is
Decision systematically identifies what might go wrong decomposed into steps required to
Programme in a plan under development. Counter achieve it. Each step is then reviewed
Charts measures are developed to prevent or offset for potential risks. The team may
(PDPC) those problems. By using PDPC, a decision brain storm ideas for anything that
may be taken either to revise the plan to avoid could go wrong and come up with
the problem or prepare a best response when a contingency plans to keep things on
problem occurs. track
It helps to prepare contingency plan.
The PDPC extends the tree diagram a couple of levels to

identify risks and countermeasures for the bottom level
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Activity Network Diagram
This tool is used to plan the appropriate sequence or

schedule for a set of tasks and related subtasks. It is used
when subtasks must occur in parallel. The diagram helps in
determining the critical path (longest sequence of tasks). The
Purpose is to help people sequentially define, organize, and
manage a complex set of activities.

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Control Quality Tools
Control Chart
•Corrective action maintains the natural stability of a stable, capable process
•The upper control limits and lower control limits are usually set at +/- 3 sigma (i.e.
standard deviation)
•Mean represent the average of control limits or specification limits
•Out of control - A process is considered out of control if:
▪ A data point falls out of control limits
▪ Breaks the rule of seven
•Rule of seven - Is a rule of thumb or heuristic which states that consecutive seven data
points one either side of the mean is considered out of control, even though the data
points are within control limits

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Control Quality – Output
Quality control measurements
•are results of ‘Control Quality’ process activities
•should be captured in the format (i.e. Quality Metrics) that was specified
through the ‘Plan Quality Management’ process
•are used to analyze and evaluate the quality of the processes of the project
against the standards of the performing organization or the requirements
specified
•can also compare the processes used to create the measurements and
validate actual measurements to determine their level of correctness

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Control Quality -
Outputs
Quality Control Measurements
Quality control measurements are the documented results of control quality
activities. They should be captured in the format that was specified through the
Plan Quality Management process
Verified Deliverables
A goal of the Control Quality process is to determine the correctness of
deliverables. The results of performing the Control Quality process are verified
deliverables. Verified deliverables are an input to Validate Scope for formalized
acceptance.
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Quality Planning Best Practices
• We will determine the elements that will be used
to evaluate quality:
• Priorities: scope, time, cost
• Scope statement
• Success criteria
• Project metrics toward project quality management

Manage Quality Best Practices
for quality assurance:
• Continuous process improvement: process analysis,
removing non-value activities, etc.
• Prevention: prevention activities before problems
occur
• Benchmark quality: establish a baseline

Quality Control Best Practices
for quality control:
• Inspection: e.g. PM and team to inspect work
• Scope verification: to ensure product is of good
quality.

Control Quality
• Process related • Product related
• Proactive • Reactive
• Audit • Check
• Prevention • Inspection
• Formally demonstrates that

• Provides confidence that
the sponsor and/or
the stakeholder’s customer’s acceptance criteria
requirements will be met have been met

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Practice test 1
A project manager has been overwhelmed with problems on his project. He would like
to identify the root cause of the problems in order to determine where to focus his
attention. Which of the following tools would be BEST for the project manager to use?
A. Pareto chart.
B. Conflict resolution techniques.
C. Fishbone diagram.
D. Trend analysis.

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Answer is C
Explanation:
A Pareto chart (choice A) might help the project manager decide which problems to focus
on, but does little to find the root cause of problems.
Though the project is troubled, there is nothing to use conflict resolution techniques with
(choice B) because the real problem has not been identified.
Trend analysis (choice D) does not deal with root causes; it deals more with predicting the
future.
The best choice is C.

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2
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0 Practice test 2
The project manager notices that project activities being completed by one department are
all taking slightly longer than planned. The project manager is bothered by the problem, since
four of the next five critical path activities are being completed by this department.
After making three calls, the project manager is finally able to converse with the department
manager to determine what is going on. The conversation is slow, because both speak
different native languages and they are trying to converse in French, a shared language. To
make communication easier, the project manager frequently asks the department manager
to repeat back what has been said.
The department manager communicates that his staff is following a company policy that
requires two levels of testing. During the conversation, the department manager also makes
a comment that leads the project manager to believe that the policy may include excessive
work.
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1
Practice test 2 .. contd.
This is the fourth time the project manager has heard such a comment. What is the BEST
thing to do?
A.Create a better communications management plan that requires only one language to be
the universal language on the project and have translators readily available on a
moment’s notice.
B.Contact someone else in the department who speaks the project manager’s native
language better to confirm the department manager’s
opinion.
C.Find out if the upcoming activities should be re-estimated.
D.Work on increasing the effectiveness of the performing organization by recommending
continuous improvement of the policy in question.

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Practice test 2 - Answer
Answer
292 is D
Explanation :
Choice A might be a good idea, but has two problems. It may not be needed on the
project, and it does not deal with the problem at hand, the policy that is slowing things
down.
Choice B is not the best choice as the project manager already has heard the opinion
on many other occasions. It is already confirmed.
Choice C is just being reactive.

A good project manager will find the root cause and deal with that, even if it means
attempting to improve the company’s policies and processes. This is continuous
improvement. Because there are several activities affected by the policy, it would serve
the project better to get to the root cause of the problem and solve it.

Which of the following statements describes best the relationship of
quality and grade?
a) Low grade is always a problem; low quality may be overcome by a good

rework and repair process.
b) Grade is a category or rank given to entities having different functional
requirements but the same need for quality.
c) Both quality and grade can often be improved through intelligent
measuring, testing and examining.
d) Low quality is always a problem as it bears on the ability of an item to
meet requirements; low grade may sometimes be acceptable.
Ans : d- Low quality is always a problem as it bears on the ability of an item to

meet requirements; low grade may sometimes be acceptable.

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By looking at the Fishbone diagram below, which action will
not have a positive impact on the miscommunication problem
hounding the project team.
A) Cross-culture training
B) Training on third-party tools, such as WebEx
C) Survey the team on compensation-related issues
D) Documenting meeting notes after every meeting
Answer : C. All options, except C, can be infered from the Fishbone
diagram. Option C can in no way be inferred from the Fishbone
diagram. SN Panigrahi, Essenpee Business
722Solutions,
India
The following Scatter Plot describes the relationship between
compensation and team motivation. As a Project Manager,
what would you infer from this Scatter Plot?
compensation
A) By increasing compensation, team motivation is bound to increase.

B) By increasing compensation, team motivation is bound to decrease.
C) By increasing compensation, team motivation will probably increase.
D) By increasing compensation, team motivation will probably not be impacted.
Ans : D. The Scatter Plot describes no correlation between two
variables, hence Option C is the only correct option SN Panigrahi, Essenpee Business Solutions,
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You suspect a the FIFA world cup is causing your project team members
to come into work late. Which of the following tools cannot help you
validate this assumption?
A) Control Chart
B) Standard Deviation and Sampling
C) Kaizen and Continuous Improvement
D) Scatter Plot
Ans : C:
Kaizen or Continuous Improvement is a philosophy that focuses on
continual improvement. This would be of little use to discover why
your PMs are coming to work late. Choice D, Scatter Plots can help
you validate this assumption. Choice A, Control Charts can help you
detect the problem.

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Look at the Scatter Plot shown below. Which of the following statements is
true?
A) There is a weak correlation between the two variables.
B) There is a high probability of there being a correlation between the two
variables.
C) There is certainty that a change in one variable causes a change in another.
D) There is no correlation between the two variables.
B. This is a strong correlation scatter plot. Don't get confused with Option C.
Certainty only exists if all points lie on a straight line. For example, by
decreasing the critical path, the duration of a project would certainly
SN Panigrahi, reduce.
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Process Analysis is a function of:
A. Performance Analysis
B. Quality Metrics
C. Process Improvement Plan
D. Quality Improvement Plan
CORRECT: C. A is incorrect as it relates to performing measurements to present performance. B is incorrect

as it relates to the specific measurements that shall be performed on the project work in order to measure
quality. C is correct because process analysis
Root Cause Analysis relates to:

1. Process Analysis
2. Quality Audits
3. Quality Control Measurements
4. Performance Measurements
CORRECT: 1. The option 2 is incorrect because a Quality Audit is to identify inefficiencies, non-compliance in
project activities. It does not necessarily identify the root cause.
Trend Analysis is often performed using:

1. Cause and Effect Diagram
2. Control Charts
3. Pareto Chart
4. Run Chart
CORRECT: 4. Run Chart shows the past pattern of variation. Trend Analysis involves forecasting the future
trend based on past performance.
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A planning phase for an engineering component generated 80 engineering
drawings. The QA team randomly selected 8 drawings for inspection. This
exercise can BEST be described as example of:
1. Inspection
2. Statistical Sampling
3. Flowcharting
4. Control Charting
CORRECT: 2. "Inspection” is what the team is doing on individual drawings;

however, the entire exercise of random selection and inspecting a work product
is known as “Statistical Sampling”

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You are working for a semi-conductor company. There have
been several instances in the past week when a few circuits have
not been giving accurate results. You have been assigned the
task of determining the probable cause for the variations. Which
tool would you use?
1. Control Chart
2. Ishikawa Diagrams
3. Pareto Diagrams
4. Inspection
Correct Answer : 2 is the correct answer
Justification
Ishikawa diagrams is also known as Cause-and-effect diagrams or
fishbone diagrams. The problem statement placed at the head of
the fishbone is used as a starting point to trace the problem`s
source back to its actionable root cause. The problem statement
typically describes the problem as a gap to be closed or as an
objective to be achieved.
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Which of the following statements related to precision and
accuracy is correct?
1. Precise measurements are always accurate
2. Accurate measurements are always precise
3. High precision measurements have little scatter
4. Accuracy means that measurements are clustered
Correct Answer
3 is the correct answer
Justification
Precision is a measure of exactness... Accuracy is an assessment
of correctness...Precise measurements are not necessarily
accurate measurements, and accurate measurements are not
necessarily precise measurements.

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You are the program level manager with several project activities underway. In the
executing process group, you begin to become concerned about the accuracy of
progress reports from the projects. What would BEST support your opinion that there is
a problem?
A-) Quality Audits

B-) Risk Quantification Reports
C-) Regression Analysis
D-) Monte Carlo Analysis
Answer is A. quality audits. If you read the second sentence again, it says that you are
concerned about the accuracy of progress reports from the project. In order to check
whether the standards of your organization have been applied in the projects that you
are responsible of, you can conduct a quality audit and find out whether there is really a
problem. Therefore, here the best answer is A, Quality Audits.
Knowledge Area: Quality Management Knowledge Area

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You are a project manager for a major information systems project. Someone from the quality department
comes to see you about beginning a quality audit of your project. The team, already under pressure to
complete the project as soon as possible, objects to the audit. You should explain to the team that the
purpose of a quality audit is:
A-) Part of an ISO 9000 investigation

B-) To check if the customer is following its quality process
C-) To identify inefficient and ineffective policies
D-) To check the accuracy of costs submitted by the team
How would you explain it to your team if you were in this case? The best answer is C, to identify
inefficient and ineffective policies. B and D are irrelevant options because quality audit is done in order to
check whether you are meeting the quality standards, whether you are following the quality procedures of
your company. Therefore, it’s not related whether the customer is following its quality processes. Or it is
not related about accuracy of costs submitted by the team.
Knowledge Area: Quality Management Knowledge Area

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In your project, you examine the work products to determine
whether they conform to documented standards. This includes
measurements conducted at various levels to determine the quality
of the product. In this context, the appropriate tool to use is:
1. Inspection
2. Control chart
3. Run chart
4. Histogram
correct answer : 1
Justification
An inspection is the examination of a work product to determine
whether it conforms to documented standards. The results of an
inspection generally include measurements and may be conducted at
any level. For example, the results of a single activity can be
inspected, or the final product of the project can be inspected.
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Your organization has a policy which they have termed as "Yearly Project
Checkup". In this policy, projects are randomly selected and reviewed by a
team of independent consultants who will make sure that the projects
comply with your company's policies, standards, and procedures. Which
tool and technique is being described in the question?
A: Audits
B: Inspection
C: Process Analysis
D: Testing/Product Evaluations
Ans : A

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In a scatter diagram, if points are close to the diagonal line, it
indicates that:
1. Scatter diagram has some erroneous data
2. Three variables are closely correlated
3. Independent and dependent variables are related
4. No inference can be made from the analysis
Correct Answer : 3
Justification
A scatter diagram shows the relationship between two variables.
This tool allows the quality team to study and identify the possible
relationship between changes observed in two variables.
Dependent variables versus independent variables are plotted. The
closer the points are to a diagonal line, the more closely they are
related.
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Which tool are you using when you compare your present
project with the one that has already achieved the highest
quality standards?
A: Analogous techniques
B: Benchmarking
C: Audit
D: Inspection
Ans : B

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Your team is confused between control quality and manage
quality processes. How can you explain things to them?
A: Control Quality involves charts like histograms and

control charts, while Manage Quality doesn't use those
charts.
B: Control Quality and Manage Quality mean the same
thing.
C: Control Quality means inspecting for defects in
deliverables, while Manage Quality means auditing a
project to check the overall process.
D: Manage Quality means looking for defects in
deliverables, while Control Quality means auditing a
project to check the overall process.
Ans : C
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You are an expert and your team needs help in defining the
quality metrics on your project. Which of the following is not
an example of quality metrics?
A: Percentage complete
B: Failure Rate
C: Customer Satisfaction Scores
D: SIPOC Model
Ans : D

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Recently, there have been quality related problems in your project and your sponsor has
asked you to work on improving the quality parameters. In this context, which of the
following statements about quality parameters is correct?
A. Customer satisfaction refers to understanding and managing expectations so that
customer requirements are met.
B. Customer satisfaction is a combination of conformance to requirements and fitness
for use.
C. Quality should be planned and built in - not inspected in.
D. Cost of preventing mistakes is generally higher than cost of correcting them.
1. A and C
2. B and C
3. Only C
4. A, B and C
correct answer : 4
Justification
One of the fundamental tenets of modern quality management states that quality is
planned, designed, and built in - not inspected in. The cost of preventing mistakes is
generally much lower than the cost of correcting them when they are found during
inspection.
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Plan Quality Management – “identifying the Ask yourself: “What will quality look like on my
quality standards and documenting how project?” and “How will we ensure this quality is
compliance to those standards will be achieved adhered to?”
throughout the project”
Perform Quality Assurance – “reviewing quality This process is where the work of the quality
requirements as well as results from management plan happens. Project team
measurements to ensure the right standards are members review the requirements and the results.
being used”
Control Quality – “reviewing the results of quality Think of this process as a check-up on quality. You
activities to see how they are performing and need high-quality review processes if you are
make changes where necessary” going to produce high-quality deliverables.

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Question: You have been receiving a lot of complaints about your product that went live a month
back. The sponsor is not happy with the end user feedback and has instructed you to make sure that
quality of the present project, which you are managing, is not compromised. You are auditing the
quality requirements and the quality control measurements to ensure appropriate quality standards
are maintained. Which process are you presently in?
A: Manage Quality
B: Plan Quality Management
C: Control Quality
D: Validate Scope
Ans
A: Manage Quality

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2. As part of the Control Quality process, your project team is focused on
completing an activity that keeps errors out of the hands of the customer?
They are most likely focused on:
A. Prevention
B. Inspection
C. Attribute sampling
D. Tolerances
B – Inspection. Although a number of these statistical method might play a

role in ensuring a customer does not receive a deliverable with errors, the best
answer is “Inspection” based on its definition (PMBOK, 250).

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3. Your team members are arguing about the acceptable budget range for a
particular deliverable. Jim says the acceptable range is +/- 5%, and Katherine
says the acceptable range is +/- 10%. Where should Jim and Katherine to look
to determine the acceptable quality metric?
A. Cost Metrics
B. Scope Metrics
C. Quality Metrics
D. Schedule Metrics
C – Quality Metrics. This question probably wasn’t too hard in the context of
an entire article about quality. Imagine it, however, in the context of your 200-
question PMP exam. You might be tempted to choose Cost or possible Scope
Metrics. Only Quality Metrics is a valid term used by PMI (PMBOK, 242).

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4. Which of the following is unacceptable to the customer?
A. Low quality & high grade
B. High quality & high grade
C. High quality & low grade
D. Quality & grade refer to internal processes that do
not involve the customer.
A – Low quality & high grade. Remember, missing

quality standards is always bad for a project, but low grade
is okay if that is the intent. High grade isn’t necessarily
better than low grade when considering cost. Our high
grade litter box cost much more than our low grade one!
(PMBOK, 228).

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You are experienced a number of problems with the
smartphone you are producing for your customer. The end
users of the smartphones want a lightweight device that
takes photos. It should have fast-loading software with
reliable internet connection. Which of the problems below is
related to the grade of the phone?
A. The phone is slow to start up.
B. The camera is only .3 megapixels.
C. Internet connection drops regularly.
D. The phone is heavy.
B – The camera quality is low. Without knowing the

quality specifications in detail, you must use the information
given in the problem to deduce the answer. While quality
standards are given for each of the other answers, the
problem only states that the phone must have a camera.
So, it may be acceptable that the camera is of low grade
(PMBOK, 228).
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The target weight of a widget is three pounds. You as the
project manager take a sample and find that the weights of the
five widgets are 3.4, 3.41, 3.4, 3.39, and 3.4 pounds each. You
would describe the weight of the widgets as:
A. Accurate but not precise
B. Precise but not accurate
C. Accurate and precise
D. Neither accurate nor precision.
B – Precise but not accurate. Did you remember your darts?

“Precision is a measure of exactness…[accuracy] is a
measurement of correctness.” (PMBOK, 228.)

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Project Resource Management

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9. Project Resource Management
295
• Project resource management includes the processes that organize, manage and
lead the project team and, physical resource
• Specific roles and responsibilities are assigned to the project team, the involvement
of all team members in planning and decision making is beneficial

9. Project Resource Management Processes
Monitoring &
Planning
Processes

Executing
Processes
ProcessGroups
Control
•Plan Resource •Acquire •Control

Project Management Resources
Resource Resources
Management •Estimate Activity •Develop Team
Resources
SN Panigrahi, Essenpee Business Solutions, India 296 749
•Manage Team
9.1 Plan Resource Management
Is a process of defining how to estimate, acquire, manage and use team
and physical resources
Source: A Guide to the Project Management Body of Knowledge. 6th Ed2it9io7n; 2017
Plan Resource Management -
Tools
Data Representation
•All team member have a clear understanding of their roles and responsibility
•Various formats exist to document team member roles and responsibilities Types of Formats:
▪ Hierarchal e.g. Organizational Breakdown Structure (OBS)

▪ Matrix e.g. Responsibility Assignment Matrix (RAM) e.g. RACI
(Responsible, Accountable, Consult and Inform)
▪ Text -oriented
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Plan Resource Management – T & T
Example of RACI Chart
Role Definition
Responsible Conducts the actual work/owns the problem. There should be at least one R
(“doer” of the work) (otherwise the work is not performed) and there can be multipl R’s (this is called team
working) -
Accountable Approves the completed work and is held fully accountable for it. There should be one and
(“owner” of the work) only one A
Consulted Has the information and/or capability to complete the work. Two-way communication
(typically between R and C) – Optional
(in the “Loop”)
Informed(Keep in Is to be informed of progress and results. One-way communication (typically from R to I) -
Optional
the “Picture”) SN Panigrahi, Essenpee Business Solutions,
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Plan Resource Management – T & T
Organizational Theories
•Motivation is one of the most important factor to generate a team spirit and enhance
the efficiency of individual as well as of team
•It is also important to understand that team members do not get De-motivated

1 Hierarchical The traditional organization chart
structure can be used to show
positions and relationships in a
graphic, top-down format.
2 Matrix A responsibility assignment matrix

(RAM) is used to illustrate the
connections between work that needs
to be done and project team members.
RACI is an example of RAM.
3 Text oriented Team member responsibilities that

require detailed descriptions can be
specified in text-oriented formats.
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•WBS Vs OBS vs RBS : All these are Hierarchical-type Charts
WBS OBS RBS

(Work Breakdown Structure) (Organization Breakdown (Resource Breakdown Structure)
Structure)
Shows breakdown of project Shows organizations existing Hierarchical list of resources
deliverables departments, units, or teams with related by category and resource
the project activities or work type. It contains resource
packages listed under each categories other than human
department. resources.

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•Responsibility Assignment Matrix (RAM) is a Matrix-based Chart / grid showing project
resources assigned to each work package. It illustrates the connection between work packages or
activities and project team members.
•RACI (Responsible, Accountable, Consult and Inform) is an example of RAM. A RACI chart is a
useful tool to depict clear division of roles and responsibilities especially when the team consists of
internal and external resources. While there can be unlimited number of members Responsible for
the execution of a project task, generally there should only be one member accountable for the
same task.
1. Accountability – A person taking Accountability is ultimately answerable for decisions taken or actions
taken. A Golden Rule is that only one person is Accountable for each task.
2. Responsibility - A person taking Responsibility is actually completing the task or work. Responsibility
can be shared, but accountability can’t be shared. For Example : A developer is responsible for
delivery of the system code. The developer's manager (or team leader) is accountable for delivery of
the system code.
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1. Virtual Teams: Virtual teams can be defined as groups of people with a
shared goal, who fulfill their roles with little or no time spent meeting face to
face.
2. Halo effect: A cognitive bias - if one is good at one thing, then considering
he may be good at everything and accordingly assigning job responsibilities
- Tendency to rate high or low on all the factors due to the impression of a
high or low rating on some specific factor.

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Team Charter
The Team Charter is a document that establishes the team values, agreements and operating guidelines for
the team.
A team charter is simply a common understanding of how a team gets its work done. It covers the basic
questions of why a team exists, what it’s designed to accomplish, and how the work will happen.
A team charter keeps your team focused on their purpose — and greatly increases your chance of a
successful outcome.
An effective, actionable team charter should include the following elements:
Background
Mission and Objectives
Team Values
Communication guidelines
Decision Making Criteria
Conflict Resolving Process
Budget and Resources
Roles and Responsibilities
Meeting Guidelines
Team Operations
Team Member Assessment
Signatures and Approvals
759Solutions,
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Team Building – Bruce Tuckman Model – Five Stages of
Development
1 Forming Team Forms, meets, learns about project; Roles & Responsibilities are not
clear; PM’s Role : guide & direct the team, and establish clear
objectives.
2 Storming Questioning established norms; conflicts between team members'; differing
working style; team experiences uncomfortable & stress; PMs Role :
Establish processes and structures; Resolve Conflicts; Remain positive.
3 Norming This is when people start to resolve their differences; know one-another better;
socialize; develop a stronger commitment to the team goal; start progress
towards it. PMs Role : Team Building - help team members take
responsibility
4 Performing The team reaches the performing stage when hard work leads, without friction,
to the achievement of the team's goal. The structures and processes that you
have set up support this well. PMs Role : Delegate; concentrate on
developing team members.
The Duration of a particular phase
5 Adjourning This is the stage of shelving / suspending the project
depends on team dynamics, size &
leadership
PMs Role : celebrate the team's achievements

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1. Ground rules are expectations that describe acceptable team behavior. They are generally set at the
start of the project by the project manager along with the project team and the responsibility for compliance
rests on the project team jointly. Commitment and compliance to ground rules decreases chance of
misunderstandings and boosts productivity.
2. Co-location also referred as Tight Matrix involves team members physically working at the same
location or holding project meetings together in a common setup for improving the efficiency and
effectiveness of working relationships and to improve communication and productivity.
3. War Room – Team meeting Room
4. Recognition and rewards are formal ways of recognizing and promoting desirable behavior by the project
team. They are most effective when carried out by the project manager or members of the management
team.
5. Monitory rewards considered as tangible and one of the most effective reward systems but other
intangible rewards like growth opportunities, public recognition are also effective.

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Motivational Theories
Maslow’s This theory suggests that humans are always in a state of need
Hierarchy of and as the lower level needs get satisfied, the next higher level
Needs becomes the driving factor for humans.
He proposed five levels in a hierarchical order as below :
Physiological, Safety and Security, Social, Esteem and self
actualization.

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Maslow’s Motivational Theory
Physiological Needs Air (Breathing); Water; Food; Sleep; Clothing; Shelter; Sexual instinct
Safety and Security Needs Personal security; Financial security; Health and well-being; Safety needs
against accidents/illness and their adverse impacts
Social belonging Needs Friendships; Intimacy; Family
Esteem Needs Desire to be Accepted and Valued by others - a sense of contribution or value -
a need for status, recognition, fame, prestige, and attention
Self-actualization This level of need refers to what a person's full potential is and the realization of
that potential. To understand this level of need, the person must not only
achieve the previous needs, but master them.

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Herzberg’s People are influenced by two factors:
Hygiene Theory Hygiene Factors are needed to ensure an employee does not become dissatisfied. They do not
(Two Factor lead to higher levels of motivation, but without them there is dissatisfaction.
Motivational Eg : The organization, its policies & administration; Kind of supervision (leadership &
Theory) management); Relationship with supervisor Work conditions; Salary ; Job security;
Interpersonal relations
Motivation Factors are needed in order to motivate an employee into higher performance. These
factors result from internal generators in employees.
Eg: Achievement; Recognition for achievement; Work itself (interest in the task); Responsibility ;
Growth and advancement

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McGregor’s Theory X – Managers believe that employees are incapable, avoid responsibility,
Theory of X
avoid work whenever possible and are lazy.
and Y
They need incentive / threats / closed supervision
Theory Y – assumes employees may be ambitious and self-motivated, will perform
given the right conditions and are willing to take responsibility without much
supervision

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Victor Vroom’s Expectancy Theory, proposed by Victor Vroom suggests that motivation occurs if
Expectancy
Theory there is expectation of favorable outcome. It also says that motivation is a
function of the value of outcome which means that higher the chances of a favorable
outcome, the higher the motivation.
This theory also proposes that people live up to the expectations that you set for
them. A project manager who openly acknowledges and praises the team’s
contribution is likely to have a high performing team than one who is constantly
complaining.

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David This theory proposes that people have three primary
McClelland’s
motivators: achievement, power and affiliation. The
Achievement
Theory achievement motivation is the need to achieve or succeed in
any endeavor. The power motivation is a desire to influence the
behavior of others. The need for affiliation is about
relationships.

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Contingency Contingency Theory is a class of behavioural theory that claims that
Theory there is no best way to organize a corporation, to lead a company, or
to make decisions. Instead, the optimal course of action is
contingent (dependent) upon the internal and external situation.
Maslow’s Maslow’s Theory Z, proposed by Abraham Maslow suggests that people
Theory Z after reaching a level of economic security, aim for a life rich in values.
Work no longer remains work for them but is a passion and a hobby.
Note that Theory Z is not an extension of the Theory X and Theory Y

proposed by Douglas Mcgregor.

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Powers of Project Manager
Formal Authorized to act on behalf of sponsor /management – Legitimate Power
Authority by Virtue of Position - This power is based on the position of
(Positional or the project manager
Legitimate) “Do what I say” – I am your Boss The Best forms of power are :
Reward This power stems from giving rewards like Rewarding special Expert & Reward Power.
Coercive or Penalty is the worst
assignments, Salary hike, Promotion
form of Power
“Because of your good performance, I am assigning you in special task
team posting in Singapore”
Reprimand Punishing and taking disciplinary action.
(Coercive or “If you not complete the job in time, you will be removed from job”
Penalty)
Expert Power Power comes from Talent, Knowledge, Experience, Ability, Expertise.
Influence using the Subject Matter Expertise or respect because of PM skills
This power comes from being the technical expert or even the project
management expert
Charismatic Power from Personal Charisma, or being liked
Power
Referent Power by virtue of his/ her association with other influential / big people
Power SN Panigrahi, Essenpee Business Solutions,
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Leadership Styles
Directing The strictest style of leadership that involves setting goals, provide specific
Leadership instructions and closely supervising and motivating followers.
Coercive Accomplishes task by bullying / commanding employees; works best when a fast
Leadership company turnaround is needed.
Autocratic A Leader who dictates policies and procedures, decides on his own what goals are to be
Leadership achieved, and directs and controls all activities without any meaningful participation by
the subordinates.
Pace-setting Sets very high work standards for themselves and the followers; works best when
Leadership followers are skilled and morale is high.
Facilitating Definition of facilitate is "to make easy" or "ease a process". In this the leader, facilitates
Leadership the conversation, encouraging people to share their ideas views, and then synthesizing
all the available information to take decision

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Leadership Styles
Coaching Connecting corporate goals whilst helping people finding strengths and weaknesses; linking
Leadership these things to career aspirations and actions. Leader is a coach, mentor and a guide to
develop individuals.
Supporting Provides direction and works together with followers to solve problems; works best when followers
Leadership are not yet comfortable making decisions.
Consultative Often involve others in problem solving, team building, retains right for final decisions. This style
Leadership focuses on using the skills, experiences, and ideas of others. Everyone’s input is considered
Delegating The delegating leadership style is thought to be most effective when the followers are comfortable
Leadership taking responsibility, and have the experience to accomplish the necessary tasks. The delegating
leader provides guidance in the decision making process; then delegates to followers the
responsibility for completion of the task. The leader then assumes responsibility for monitoring the
progress.
Bureaucratic The bureaucratic style is based on following normative rules, and adhering to lines of authority.
Leadership Leaders impose strict and systematic discipline on the followers

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Charismatic Leaders charisma, personality, grace creates followers. A charismatic leader is
Leadership easily able to move people and cause a change in disposition with respect to a
wide variety of issues.
Democratic / The democratic leader builds consensus through participation involving all the
Participative concerned and take collective / group decisions
Affiliative Focuses on emotional needs over work needs. Best used for healing rifts, and getting
Leadership through stressful situations. Promotes harmony and helps to solve problems; works
best when morale is low and teambuilding is needed.
Laissez Faire A non-authoritarian leadership style. Laissez faire leaders try to give the least possible
Leadership guidance to subordinates, and try to achieve control through less obvious means. They
believe that people excel when they are left alone to respond to their responsibilities
and obligations in their own ways.
Analytical Analytical leadership style reduces the risks and uncertainty in planning and solving
Leadership the complex problems - looks for analytical trends in the data in order to predict
outcomes, and this makes make them more cautious and deliberation in their actions-
values accuracy and logic SN Panigrahi, Essenpee Business Solutions,
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Authoritative Seldom lets others make decisions, feels he/she is the most qualified and
Leadership experienced and an expert - knows what needs to get done; works best when
the workgroup is without clear direction.
Transactional Transactional leaders achieve set goals by acting within established procedures and
Leadership standards. This leader assigns specific, well-defined tasks to subordinates and requires
that they fulfill their responsibilities and meet standards precisely as prescribed or
agreed upon.
Transformational Transformational leadership generally aims at higher goals than transactional does.
Leadership Transformational leaders achieve the goals by inspiring and motivating followers and
encouraging their initiative. Transformational leaders are able to create vision. They are
able to establish a shared vision and sense of purpose among team members.
Situational The concept under the theory is that there is no single "best" style of leadership.
Leadership Effective leadership is task-relevant to the situation and the most successful leaders
are those that adapt their leadership style to the maturity (situational)
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1. Hersey-Blanchard Situational Leadership Model rests on two fundamental concepts; leadership style
and the individual or group's maturity level.
They categorized all leadership styles into four behaviour types, which they named S1 to S4, of these,
no one style is considered optimal for all leaders to use all the time. Effective leaders need to be
flexible, and must adapt themselves according to the situation.:
• S1: Telling - is characterized by one-way communication in which the leader defines the roles of the
individual or group and provides the what, how, why, when and where to do the task;
• S2: Selling - while the leader is still providing the direction, he or she is now using two-way
communication and providing the socio-emotional support that will allow the individual or group being
influenced to buy into the process;
• S3: Participating - this is how shared decision-making about aspects of how the task is accomplished
and the leader is providing less task behaviours while maintaining high relationship behavior;
• S4: Delegating - the leader is still involved in decisions; however, the process and responsibility has
been passed to the individual or group. The leader stays involved to monitor progress.
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Leadership style
Follower 'situation' H & B terminology Quick description
emphasis
Unable and Unwilling Telling
Follower lacks experience or skill, and high task - low Leader gives precise firm instruction, direction,
confidence to do the task, and may relationship instructions and deadlines and autocratic
also lack willingness. closely monitors progress.
Unable but Willing Selling
Persuasion,
Follower lacks the ability, perhaps due high task - high Leader explains goals, tasks,
Encouragement,
to lack of experience, but is relationship methods and reasons, and
Incentive
enthusiastic for the work. remains available to give support.
Able but Unwilling Participating
involvement,
Follower is capable and experienced, low task - high Leader works with follower(s),
consultation,
but lacks confidence or commitment relationship involved with group, seeks input
teamwork
and may question the goal or task. and encourages efforts.
Delegating
Able and Willing
low task - low Leader gives responsibility to trust, empowerment,
Follower is capable, experienced,
relationship followers for setting goals, responsibility
confident and committed to the goals.
planning and execution.

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Plan Resource Management – Output
Resource Management Plan
•Contains both team management plan and physical resource management plan, includes
• Identification of resources
• Acquiring resources
• Roles and responsibilities
•Project organizational charts
•Training
•Team development
•Recognition plan

Plan Resource Management – Output
Team Charter
• Establishes team values, agreements and operating guidelines for the team, includes
➢ Background
➢ Mission and Objectives
➢ Budget and Resources
➢ Roles and Responsibilities
➢ Team Operations
➢ Team Member Assessment
➢ Signatures and Approvals
➢ Communication guidelines
➢ Decision-making criteria and process
➢ Conflict resolution process
➢ Meeting guidelines
➢ Team agreements

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Staffing Management Plan : The staffing management plan, a subset of the project management plan
describes when and how human resource requirements will be met.
The staffing management plan, along with the project schedule, identifies the time periods each project
team member will be needed and other information important to acquiring the project team.
The staffing management plan identifies training strategies and plans for developing the project team.
The staffing management plan lists the time periods that team members are expected to work on the
project, along with information such as training plans, certification requirements, and compliance issues.
Responsibility Assignment Matrix (RAM): defines who does what. The Staffing Management Plan
defines when will people get added and removed from the project.

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9.2 ESTIMATE ACTIVITY RESOURCES
The process of estimating team resources and the type and quantities of
materials , equipment and supplies required to perform project work
Estimate Activity Resources:
1. This is the process of estimating the type and quantities of material, human resources, equipment, or supplies required
to perform each activity.
2. Estimate is a quantitative judgment for project variables like costs, durations or resources.
3. Duration is the amount of time that an activity takes, while effort is the total number of person-hours that are expended.
Effort is the amount of work required to complete a task.
4. A resource calendar is a calendar that identifies the working days and shifts on which each specific resource is
available. Resource calendar spells out the availability of resources (internal/external) during the project period
5. Activity Resource Requirements may include the basis of estimation
6. Alternative analysis includes make-or-buy decisions, different tools, different skills, etc.
7. Bottom-up-estimating is a method of estimating project duration or cost by aggregating the estimates of the lower–
level components of the WBS. This is the most accurate method for generating project estimates, but is time
consuming.
8. Resource Breakdown Structure (RBS) is a hierarchical chart of resources based on category and type that can be
used to optimize resource utilization by techniques such as resource leveling.
9. Resource leveling is a technique used to smooth out the resource assignments without over-allocating resources and
without a detrimental impact on the project schedule.

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Estimate Activity Resources - T & T
306
Alternative Analysis
▪Many schedule activities have alternative ways of accomplishment
▪Include various levels of resource capability or skills, different type
or size of machine, different tools, make or buy decisions
▪Published Estimating data

▪Several organizations routinely publish updated production rates and unit cost of resources for
an extensive array of labor trades
, material and equipment for different countries and geographical locations
▪Bottom Up Estimating
▪Method of estimating project duration or cost by aggregating the
estimates of the lower level components of WBS
▪When an activity cannot be estimated with confidence, activity is decomposed into more detail

Estimate Activity Resources - Outputs
307
Activity Resource Requirements :

▪Identify the type and quantity required for each activity in a work package
▪These requirements aggregated to determine the estimated resources for
each work package and work period
Resource Breakdown Structure (RBS) :

▪RBS is a hierarchical representation of resources by category and type.
Resource categories include labor, material, equipment, supplies. Resource
type include skill level, grade level etc.

Estimate Activity Resources - Outputs
• Example – RBS
Project Project
Resources Resources
Materials People Equipment Materials People Equipment
Project
Building Promotion Engineering Fit Landscaping Marketing Purchasing Technical Construction
Management
Out
Electrical Mechanical Electrical Mechanical Building

Building Finishes
Items Items
Engineers Designers
Piping Systems Plants
Sr.Engineer Jr.Engineer
SightGlasses Pipe-work Valves Pipe Supports

•
9.3 Acquire Resources
The process of obtaining team members, facilities, equipment, materials and resources
necessary to complete project work
Source: A Guide to the Project Management Body of Knowledge. 6th Edition3;029017

Acquire Resources– T & T
Virtual Teams
310
•Are groups of people with a shared goal who fulfill their roles with little or no time spent meeting
face to face
Communication technology used for interaction:

•E-mail, audio conferencing, web-based meetings and video conferencing
Virtual team model makes it possible to:
•Form teams of people from the same company who live in widespread geographical
areas
•Special expertise can work from remote areas
•Team members can work from homes
•Team members who work different shifts or hours
•People with mobility limitations or disabilities
Virtual Teams
Important mode of interaction:

• Communication planning
Additional time would be required:
• to set clear expectations
• facilitate communications
• develop protocols for resolving conflict
• include people in decision making
• understand cultural differences
• share credit in successes

Multi Criteria Decision Analysis:
•To acquire the project team, use of a multi-criteria decision analysis tool may be used
•Selection criteria are developed and used to rate or score potential team members
(please refer next slide)
•Criteria’s are then weighted according to the relative importance of the needs within
the team

Multi Criteria Decision Analysis:

Examples of selection criteria used to score team members –
1.Availability: Check for the team members availability to work on the project within the time period needed
2.Cost: Verify if the cost of adding the team members is within the budget
3.Experience: Verify that the team member has relevant experience to contribute to the
success of the project
4.Ability: Verify that the team member has the required competency needed to work on the project
5.Knowledge: Consider if the team member has relevant knowledge of the
customer, similar implemented projects and nuances of the project environment
6.Skills: Ensure that the team members has the relevant skills to use a project tool, implementation or training
7.Attitude: Determine if the team member has the ability to work in a team
8.International factors: Consider team member location, time zone and communication capabilities

9.4 Develop Team
The process of improving competencies, team interactions, and the overall team
environment to enhance project performance
Develop Team – T & T
Objectives of developing a project team:

•Improving knowledge and skills of team members to increase their ability to complete
project deliverables, while lowering costs, reducing schedule delays and improving quality
•Improving feelings of trust and agreement among team members to raise morale, lower
conflict and increase team work
•Creating a dynamic, cohesive, and collaborative team culture to

▪ improve individual and team productivity, team spirit and cooperation
▪ allow cross training and mentoring between team members to share knowledge
and expertise

Interpersonal Skills
• Sometimes known as ‘soft skills’
• Skills such as emotional intelligence, conflict resolution, negotiation, influence, team
building and group facilitation are valuable assets when developing a project team
Team Building Activities

• Encouraging various formal, informal communication and activities based on the
individual’s roles builds trust and establishes good working relationships
• In virtual teams this is a very important activity

Manage Reams
Interpersonal & Team Skills
Conflict Management
Decision Making
Emotional Intelligent
Influencing
Leadership
Motivation
Negotiation
Team Building

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Project Manager’s Role : CONFLICT RESOLUTION
One of the Major Role of Project Manager is Resolving Conflicts. The key
conflict resolution techniques are:
Confronting (problem solving)
• Confronting means solving the real problem so that the problem goes away. Confronting
leads to a win-win situation.
Compromising
• This is lose-lose situation, since no party gets everything. This technique involves finding
solutions that bring some degree of satisfaction to both parties.
Withdrawal (Avoidance)
• In this technique, the parties retreat or postpone a decision on a problem. Dealing with
problems is a PMI-ism; therefore, withdrawal is not usually the BEST choice for resolving
conflict
Smoothing (Accommodating):
• This technique emphasizes agreement rather than differences of opinion
Forcing
• This technique involves pushing one viewpoint at the expense of another - win-loose
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You are the PM, and two of your team members are always arguing. In order to resolve their latest
conflict, you help them come to a conclusion that uses a little of both of their ideas. Which conflict
management technique have you employed?
A. Withdraw/Avoid
B. Smooth/Accommodate
C. Compromise/Reconcile
D. Collaborate/Problem Solve
Answer: C. Compromise/Reconcile. Since you went with a solution that used both of their ideas, it’s a
compromise.
Sometimes deciding between Smooth/Accommodate and Compromise/Reconcile can be tricky, so it’s

important to do lots of practice questions on this topic.

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Consequences of Improper Conflict Resolution
If you are not able to solve conflict effectively, your team members will lose trust in you, and each other,
weakening their ability to work together and detracting from your project’s success. You must deal with
conflict before it is beyond repair and starts affecting your project.
The following are a few consequences of improper conflict resolution:
•Low team morale.
•Negative impact on the project manager’s authority.
•Increased number of personal clashes.
•Low productivity and efficiency.
•Low quality work.
Often a project manager must monitor and resolve conflicts as quickly as possible to keep them from
becoming a significant issue.

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How to Prevent Conflict
You cannot keep conflict from happening, but following a few rules can minimize how often it happens.
Fewer issues give you more time to focus on your task.
•Establish Strict Ground Rules: These help in discipline team members resulting in less conflict.
•Have an Effective Communication Plan: This plan can help you avoid many conflicts. Invest time in
defining how much and how often you should communicate with your stakeholders.
•Have a Better Stakeholder Management Plan: Your project is successful if your stakeholders are
happy, and project management is all about managing stakeholders’ requirements. Conflict is caused
by unsatisfied stakeholders, so manage them well.
•Solve Conflict Early: This is easy and requires less time and effort over the long. Make sure an
unresolved conflict doesn’t resurface again later

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The Role of the Project Manager in Conflict Resolution
While resolving a conflict, keep the following points in mind:
➢ Treat each participant with respect.

➢ Be calm and rational.
➢ Keep people and problems separate.
➢ Listen to each participant patiently.
➢ Explore all possible solutions.
➢ Do not let yourself be biased towards one side or the other.
➢ Avoid forcing or pressuring participants to reach a solution.
➢ Do not postpone a conflict, as it may fester.

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A conflict-resolution technique that occurs when one party refuses to talk anymore about the issue
and physically leaves. This is an example of a lose-lose conflict-resolution technique. This technique
is also known as withdrawal.
1.forming
2.forcing
3.avoiding
4.Storming
Ans : 3 – Avoiding
A conflict-resolution technique that is also known as problem solving. This is the best way to resolve
conflicts and involves fact finding to bear out the solution. This is a win-win conflict-resolution
technique.
1.forming
2.confronting
3.performing
4.forcing
Ans : 2 – confronting

800
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801
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Team Building – Bruce Tuckman Model – Five Stages of
Development
1 Forming Team Forms, meets, learns about project; Roles &
Responsibilities are not clear; PM’s Role : guide & direct
the team, and establish clear objectives.
2 Storming Questioning established norms; conflicts between team
members'; differing working style; team experiences
uncomfortable & stress; PMs Role : Establish processes
and structures; Resolve Conflicts; Remain positive.
3 Norming This is when people start to resolve their differences; know
one-another better; socialize; develop a stronger
commitment to the team goal; start progress towards it. PMs
Role : Team Building - help team members take
responsibility
4 Performing The team reaches the performing stage when hard work
leads, without friction, to the achievement of the team's goal.
The structures and processes that you have set up support
this well. PMs Role : Delegate; concentrate on developing
team members.
5 Adjourning This is the stage of shelving / suspending the project
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Bruce Tuckman’s Ladder of Team Development Model
• Team meets and learns about the project and what their formal roles and
responsibilities are. Team members are positive and excited about the Task
Forming Ahead. Role of PM : Communicating Roles & Responsibilities, Team Goals
and provide clear Direction regarding the project Objectives.
• During this phase, the team begins to address the project work, technical
decisions, and the project management approach. If team members are not
collaborative and open to differing ideas and perspectives the environment
Storming can become destructive. Role of PM : Conflict Resolution; Clarifying Roles;
Converging / Unifying Divergent views towards Project Objectives. Coach,
Facilitate, Establish Processes and Structures.
• In the norming phase, Team Members begin to Work Together and adjust work
habits and behaviors that support the team. The team begins to trust each other.
Norming The team has greater self-direction and is able to resolve issues and conflict as
a group. Role of PM : Team Team Building; Ensure that the team members are
working Collaboratively; help team members take responsibility
• Teams that reach the performing stage function as a well-organized unit. They
are interdependent and work through issues smoothly and effectively. The team
Performing members work effectively as a group and do not need the oversight that is
required at the other stages. Role of PM : Delegate Work to Team -
concentrate on developing team members & continue to monitor the
progress of the Team and Celebrate Milestone Achievements.
• In the adjourning phase, the team completes the work and moves on from the
Adjourning project. Role of PM: Ensure that there is time for the team to celebrate the
success of the project and capture best practices SNfor future use.
803 India
A development phase where great teams end up. This stage is where the team is
productive and effective. The level of trust among team members is high, and
great things are achieved. This is the mature development stage.
1.forming
2.norming
3.performing
4.Storming
ANS: 3 - Performing
This is a conflict-resolution technique where one party forces their solution on the others. This is
an example of a win-lose conflict resolution technique.
1.storming
2.forcing
3.norming
4.Forming
ANS: 2 - Forcing

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This involves formally reviewing the project at specific points to determine whether the project should
proceed.
1.phase gate approval
2.negotiating
3.performing
4.storming
Ans : 1. phase gate approval
A way to get diverse groups of people to work together efficiently and effectively. This is the responsibility
of the project manager. It can involve activities performed together as a group or individually designed to
improve team performance.
1.negotiating
2.avoiding
3.adjourning
4.team building
5.Ans : 4. team building

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Negotiating is a leadership technique and a conflict-resolution technique. Negotiating is the act of two or
more parties explaining their needs and coming to a mutual agreement on a resolution.
1.smoothing
2.norming
3.negotiating
4.avoiding
Ans : 3. negotiating
At this development stage, team members know each other fairly well by now. They're comfortable with
their positions in the team, and they begin to deal with project problems instead of people problems.
Decisions are made jointly at this stage, and team members exhibit mutual respect and familiarity with
one another.
1.storming
2.forming
3.norming
4.forcing
Ans : 3. norming
As the name implies, adjourning refers to breaking up the team after the work is completed.
1.adjourning
2.norming
3.storming
4.Avoiding
Ans : 1. Adjourning SN Panigrahi, Essenpee Business Solutions,

806
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The development stage where the action begins. Team members become confrontational with each other
as they're vying for position and control during this stage. They're working through who is going to be the
top dog and jockeying for status.
1.forming
2.storming
3.forcing
4.norming
Ans : 2. storming
A conflict-resolution technique where each party involved gives up something to reach a resolution. This is
not generally a permanent solution.
1.confronting
2.forming
3.compromise
4.norming
Ans : 3. compromise
A temporary way to resolve conflict; the areas of agreement are emphasized over the areas of difference,
so the real issue stays buried.
1.smoothing
2.forming
3.storming
4.Forcing
Ans : 1. smoothing
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Co-Location
•Placing many or all of the most active team members in the same physical location to
enhance their ability to perform as a team
•Can be temporary such as at strategic important times during the project or for the
entire project

Develop Team - Output
Team Performance Assessments

Evaluation of a team’s effectiveness may include indicators -
•Improvements in skills to perform assignments more effectively
•Improvements in competencies to perform better as a team
•Reduced staff turnover rate
•Increased team cohesiveness to improve the overall project performance
• As a result of overall evaluation, the project management team may identify

specific trainings, coaching, mentoring, or changes required to improve the teams
performance

9.5 Manage Team
The process of tracking team member performance, providing

feedback, resolving issues and managing team changes to optimize project
performance
Source:
SN Panigrahi, A Guide toBusiness
Essenpee the Project Management
Solutions, Body of Knowledge. 6th Edition; 2031270
India 810
Manage Team – T & T
Conflict Management
Positive Approach
•Timely address & proper methodology, generally collaborative and in private
•Result : Better inter relationship & improved efficiency
Disciplinary Approach
•Formal procedures may need to apply with strict actions
•Cause : Conflict continues to disturb project work in spite of all formal positive
approach
Common Sources
•Resources, Scheduling priorities, Individual working styles, etc.
Proactive actions
•Following Standard Project Management practices
•Planning for clear roles and responsibilities
•Communication practices
•Ground rules etc.
Conflict Management – Conflict Resolving Techniques
Withdrawal/Avoid (Lose-Lose)
• Postponing the issue to be better prepared or to be resolved by others
• Retreating or withdrawing from an actual or potential disagreements
• No direct solution directly possible
Smooth/Accommodate (Lose-Lose)
• Conceding one’s position to the needs of others to maintain harmony and relationship
• De-emphasizing or avoiding areas of difference and emphasizing on areas of agreement
• Partial solution & buy time

323Compromising/Reconcile (Lose-Lose)
•Both sides going back a step

•Bargaining or searching for solutions that bring some degree of satisfaction to the parties
in order to temporarily or partially resolve the conflict
Forcing / Direct (Win-Lose)
•Using formal power
•Exerting one’s point at the potential expense of another
Collaborate/Problem Solve/Confronting (Win-Win)
•Incorporate multiple viewpoints and insights from differing perspectives

•Requires a cooperative attitude and open dialogue that typically leads to consensus and
commitment
Arbitration
• Both the party agree to a neutral third party and communicate their opinion
• The decision of arbitrator is binding to both the party
• Normally this method is used to avoid placing conflicts to the Court of Law
PM Must Carefully Select The Appropriate Mode

Manage Team - Tools and Techniques
Conflict Management - Examples

Types of Power
Legitimate Power
•Formal Power or Positional Power
•Power comes from being formally in charge of the project and the people
Reward power
•Your ability to give award a bonus or another kind of reward in order to motivate team members
Expert power
•You are the subject matter expert
•The team respects you for your expertise in a specific-area and gives you credibility because of that

Manage Team – T & T Formal or Legitimate Power
Types of Power This power comes with the position itself; therefore, this power is also known
as positional power. Team members will obey orders from you because they
know that you have the authority to issue orders. PM has such Power in
a Projectized organization and in a Strong Matrix type of organization
Reward Power
Positional Reward power is (to some extent) tied to the formal power of the project manager. You will
earn the team’s support because team members think that you are capable of rewarding
Powers them if they perform well. Rewards may be monetary (salary increase, bonus, promotion,
etc.) or non-monetary (recognition, professional development, appreciation letter, day off,
etc.).
Punishment Power
Punishment Power comes with the formal power of the project manager. Here,
you will get your team’s obedience because the team members are afraid that
Types if they don’t perform their duties efficiently, they may get punished. Here you
use fear as a primary tool to get work done. Punishment power is also known
of as coercive power.
Power
Expert Power
Being a subject matter expert itself is a great influential power. Team
members will respect you for your technical expertise. They trust you
because they think that you are an expert and know how to handle issues
Expert power is considered to be a positive power that influences team
Personal members to follow your lead.
Powers Referent Power

If you have connections with some influential people in the organisation, you
are said to possess referent power. Since you are connected with influential
people, your team members want to connect with you as well. 8
S.N.Panigrahi 1
India 7
9.6 Control Resources
• Process of ensuring that 1) physical resources assigned and

allocated to the project are available as planned 2) monitoring
the planned versus actual utilization of resources 3) taking
corrective action
Source:
SN Panigrahi, A Guide toBusiness
Essenpee the Project Management
Solutions, Body of Knowledge. 6th Edition; 2031279
India 818
Practice test 1
The project is just starting out and consists of people from 14 different
departments. The project charter was signed by one person and contains over
30 major requirements that must be met on the project. The sponsor has
informed the project manager that the SPI must be kept between 0.95 and 1.1.
A few minutes of investigation resulted in the identification of 34 stake holders
and the schedule objectives on the project are constrained. A project manager
has just been hired. Which of the following types of project managers gain the
co-operation of others?
A. Formal
B. Referent
C. Penalty
D. Expert

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Answer is A
Explanation: Generally, the best forms of power are reward or expert. The project
manager has not had time to become a recognized expert in the company (choice D) and
reward is not included as a choice here. This leaves formal power (choice A) as the only
logical answer.

Practice test 2
You just find out that a major subcontractor for your project consistently provides
deliverables late. The sub contractor approaches you and ask you to continue accepting
late deliverables in exchange for a decrease project cost. This offer is an example of:
A. Confronting
B. Compromise
C. Smoothing
D. Forcing
Answer is B
Explanation: Both parties are giving up something. This is a compromise.

A document or tool which describes when and how human resources
will be brought onto and taken off the project team is called a:
a) Staffing Management Plan

b) Responsibility Assignment Matrix (RAM ).
c) Organizational Breakdown Structure (OBS).
d) Resource Assignment Chart
Answer : A

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Should historical information be used during resource planning?
A. no, since there is rarely any correlation between resource
expectations on one project when compared to another.
B. Yes, as historical information is available can provide insight
into what type of resources were required on previous projects
of similar nature.
C. No, since historical information is usually misleading, given the
cost of resources have undoubtedly changed since the
completion of the prior project.
D. Yes, since historical information can be easily adjusted to
accurately determine current project costs.
Ans : B

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Which of the following Enterprise Environmental factors is NOT a relevant input for Human
Resource Planning process:
1. Organizational Chart Templates
2. Supervisor-subordinate relationships
3. Technical competencies of project staff
4. Individual goals and agendas of project stakeholders
CORRECT: 1
Which of the following is the most important element of Project Management Plan that is
useful in HR Planning process:
1. Risk Management activities
2. Manage Qualityactivities
3. Activity Resource requirements
4. Budget Control activities
CORRECT: 3. Activity Resource requirements is a primary input to HR Planning. It is used to

determine the human resource needs of the project.
All of the following can be used to document team member roles and responsibilities
EXCEPT:
1. Hierarchical-type Organizational Chart
2. Matrix-based Responsibility Chart
3. Text-oriented Format
4. Functional Chart
SN Panigrahi, Essenpee
CORRECT: 4. Functional Chart is not listed in PMBOK as a type of Organizational Chart Business Solutions,
India
824
Carl is a project manager working on a large software
implementation project. His sponsor requests a major
change on the project and says that it is a showstopper.
Carl recommends that the sponsor use the change control
process but the sponsor is not ready to listen. In one of the
status meetings, Carl decides to stop working on the project
until the sponsor starts following the processes and makes
his/her demands reasonable. Which conflict resolution
technique is being used by Carl?
A: Direct
B: Reconcile
C: Withdraw
D: Collaborate
Ans : C
PMBOK 6th Edition – Page : 349 SN Panigrahi, Essenpee Business Solutions,

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825
Resource Breakdown Structure is an example of:
2. Responsibility Assignment Matrix
3. Text-oriented Format
4. Functional Chart
CORRECT: 1
Which of the following types of Organizational Charts can be BEST used to

track project costs :
2. Organizational Breakdown Structure
3. Resource Breakdown Structure
4. Responsibility Assignment Matrix
CORRECT: 3. A RBS can be aligned with Organization’s accounting system
Which of the following is not true for a Responsibility Assignment Matrix

(RAM):
1. Defines what project team is responsible for each WBS component
2. Defines what project member is responsible for each activity
3. Text description of roles, responsibilities, authorities
4. Defines all people associated with each activity
CORRECT: 3. SN Panigrahi, Essenpee Business Solutions,
India
826
You are working with two of your team members who have a
conflict. One of the team members puts forth valuable points,
but the other member doesn't like the approach and storms
out of the room. Which conflict resolution technique did the
second person use?
A: Withdraw
B: Problem Solve
C: Force
D: Smooth
Ans : A

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Competencies developed as a result of project performance appraisals conducted during
the controlling process of project management are an example of:
1. Unplanned Training
2. Planned Training
3. Project Performance Measurement output
4. Recognition and Rewards
CORRECT: 1
War room creation during project deployment phase is an example of:

1. Team Building activity
2. Establishing Ground Rules
3. Co-Location
4. General Management Skills
CORRECT: 3

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You are a project manager and you have borrowed two
resources from the functional manager for your project. The two
resources, Ryan and Harris, are in constant argument about
two features of the product. Due to this, the deliverables have
started to miss the deadline. What should you do in such a
scenario?
A: Remove them and request for new resources.

B: Meet with them and try to find the root cause of the
situation.
C: Escalate it to the concerned functional manager.
D: Request the remaining resources to work on the missed
deliverables.
Ans : B

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Schedule, Project Priorities and ________ are the most
common causes of conflict on the project.
A: Team members personality

B: Resources
C: Cost
D: Quality
Ans : B

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Mark, a project manager, is working on planning the human
resource activities of the project. Somebody recommends
that he use the RACI chart because it clearly defines the
roles and responsibilities of the stakeholders. RACI chart is
a type of RAM but RAM is an example of _____ .
A: Networking
B: Organizational theory
C: Organizational chart and position description
D: Hierarchical-type organization chart
Ans : C: Organizational chart and position description

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Question: You are working with your HR manager to include new methods
to develop the team. You are bringing a lot of changes to the table and
your senior leadership is glad that these changes are positively impacting
the team. Which of the following is not a technique that can be used?
A: Project Management Information System

B: Recognition and Rewards
C: Conflict Management
D: Motivation
Ans : A
Refer to PMBOK ® Guide - Sixth Edition: Pg 336. You are in the
Develop Team Process. Option B, C and D are all part of Develop
Team Process except option A which is a technique for Manage Team
Process.
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Project Communication Management
336
Project Communications Management includes the processes that are

required to ensure timely and appropriate planning, collection, creation,
distribution, storage, retrieval, management, control, monitoring and
the ultimate disposition of project information
90% of the ProjectSNManager’s job is Business

Panigrahi, Essenpee Communication
Solutions, India
Project Communications Management
▪ Communication activities : Potential dimensions

▪ Internal ( within the project ) External ( Customer, vendor etc.)
▪ Formal ( reports, minutes, briefings); Informal ( email memos, adhoc
discussions)
▪ Vertical ( up and down the organization) ; Horizontal ( with peers)
▪ Official ( News letters, annual report); Unofficial ( off-the record
communication)
▪ Written and oral and verbal ( voice inflections) , non verbal ( body
language)
Project manager cannot control all communications but should try to control or
prevent miscommunication, unclear directions, and scope creeps

Kinds of Communication
Formal Written
•Anytime you are signing a legal document or preparing formal documentation for
your project, blueprints, specifications
Informal Written
•If you drop someone a quick email, leave them a memo or a sticky note
Formal Verbal
•If you have to give a presentation to update people on your project, speeches,
prepared talks
Informal Verbal
•Just calling somebody up to chat about your project, meetings, hallway chats

On your project you want to avoid bureaucracy, so you adopt an informal approach to change control. The main
problem with this approach is______________.
•A. There is no "paper trail" of change activity

•B. Regular disagreements between the project manager and the functional manager will occur
•C. There are misunderstandings regarding what was agreed upon by stakeholders
•D. There is a lack of sound cost estimating to assess the change's impact
•Correct Answer: C
Using a formal, documented approach to change management reduces the level of misunderstanding or
uncertainty regarding the nature of the change and its impact on cost and schedule. For large projects, change
control boards are recommended.

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Common Communications Skills
•339Listening actively and effectively
• Questioning and probing ideas and situations to ensure better understanding
• Educating to increase team’s knowledge so that they can be more effective
• Fact-finding to identify or confirm information
• Setting and managing expectations
• Persuading a person, a team or an organization to perform an action
• Motivating to provide encouragement or reassurance
• Coaching to improve performance and achieve desired results
• Negotiating to achieve mutually acceptable agreements between parties
• Resolving conflict to prevent disruptive impacts
• Summarizing, recapping and identifying the next steps

Question
You are managing a project that has teams located in different parts of the world.
While the advantage of colocation is beneficial - the team structure or locations
cannot be changed. Being an experienced manager that you are - you realize that
without a proper communication channel can quickly lead to chaos. What would
your choice of communication be?
A.Formal and Verbal
B.Formal and Written
C.Informal and written
D.Informal and Verbal
B is the correct answer.
Considering cross located teams and difference in cultures

involved the best choice of communication in this case would
be formal and written.
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Project Communication Management
Monitoring &
Planning
Processes

Executing
Processes
Process Groups
Control
Plan
Communication Monitor
Communications Manage Communications
Management Communications
Management 340
10.1 Plan Communications Management
Plan Communications Management is the process of developing an
appropriate approach and plan for the project based on stakeholder’s
information needs and requirements, available organizational assets,
and the needs of the project
Guide to the Project Management Body of Knowledge. 6th Edition; 2017

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Communication Requirements Analysis - T & T
342
▪ A key component is communication planning is to determine who will

communicate with whom and who will receive what information
▪ Project resources shall be expended only on communicating information
that contributes to success, or where a lack of information can lead to
failure of the project

Communication Complexity
•The project manager should consider the number of potential channels or paths as an
indicator of the complexity of a project’s communication
No of Channels : n (n – 1) n = Number of Resources

2
2 Resources
= 1 Channel 3 Resources = 3 Channel
4 Resources = 6 Channel
•Planning project’s actual communications is to determine and limit who will

communicate with whom and who will receive what information

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Question - 7
You are in charge of a project that deals with laying out a lavish 18 hole golf course. The project work
is in progress. You also have a number of contractors working on the project. Being an experienced
manager you know that communication is key to success of the project. You have identified 10
stakeholders including you. Due to some internal and external organizational changes at the client
end three new stakeholders have been added with whom you need to communicate with. You also had
to reduce one of the contractors with whom you were communicating. How many communication
channels do you have now?
A.45
B.78
C.91
D.66
D is the correct answer.
Originally you had 10 stakeholders to communciate with - so number of communication channels were 10 * (10-
1) /2 = 45. However the question states that 3 new stakeholders got added while 1 stakeholder got reduced. So
total number of stakeholders = 10 + 3 -1 = 12 So the total number of communication channels are (12 * ( 12-1 ))
/2 = 66 So the correct answer is option D

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Tools and Techniques
Communications Requirements Analysis
•Who needs what information

•To what level of detail
•When is it required
•What format will it be given in
•What value will it add (could it be done better
another way)
•Confidentiality (internal/external)
•Security / delegated access
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Sources of information to identify and define project communication requirements:

▪ Organization charts
▪ Project organization and stakeholder responsibility relationships
▪ Disciplines, departments and specialties involved in the project
▪ Logistics of how many persons will be involved with the project and at which locations
▪ Internal information needs, when communicating within organizations
▪ External information needs, when communicating with the media, public or contractors
▪ Stakeholder information and communication requirements from within the stakeholder
register

Communication Requirements Analysis
-T&T
345
Customer, Sponsor, Functional managers, and Team Members
• Other Project Managers
The Other
Other Project Project Projects
Managers
Other
Stakeholders

Communication Technology - T & T
346
The methods used to transfer information among project stakeholders may vary
significantly such as -
▪from brief conversations to extended meetings

▪from simple written documents to extensive materials (e.g. schedules, databases and
websites) which are accessible online as methods of communication
•Factors that can affect the choice of communication technology include:
❑ The urgency of the need for information
❑ The availability : Technology, Resources
❑ Easily Usable
❑ Project Environment
❑ Sensitivity and confidentiality of the information

Basic Communication Model - T & T
347 Sender-Receiver Model
Transmit Noise
Message
Encode Decode
Acknowledge
Noise Message
Sender Receiver
Medium
Noise
Decode Encode
Feedback
Message

Basic Communication Model Sequence
348
• Encode: Thoughts or ideas are translated into language by sender

• Transmit message: This information is then send by sender using
communication channel
• Decode : To translate message back into meaningful thoughts or ideas
• Acknowledge: Upon receipt of the message, receiver may signal receipt of
the message
• Message and feedback message : The output of encoding
• Feedback/response: When the received message has been decoded and
understood the receiver encodes thoughts and ideas into a message and
transmit this message to the original sender.
• Medium : The method used to convey the message
• Noise : Anything that interfaces with the transmission and understanding
of message (Distance, un-familiar technologies, etc.)
Communication Methods - T & T
349
• Interactive communication - Between two or more parties in

multidirectional (Phone calls, meetings, interviews), most effective
way
• Push communication - Sent a specific information to specific

recipients. Examples are letters, memos, emails, faxes etc. This
ensures that message is sent but will not certify that it is actually
received or understood (Push the message to recipient)
• Pull communication – Used for large volume of information and large

audiences. Examples are internet sites, company data bases, e-
learning, etc. Recipients has to access the communication content
(Pull out information) at their own discretion
• SN Panigrahi, Essenpee Business Solutions, India
Plan Communication - Output
350
The Communications Management Plan is a subsidiary plan of the project

management plan, and it details how the project communications will be
planned, structured, implemented and monitored for effectiveness
It contains :
– Stakeholder communication requirements
– Information to be communicated
– Time frame and frequency for the distribution of required information
– Person responsible for communication the information
– Person responsible for authorizing the release of confidential information
– Person or groups who will receive the information
– Methods or technologies used to convey information
– Resources allocated for communication
– Escalation process identifying timeframes and the management chain
– Method for updating and refining communication management plan
– Glossary of common terminology
10.2 Manage Communications
Manage Communications is the process of ensuring timely and appropriate
creation, collection, distribution, storage, retrieval, management, monitori
ng, and the ultimate disposition of project information in accordance to
communications management plan

Manage Communications – T & T
352
Project Management Information Systems

•Ensure that stakeholder easily retrieve information they
need in a timely manner. Project information is managed and
distributed through the use of a variety of tools -
•Hard copies- letters, memos, press releases
•Electronic communications management – e-
mail, fax, video and web conferencing, websites etc.
•Electronic project management tools – web interfaces to
scheduling and project management software, meeting and
virtual office support software, portals etc.
•Social Media Management – Websites and web publishing
Manage Communications – T & T
353
Project Reporting :
•The process of collecting and distributing performance information,
including status reports, progress measurements and forecasts:
Report may include :
•Analysis of past performance
•Analysis of project forecast
•Current status of risk and issues
•Work completed during the period
•Work to be completed in the next period
•Summary of changes approved in the period

10.3 Monitor Communications
Monitor Communications is the process of ensuring the information needs of

the project and its stakeholder are met. This is performed throughout the
project to ensure the information needs of the project stakeholders are
met

Practice test 1
355
Communication is the key to the success of a project. As the project

manager, you have three stakeholders with whom you need to
communicate. As such you have six channels of communicate with.
A new stakeholder has been added that you also need to
communicate with. How many communications channels do you
have now?
A. 7
B. 10
C. 12
D. 16

356
Answer is B
Explanation: Did you realize that the project manager is part of
the communication channels? Therefore, there are actually
four stakeholders to begin with and six channels of
communication. The question is asking how many total
channel of communication you have with a team of five
people.
The formula is [N *(N-1)]/2 or (5*4)/2=10

Practice test 2
357
Project information has been distributed according to the

communications management plan. Some project deliverables have
been accordance with the project management plan. One
stakeholder expressed surprise to the project manager upon
hearing of a previously published change to a project deliverable.
All stakeholders received the communication containing notification
of the change. What should the project manager do?
A. Determine why the stakeholder did not receive the information

and let him know when it was published
B. Ask the functional manager why the stakeholder did not
understand his responsibility
C. Review the communication management plan and make revisions
if necessary
D. Address the situation in the next steering committee meeting so
others do not miss published changes
358
Answer is C
Explanation: Choice A cannot be correct because the question states
that all stakeholders received the information. Choices B and D do not
address the root cause of the problem. The problem presented here
shows that there is something missing in the communication
management plan. The best answer is to review the communication
management plan in order to prevent future problems and find any
instances of similar problems.

The project you are managing has nine stakeholders. How many channel of
communications are there between these stakeholders?
1. 9
2. 8
3. 45
4. 36
CORRECT: 4. There will be (9*8)/2 channel of communication.
Which of the following is not an example of formal communication?

1. Contract
2. email
3. Project status report
4. Status meeting
CORRECT: 2. Communication via email is not considered a formal communication.
Which of the following process is not included in project communication knowledge area?
1. Control Communications
2. Plan Communications Management
3. Manage Communications
4. Manage Stakeholder Expectations
CORRECT: 4 Manage Stakeholder Expectations is not a process in Project communication

knowledge area.
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A project manager has been introduced to newly hired
multi-ethnic members of the team. At this point, what skill
is essential?
A: Team communication with the WBS

B: The responsibility assignment matrix
C: Communication and well developed people skills
D: The teleconference
Ans : C

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11. Project Risk Management

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The risk is future uncertain event or condition that, if it occurs, has a positive or negative
effect on one or more project objectives (scope, time, cost and quality). [PMBOK6]
The risk is the effect of uncertainty on objectives, and an effect is a positive or negative
deviation from what is expected. [ISO31000]
The European Commission suggests that a risk is any factor, event or influence that threatens the
successful completion of a project in terms of time, cost or quality.
Risk may have Positive Impact (referred to as Opportunity) or Negative impact (referred as Threat)
There are hardly any risk-free projects since there are multiple events that can Positively or Negatively
influence the project. Risk has one or more causes and has one or more impacts

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Certainty: Complete and accurate knowledge of the outcome of each alternative. There is only one outcome for each
alternative.
Uncertainty: The lack of certainty. Multiple outcomes for each alternative can be identified, but there is no
knowledge of the probability of outcome to be attached to each other. That means there is no idea of what the
possible outcome might be. The probability distribution is unknown. With conditions of uncertainty there is not
enough information to make a clear decision and understand how making a decision will influence alternative
outcomes.
Uncertainty and Risk
Uncertainty is not the same as risk. The two terms are distinct and have different meanings.
‘Uncertainty’ refers to the occurrence of an event about which little is known, while a risk is the
outcome of an event which is predicted on the basis of statistical probability.
Uncertainty exists when there is more than one possible outcome and risk exists when a decision is
expressed in terms of a range of possible outcomes.

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A known risk means that the project manager thoroughly
comprehends the consequences that could result in a
challenge to overcome.
Known For instance, while setting a budget, there is a known risk that
Risk project may surpass the economic estimates and for that
reason, the project may encounter issues in meeting the
completion deadline. The known risks are identified and
evaluated for which further planning is possible.
Types of
Risk
Unknown risks are more threatening since they can come up
when the project manager doesn’t expect it. Unknown risks
are unidentified because they are not known until they
happen. It’s nearly impossible to formulate a response plan
Un-Known for these risks.
You are unable to manage these risks proactively since
Risk they are not determined during the planning phase. Unknown
risks are primarily managed through the workaround. To
effectively manage these risks, you will need to use the
management reserve.
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Known Risks
Known risks are risks that have been identified and analyzed
beforehand in such a way as to be able to reduce the likelihood of their
occurrence, or plan a risk response
to reduce their impact in the event of occurrence. Inflation – is an
external known –risk (but outcome unknown).
For example, you know there is a chance that one of your team
members may go on leave during the peak of your project. This is a
known risk, and to manage this risk you make a plan that if the
employee takes the leave, you will bring on another identified employee
from your organization.
Also note that to manage identified risks you will use the contingency
reserve.

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Unknown Risks
Unknown risks are unknown, and they are not known until they happen
cannot be anticipated at all and are not identified beforehand. Since
they are not identified, they can’t be analyzed and of course can’t be
managed pro-actively. You cannot make a response plan for these
risks, and you cannot manage them proactively since they are not
identified during the planning phase.
Natural calamity (floods / earthquakes) are unknown risks (and

unpredictable)
Unknown risks are managed through the workaround, and to manage

these kinds of risks you will use the management reserve.
There is a difference between the contingency reserve and

management reserve. You as a project manager will have the authority
to use the contingency reserve, but to use the management
reserve you need management’s permission.
867Solutions,
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Un-
Known
Known–unknowns Unknown–unknowns
(risks) (unfathomable
Elections uncertainty)
Un-
Known
Known
Known – Known Unknown – Knowns
(Knowledgeable) (impact is unknown but
existence is known, i.e.,
Floods untapped knowledge)
Known SN Panigrahi, Essenpee Business Solutions,

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Issue :An issue it a hot point or a matter in dispute. With an issue, there will
be some kind of disagreement among the project stakeholders. As a project
manager, it will be your responsibility to manage issues and note them in an
issue log with their resolution.
Issue Vs Risk : The key difference is an “issue” already has occurred and a
“risk” is a potential issue that may or may not happen and can impact the
project positively or negatively. ... Because of these differences, the language
used to describe risks is future tense: “If this happens, then this will be
impacted.”
“Issues” “Risks”
– Present focused – Future focused
– Always negative – Can be positive (or) negative
– Documented in “Issue – Documented in “Risk register”
register” – Response will be done based
– Response will be “Issue on “risk response planning”
workaround”

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Positive Risk
A positive risk is also known as an opportunity.
A positive risk is a condition or situation favorable to the project that, if it occurs,
will have a positive impact on any of your project objectives.
Simply put, a positive risk or opportunity can positively affect your project
objective, and in this case, you work hard to realize this opportunity. The response
strategy for positive risks is to increase the likelihood of the event happening.
For example, let’s say that you are managing a project and there is a chance that
if you complete the project a few days earlier than the planned date, you might get
another project.
Negative Risk
A negative risk is also known as a threat.
A negative risk is a condition or situation unfavorable to the project that, if it
occurs, will have a negative impact on any of your project objectives.
Negative risks will always harm your project; therefore, it is necessary for you to
manage them accordingly. Since negative risks negatively affect the project, here
your strategy will be to either remove the risk or minimize its chance of happening
or its impact.
For example, let’s say that in your project there is a chance that some equipment
may break down due to workload. This is an example of a negative risk, and if this
happens it will have a negative impact on your project.
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Positively Affect your Project Objective
The response strategy for positive risks is to

increase the likelihood of the event happening.
Positive Favorable For example, let’s say that you are managing
Outcome
Risk a project and there is a chance that if you
complete the project a few days earlier than
Opportunity the planned date, you might get another
project.
Types of
Risk
Negative Impact on any of your Project
Objectives
Negative Risks will always Harm your Project
Unfavorable strategy will be to either Remove the Risk or
Negative Or Minimize its Chance of Happening or its
Adverse Impact
Risk Outcome For example, let’s say that in your project
there is a chance that some equipment may
Threat break down due to workload which will have a
negative impact on your project
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1.The contingency reserve is for known - unknowns, or
risks that you know about and explicitly planned for and
put in your risk register.
2.The management reserve is for unknown-

unknowns—things that you haven’t planned for but could
impact the project.

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It includes Damage to Persons
and Property such as Fire, Natural
Negative or
Pure Disasters like Earthquake, Floods, Storm,
Adverse
Unusually Bad Weather, Accidents like
Impact
Risk Only
collapse, subsidence, vibration etc.
Political Risks, War, Theft, Crime &
Insurable Existential Risk
Types of
Risk
Business Profit or Loss; Government
Policy on Taxes, Labour, Safety or other
Laws; Malicious Damage; and
Either Industrial Disputes
Business Positive or Speculative Risks unexpected Ground
Negative conditions, exceptionally adverse weather,
Risk Risk unforeseeable shortages
of labour or materials, and other similar
Not matters beyond the control of
the contractor.
Insurable SN Panigrahi, Essenpee Business Solutions,
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Risk Appetite – Risk appetite is the degree of uncertainty an entity is
willing to take on in anticipation of a reward.”. The risk appetite of an
organization shows how much an organization is willing to take a risk in
order to grow itself.
If the organization is willing to take a risk, you will say that its risk
appetite is high, and the organization that plays conservatively has a
low-risk appetite

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Risk Tolerance – The degree, amount or volume of risk that an
organization will withstand.
Risk tolerance tells you how sensitive the organization or individuals are to
risks. High tolerance means people are willing to take a high risk, and low
tolerance means people are not willing to take a high risk unless the benefit
of taking the risk outweighs the fear of the risk.
It shows the risk attitude of stakeholders or an organization in measurable

units. Tolerance is shown in limits.
For example, for an organization a 5% cost overrun is acceptable, but

anything more than that is not acceptable.
Let’s consider a real-world example.

You are bidding for a project. Your rough order estimates say that the cost
of this project is approximately 100,000 USD. You are in the process of
applying for this bid, and your organization told you that they cannot allow
you to bid for more than 10% of this amount.
This 10% is your tolerance limit. SN Panigrahi, Essenpee Business Solutions,

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Risk Threshold – A specific point at which risk becomes unacceptable.
Below the risk threshold, the risk is acceptable and above the threshold
limit the risk will not be tolerated.
The risk threshold is an amount of risk that an organization or individual
is willing to accept.
The risk threshold is usually a definitive figure.
Let’s consider a real-world example.

You are planning to bid a contract. You think that the value for this
contract will be approximately 100,000 USD. You are in the process of
applying for this bid, and your organization has told you that due to some
financial problems they cannot allow you to go beyond 10,000 USD,
apart from the 100,000 USD.
In this case, your threshold for this project is 10,000 USD.
The risk threshold is a further step in risk tolerance. In other words, you
can say that it quantifies the risk tolerance with a more precise figure.
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1.Risk Attitude – The way organizations respond to the risk
2.Factors Influencing Risk Attitude – Perception,
Tolerance and other biases
3.Risk Response – Perceived balance between risk taking
and risk avoidance
1. Risk Averse – Not want to take any risk
2. Risk Neutral
3. Risk Seeking
4.In case an expected risk did not materialize, it may lead to
a finish the project earlier
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Residual Risks
Residual risks are those risks that are expected to remain after implementing
the planned risk response, as well as those that have been deliberately
accepted.
For example, let’s say you are constructing a building in an earthquake prone
zone. You design the building by assuming the highest degree of earthquake that
can happen is 6 on the Richter Magnitude Scale. But what if an earthquake
happens at 7 on the Richter Magnitude Scale?
In this case, the building might collapse.

This is an example of a residual risk.
Secondary Risks
Secondary risks are those risks that arise as a direct outcome of implementing a
risk response of an identified risk.
For example, let’s say you are constructing a building, and as a security measure
you installed electrical wire at the top of the boundary wall. But what will happen if
someone accidentally touches the electrical wire, or during rain the electricity
passes through the wet wall?
They will get an electric shock.

This is an example of a secondary risk. SN Panigrahi, Essenpee Business Solutions,
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Risk Triggers
Risk triggers are indications that a risk has occurred or is about to occur. Risk
triggers are sometimes called warning signs or risk symptoms.
For example, cloud movement can be a risk trigger for rainfall.
Risk Owner
A risk owner is a project team member who is assigned the responsibility of
ensuring that the risk response is effective, and to plan additional risk response if
required.
Usually the risk owner and risk action owner is the same person in a small or
medium type of project. However, if the project is large and complex you can
depute a separate risk action owner.
The responsibility of the risk owner will be to continuously manage the risks
assigned to him and update the project manager on a regular basis.
You can assign a single risk to a single owner or many risks to a single owner
depending on the situation, requirement, and capability of the team member.
Risk Action Owner
Usually you will depute a risk action owner if you have a very large project where it
will be difficult for risk owner to manage the risk on its own, and therefore he needs
a helping hand.
The risk action owner helps the risk owner to manage the risk. The
responsibility of a risk action owner is to ensure that the agreed-upon risk
responses are carried out as planned and in a timely manner.
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Risk Attitude
To prioritize and rank the risks, you need to understand the risk attitude of
your stakeholders and the organization. An important risk for one
stakeholder may not be important for another stakeholder. You have to
adapt a collective approach to rank the risks.
Risk attitude helps you prioritize and rank the risks. This is a crucial
step in developing a risk management plan. A risk management plan
depends on the risk attitude of your stakeholders and organization.
Attitude is inherent in nature, and nature is something you are born with.
Therefore, you can say that risk attitude is inherent to human nature. Some
people are scared of risks, some people are neutral to them, and others
enjoy them. This behavior depends on that how that person views risks
Risk attitude is an enterprise environmental factor that

keeps on changing as the project progresses. Therefore, you
have to look continuously to your stakeholders for any change
in their risk attitude.
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Risk Attitude
An organization or a person can have any of these four types of risk
attitude:
1.Risk averse
2.Risk seeker or taker
3.Risk neutral
4.Risk tolerant
Risk Averse
Averse means opposing.
A risk averse person or organization is not comfortable with digesting risks.
They are not very creative or supportive towards risks. They usually try to
avoid risks unless the reward to take on the risks is high enough to
outweigh the aversion of the risk.
Risk Seeker or Risk Taker
Seeker means loving.
A risk seeking or risk taking person or organization likes to seek risks if
they see any opportunity. They enjoy and find it challenging to deal with
risks; however, sometimes this excessive optimism can cause losses.
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Risk Neutral Risk Attitude
Neutral means neutral.
As the name suggests, these people or organizations are neutral to risks.
These people deal with risks objectively. They analyze risks with various
techniques such as Expected Monetary Value (EVM), the Decision Tree
Method, or any other tool, and then make an informed decision.
Risk Tolerant
Tolerant means forbearing.
These people or organizations are very comfortable with ignoring risks.
They don’t care and never pay any attention to a risk until it becomes an
issue. It is the job of a project manager to find the risk attitude of individual
stakeholders and any group formed by these stakeholders.
Group mentality is different than individual mentality. The risk attitude
of a group of stakeholders might be different than the stakeholders
individually.
Moreover, this attitude keeps on changing as the project progresses.
Therefore, either you have to change the attitude of the stakeholders or
adjust the project plan to reflect the current risk attitude of the
stakeholders. It is recommended a project manager behave as a risk
neutral person and make decisions based on objective SN
evidence.
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Project Risk Management
365
Necessity of Risk Management

•Any project is subject to risk
•Risk can be minimized BUT CAN NOT be eliminated

•Risk Management is about “Minimizing negative impacts and Maximizing positive
impacts” on the project objectives
•Risk is required for Growth & Returns Why Manage Risks ?

1. Helps stakeholders to understand the nature of the project.
2. Helps team members in defining strengths & weaknesses.
3. Helps to integrate project resources.
4. Helps in prioritizing resources & efforts.

Project Risk Management
366
Necessity of Risk Management

A.It is a scientific approach to identify, analyze, assign and respond to the risk regularly
across the project life & so as to achieve the maximum towards meeting project
objectives.
B.Provides input for realistic planning of-
a. project schedule,
b. cost estimates and
c. resource requirements
to achieve the project objectives ‘successfully and efficiently’.

Project Risk Management Processes Monitoring &
Planning
367 Processes
Enter phase/
Start project
Initiating Closing Exit phase/
Processes Processes End project
Executing
Processes
Process Groups
Knowledge Area
Monitoring &
Control
•Implement
•Plan Risk Management Risk Responses
•Identify Risks
Risk •Perform Qualitative Risk Analysis Monitor Risks
Management Perform Quantitative Risk Analysis
Plan Risk Responses
11.1 Plan Risk Management
The process of defining how to conduct risk management activities for a project.
Source: A Guide to the Project Management Body of Knowledge. 6th Edition; 2 0 17

368
Plan Risk Management
369
The Risk factors include:

• Risk Event
▪ What might happen?
• Probability
▪ What is the chance of it happening?
• Impact (or Amount at Stake)
▪ What is the financial impact?
• Exposure = Probability X Amount at Stake
• Risk proximity
▪ When it will happen - How soon ?

Plan Risk Management - Output
370
Risk Management Plan
•Methodologies- The approach, tools, techniques, data sources the team plans to use to
manage risk on the project
•Roles and responsibilities- A defined role with clear responsibilities for each team
member who will play a part in the project’s risk activities
•Budgeting - Estimates of the financial resources that will be needed for the
implementation of each risk activity, to be included in the project’s Cost Baseline (CBL). Also
included here are the procedures to be used in applying Contingency and Management
Reserves
•Timing - When and how frequently the Risk Management processes will be performed
during the project
•Risk categories- The risk categorization activity is often performed using a Risk Breakdown
Structure (RBS), which shows graphically the areas in which risks may arise. Areas that are
broken down typically include technical, organizational, project management and external
Risk Management Plan .. contd.

•Definitions of risk probability and impact - All identified risks are rated in terms of priority
in the Perform Qualitative Risk Analysis process, typically with the use of a Probability and
Impact (P-I) Matrix. However, for the P-I values that populate the matrix to be
meaningful, definitions must be established
•Probability and impact matrix - To be used in the following process, Perform Qualitative
Risk Analysis, but selected in this process from the OPAs and tailored as necessary to fit the
needs of the project
•Revised stakeholder’s tolerances - tolerances may need to be revised here
•Reporting formats - How would the results of the risk management process be
documented, analyzed, and communicated with the content and format of the risk register
as well as any other risk reports required
•Tracking - How risk activities will be documented for the current project and how risk371
management process will be audited
RBS Provide a means for grouping potential causes of risk
PROJECT
TECHNICAL EXTERNAL ORGANIZATIONAL PROJECT

MANAGEMENT
Requirements Subcontractors & Project Estimating

Suppliers Dependencies
Technology
Regulatory Resources Planning
Complexity &
Interfaces
Market Funding Controlling
Performance &
Reliability
Customer Prioritization Communication
Quality
Weather

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RBS Provide a means for grouping potential causes of risk
372
PROJECT
Time EXTERNAL ORGANIZATIONAL PROJECT

MANAGEMENT
Requirements Subcontractors & Project Estimating

Suppliers Dependencies
Technology
Regulatory Resources Planning
Complexity &
Interfaces
Market Funding Controlling
Performance &
Reliability
Customer Prioritization Communication
Quality
Weather

RBS
Project
Time People Costs Deliverables Quality Contract Market
Schedule Cost Issues -Tech/ Lack of

Shortages Performance Competition
Delays Escalations Functional Quality
Force Labor Estimating Component Warrantee Demand of

Disputes
Majeure Strikes Errors Issues Exposure Products
Sub- Sub-
Schedule Skill Penalty Un-Proven
Contractor Contractor
Changes Deficiency Exposure Designs Items Failures
Exchange
Funding
Rates

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Definitions of Risk Probability and Impact

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11.2 Identify Risks: The process of determining project risks
as well as sources of overall project risk and documenting
their characteristics

Identify Risks – T & T
375
Data gathering techniques

•Brainstorming
▪ Here the goal is to obtain a comprehensive list of project risks
▪ Often performed with a multidisciplinary set of experts who are not part of the team
•Delphi technique
▪ It is a way to reach a consensus of project risk experts who participate in this technique anonymously
▪ Helps reduce bias in the data and having undue influence on the outcome
•Interviewing
▪ Helps to identify risks after interviewing project participants, stakeholders and
subject matter experts (SMEs)

Identify Risks – T & T
Data analysis techniques
376
•Root cause analysis
▪ It is a specific technique to identify a problem, investigate the underlying causes that lead to it and develop
preventive actions to avoid from happening again
▪SWOT analysis
▪ It examines project from each of the strength, weaknesses, opportunities and
threats perspectives.
Interpersonal skills
▪Prompt list
▪ Predetermined list of risk categories that might give rise to individual project risks
and could also act as sources of overall project risk
▪ Strategic framework for identifying sources of overall project risks
▪ PESTLE – Political, economic, social, technological, legal, environmental
▪ VUCA – volatility, uncertainty, complexity, ambiguity
▪ TECOP – technical, environmental, commercial, operational, political
Identify Risks - Output
377
Risk Register
1.List of Identified Risk
2.Potential Risk Owner
3.Root Cause
4.Potential Responses
Risk Report
Represent information on sources, together with summary on identified individual
project risks

Broad Categories of Risk
• Many organizations develop their own risk questionnaires.
Some of the categories of risk might include:
• Market risk – Will the new service or product be useful to the
organization or marketable to others? Will the users accept it?
Will someone else create a better product?
• Financial risk – can the organization afford to undertake the
project? Will the project meet NPV, ROI and payback
estimates?
• Technology risk – is the project technically feasible? Is it
leading edge or bleeding edge technology?
• People risk – Are people with appropriate skills available to
help complete the project? Does senior management support
the project?
• Structure/process risk – What is the degree of change the
new project will introduce into user areas and business
procedures? With how many other systems SNdoes a new
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Business Solutions,
project/system need to interact?

Potential Negative Risk Conditions Associated
With Each Knowledge Area

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Risk Register Contents
• An identification number for each risk event

• A rank for each risk event
• The name of each risk event
• A description of each risk event
• The category under which each risk event falls
• The root cause of each risk

900 India
Information Technology Project Management, Fifth Edition, Copyright 2007
Risk Register Contents (continued)
• Triggers for each risk; triggers are indicators or

symptoms of actual risk events
• Cost overruns on early activities, defective products
• Potential responses to each risk
• The risk owner or person who will own or take
responsibility for each risk
• The probability and impact of each risk occurring
• The status of each risk

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RISK REGISTER TEMPLATE
Risk Identification Qualitative Rating Risk Response

Risk Risk Probabilit Impact Risk Risk Risk Trigger Risk
Category y Score Ranking Respons Owner
e

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11.3 Perform Qualitative Risk Analysis
The process of prioritizing risks for further analysis of action by assessing and combining their
probability of occurrence and impact
Source: A Guide to the Project Management Body of Knowledge. 6th Edition;3270817

Perform Qualitative Risk Analysis – T & T
379
Risk probability and impact assessment

•Risk probability (p) assessment investigates the likelihood that each specific risk will
occur
•Risk impact (i) assessment investigates the potential effect on a project objective such as
schedule, cost, quality, or performance, including both negative effects for threats and
positive effects for opportunities
▪ For objective analysis the probability and impact rating scales are used
•Risks with low ratings of probability and impact will be included within the risk register as
part of the watch list for future monitoring

Risk Calculation – Ranking
1
SELECT RISK
AREA & ASSIGN
RISK FACTORS
FOR EACH
6 2
ASSIGN RANKS ASSIGN RELATIVE
BASED ON WEIGHT (SEVERITY
AV. SCORE OF IMPACT) TO EACH
RISK PROFILE RISK FACTOR
RISK
RANKING
5 3
WORK OUT EVALUATE
TOATL SCORE PROBABILITY OF
& AV. SCORE OF OCCURANCE OF
RISK PROFILE OF ALL
4 EACH RISK
AREAS OF RISK CALCULATE FACTOR
RISK PROFILE
(SEVERITY IMPACT
X
LIKELIHOOD OF
NTI – SN Panigrahi
OCCURANCE)
Risk Calculation
Likelihood of Occurance
Descriptor Probability Rank Value
Highly
>75% High 5
Probable
Probable >50%<75% Medium High 4
Occasional >25%<50% Medium 3
Remote >10%<25% Medium Low 2
Improbable <10% Low 1
NTI – SN Panigrahi SN Panigrahi, Essenpee Business Solutions, India 906

Risk Calculation
Severity of Impact
Descriptor Rank Value
Catastrophic High 5
Critical Medium High 4
Serious Medium 3
Marginal Medium Low 2
Negligible Low 1
NTI – SN Panigrahi SN Panigrahi, Essenpee Business Solutions, India 907

Risk Calculation
RISK Value = SEVERITY OF IMPACT X LIKELIHOOD
RISK PRODUCT PROFILE
NTI – SN Panigrahi
Risk Calculation Sheet
SEVERITY OF LIKELIHOOD OF
ITEM / SUPPLIER RISK FACTOR IMPACT RISK PROFILE
OCCURANCE
TOTAL SCORE
NTI – SN Panigrahi SN Panigrahi, Essenpee Business Solutions, India

AV. SCORE 909
Risk Register
Risk Register (also called as Risk Log) is a master document that provides the details of all identified
risks and their characteristics. Though it is created during risk identification process, it is periodically
updated throughout the project management life cycle & it is an important risk management document in
every project. Here are the list of data fields part of a typical risk register:
➢ Risk ID – Unique ID to report/review/communicate the ➢ Approved final response – Response selected for
risk implementation
➢ Risk description – Short description about the risk ➢ Contingency plan – Plan in place to reduce the risk
event effect in case a risk trigger occurs
➢ Risk owner – Name of the risk owner ➢ Fallback plan – Plan in place suppose primary
➢ Risk Category – Category of the risk response didn’t work effectively as expected
➢ Cause of the Risk – Information about the risk trigger ➢ Risk Triggers – warning signs of a risk occurrence
➢ Effect or Impact of the Risk – Information about the ➢ Last occurrence – Last occurred date/time
effect or impact if the risk occurs ➢ Cost of mitigation/fallback plans – Cost estimated for
➢ Project phase detected & affected mitigation or fallback plan execution
➢ Ranking – Ranking of the risk ➢ Time required for risk responses – helps in schedule
➢ Affected WBS activity – WBS ID if it affects a specific plans
work package ➢ Reserves – Management & contingency reserve
➢ Probability of risk occurrence – This is from information if available
qualitative risk analysis ➢ Risk review audit information – Comments about the
➢ Frequency of risk occurrence – This from qualitative risk based on risk review audit
risk analysis ➢ Current status of the risk – Closed (or) Open (or)
➢ Potential responses – Possible responses for the risk. Trigger event identified, etc.
It can be more than one
NTI – SN Panigrahi SN Panigrahi, Essenpee Business Solutions,

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RISK REGISTER TEMPLATE
Risk Identification Qualitative Rating Risk Response

Risk Risk Probability Impact Risk Score Risk Risk Trigger Risk
Category Ranking Response Owner

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Risk Avoidance - involves making changes to the project management plan to either eliminate the risk or
protect the negative impact of the risk on project objectives. Eg : Extending the schedule, changing the strategy,
or reducing the scope
Risk Transference - involves transferring risk impact to a third party along with the ownership of risk responses.
It doesn’t eliminate risk – risk exists but only being transferred from one party to the other – involves payment of
risk premium – most effective in dealing with financial risks. Eg : Insurance, Warrantee, Guarantees, Performance
bonds, contracts, agreements, outsourcing. In case of Cost – Plus contract, seller transfers the risk to the
buyer; whereas in case of Fixed –Price contract the risk is transferred by buyer to the seller

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Exploit - involves strategies to ensure that the opportunity is definitely realized. Actions are specifically directed to
reduce or remove the uncertainty of the opportunity being missed. Eg : Assigning most experienced resource to reduce
time to complete; adopting new technology or upgrading technology
Enhance - involves strategies of monitoring and emphasizing risk triggers and identifying root causes to increase
probability of opportunity realization. Eg : Adding more resources to finish an activity early to realize opportunity.
Share - involves strategies of assigning partial or complete ownership of the risk to a third party who is in a better
position to make sure the opportunity is realized. Eg : Partnerships, joint ventures, team forming etc
Acceptance – Willing to take advantage of the opportunity if it arises and not pursuing it actively

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Perform Qualitative Risk Analysis – T & T
381
Risk Data Quality Assessment

•It involves examining –
▪ the degree to which the risk is understood AND
▪ the accuracy, quality, reliability and integrity of risk data
•If data quality is unacceptable, it may be necessary to gather better data
• Assessment of other parameters (urgency, manageability, controllability )
• Risk Urgency Assessment
Risks requiring near-term responses may be considered more urgent to address
Indicators of urgency or priority could include :
✓ Probability of detecting the risk

✓ Time to implement a risk response
✓ Symptoms and warnings signs
✓ Risk Urgency rating
SN Panigrahi, (H /Business
Essenpee M / L) Solutions, India
Perform Qualitative Risk Analysis - Output
382
Risk Register Updates

1. List of Identified Risk 1. Category
2. Root Cause 2. Sub-Category
3. List of response owner 3. Prob. of Occurrence(%)
4. Potential Response 4. Impact on which of the project objective(s) ?
5. Impact (%)
6. Risk Raking (H/M/L)
7. Occurring in near term ?
8. Time to implement response for near term risk
9. Risk Urgency/Priority rating (H/M/L)

11.4 Perform Quantitative Risk Analysis
The process of numerically analyzing the combined effect of identified individual project
risks and other sources of uncertainty on overall project objectives
Perform Quantitative Risk Analysis - Activities
384
• Process is performed on risks that have been prioritized by the perform qualitative risk
analysis process as potentially and substantially impacting the project’s competing
demands
• It analysis the impact of those risks on project objectives
• It is mostly used to evaluate the aggregate effect of risks on projects
• The project manager should use expert judgment to determine the need for the viability
of quantitative risk analysis
• This process should be repeated , as part of, the control risk process to determine if the
overall project risk has been satisfactorily decreased

Perform Quantitative Risk Analysis – T & T
385
Data Gathering and Representation Techniques

• Interviewing
• Probability Distribution
Data Analysis Techniques

• Sensitivity Analysis
• Expected Monetary Value (EMV)
• Modeling and Simulation (e.g. Monte Carlo Analysis)
• Influence diagrams

Data Gathering and Representation Techniques -
Interviewing
The information
needed depends
upon the type of
probability
distributions that
will be used

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Data Gathering and Representation Techniques -
Probability distribution
388
Modeling and Simulation (Monte Carlo Technique): A technique that uses simulation to
show the probability of completing your project on time and within budget
•Overall risk of the project is determined and not the activities
•Probability of completing the project on a specific day and within the specified cost is
determined
•All the path convergence in the network diagrams are considered
•Impacts to your schedule and budget is evaluated
•Since the mathematical computations are very complicated, analysis is usually done with a
computer program
•Creates triangular, beta, uniform and lognormal probability distributions

389
Modeling Techniques - Sensitivity Analysis

* A quantitative risk analysis and modeling technique used
•To help determine which risks have the most potential impact on the project
•To examine the extent to which the uncertainty of each project element affects the
objective being examined when all other uncertain elements are held at their baseline
values
•To display results in the form of a Tornado diagram
▪ is useful for comparing relative importance and impact of variables that have a
high degree of uncertainty to those that are more stable
▪ is also helpful in analyzing risk-taking scenarios enabled on specific risks whose
quantitative analysis highlights possible benefits greater than corresponding
identified negative impacts

390
Modeling Techniques -
Sensitivity Analysis : Example of a Tornado diagram
•is a special type of bar chart used in sensitivity analysis for comparing the relative
importance of the variables
•the Y-axis contains each type of uncertainty at base values, and the X-axis contains the
spread or correlation of the uncertainty to the studied output
•each uncertainty contains a horizontal bar and is ordered vertically to show

uncertainties with a decreasing spread from the base values

Sensitivity Analysis – Example of a Tornado diagram
The Tornado diagram is a visual display of the sensitivity of various risks with regards to their
positive or negative impact.
Tornado Diagram Analysis Criteria:

taking the risk will result in either a positive or negative outcome
the impact of the risk can be estimated
the outcome is uncertain
In the Tornado diagram below there are positive and negative results for each risk. Risk
A has the potential to save the project $80,000 and a possibility of losing $40,000. This
makes Risk A the most sensitive because the outcome is highly variable. Implementing
Risk D has variability but a much more narrow range of possible outcomes.

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392
Sensitivity Analysis : Characteristics of a Tornado diagram
•The longer the bar the more sensitive the project objective is to the risk
•The risks are presented in descending order, with the largest impact on the top and the
least impact on the bottom
•It allows the team to focus on those risks with the greatest impact on a project objective

393
What is Expected Monetary Value (EMV) ?
* Is a statistical concept that calculates the average outcome when the future includes
scenarios that may or may not happen
•EMV of opportunities are generally expressed as positive values (+), whereas of threats
are expressed as negative values (-)
•EMV for a project is calculated by multiplying the value of each possible outcome by its
probability of occurrence and adding the products together
•Most common method of this analysis is by using Decision Tree Analysis

Example of Expected Monetary Value (EMV)
Expected Monetary Value (EMV)
SN Panigrahi,
Essenpee Business
Solutions, India
929
Diagramming Techniques
• Cause and Effect Diagrams
• Also known as Ishikawa or fishbone
Testing Inadequate Project

Time Prioritization
Product
Delivered
Late
Personnel Materials Insufficient Bad Specs

Resources
Potential
SN Panigrahi,Causes
Essenpee Business Solutions, IndiaEffect 930
Simulation
• Simulation uses a representation or model of a system
to analyze the expected behavior or performance of
the system
• To use a Monte Carlo simulation, you must have three
estimates (most likely, pessimistic, and optimistic) plus an
estimate of the likelihood of the estimate being between the
most likely and optimistic values
• Monte Carlo analysis simulates a model’s outcome
many times to provide a statistical distribution of the
calculated results
• Predicts the probability of finishing by a certain date or that
the cost will be equal to or less than a certain value
931 India
Steps of a Monte Carlo Analysis
1. Assess the range for the variables being considered –
gather most likely, optimistic and pessimistic time
estimates for each task
2. Determine the probability distribution of each variable
1. Optimistic 8 weeks, most likely 10 and pessimistic 15
3. For each variable, select a random value based on the
probability distribution
1. 20% chance between 8 and 10 weeks, 80% between 10 and
15
4. Run a deterministic analysis or one pass through the
model
5. Repeat steps 3 and 4 many times to obtain the probability
distribution of the model’s results – usually between 100
to 1,000 iterations SN Panigrahi, Essenpee Business Solutions,
932 India
Sample Monte Carlo Simulation Results
SN Panigrahi,
Essenpee Business
Solutions, India
for Project Schedule
933
Expected Monetary Value (EMV)
Building
Cost Probability
Optimistic Outcome $150K 0.2 $30K
Likely Outcome $225K 0.5 $113K
Pessimistic $300K 0.3 $100K
Outcome
Expected Value $243K

Perform Quantitative Analysis – T & T
• Influence diagrams
▪ Are graphical representations of situations showing causal influences, time ordering
of events and other relationships among variables and outcomes (refer example
shown below)
Project Risk
Estimates Condition
Project Activity Deliverables

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935
Perform Quantitative Risk Analysis - Output
396
Risk register updates

13. Probabilistic analysis of the project
1. Identified Risk
14. Probability of achieving cost and time objectives
2. Root Cause
15. Prioritized list of quantified risks
3. Potential Response
16. Any trends observed ?
4. Category
17. Expected Monetary Value (EMV)
5. Sub-Category
6. Prob. of Occurrence(%)
7. Impact on which of the project objective(s) ?
8. Impact (%)
9. Risk Raking (H/M/L)
10. Occurring in near term ?
11. Time to implement response for near term risk
12. Risk Urgency/Priority rating (H/M/L)

11.5 Plan Risk Responses
The process of developing options, selecting strategies, and actions to address overall
project risk exposure, as well as to treat individual project risks
Plan Risk Responses
• It includes the identification and assignment of one person (an owner for risk response)
to take responsibility for each agreed-to and funded risk response
• Risk responses should be
▪ appropriate for the impact of the risk,
▪ cost-effective in meeting the challenge,
▪ realistic within the project context,
▪ agreed upon by all parties involved and owned by a responsible person
• Selecting the optimum risk response from several options is often required

Plan Risk Responses – Risk Response Strategies
Risks
Avoid Exploit
Mitigate Share
Transfer
Negative Positive Enhance
[Threats] [Opportunities]
Risk that may Risk that may

have negative have positive
impacts on impacts on
project project
objectives if objectives if
they occur they occur
Acceptance
Escalate
Risk Avoidance - involves making changes to the project management plan to either
eliminate the risk or protect the negative impact of the risk on project objectives. Eg : Extending
the schedule, changing the strategy, or reducing the scope
Risk Transference - involves transferring risk impact to a third party along with the ownership
of risk responses. It doesn’t eliminate risk – risk exists but only being transferred from one party
to the other – involves payment of risk premium – most effective in dealing with financial risks. Eg :
Insurance, Warrantee, Guarantees, Performance bonds, contracts, agreements, outsourcing. In
case of Cost – Plus contract, seller transfers the risk to the buyer; whereas in case of Fixed
–Price contract the risk is transferred by buyer to the seller

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Risk Mitigation - involves identifying risk responses that could reduce the
probability of risk event and / or lower the impact to an acceptable
threshold level. Eg : Adopting less complex processes, conducting more
tests, selecting a more reliable supplier, developing prototypes (reduce risk
probability), designing redundancy into the system (reducing the impact) etc
Risk acceptance – Acknowledge the risk and not take any action unless
the risk occurs. It is a risk response technique employed when the risk
cannot be avoided / mitigated or the project team decides to accept the risk
and its consequences since it is not possible or cost-effective to make any
alternative risk response strategies. There are primarily two types of risk
acceptance strategies – Passive Acceptance and Active Acceptance.

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1. Risk Passive Acceptance – No action taken, leaving the project team to deal
with as they occur (work around). Only document the risk, and watch and
monitor that it does not change significantly.
2. Risk Active Acceptance – Establish contingency reserve for time, money, and
resources to handle the risk
3. Avoidance and Mitigation are good strategies for critical risks with high
impact risks.
4. Transference and Acceptance are good strategies for less critical and low
impact risks.
5. Pure risk - also called absolute risk, is a category of threat that is beyond
human control and has only one possible outcome: loss. Pure risk includes such
things as natural disasters, fire or untimely death. Pure risk is often transferred
by purchasing insurance, which transfers the risk to an insurance company.
6. Business Risks - the inherent chances for both profit and loss associated with a
particular endeavor – Cannot be Insured
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Exploit - involves strategies to ensure that the opportunity is definitely realized. Actions are specifically
directed to reduce or remove the uncertainty of the opportunity being missed. Eg : Assigning most
experienced resource to reduce time to complete; adopting new technology or upgrading technology
Enhance - involves strategies of monitoring and emphasizing risk triggers and identifying root causes to
increase probability of opportunity realization. Eg : Adding more resources to finish an activity early to
realize opportunity.
Share - involves strategies of assigning partial or complete ownership of the risk to a third party who is
in a better position to make sure the opportunity is realized. Eg : Partnerships, joint ventures, team forming
etc
Acceptance – Willing to take advantage of the opportunity if it arises and

SN not pursuing
Panigrahi, it actively
India
943
Plan Risk Responses – T & T
400
Strategies for Negative Risks

Escalate
•Escalated risk is managed at program level, portfolio level, or any other relevant part of an
organization, and not on the project level.
•Threat outside the scope of the project or the proposed response exceed the project
manager’s authority
•Escalated threats are not monitored by the project team
•Recorded in the risk register for information

401

Avoid
•Risk avoidance is to eliminate the threat posed by an adverse risk

e.g. changing the project management plan to eliminate the threat entirely OR to change the objective
that is in jeopardy such as extending the schedule, changing the strategy or reducing scope OR to shut
down the project entirely OR during the initial stages of the project, clarifying requirements, obtaining
information, improving communication or acquiring expertise
Transfer
•Requires shifting the negative impact of a threat, along with ownership of the response, to a third
party
•Involves payment of a risk premium to the party taking on the risk
e.g. insurance, performance bonds, warranties, guarantees, etc.

Mitigate
•It implies a reduction in the probability and / or impact of an adverse risk event to an
acceptable threshold
•‘Transference’ is a form of mitigation

e.g. adopting less complex processes, conducting more tests, or choosing a more stable
supplier
Sr.No. Strategy Example of Risk Risk Response

Marketing analysis to ensure
Obsoleteness of Product due to
1 Avoid latest desired features in
delay in launch
product
Penalties, expenses due to
accidents. Insurance Outsourcing
2 Transfer
Labor head count increases long
term liability
Contingency Plans, Backup
3 Mitigate Resource failure
resources, Redundancy
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946
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Accept
It is a strategy that is adopted because it is seldom possible to eliminate all risk from a
project
•It indicates that the project team :

▪ Has decided not to change the project management plan to deal with risk OR
▪ Is unable to identify any other suitable response strategy
Active Acceptance most commonly involves establishing a contingency reserve, is to
establish a contingency reserve, including amounts of time, money, or resources to handle
the risks
Passive Acceptance requires no action except to document the strategy, leaving the project
team to deal with threats or opportunities as they occur and to periodically review the
threat to ensure that it does not change significantly
Risks can be either accepted actively or passively:
•active acceptance means the identified risk is accepted without any

response to reduce or eliminate the chance of occurrence but
measures are planned (i.e. fallback) to deal with it once it occurs
•passive acceptance means the identified risk is accepted without
any response altogether (maybe the chance of occurrence is too low
or the effect too minimal), just wait and see if workaround is needed
once it occurs.

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948
Strategies for Positive Risks
Escalate
404
•Escalated opportunity is managed at program level, portfolio level, or any other relevant
part of an organization, and not on the project level.
•Opportunity outside the scope of the project or the proposed response exceed the
project manager’s authority
•Escalated opportunities are not monitored by the project team
•Recorded in the risk register for information

Exploit
405
•It seeks to eliminate the uncertainty associated with a particular upside risk by making the
opportunity definitely happen
•It may be selected for opportunities where the organization wishes to ensure that it is
realized
•It is analogous to ‘Avoidance’
e.g. assigning more talented resources to the project to reduce time to completion OR to
provide better quality than originally planned OR using new technologies OR technology
upgrades to reduce cost and duration required to realize project objectives
Share
•It involves allocating some or all of the ownership of the opportunity to a third- party, who
is best able to capture the opportunity for the benefit of the project
•It is analogous to ‘Transference’ e.g. forming risk-sharing partnerships OR joint ventures

Enhance
406
•It modifies the size of an opportunity to increase probability and / or positive impacts by
reinforcing it’s trigger conditions
•It is analogous to ‘Mitigation’
e.g. adding more resources to an activity to finish early
Accept
•Accepting an opportunity is being willing to take advantage of the opportunity if it arises,
but not actively pursuing it
Sr.No. Strategy Example of Risk Risk Response
Availability of new technology enhances
1 Exploit Acquire Technology
performance
Outsourcing Activities, Partnering
Large contract needing lots of man-
2 Share with others having core competency
power, and end-to end responsibility
Make presentation to educate and

New government policy being formed,
3 Enhance influence into your own product
new tender being designed
specifications
407

• Risk owners and assigned responsibilities
• Agreed-upon response strategies
• Specific actions to implement the chosen response strategy
• Trigger conditions, symptoms, and warning signs of a risk occurrence
• Budget and schedule activities required to implement the chosen responses
• Contingency plans and triggers that call for their execution
• Fallback plans for use as a reaction to a risk that has occurred and the primary response
proves to be inadequate
• Contingency reserves that are calculated based on the quantitative risk analysis of the
project and the organization’s risk thresholds
408

Residual Risks
•that are expected to remain after planned responses have been taken, as well as those
that have been deliberately accepted
Secondary risks
•that arose as a direct outcome of implementing a risk response

•Fallback is pre-developed risk response strategies for identified risks in order to protect
the original project plan (the costs deal with identified risks are included in the contingency
reserve)
Fallback: a fallback plan is a plan developed to deal with risks that have been identified
during project planningfor identified risks
known unknowns
•Workaround is immediate risk response strategies for unidentified risks (or identified risks
that have been accepted passively) in order to contain the damages to the project plan (the
costs deal with unidentified risks can be obtained from the management reserve upon
management approval)
Workaround: a workaround is the unplanned response the Project Manager need to take to
deal with emerging risks and risks that are passively accepted as the risk response during
project execution (i.e. there are no pre-determined risk response plan in
place)for unidentified risks or risks that are passively accepted (note: risks that are
accepted actively will be dealt with a Fallback)
unknown unknowns
•work around – plan to deal when no contingency plan exists - executed on-the-fly to
address unplanned events – like passively accepted risks and unknown risks - still need to
pass through normal change control if change requests are needed
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Plan Risk Responses - Output
1. Identified Risk 18. Risk triggers
2. Root Cause 19. Risk symptoms
3. Potential Response 20. Risk warnings
4. Category 21. Risk response owners
5. Sub-Category 22. Risk response strategy
6. Prob. of Occurrence(%) 23. Any specific actions to implement response
7. Impact on which of the project objective(s) ? strategy
8. Impact (%) 24. Contingency plans for responses
9. Risk Raking (H/M/L) 25. Fall-back plans
10. Occurring in near term ? 26. Residual risk ?
11. Time to implement response for near term risk 27. Secondary risks ?
12. Risk Urgency/Priority rating (H/M/L) 28. Contingency Reserves
13. Probabilistic analysis of the project 29. Risk status
14. Probability of achieving cost and time objectives 30. Remarks
15. Prioritized list of quantified risks

16. Any trends observed ?
17. Expected Monetary Value (EMV)

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Residual and Secondary Risks
• It’s also important to identify residual and secondary

risks
• Residual risks are risks that remain after all of the
response strategies have been implemented
• Even though used stable h/w platform, it still may fail
• Secondary risks are a direct result of implementing
a risk response
• Using stable h/w may have caused a risk of peripheral
devices failing to function properly

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11.6 Implement Risk Responses
The process of implementing agreed –upon risk response plans
Source: A Guide to the Project Management Body of Knowledge. 6th Edition; 20 1 7

410
11.7 Monitor Risks
The process of (a) monitoring the implementing of agreed-upon risk response plans, (b)
tracking identified risks, (c) identifying and analyzing new risks and (d) evaluating risk
process effectiveness throughout the project
4 11
Monitor Risks – T & T
Technical performance analysis
•Compares technical accomplishments during project execution to the schedule of
412
technical environment
•Technical measures may include weight, transaction times, number of delivered
defects, storage capacity.
•Deviations can indicate potential impact on threats or opportunities
Audits
•To check the effectiveness of the risk management process
•Performed at predefined time and at appropriate frequency

413
An experienced project manager has just begun working for a large information technology
integrator. Her manager provides her with a draft project charter and immediately asks her to
provide an analysis of the risks on the project. Which of the following would BEST help in this
effort?
A. an article from PM network magazine
B. her project scope statement from the project planning
process
C. her resource plan from the project planning process
D. a conversation with a team member from a similar project
that failed in the past
Answer is D
Explanation :Did you realize that this situation is talking place during the initiating process group? Choices B and C are
created in the project planning process and so are not yet available. Therefore, we are left with deciding if choice A or
D provides the greater value. Since the information gained in choice D is more specific to your company, it is the best
choice
Practice test 2
415
While preparing your risk responses, you identify additional risks. What should you do?
A.add reserves to the project to accommodate the new risks and notify management
B.document the risk items and calculate the expected monetary value
based on probability and impact that result from the occurrences
C.determine the risk events and the associated cost, then add the cost
to the project budget as a reserve`
D.add a10 percent contingency to the project budget and notify the
customer

Answer B
416
Explanation When a new risk is identified, it should go through the risk management
process.
Choice A cannot be the best choice, as you first need to determine the probability and
impact of the risk and then try to diminish impact through risk response planning. Only
after these efforts should you add reserves.
Choice C addresses only costs, when there could also be a time impact. This choice also
ignores risk response planning work.
Choice D cannot be the best choice because it is better to determine reserves based on a
detailed analysis of risk. Therefore the best choice is B.

417
PROJECT RISK MANAGEMENT

ASSESSMENT

India
Choose correct sequence of processes involved in Project Risk Management.
•1. Identify risks, plan risk management, perform quantitative risk analysis,
perform qualitative risk analysis, plan risk responses, control risks
•2. Identify risks, plan risk management, perform qualitative risk analysis,
perform quantitative risk analysis, plan risk responses, control risks
•3. Plan risk management, identify risks, perform quantitative risk analysis,
perform qualitative risk analysis, plan risk responses, control risks
•4. Plan risk management, identify risks, perform qualitative risk analysis,
•Ans : 4. Plan risk management, identify risks, perform qualitative risk analysis,
Which of the following is correct about risks and risk management?

•1. A negative project risk that has occurred is called as an issue
•2. Risk tolerance is the degree of uncertainty an entity is willing to take on in
anticipation of a reward
•3. Risk appetite is the level of uncertainty at which a stakeholder may have a
specific interest
•4. Risk threshold is the degree, amount or volume of risk that an organization or
individual will withstand
Ans : 1. A negative project risk that has occurred is called as an
SN issue
964
India
To identify risks in a project, you decided to collect risks using a technique. In this
technique, project risk experts participate in this technique anonymously. A facilitator
uses a questionnaire to solicit ideas about the important project risks. The responses are
summarized and are then re-circulated to the experts for further comments. Consensus
may be reached in a few rounds of this process. What this technique is known as?
•1. Facilitation technique
•2. Surveys/Questionnaire
•3. Delphi technique
•4. Interviewing
•Ans : 3. Delphi technique
What are the four strategies for negative risks or threats?

•1. Avoid, Transfer, Mitigate, Accept
•2. Avoid, Withdraw, Mitigate, Accept
•3. Share, Mitigate, Withdraw, Accept
•4. Share, Minimize, Tolerate, Accept
•Ans : 1. Avoid, Transfer, Mitigate, Accept

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A technique of ‘Identify Risks’ process that identifies any
opportunities for the project from the organizational strengths and
any threats arising from organizational weaknesses is known as:
•1. Checklist analysis
•2. SWOT analysis
•3. Risk analysis
•4. Root cause analysis
•Ans : 2. SWOT analysis
What are the four strategies for positive risks or opportunities?

•1. Exploit, Transfer, Obtain, Accept
•2. Exploit, Enhance, Share, Accept
•3. Maximize, Obtain, Share, Accept
•4. Maximize, Invest, Decide, Accept
•Ans : 2. Exploit, Enhance, Share, Accept

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You are working as a project manager on a project where you have
used a diagram for analysis of risks. The diagram has Y-axis
containing each type of uncertainty at base values and X-axis
contains the spread or correlation of the uncertainty. Which
diagram you are using to determine the risks having the most
potential impact on the project?
•1. Probability distribution
•2. Decision tree diagram
•3. Tornado diagram
•4. Risk correlation diagram
•Ans : 3. Tornado diagram

India
967
Which of the risk management processes enable project managers
to reduce the level of uncertainty and to focus on high priority
risks?
•1. Plan risk responses
•2. Perform quantitative risk analysis
•3. Plan risk management
•4. Perform qualitative risk analysis
•Ans : 4. Perform qualitative risk analysis
Which of the following is not a tool or technique of ‘Control Risks’ process?

•1. Expert judgment
•2. Risk audits
•3. Variance and trend analysis
•4. Technical performance measurement
•Ans: 1. Expert judgment

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Question No: 6
Risks included in the Watch List are known as:
(a) High priority
(b) Low priority
(c) Negative risk
(d) Positive risk
Answer- 6: b
Explanation: Low priority risks are kept in the Watch List. These
risks have low probability and low impact. These risks are kept
in the Watch List for future monitoring to determine if they may
become a high probability or large impact risk.

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Risks that arise as a direct result of implementing a risk response
are called as:
•1. Positive risks
•2. Secondary risks
•3. Negative risks
•4. Contingent risks
•Ans: 2. Secondary risks

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970
Your senior manager is not pleased with you display of
identified project risk categories to senior leadership. They
recommend a hierarchical representation of project risks.
What should you be delivering to them?
A: Work Breakdown Structure

B: Risk Breakdown Structure
C: Milestone Chart
D: Org Chart
Ans : B

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971
Your project has a medium amount of risk. Your sponsor
wants you to confirm whether the allocated budget for the
project is sufficient for its successful completion. How can
you handle this situation?
A: Ask for help from your team members to estimate the

cost based on the information given.
B: Calculate the three-point estimates and provide that
information to the sponsor.
C: Provide an estimate in the form of a range.
D: Look for previous similar projects to get an answer.
Ans : C

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972
A project has a 60% chance of a $100,000 profit and a 40 percent of a US $100,000 loss.
The Expected Monetary Value for the project is:
1.$100,000 profit
2.$60,000 loss
3.$ 20,000 profit
4.$40,000 loss
Answer: 3
Expected Monitory Value (EMV) is computed by EMV = Probability × Impact.
Compute both positive and negative values and then add them:
0.6 × $100,000 = $60,000 0.4 × $100,000 = $40,000 EMV = $60,000 - $40,000 = $20,000
profit

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973
Assuming that the ends of a range of estimates are +/- 3 sigma from
the mean, which of the following range estimates involves the
LEAST risk?
1.30 days, plus or minus 5 days

2.22 – 30 days
3.Optimistic = 26 days, most likely = 30 days, pessimistic = 33
days
4.Mean of 28 days
Answer: 3
The estimate with the smallest range is less risky.

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974
If a risk has a 20 percent chance of happening in a given month,
and the project is expected to last five months, what is the
probability that the risk event will occur during the fourth
month of the project?
1.Less than 1 percent

2.20 percent
3.60 percent
4.80 percent
Answer: 2

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975
Overtime associated with the execution effort of a project is
estimated at 120 hours with probability 0.5, 250 hours with
probability 0.6, and 300 hours with probability 0.3. What is the
monetary value of the amount of overtime?
1.300 hours
2.670 hours
3.250 hours
4.100 hours
The Monetary Value of the amount of overtime is (120 x 0.5) +

(250 x 0.6) + (300 x 0.3) = 300 hours.

India
976
Your team has just bagged a software development project.The executive management
is very pleased as this is a very prestigious project.However you are a little worried
considering the complex nature of the project.You decide to try and identify the
possible risks.You get all relevant stakeholders together and conduct mammoth
discussions.Together you have come up with a number of risks.However based on your
experience - you still feel that not all the risks have been identified.You decide to set
aside some budget for the risks that you have not identified but are sure you will
encounter.Where does this budget come from?
1.Cost Management Plan

2.Cost Baseline
3.Contingency Reserves
4.Management Reserve

Explanation :
The type of risk here is an unknown risk.For known risks risk responses can be
proactively planned for.For the known risks where we cannot plan proactively - we
set aside a reserve called Contingency Reserves.For unknwon risks we set aside
a Management Reserve.Cost management Plan deals with how you will manage
costs on your project and Cost baseline is the baselined cost expected to be
expended on the project. India
977
Which is least risk phase of a project ?
1. Planning
2. Closing
3. Execution
4. Control
correct is :1
Explanations :
The Planning phase is the phase with the least risk attached.
Because you have not committed the major part of your
project.

India
978
You are the project manager of a Project. Which of the following techniques will
you use to create
the risk management plan?
1. Planning meetings
2. Status meetings
3. Variance meetings
4. Risk tolerance
correct is :1
Explanations :
Planning meetings are used to create the risk management plan.

Planning Meetings and Analysis: Attendees are the PM, leadership team,
key stakeholders and those in the organization responsible to manage project
risks.

India
979
A person's willingness to tolerate risk is known as
__________?.
1. The utility function

2. Risk acceptanc
3. The risk reward ratio
4. Scope Statement.
correct is :1
Explanations :
The utility function describes a person's willingness to
tolerate risk.

India
980
A risk trigger is also called __________?
1. A warning sign
2. A delay
3. A cost increase
4. None of the above
correct is :1
Explanations :
Risk triggers can also be known as warning signs.
Triggers - Risk symptoms or warning signs that indicate a
risk even has occurred or is about to occur.

India
981
The risks of financial gain or loss are called
_____________.
1. Business risks
2. Financial risks
3. Organizational risks
4. Functional risks
correct is :1
Explanations :
Business gains are directly tied to the risk of financial gains
or loss

India
982
A risk is ____________ occurrence that has a positive or a
negative effect on a project .
1. Known
2. Uncertain
3. Known
4. Potential
correct is :2
Explanations :
Risks are not planned, they are left to chance.

India
983
A table of risks, probability of risks, impact, and a number
representing the overall risk score is
called a ________.
1. Risk table
2. Risk matrix
3. Qualitative matrix
4. Quantitative matrix
correct is :2
Explanations :
A table of risks, probability of risks, impact, and a number
representing the overall risk score is
called a Risk matrix.

India
984
The Risk Register is initiated during __________phase?
1. Risk Identification
2. Risk Management Planning
3. Qualitative Risk Analysis
4. None of the above
correct is :1
Explanations :
The Risk Register is initiated during Risk Identification phase
and periodically updated Qualitative
Risk Analysis phase.

India
985
You are a project manager and you are in the executing
stage. You have identified all the risks and your risk register
is fully updated. From your risk register, an identified risk
which had a very low probability, occurs and you plan to use
the contingency reserves. What is the purpose of using
contingency reserves?
A: Scope creep
B: Unanticipated events
C: Anticipated but not certain events
D: Anticipated and certain events
Ans : C

India
986
Most subjective Quantitative Risk Analysis Tools and
Techniques are :
1. Interviewing and Expert judgment

2. Probability distributions
3. Decision Tree Analysis
4. Simulation
correct is :4
Explanations :
Decision Tree Analysis, Probability Distributions, Modeling
and Simulation, Expected Monetary Value, and Sensitivity
Analysis are numerically based tools.

India
987
Risk management should be done:
a. Just before meeting with a client

b. Consistently throughout the project life cycle
c. As soon as time and cost estimates are ready
d. Early in the execution phase
Answer-b:
All of the following are inputs to the risk identification process EXCEPT:
a. Risk Management Plan
b. Categories of risk
c. Workaround plan
d. Published information
Answer-c:
India
988
The tools and techniques of quantitative risk analysis are:
a. Contracting, contingency planning, alternative strategies and insurance

b. Interviewing, historical results, workarounds and additional response
development
c. checklists, damage control reports, standard allowances, and inspection
d. Interviewing, probability distribution, expert judgment, sensitivity analysis,
EMV, decision tree analysis, and modeling and simulation
Answer-4:

India
989
The risk management plan may include all of the following EXCEPT:
a. Methodology
b. Definitions of risk probability and impact matrix
c. Responses to individual risks
d. Stakeholders tolerances
Answer-c:
The Delphi technique has all of the following characteristics EXCEPT:

a. It is a way to reach a consensus of experts
b. It is a technique in which experts participate anonymously
c. It helps reduce bias in the data and keeps any person from having undue
influence on the outcome
d. It is an ancient Greek technique to ensure that actions of subordinates are aligned
with the vision of senior executives
Answer-d:

India
990
If a risk has a 20% chance of happening in a given
month and the project is expected to last five months,
what is the probability that this risk event will occur
during the fourth month of the project?
a. Less than 1%
b. 20%
c. 60%
d. 80%
Answer-7:Many people miss this one. No calculation is

needed. If there is a 20% chance in any month the
chance in the fourth month must also be 20%.

India
991
If a risk event has a 90% chance of occurring, and the consequences will
be Rs. 10,000.What does Rs. 9000 represent?
a. Risk value
b. Present Value
c. Expected monitory value
d. Contingency budget
Answer-C: EMV = probability X impact

India
992
Use of insurance is BEST considered an example of risk:
a. Mitigation
b. Transfer
c. Acceptance
d. Avoidance
Answer-9:

India
993
Question: You are working on a project with a vendor who is currently located in a different country
than yours. Recently, due to severe economic depression, you are almost certain that the price of
their local currency will drop, because of which you will be able to save significantly in the project
budget. There is no clause mentioned in the contract for a situation like this. This is an example of?
A: Code of Ethics and Professional Responsibility

B: Opportunity
C: Threat
D: Constraint

994
India
Workarounds are determined in response to :
a. Risk Identification
b. Risk Quantification
c. Risk Management Plan
d. Negative Risk that has occurred
Answer-:
A workaround refers to determining how to handle a negative
risk that has occurred. Distinguished from contingency plan in
that a workaround plan is not planned in advance of the
occurrence of the risk event.

India
995
An output from risk response planning is:
a. Residual risks
b. Risk Identified
c. Prioritized list of risks
d. Risk Monitoring and Control
Answer-: Impacts (choice D) are generally created during

risk quantification. Prioritized risks (choice C) are created
during qualification and quantification. Risks are identified
(choice B) during risk identification. The best answer is A.

India
996
Project Procurement Management
Objectives
•Understand the different Procurement Management Processes

•Their Inputs, Tools and Techniques, Outputs

India
997
• The project procurement management includes the processes necessary to purchase or
acquire products, services or results needed from outside the project team
• It includes contract management and change control processes , to develop and

administer or purchase order issued by authorized project team members
• Also includes controlling any contract issued by an outside organization (the buyer) that is
acquiring deliverables from the project from the performing organization ( the seller) and
administering the contractual obligations placed by the contract on the project team

India
998
A mega project may involve multiple sellers being contracted to
procure various services for the needs of the mega project.
Managing these many sellers on their individual contracts need a
specialized team in procurement and is normally a part of the
administrative or financial function in organizations, however,
project teams may also be employed to administer as well.
•Seller goes through a change of status in the procurement

cycle.

India
999
420
• Depending on the application area: the seller may be identified as a

contractor, subcontractor, vendor, service provider, or supplier
• Depending on the buyer’s position: in the project acquisition cycle, the buyer may be
called a client, customer, prime contractor, contractor, acquiring organization, service
requestor, or purchaser
• The seller can be viewed during the contract life cycle first as a bidder, then as the
selected source and then as the contracted supplier or vendor
Project management team has to make certain that all procurements meet the specific
needs of the project while adhering to organizational procurement policies

421 Buyer and Seller Roles
SERVICE
CUSTOMER PROVIDER
ORGANIZATION ORGANIZATION

Project Procurement Management Processes
422 Monitoring &
Planning
Processes

Executing Processes
Process Groups
Knowledge Area
Initiating Monitoring &
Planning Executing Closing
Control
Procurement Plan Procurement Conduct Control

Management Management Procurements Procurements

Knowledge Area: Procurement Management
•There are 3 Procurement Management processes, namely:
Plan Procurement Management:
•It is the process of planning the identification of Sellers, how the
contract will be awarded, and how the project will be executed.
Conduct Procurements
•Process of conducting the procurement which includes circulating
proposals, obtaining seller responses, selection & award of the
contract to a particular seller.
Control Procurement
•Controlling Procurements involve the management of executing
the awarded contract on the parameters defined during the
contract award. Validation of the work being performed as the
criteria to release the payments.

India
1003
12.1 Plan Procurement Management
Is the process of documenting project procurement decisions, specifying the

approach, and identifying potential sellers

Plan Procurement Management
Typical Steps
• Prepare the procurement statement of work (SOW)

• Prepare a High-Level Cost estimate to determine the Budget
• Advertise the Opportunity
• Identify a short list of qualified sellers
• Prepare and issue bid documents
• Prepare and submit proposals by the seller
• Conduct a technical evaluation of the proposals including quality
• Perform a cost evaluation of the proposals
• Prepare the final combined quality and cost evaluation to select the winning
proposal
• Finalise negotiation and sign contract between the buyer and seller

India
1005
CONTRACT
=
AGREEMENT
(meeting of the minds )
PROMISOR / PROMISEE /
OFFEROR / PROMISE / OFFER OFFEREE /
L
E
SELLER ACCEPTANCE BUYER L
E
G G
A A
L L
R
E
L
+ R
E
L
A A
T
I
ENFORCEABLE BY LAW T
I
O COMPETENT TO CONCTRACT O
N FREE CONSENT N
S S
H
LAWFUL OBJECT H
I LAWFUL CONSIDERATION I
P NOT VOID P
SN Panigrahi,
1006
Essenpee
LEGAL OBLIGATIONS
Business
PROCUREMENT PROCESS CYCLE
Identify
Needs
Write
Specifications
Raise
Purch. Requisition
`
Cost / Budget Check & Scrutiny PR Approval
Evaluation Quotes Vendors Selection & Selection of a Verification & Study

Receipt and Opening Bid Notification / Procurement Method By Purch. Dept.
RFQ
CONTRACT
------- --------- ------- ------ -----
-- --- ------ ------- ------ ------- -
-------- ------ ABCD ------ ------ ----
---- ----------- -------- ------- -----
------- ----- ------- -12345 --- -----
--- ---- ----- ------- ----- ---- ------
----- ------ ------ ------ XYZ
VENDOR
SIGNATURE
Negotiations Review By Contracts
Proposal Approval Award Contract/PO
Committee

Payment Material Receipt & Inspection Material Delivery
1007
Solutions, India
Contractual Relationships
•Majority of the companies with descent size, scale and maturity have a separate
legal and procurement team to ensure the procurements are done in a legal,
ethical practiced manner to avoid any wrong-doings during the procurement
process.
•Wherein such specialized teams are not available in the companies, project
management team has to supplement this function with their expertise.
•Different types of Contracts may be clubbed for better performance and the
nature of work to be accomplished.
•Contracts awarded are bonded by the legal agreements where in the approach
(contractual relationship) could be defined as follows:
•Fixed Price Contracts
•FFP (Firm Fixed Price)
•FPIF (Fixed Price Incentive Fee)
•FP EPA (Fixed Price Economic Price Adjustment)
•Cost Reimbursable Contracts
•CPFF (Cost Plus Fixed Fee)
•CPIF (Cost Plus Incentive Fee)
•CPAF (Cost Plus Award Fee)
•Time & Material Contracts SN Panigrahi, Essenpee Business Solutions,
India
1008
Plan Procurement Management – Contract Types
What is a Fixed Price contract ?
• It involves a fixed total price for a well-defined product
• Scope of work is very well-known and provides complete and exact specifications
• Kind of projects that have been undertaken multiple times in the past e.g. construction
projects or most software development projects
In order to provide a fixed price contract the buyer has to perform due-diligence and define
the scope of work clearly to be done.
Contract Type Description
Fixed Price Plus • The buyer pays the seller a fixed total amount plus an incentive bonus, if
Incentive certain performance objectives are met
Fee (FPIF )
• The buyer pays the seller a fixed total amount, regardless of the seller’s
costs
• This contract type poses the greatest risk for the seller, however, it also offers the
Firm Fixed Price (FFP) best opportunity for the seller organization to make increased profits by reducing
it’s costs
Fixed Price with • This type is used whenever the seller’s performance period spans a
considerable period of years as it is desired to with many long term relationships
Economic Price
• It is fixed price with special provision allowing for pre defined final adjustments to
Adjustment the contract price due to changed conditions, such as “Inflation, specific
(FP-EPA) commodities etc. 100Solutions,
India 9
What is a Cost Reimbursable contract ?
•It involves payment or reimbursement to the seller for the seller’s actual direct costs,
plus a fee typically representing the seller’s profit
•Entire project scope is not clearly known but only the requirements are known, typically
in the kind of projects that have never been attempted before e.g. research and
development (R&D) projects
Cost Plus Fixed Fee • The seller’s fee is a fixed fee, calculated as a percentage of the estimated project costs
(CPFF) and does not change unless the project scope changes
• The seller’s fee is a pre-determined fee plus an incentive bonus, if certain
Cost Plus Incentive performance objectives are met
Fee (CPIF) • Such a contract often specifies a pre-negotiated sharing formula, for sharing the cost
savings, if the final costs are less than the expected costs
• The seller is reimbursed for all legitimate costs, but the majority of the fee is only
Cost Plus Award Fee
earned based on the satisfaction of certain broad subjective performance criteria
(CPAF)
• The determination of the fee is based solely on the subjective determination of seller
performance by the buyer and is generally not subject to appeals
425
or production 1010
India
426
What is a Time and Material contract ?

•It is a hybrid type of contract that contains aspects of both cost -reimbursable and
fixed-price type of contracts.
•It resembles CR contracts because the full value of the agreement and the exact
quantity of items to be delivered are not defined by the buyer at the time of
awarding the contract
Time & Material (T&M) •It resembles fixed-price contracts because the unit rates are preset by the buyer
and seller when both parties agree on the rates for a particular resource
▪ For instance, the per person hour $ rate might be pre-decided but the
total effort and hence, the total value of the project may not be known

Types of Contracts
Time & Cost

Fixed Price
Material Reimbursable
Firm Fixed Price Cost Reimbursement
(FFP) or Lump (CR) or Cost Plus
Sum Contract Fixed Fee (CPFF)
Fixed Price Plus Cost Plus

Incentive Fee Incentive Fee
(FPIF) (CPIF)
Fixed Price with

Cost Plus Award
Economic Price
Adjustment (FP/EPA) Fee (CPAF)
Fixed Price with Cost Plus

Re-determination Percentage of
(FP/RD) SNCost (CPPC)
1012
India
1013
Fixed Price Contracts

Fixed Price is Fixed Irrespective of Market Fluctuations. Suitable where
Scope is Clearly Defined. Requirement Changes would typically
Price call for re-negotiating on the Price. Cost & Time is certain for
buyer; but seller bears risk of cost & time overrun
Firm Fixed Price Contracts (FFP): The price is fixed firm. Most commonly used
contract type. Favored by buyer if the scope is very Clear. Low Risk to Buyer:
High Risk to Seller
Fixed Price Incentive Fee contracts (FPIF): The price is fixed, with incentive
for over performance and / or penalty for under performance.
Fixed Price with Economic Price Adjustment Contracts (FP-EPA): Applicable

for long term projects. It is a fixed price contract, with special provision for final
price adjustment due to inflation; tied to clear Financial Index like Inflation Index,
Labour Index, Commodity Index, dollar exchange rate etc.,
1014
Fixed Price Contracts

1015
Cost Reimbursable (CR) Cost Plus Contracts

Cost In these contracts, all applicable COSTs are reimbursed along with an agreed
Reimbursable FEE representing seller profit. These contracts are inherently flexible to
(CR) Contracts Scope / Requirement changes. Buyer takes More Risk as the overall time
& cost is open ended.
Cost Plus FIXED FEE contracts (CPFF): Provides the contractor with a fee, or
profit amount, that is determined at the beginning of the contract and does not
change apart from Actual Cost which is Reimbursed.
Cost Plus Percentage of cost contracts (CPPC): Reimburses actual costs +

agreed percentage fee on actual expenses such as 5% of total allowable costs.
More popular over CPFF, as seller gets rational fee based on volume of work..
Cost Plus incentive fee contracts (CPIF): used to encourage performance in

areas critical to the project. Often the contract attempts to motivate contractors to
save or reduce project costs. The use of the cost reimbursable contract with an
incentive fee is one way to motivate cost reduction behaviors.
Cost Plus AWARD fee contracts (CPAF): reimburses the contractor for all allowable costs plus
a fee that is based on performance criteria. The fee is typically based on goals or objectives that
are more subjective. An amount of money is set aside for the contractor to earn through
excellent performance, and the decision on how much to pay the contractor is left to the
judgment of the project team. The amount is sufficient to motivate excellent performance.
1016
A cost-plus-incentive-fee contract has the following characteristics:

• Sharing ratio: 80/20
• Target cost: $100,000
• Target fee: $12,000
• Maximum fee: $14,000
• Minimum fee: $9,000
How much will the seller be reimbursed if the cost of performing the work is $95,000?
A) $98,000 B) $100,000 C) $108,000 D) $114,000
Calculating the Final Incentive Fee

The final incentive fee due to the seller is calculated as:
Final Fee = ((Target cost – Actual Cost) * Seller’s sharing ratio) + Target fee
Substituting the values in the above formula, we get
Final Incentive Fee = (( $100,000 – $95,000) * 20% ) + $12,000
= $5,000 * 20% + $12,000
= $1,000 + $12,000
= $13,000
But this is just the incentive. The Seller will also get the costs paid.
Therefore, the Final Reimbursed Price = Actual cost + Final Incentive Fee
=$95,000 + $13,000
= $108,000
Therefore, the answer for this PMP question would be Choice C = $108,000.
1017
Question: Using the same data as above, what will be the reimbursement to the seller if
the cost of performing the work is $120,000?
A) $112,000 B) $119,000 C) $126,000 D) $129,000

Do note here that the Actual cost is $120,000, and it is ABOVE the Target Cost. Thus, the seller has exceeded
the costs, and will be penalized.
= -$20,000 * 20% + $12,000
= -$4,000 + $12,000
= $8,000
This incentive is lower than the Minimum Fee. Thus, the $8,000 will be adjusted upwards to $9,000
(the minimum amount). The Seller will also get the costs paid.
=$120,000 + $9,000
= $129,000
Therefore, the answer for this PMP question would be Choice D = $129,000.
1018
Time & Materials (T&M)

The seller charges for TIME and AMOUNT of materials
(including travel) used as per agreed RATE.
The rates are fixed for every category of resources and includes
profit. Rates are charged like DOLLAR per Hour, DOLLAR per
Ton...... Per Unit Proce. These contracts are inherently flexible
to Requirement Changes. This contract is often used in Annual
Maintenance Contracts / Rate Contracts, Resource Engagement
Contracts, Material Handling Contracts etc where Scope is not
Very Clear at the begining.
T&M contracts have characteristics of both FP & CR contracts,
therefore also called as Hybrid Contracts.
They resemble FP with predefined unit labor or material rates and
at the same time resemble cost reimbursable as Time & Cost are
1019
Cost Plus Contracts & Time & Materials (T&M)

Contract Type & Risk
100%
Buyer
Risk
Seller
0%
Contract Type
CPPC CPFF CPAF CPIFT & M FPEPA FPIFEssenpee
SN Panigrahi, FFP Business Solutions,
1020
India
Contract Type & Risk
Risk
Contract Type
India
1021
427
High Buyer Low
T&M CPFF CPAF CPIF FPEPA FPIF FFP
Low Seller High

Point of Total Assumption (PTA)
This concept is only related with fixed price incentive fee contracts and refers to
the amount above which the seller bears all the losses of an additional cost
overrun. The concept work when buyer and seller has agreed criteria for fixing the
price, and buyer is willing to repay part of cost overrun till it reaches a ceiling price.
Let’s look at a few terms before we get into the PTA.
Target Cost: This is the estimated budget, which the seller has planned for
delivering the given project; it can be looked as a project budget,in this type of
contracts this is shared with the buyer and the process of estimating project budget
is also kept transparent.
Target Fee: This is the fee which the seller wants to charge for the work he is doing,
this is the planned fee, and the actual fee will depend upon how well the seller
manages the project (cost overruns)
Target Price: This is the price the buyer is looking towards, this is a sum total of
Target Cost + Target Fee, both seller and buyer use this as a benchmark, if the final
project cost less than this price, buyer and seller will share the profit as per profit
sharing agreement, if the price goes beyond the target price, buyer and seller share
the cost as per cost sharing agreement (subject to maximum ceiling of selling price) 102
India 3
Share ratio: In this type of contract we will have two types of
ratio, one for sharing profit, which is used when the project
cost less than the target cost and another is cost sharing ratio
which is used when the project cost more than the target cost.
Ceiling Price: this price is put by the buyer to limit the cost
liabilities, buyer will not pay anything beyond this price, even
if the actual project cost more than the ceiling price buyer will
not pay anything extra than the ceiling price.
(Ceiling Price – Target Price)

PTA = + Target Cost
Buyer’s Share Ratio

India
1024
Lets take an example, I am taking the example from Rita Mulcahy’s PMP
Exam Prep Eighth Edition page no 480.
Target Cost 150,000
Target Fee 30,000
Target Price 180,000
Sharing Ratio (Cost Overrun Sharing 60/40

Ratio)
Ceiling Price 200,000
Let’s calculate PTA for this

PTA = (Ceiling Price – Target Price) / Buyer’s Share Ration + Target Cost
PTA = (200,000 – 180,000) /. 60 + 150,000

PTA = 183,333
What does it mean?
The seller should target that the cost of development should not touch Point
of Total assumption (PTA) (183,333), if it touched PTA all further cost overrun
has to be paid by the seller. 102Solutions,
India 5
Let’s take an example:
Target Cost: 1,000,000

Target Profit for Seller: 100,000
Target Price: 1,100,000 (Target Cost + Profit for Seller)
Ceiling Price: 1,300,000 ( the maximum the buyer will pay)
Share Ratio: 80% buyer–20% seller for over-runs, 50%–50% for under-
runs.
PTA = ((1,300,000 – 1,100,000)/ 0.80) + 1,000,000 = 1,250,000.
Beyond the Point of Total Assumption, the seller’s profitability
decreases, and their initiative and interest to complete the project may
diminish too. Therefore, the PTA is also a risk trigger. As this point is
reached, the project risk increases, and more attention is needed to
complete the project at the earliest, with as little cost deviation as
possible.

India
1026
Plan Procurement Management – T & T
Data Analysis - Make or Buy Analysis
•A general management technique used to determine whether it is more cost-effective for
428
the project team to produce a particular product or service or to purchase it from outside
sources
•If a buy decision is to be made, then a further decision of whether to purchase or
rent is also made
•Should consider direct costs (out-of-pocket costs to purchase the product) as well as
indirect support costs (costs involved in supporting the purchasing processes and the
purchased item).
•The long-range strategy of the performing organization is also a component of the make-or-
buy analysis, if it anticipates future requirements for those items
▪ When this occurs, the costs charged or allocated to the project might be less than
the actual costs, with the difference representing the organization’s investment for
the future
Source Selection Analysis
• Least Cost
• Qualifications only
• Quality – based / Highest Technical Proposal Score
• Quality and cost – based
• Sole Source
• Fixed budget

India
1028
Plan Procurements Management - Output
Procurement Management Plan
429
1.Standardized procurement documents and types of contract to be used.

2.Risk management issues.
3.Whether independent estimates will be used and whether they are needed as evaluation
criteria.
4.Those actions project management team can take unilaterally, if the performing
organization has a prescribed procurement, contracting and purchasing department.
5.Managing multiple suppliers.

6.Coordinating procurement with other project aspects, such as scheduling and performance
reporting.
7.Handling the make-or-buy decisions and linking them to Estimate Activity Resources and
Develop Schedule processes.
8.Setting the scheduled dates in each contract for the contract deliverables and coordinating
with the schedule development and control processes.
430
Procurement Management Plan
9.Handling the long lead time to purchase certain items from sellers and coordinating the
extra time needed to procure these items with the development of the project schedule.
10.Identifying requirements for performance bonds or insurance contracts to mitigate some

forms of project risks.
11.Constraints and assumptions which could affect planned procurements.
12.Establishing the direction to be provided top the sellers on developing and maintaining a
WBS.
13.Establishing the form and format to be used for the procurement / contract statement of
work.
14.Identifying pre-qualified sellers, if any, to be used.

15.Procurement metrics to be used to manage contract and evaluate sellers.
431
Procurement Statement Of Work

•It is developed from project scope baseline
•It defines only that portion of the project scope that is to be included within the related
contract
•It describes the procurement item in sufficient detail to allow prospective sellers to
determine if they are capable of providing the products, services or results
•It includes a description of any collateral services required such as performance reporting
or post-project operational support for the procured item
•Each procurement item requires a Procurement SOW, but multiple products or services can
be grouped as a single SOW
•It can be revised and refined as required, as it moves through the procurement process until
incorporated into a signed contract award
432
Procurement Statement Of Work
• Specifications
• Quantity desired
• Quality levels
• Performance data
• Period of performance
• Work location
• Other requirements, if any

433
Procurement Documents
•Are used to solicit proposals from prospective sellers
•Are structured to facilitate an accurate and complete response from each prospective seller
•Are sufficient enough to ensure consistent, appropriate responses but flexible enough to
allow consideration of any seller suggestions for better ways to satisfy the same
requirements
•Are structured to facilitate easy evaluation of the responses
They include –
1.A description of the desired form of the response
2.Relevant procurement statement of work
3.Any required contractual provisions like NDA, a copy of the model contract, etc.
434
Common terms Used For Procurement Documents
•RFI – Request For Information

•IFB – Information For Bid
•RFP – Request For Proposal
•RFQ – Request For Quotation
•Tender Notice
•Invitation For Negotiation
•Seller Initial Response
Specific procurement terminology used may vary by industry and location of the
procurement
Sole Source/Single Source Procurement
In Sole Source procurement only one vendor can supply the

commodity, technology and/or perform the service required by
the agency. This method of procurement requires a Procurement Record
explaining
a) the unique nature of the requirement;

b) the basis upon which it was determined that there is only one known
vendor able to meet the need; and
c) the basis upon which the agency has determined the cost to be
reasonable. All of the above documentation is required by OSC
to review the proposed contract.

India
1035
A Single Source procurement is one in which two or more vendors
can supply the commodity, technology and/or service required, but the
agency selects one vendor over the others for reasons such as expertise or
previous experience with similar contracts. This type of procurement
requires a Procurement Record explaining
a) the circumstances leading to the selection

of the vendor, including the alternatives considered;
b) Its rationale for selecting the specific vendor; and
c) the basis upon which it determined the cost was reasonable. All of the
above documentation is required by OSC to review the proposed
contract.

India
1036
Source Selection Criteria
• Understanding of need
• Overall or life-cycle cost (on the lower side)
• Technical capability
• Risk
• Management approach
• Technical approach
• Warranty
• Financial capacity
• Production capacity and interest
• Business size and type
• Past performance of the sellers
• References
• Intellectual property rights
• Proprietary rights SN Panigrahi, Essenpee Business Solutions,
India
1037
Make-or-Buy Decisions
•They are documented conclusions reached of what project products, services or results
will be acquired or developed internally by the project team
•If a decision to make is reached then the procurement plan may define processes and
agreements internal to the organization
•If a decision to purchase is reached then a similar process of reaching agreement with
the seller is defined and documented

Make-or-Buy Analysis
•Make or Buy analysis is usually performed to analyze should the
work be done internally or externally.
•In some cases though expertise lies in the organization, it may not
be rightful to consider to be done it in house may be due to:
•Excessive cost implications
•Externally available cost effective deliveries
•Internal resources tied to other projects and so on..
•Whenever the Buy option is thought through, along with the buy,
the option of lease is also first considered.

India
1039
12.2 Conduct Procurements
Conduct Procurements is the process of obtaining seller
responses, selecting a seller, and awarding a contract

Conduct Procurements – Process Flow
438

Conduct Procurements – T & T
Agreements
•Can be in the form of a simple purchase order or a complex document
•Is439
a mutually binding agreement that obligates the seller to provide the specified
products, services or results and obligates the buyer to pay the seller for them
•Is a legal relationship subject to remedy in the courts
✓ Statement of work ✓ Warranty

✓ Schedule baseline ✓ Product support
✓ Performance reporting ✓ Limitation of liability
✓ Period of performance ✓ Fees and retainer
✓ Roles and responsibilities ✓ Penalties
✓ Seller’s place of performance ✓ Incentives
✓ Pricing ✓ Insurance and performance bonds
✓ Payment terms ✓ Subordinate contractor approvals
✓ Place of delivery ✓ Change request handling
✓ Inspection and acceptance criteria
✓ Termination clause
✓ Alternate Dispute Resolution (ADR) mechanism
12.3 Control Procurements
Process of managing procurement relationships , monitoring contract performance, and making
changes and corrections to contract; and closing out contracts

Control Procurements – T & T
• Both the parties meet their contractual obligations and that their own legal rights are
protected
• Managing interfaces among the various providers
• Monitoring payments to the seller and ensures that payment terms within the contract
are met and that seller compensation is linked to seller progress, as defined in the
contract
• Managing any early termination of the contracted work (for cause, convenience or
default) in accordance with the termination clause of the contract
• Agreements can be amended any time prior to contract closure by mutual consent, in
accordance with the change control terms of the agreement (such amendments are
captured in writing)

India
1044
• Includes the application of the appropriate project management processes to the
contractual relationship(s) and
• Integration of the outputs from these processes into the overall management of the
project
❑ Direct and Manage Project Work to authorize the contractor’s work at the
appropriate time
❑ Control Quality to inspect and verify the adequacy of the contractor’s product
❑ Perform Integrated Change Control to ensure that changes are properly approved
and that all those need to know are aware of such changes
❑ Control Risks to ensure that all risks (vendor-related) are mitigated

India
1045
443
Procurement Performance Reviews

Are structured reviews of the seller’s progress to deliver project scope and quality, within
cost and on schedule, as mentioned in the contract
•Rates how well the seller is performing the project work

•Includes buyers inspections as well as quality audits
•Documents the seller’s ability to continue to perform work on the current contract
•Indicates if the seller can be allowed to perform work on future projects
•Can form the basis for early termination of the seller’s contract
•Can determine how contract penalties, fees or incentives are administered

444
Claims Administration
•Contested changes (also called as claims, disputes or appeals) and potential constructive
changes are those requested changes where the buyer and the seller cannot agree on
compensation for the change or cannot agree that a change has occurred
•Claims are documented, processed, monitored and managed throughout the contract
life-cycle
•If the parties themselves do not resolve a claim, it may have to be handled in accordance
with the alternative dispute resolution (ADR) typically following procedures established in
the contract
•Settlement of all claims and disputes through negotiation is the preferred method

Closed Procurements
•It involves verification that all of the seller’s work and deliverables were approved prior
to closure
•Early termination of a contract is a special case of contract closure and can result from a
mutual agreement of the parties or from the default of one of the parties
•Based upon the terms and conditions, the buyer may have the right to terminate the
whole contract or a portion of it, for cause or convenience, at any time
•It also involves administrative activities such as finalizing open claims, updating records
to reflect final results and archiving such information for future use
•Unresolved ‘claims’ may be subject to ‘arbitration’ or ‘litigation’ after contract closure

India
1048
446
Practice test 1
As part of the records management system, you are trying to make
sure that all records from the procurement are documented and
indexed. Which of the following do you not have to worry about ?
A. proposal
B. statement of work
C. terms and conditions
D. negotiations process

447
Answer is D
Explanation: You will see long, wordy questions consisting of many paragraphs on the
exam but do not let them worry you. Sometimes the briefer questions are harder. To
answer this question you need to know what a record management system is and that
it would not be used to keep track of negotiations. The negotiation process is not a
document.

Practice test 2
448
Your project has just been fast tracked and you are looking at bringing in a subcontractor to
complete networking quickly. There is no time to issue a request for proposal (REP) so you
choose to use a company you have used many times before for software development. A
primary concern in this situation is
A. Collusion between subcontractors.

B. The subcontractor’s qualifications
C. The subcontractor’s evaluation criteria.
D. Holding a bidder conference.

You have replaced an earlier project manager in a project .The earlier project
manager has left the prganization and you are now responsible for the
project.On reviewing the project management plan you are disturbed
because a number of procurement contracts have been signed and they all
turn out to be Cost plus fixed fee types of contracts - why are you worried ?
1.Seller has no motivation to control cost and infact cost could spiral
2.All the risk is now with the seller
3.Contracts should always be T & M
4.Contracts should always be Fixed Price

Explanation :
As a project manager - you indeed have a reason to be worried if your project has
already signed off on Cost Plus Fee type of contracts.This is because in such
contracts - you the buyer needs to pay the seller for all the costs and in addition
an agreed percentage of the cost.As a result there is no motivation on the seller
to control the costs - infact it is in the interest of the seller to increase the costs.It
is not necessary that all projects should always be T & M or Fixed Price.Option A
is clearly wrong since all the risks are infact with the buyer not the seller!
India
1052
You have been assigned to manage a project that deals with setting up a railway line connecting two cities.The project is
complex with a lot of contracting involved.You and experts in your organization are evaluating if the rail line alignment
machinery should be purchased outright or if it would be better to lease.The cost of leasing the equipment is 1200 $ per day
while the cost of an outright purchase is 96000 $ and a daily cost of 200 $.The duration of laying out the railway lines is
scheduled to be an activity duration of 150 days.Should you purchase the machinery or be leased - which option would be more
economical?
1.Lease the machinery as it will be cheaper by 84000 USD

2.Purchase the machinery as it its usage beyond the 80th day would be more cost effective to purchase rather than
lease
3.Lease the machinery as it will be cheaper by 36000 USD
4.Purchase the machinery as it its usage beyond the 96th day would be more cost effective to purchase rather than
lease

Explanation :
The question is actually looking for a simple mathematical formula!.Do not get flustered by all the numbers. The activity
duration is 150 Days .So cost of leasing is 150 * 1200 = 180000 , while cost of an outright purchase is 96000 + 200 *
150 = 96000 + 30000 = 126000 USD. So definitely leasing is not cheaper and purchasing the machinery is the better
option. Now what is the breakeven point of a purchase - on the 96th day of usage of the machinery - the cost of
purchase incurred is 115200 $ which is exactly the cost incurred if it were leased so 96th day is the break even point and
hence the correct answer is option C.
India
1053
You are negotiating an FPIF contract. The ceiling price is $2 million, and
the target price is $1.8 million. The buyer’s share ratio is 75% for
overruns. What is the target profit for the seller if the target cost for
the buyer is $1.5 million?
A. $150K
B. $200K
C. $300K
D. $1.5 million
Ans : C. $300K – This problem is a good example of (1) not just memorizing the
formula but knowing what goes into it and (2) avoiding extraneous information. The
problem sets you up to think that you’ll be using this formula: PTA = [(Ceiling –
Target)/Buyer’s Share Ratio] + Target. Actually, you just need to know that the Target
Price is made up of both the Buyer’s Target Cost and the Seller’s Target Profit. $1.8
million – $1.5 million = $300K in target profit for the seller.

India
1054
You are running a project for a customer based on a cost-
reimbursable contract with the following terms:
Which is the PTA (= point of total assumption, break point) of

the project?
Target costs: $ 1,000,000
Fixed fee: $ 100,000
Benefit/cost
80% / 20%
sharing:
Price ceiling: $ 1,200,000
a) $1,300,000
b) $1,500,000
c) $80,000
d) $1,125,000
Ans : d
PTA = (Ceiling Price – Target Price) / Buyer’s Share Ration + Target Cost
1055
India
Question: A cost-plus-incentive-fee contract has the following
characteristics:
How much will the seller be reimbursed if the cost of performing the work
is $95,000?
A) $98,000 B) $100,000 C) $108,000 D) $114,000

India
1056
= $5,000 * 20% + $12,000
= $1,000 + $12,000
= $13,000
But this is just the incentive. The Seller will also get the costs paid.
Therefore, the Final Reimbursed Price = Actual cost + Final Incentive
Fee
=$95,000 + $13,000
= $108,000
Therefore, the answer for this PMP question would be Choice C =

$108,000.
India
1057
Using the same data as above, what will be the
reimbursement to the seller if the cost of performing
the work is $120,000?

A) $112,000 B) $119,000 C) $126,000 D) $129,000

India
1058
Do note here that the Actual cost is $120,000, and it is ABOVE the Target Cost. Thus,
the seller has exceeded the costs, and will be penalized.

= -$20,000 * 20% + $12,000
= -$4,000 + $12,000
= $8,000
This incentive is lower than the Minimum Fee. Thus, the $8,000 will be
adjusted upwards to $9,000 (the minimum amount). The Seller will also get
the costs paid.
=$120,000 + $9,000
= $129,000
Therefore, the answer for this PMP question would be Choice D = $129,000.
1059Solutions,
India
449
Answer is B
Explanation: Although you have used this contractor before, how can you be sure the company
is qualified to do the new work, since it is not exactly like the previous work? This is the risk
you are taking.

Sam Consultancy has a large internal project to be initiated. To staff this project, Sam
Consultancy is working with People Consultancy to provide three resources for six months.
The resources will be part of the team managed by Sam Consultancy for six months. Which
contract type should be used by Sam Consultancy?
1. Purchase Order
2. Cost plus Fee
3. Fixed cost
4. Time and Material
CORRECT: 4. This is a case of Staff Augmentation. These projects are managed in Time
and Material.
Sam Consultancy is planning to buy ten desktops for $1500 each from a leading computer
store. Which type of contract will get signed in this case?
1. Purchase Order
2. Cost plus Fee
3. Fixed cost
4. Time and Material
CORRECT: 1. Purchase Order is used.

India
1061
Alice is a Project Manager. She is coordinating a bidder conference to allow vendors to get
clarification on the work that needs to be performed. Which phase of Project Management is in
progress.
1. Conduct Procurements
2. Plan Procurements
3. Control Procurements
4. Close Procurements
CORRECT: 1. During the Conduct Procurements process, bidders can clarify their doubts
using bidder conference.

India
1062
A contract obligates the seller to provide the specified product
and obligates the buyer to pay for it. In this context, which of the
following is a mandatory feature of a contract?
1. Mutually binding
2. Complicated
3. Very detailed statement of work
4. Signatures of senior leadership of the buyer

Justification
A contract is a mutually binding agreement that obligates the
seller to provide the specified product, or service or product and
obligates the buyer to pay for it.

India
1063
In your project, you are entering into a fixed-price contract in the
form of a purchase order. The contract is for a specified item to be
delivered by a specific date for a specified price. In the contract,
the profit is:
1. Determined by the buyer during contract sign-off
2. Determined by the seller during contract sign-off
3. Provided by the buyer to the seller at the end of the project if
defined performance criteria are met
4. Not known at the time of the contract sign-off

Justification
Fixed-price contracts involve setting a fixed total price for a defined
product or service or result to be provided.
The profit is not known at the time of contract sign-off; only the
fixed price of the contract is determined at that time.
India
1064
Which of the following is a hybrid type of contractual
arrangement?
1. Time and material contracts

2. Fixed-price contracts
3. Cost-reimbursable contracts
4. Fixed price with redetermination

Justification
The time and material contracts are a hybrid type of contractual
management that contain aspects of both cost-reimbursable and
fixed-price contracts.

India
1065
In your project, your subcontracting requirements of the
machining of high-value equipment are very demanding. Hence,
you have determined the technical criteria to evaluate the sellers.
This is an example of:
1. Objective evaluation criteria

2. Source selection criteria
3. Statement of work
4. Work breakdown structure

Justification
Selection criteria are developed and used to rate or score seller
proposals, and can be objective or subjective.

India
1066
In your project, you are preparing procurement documents to seek proposals from
prospective sellers. Which of the following statements about procurement documents
are accurate :
A. The buyer structures the procurement documents to facilitate an accurate and

complete response from prospective sellers.
B. Requests to potential sellers to submit a proposal or bid is formally issued in
accordance with the policies of the buyer`s organization.
C. With government contracting, some or all of the content and structure of
procurement documents can be defined by regulation.
D. The term `proposal` is usually used when the seller selection decision will be
based on price.
1. B, C and D
2. Only B and C
3. All of the Above
4. A, B and C

Justification
Terms such as bid, tender, or quotation are generally used when the seller
selection decision will be based on price (as when buying commercial or
standard items), while a term such as proposal is generally used when other
considerations such as technical capability or technical approach are paramount.
India
1067
The process of identifying the project needs that can be met by
acquiring products outside the project organization is done as part
of:
1. Conduct Procurements
2. Control Procurements
3. Close Procurements
4. Plan Procurement Management
Correct Answer! 4 is the correct answer

Justification
The key benefit of the Plan Procurement Management process is
that it determines whether to acquire outside support, and if so,
what to acquire, how to acquire it, how much is needed, and when
to acquire it.

India
1068
Early termination of a contract is a special case of contract
closure. This can happen because of:
1. Default of the buyer
2. Default of the seller
3. Mutual agreement of the parties
4. Any of the above reasons

Justification
Early termination of a contract is a special case of procurement
closure that can result from a mutual agreement of both parties,
from the default of one party, or for convenience of the buyer if
provided for in the contract.

India
1069
You are performing a make-or-buy analysis. In which of the following cases
would you not prefer making the product/service in-house?
1. The item under consideration is a capital item which can be used for other
projects in the same organization (in other words, there is an ongoing need
for the item).
2. Your organization is going through a slack period, and some resources,
who can produce the product in-house, are underutilized.
3. The item under consideration is a proprietary or business critical product
which is a part of the core business for the company.
4. The item under consideration is not part of your core business, but your
company has the skills for developing the product in-house, if required.

Justification
If it is a non-core item, it may make sense to consider outsourcing as an option,
as it may be cheaper than making the item in-house.

India
1070
Your company has decided to outsource one of its IT product developments to
ABC IT Services through a contract. You clarify the structure and requirements
of the contract so that mutual agreement can be reached prior to signing the
contract. Which of the following statements on procurement negotiations are
correct? A. You have to discuss technical and business management
approaches, proprietary rights, overall schedule, payments, and price. B. At the
end of the procurement negotiations, you will have a contract document
executed by both buyer and seller. C. The project manager is the lead
negotiator on the procurements. D. Final contract language will reflect all
agreements reached.
1. B, C and D
2. Only B and D
3. A, B and D
4. All of the Above

Justification
The project manager may not be the lead negotiator on
procurements. SN Panigrahi, Essenpee Business Solutions,
1071
India
You are considering whether to buy or make a software
product. If you want to buy, the cost is $80,000, and the cost of
procuring and integrating the product in your company is
$1,000. If you want to build it yourself, the product will require
seven engineers working for three months. The salary of each
software engineer is $4,000 per month. The other related
miscellaneous costs allocated to the project are $2,000. Which
option will you choose?
1. Buy
2. Build
3. Neither builds nor buys
4. Need more information on suppliers to make a decision

Justification
If you buy, the cost is: $80,000 + $1,000 = $81,000. If you build,
the cost is: $4,000 x 7 x 3 + $2,000 = $86,000. So, it is preferable
to buy. SN Panigrahi, Essenpee Business Solutions,
1072
India
As a buyer, during Control Procurements, you have recently conducted an audit
of your seller to determine weaknesses in the seller`s processes that need to be
corrected. You want to document the results of the audit and the
communications with the seller. This should be done using:
1. Performance reports
2. Correspondence
3. Change requests
4. Procurement audits
Correct Answer: 2 is the correct answer

Justification
Correspondence: Contract terms and conditions often require written
documentation of certain aspects of buyer/seller communications, such as the need
for warnings of unsatisfactory performance and requests for contract changes or
clarification. This can include the reported results of buyer audits and inspections
that indicate weaknesses the seller needs to correct.

India
1073
Question: Shawn works as project manager for a
construction company. His company has secured a new
contract to remodel a kitchen in two months. The budget of
the project is $10,000. Before awarding the contract to
Shawn’s company, the client informs him that the scope is
well-defined for the project. For this scenario, which contract
type is recommended?
A: Commission
B: Cost reimbursable
C: Fixed price
D: Time and material
Ans : C: Fixed price

India
1074
Since the buyer could not meet the requirements of the
contract, you (the seller) want to terminate the contract early.
This is done in the:
1. Plan Procurement Management process

2. Control Procurements process
3. Close Procurements process
4. Conduct Procurements process

Justification
Early termination of a contract is a special case of procurement
closure. Procurement closure takes place in the Close
Procurements process.

India
1075
You would like to obtain information, quotations, bids, offers, or proposals from sellers
as part of the Conduct Procurements process. In this process, which of the following is
the most critical?
1. Determine whether a product should be purchased or manufactured in-house.

2. Ensure that prospective sellers clearly understand the technical and contract
requirements.
3. Clarify the structure and requirements of the contract.
4. Prepare an independent estimate to verify the proposed price structures of the
sellers.

Justification
Bidder conferences (sometimes called contractor conferences, vendor conferences, and
pre-bid conferences) are meetings between the buyer and all prospective sellers prior to
submittal of a bid or proposal. They are used to ensure that all prospective sellers have a
clear and common understanding of the procurement (both technical and contractual
requirements), and that no bidders receive preferential treatment.
Option 2: This is the correct answer. Option 1: This refers to a make-or-buy analysis, which
is performed during the Plan Procurement management process Option 3: This refers to
procurement negotiations, which are performed during the Conduct Procurements
process. This succeeds the activity specified in option 2. Option 4: This refers to
independent estimates, a technique used in the Conduct Procurements process.
1076
India
Which of the following is the most widely used contract type?
1. Cost plus incentive fee contracts
2. Fixed price incentive fee contracts
3. Cost plus award fee contracts
4. Firm fixed price contracts

Justification
The most commonly used contract type is the Firm Fixed Price
Contract (FFP).

India
1077
If you would like to compare different suppliers and rate their
proposals for the purpose of procurements, you should use:
1. Bidder conferences
2. Selected sellers
3. Procurement documents
4. Source selection criteria

Justification
Source selection criteria are developed and used to rate or score
seller proposals, and can be objective or subjective.

India
1078
A contract where the buyer reimburses the seller the costs incurred
by her and also provides a fixed amount of profit is called a:
1. Cost plus incentive fee contract
2. Cost plus fixed fee contract
3. Time and material contract
4. Cost plus award fee contract

Justification
In Cost plus fixed fee contracts (CPFF), the seller is reimbursed for all
allowable costs for performing the contract work, and receives a
fixed fee payment calculated as a percentage of the initial estimated
project costs. Fee amounts do not change unless the project scope
changes.

India
1079
In which of the following cases is a contract NOT legally binding?
1. The seller is not able to produce goods as part of the contract.
2. The signatory to the contract leaves the company.
3. The buyer is not able to satisfy financial obligations.
4. The contract violates the law of the land.

Justification
A contract is a legal relationship subject to remedy in the courts. A
contract containing provisions that violate the law of the land is not
enforceable in the courts of law.

India
1080
During execution of your project, a major dispute arises between your company and one of its
vendors following your latest review of the vendor's performance reports. Your company's
position is that the vendor has failed to meet certain performance obligations under the
contract terms. The vendor feels that your company is behind in making payments. What is
the best course of action for you to take in this situation?
A. Refer this issue to a third party for mediation or arbitration

B. File a contract claim and then work directly with the vendor to resolve the issue
C. Terminate the contract early, document lessons learned, and find another vendor who can
do the work
D. Conduct a procurement audit
HINT: What is the tool used during Control Procurements to document, process, monitor, and
manage disputes between a buyer and seller?
Answer and Explanation:

The correct answer is B.
When disputes arise on a project, claims administration can be an effective tool to help buyers and
sellers reach an agreement and prevent damage caused by litigation and early contract termination.
Filing a contract claim and working with the vendor to reach an agreement is a more direct problem-
solving approach and therefore the 'best' answer choice. Claims administration also refers to using
alternative dispute resolution. However, since mediation and arbitration can be costly, risky, and time-
consuming processes, of the choices provided, negotiation is the preferred method of settling disputes
and is, therefore, the best course of action for you to take in this situation.
India
1081
You had conducted an independent estimate to find out the cost of sub-contracting
the manufacturing of 1,000,000 ball-bearings for your automobile company. You
estimated the cost to be $500 per bearing. However, when you asked for bids and
proposals from prospective sellers, the minimum price quoted was $750 per
bearing. Which of the following can be a reason for the variance in the estimate?
A. The procurement statement of work was not clear.

B. The prospective sellers misunderstood the procurement statement of work.
C. The procurement statement of work was not sufficient.
D. There have not been major changes in the cost of material and labor since last
year.
1. B, C and D
2. Only B and C
3. All of the Above
4. A, B and C

Justification
Significant differences in cost estimates can be an indication that the procurement
statement of work was deficient, ambiguous, and/or that the prospective sellers
either misunderstood or failed to respond fully to the procurement statement of
work. Since there have not been major changes in the cost of material and labor
since last year, the independent estimates should be close toSNthe
Panigrahi, Essenpee Business
amount quotedIndia
by Solutions,
1082
You have contracted some work to a vendor, and would like to identify
successes and failures that warrant recognition in the preparation or
administration of other procurement contracts within the performing
organization. This can be performed through:
1. Procurement audit
2. Contract file
3. Contract performance reporting
4. Lessons learned documentation

Justification
A procurement audit is a structured review of the procurement process originating
from the Plan Procurement Management process through Control Procurements.
The objective of a procurement audit is to identify successes and failures that
warrant recognition in the preparation or administration of other procurement
contracts on the project, or on other projects within the performing organization.

India
1083
In your project, you wish to manage procurement relationships,
monitor contract performance, and make changes and corrections
as needed. Which of the following would you not use?
1. Agreements
2. Work performance data
3. Approved change requests
4. Project schedule

Justification
Project schedule is an input to the Plan Procurement Management
process; all the other options are inputs to Control Procurements
process.

India
1084
In your new project, you have to provide a critical deliverable
within five months and do not have time to go through the
Conduct Procurements process. You decide to sign a contract
with a supplier with whom your company has done some work
in the past. The risk you are accepting in this situation is:
1. The ability of the supplier to deliver the goods

2. Collusion between the supplier and your team
3. Lack of proper scope definition
4. Lack of a legally binding agreement

Justification
The risk here is that even though the supplier has worked with
the company in the past, they may not have the required skills for
the current project.

India
1085
You are half way through a 12-month contract on a high-priority project for your
company. The team has been progressing well during execution of the project work.
Some of the deliverables have already been approved by the buyer and they seem to be
happy with the progress so far. Cumulative CPI and SPI are 1.09 and .98, respectively.
Your sponsor comes by your office and you are shocked to hear from her that the buyer
has decided to terminate the contract per the terminations clause and move the work to
another seller. The buyer asks you to work for the new seller. Your next step is to:
1. Accept the new position and bring the project documents with you
2. Execute contract closing procedures
3. Transfer the effort to the new seller
4. Close the contract and contact the new seller to see if the buyer has already
spoken to them about you coming on board

Justification
The buyer has a right to terminate the contract if a termination clause is specified in the
contract. Requirements for procurement closure are defined in the terms and conditions of
the contract.
Options 1 & 4: These options would be considered unethical and may violate
confidentiality agreements you have with your current employer. Option 3: You should
provide all deliverables and documents to the buyer, not the new seller.
India
1086
You are considering whether to buy or lease a machine for your heavy engineering
plant. Your finance department has provided you the following data: The cost of buying
the machine (Ìf you buy`) is $29,000 and the one-time cost of procurement and
integration is $1000. The cost of leasing the machine (Ìf you lease`) involves $10,000 as
down payment and $5,000 per month as license fee. What is the breakeven duration
after which the buying of the machine is preferable to leasing it?
1. 3 months
2. 4 months
3. 5 months
4. Cannot be determined from the available data
Correct Answer! 2 is the correct answer

Justification
If you buy, the cost is $29,000 + $1,000 = $30,000 Assuming that the lease is for M
months, the cost is $10,000 + ($5,000 x M) The breakeven point is reached when the cost
of buying becomes equal to the cost of leasing, i.e., $ 30,000 = $10,000 + ($5,000 x M) M
= 20,000/5,000 = 4 months

India
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Project Stakeholder Management
Activities involved in this process are to identify people,

groups, or organizations that could impact or impacted by the
project; to analyze stakeholder expectations, and their impact
on the project and to develop appropriate strategies to engage
them.

India
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India
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13. Project Stakeholder Management
Monitoring &
Planning
Processes

Executing Processes
Process Groups

Control
Plan Monitor
Stakeholder Identify Manage Stakeholder
Stakeholder Stakeholder
Management Stakeholders Engagement Engagement
SN Panigrahi, Essenpee Business Solutions, IndiaEngagement 1091
1091
Identify Stakeholders
The process of (a) identifying project stakeholders regularly and analyzing
and documenting relevant information regarding their
interests, involvement, interdependencies, influence and potential impact on
Project Sucess
India
1092
13.3 Manage Stakeholder Engagement
It is the process of (a) communicating and working with stakeholders
to meet their needs, (b) addressing issues as they occur and (c) foster
appropriate stakeholder engagement in the project
Manage Stakeholder Engagement - Activities
• Engaging stakeholders at appropriate project stages to obtain or

confirm their continued commitment to the success of the project
• Managing stakeholder expectations through negotiation and
communication, ensuring project goals are achieved
• Addressing potential concerns that have not yet become issues and
anticipating future problems that may be raised by stakeholders
• Clarifying and addressing issues that have been identified

129
Examples of this type of stakeholder includes such
These folks include funding agencies, upper
entities as building plans department that have to
issue construction permits and perform inspections;
management, and (often) your customer base.
Examples of these stakeholders include

members of the general public, who often Examples of these stakeholders include
aren’t even necessarily aware of your community groups and others that may be
project. affected by the outcome of your project.

1095
India
The term salience means “the quality of being
particularly noticeable, important or prominent,”
and so stakeholder salience means the
importance you give to your stakeholders.
Stakeholder salience can be defined as the

“degree to which managers give priority to
competing stakeholders’ claims in their decision-
making process.”
The stakeholder salience is decided by the assessment

of their power, legitimacy and urgency in the
organization.
•Power – is the ability of a stakeholder to impose their

will.
•Urgency – is the need for immediate action.
•Legitimacy – is to assess if their involvement is
appropriate.

1096
India
Dormant stakeholders: They have power but not urgency or legitimacy.
Thus the manager should be aware of them but there is no need to
plan for their communication needs.
Discretionary stakeholders: They are legitimate but have no power or
urgency. Their communications needs maybe in the form of actually
asking for some details. They may not need much attention.
Demanding stakeholders: They are with urgency and their needs have
to be met when asked for.
Dominant stakeholders: Power and legitimacy overlap in this case.
Dominant stakeholders have legitimacy and authority. Their
communication needs must be taken into account.
Dangerous stakeholders: These stakeholders have the dangerous mix
of power and urgency. This combination of power and urgency, makes
them very useful for the welfare of the project therefore their needs
must be met.
Dependent stakeholders: They are legitimate and have the urgency but
do not have commensurate power. Keep them informed as they could
be of help when you need to leverage their strengths in navigating the
organization complexities.
Definitive stakeholders: The most important area in this model –
where the power and legitimacy converge and gets combined with
ability to get urgency from the organization; the most critical category
of stakeholders which is always to be kept informed, satisfied and
involved. SN Panigrahi, Essenpee Business Solutions,
1097
India
You are managing an electric works project. You are required to design and deploy the electrical network for
an airport construction project that is underway. Your project is part of the airport construction program your
company is undertaking. A number of other sub-projects, such as building and runway construction, and
communication network deployment are part of the program. Due to the inter-project dependencies, your
sponsor always seems panicked and in a hurry to do everything. Which of the following classification models
should you choose to analyze the impact of your project sponsor as a stakeholder?
A) Power/Interest Grid
B) Power/Influence Grid
C) Influence/Impact Grid
D) Salience Model
Answer and Explanation:

The Correct answer is D. The Salience Model analyzes stakeholders based on their power (ability to impose
their will), urgency (need for immediate attention), and legitimacy (their involvement is appropriate).

1098
India
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13.4 Monitor Stakeholder Engagement
Monitor Stakeholder Engagement is the process of (a) monitoring overall
project stakeholder relationships and (b) adjusting strategies and plans for
engaging stakeholders
India
1100
Question 1: You are engaged in gathering information from
stakeholders regarding whose interests should be taken
into account throughout the project. This is called:
a. Identify stakeholders
b. Stakeholder analysis
c. Expert judgment
d. Plan stakeholder management
Answer: B - This is called a

stakeholder analysis

India
1101
Question 2: Plan stakeholder management is fundamentally
concerned with all the following except...?
a. Developing strategies to effectively engage stakeholders

throughout the project
b. Development of the stakeholder register
c. Development of the stakeholder management plan
d. Identifying how the project will affect stakeholders
Answer: B - The stakeholder

register is created in the Identify
Stakeholders process.

India
1102
Question 3: Which of the following is not included in the
Stakeholder Management Plan?
a. Project lifecycle
b. Communications requirements
c. Impact of scope changes to stakeholders
d. Stakeholder management strategy
Answer: A - The project lifecycle is selected and

defined in the project management plan.

India
1103
Which of the following are items to consider during
stakeholder management:
a. Over deliver on expectations

b. Communicate the same to every stakeholder
c. Identify the needs of all stakeholders
d. Avoid challenging stakeholders
Ans : C.
It is important in any project to identify all
stakeholders. Then you need to understand each
stakeholder’s unique needs and expectations, so
you can meet them.

India
1104
An important input to planning stakeholder
management is:
a. The risk management plan

b. The stakeholder register
c. The stakeholder analysis
d. The WBS
Ans : B.
The stakeholder register is an input to plan
stakeholder management. Did the stakeholder
analysis confuse you? Remember the analysis is part
of the register, so this makes the complete register
the best answer.
India
1105
The most important part of stakeholder management
is:
a. Ensuring all stakeholders are communicated with
the same
b. Good relationships are established with all
stakeholders
c. Challenging stakeholders are avoided and added
to the risk register
d. Changes are made to the project schedule
Ans : B.
Relationships, relationships, relationships. The
most critical part of stakeholder management is
relationships.

India
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4. A stakeholders ability to affect the project is
known as?
a. Power
b. Engagement
c. Risk
d. Influence
Ans: D.
Influence. Remember influence is an important
attribute of each stakeholder. The more they can
influence the project the more important they
become.

India
1107
5. The project manager is responsible for all of the
following during stakeholder management except:
a. Communication
b. Hand selecting the stakeholders
c. Determining stakeholders unique requirements
d. Establishing relationships with stakeholders
Ans : B. The project manager is not the only person

who determines stakeholders. The sponsor as well
as key stakeholders have say over this.

India
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What is Project Stakeholder Management?
•
Project stakeholder management identifies the processes required to
know the people, groups, and organizations that can impact/be impacted
by the project. It involves analyzing stakeholder expectations while
developing management strategies for engaging stakeholders and
executing project decisions. Stakeholder management includes
communications with stakeholders, managing conflict and promoting
appropriate stakeholder engagement.
The following processes and the primary goals of project stakeholder

management are defined below:
Identify Stakeholders. Goal: stakeholder register

•Plan Stakeholder Management: Goal: stakeholder management plan
•Manage Stakeholder Engagement: Goal: issue log, change requests
•Control Stakeholder Engagement: Goal: work performance information,
change requests

India
1109
Ethics & Professional Responsibilities
450

Respect Fairness
Responsibility Honesty
Code of
Ethics and
Professional
Conduct

India
1111
Code of Ethics and Professional Conduct
451
Responsibility:
It is our duty to take ownership for the decisions we make or fail to make, the actions we
take or fail to take & the consequences that result
1.Make decisions and take actions based on the BEST interests of society, Public safety and
the environment.
2.We accept those assignments that are consistent with our background, experience, skills
and qualifications.
3.We inform ourselves and uphold the policies, rules and regulations and laws that govern s
our work, professional and volunteer activities.
4.We report unethical or illegal conduct to appropriate management & if necessary to
those affected by the conduct.
5.We bring violations of this Code to the attention of the appropriate body for resolution.
We only file ethics complaints when they are substantiated by facts.
452
Respect:
1.Respect is our duty to show a high regard for ourselves, others and the resources
entrusted to us.
2.We inform ourselves about norms and customs of others and avoid engaging in
behaviors they might consider disrespectful.
3.We listen to others points of view, seeking to understand them.
4.We approach directly those persons with whom we have conflict.
5.We conduct ourselves in a professional manner.
6.We negotiate in good faith, do not exercise the power of our expertise or position to
influence decisions.

453
Fairness :
Fairness is our duty to make decisions and act impartially & Objectively.
Our conduct must be free from competing self interest , Prejudice and favoritism.
1.We demonstrate transparency in decision making and constantly reexamine our
impartiality.
2.We provide equal access to information to those authorized & equal opportunities to
qualified candidates.
3.We do not discriminate against others based on, but not limited
to, gender, race, age, religion, disability, Nationality or Sexual orientation.

454
Fairness : Conflict of Interest

1.We proactively and fully disclose any real or potential conflicts of interest to the
appropriate stakeholders.
2.When we realize that we have a real or potential conflict of interest : We refrain from
engaging in the decision making process or otherwise attempting to influence outcomes,
unless or until we have made full disclosure to the affected stakeholders.
3.We do not hire or fire, reward or punish, or award or deny contracts based on personal
considerations. Including but not limited to favoritism, nepotism or bribery.

455
Honesty:
Honesty is our duty to understand the truth and act in a Truthful manner both in our
communication and in our conduct
1.We earnestly seek to understand the truth.

2.We are truthful in our communications and conduct and provide in timely manner.
3.We make commitments and promises in good faith (implied & explicit).
4.We do not engage on or condone behavior that is designated to deceive others.
5.We do not engage in dishonest behavior with the intention of personal gain or at the
expense of other.

Question: You are in the process of gathering feedback
from stakeholders based on the tools documented in the
Stakeholder Management Plan. You want to evaluate
whether the stakeholders were satisfied or not. Which
process group are you currently in?
A: Planning
B: Execution
C: Monitoring and Controlling
D: Closing
Ans : D: Closing

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1118
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https://www.youtube.com/channel/UCVZ
ScNa_leR8XbYINEwTFwQ/videos

1119
India
Advanced Procurement & Negotiations FIDIC Form of Contracts
Strategic Sourcing Contract Excellence For Non-Legal
Advanced Procurement Skills to Reduce Professionals
Costs Contract Management & Business Negotiation
Procurement Process Development Skills
E- Procurement & Reverse Auction Contract Drafting from Risk Point of View
Purchasing and Procurement Management Contractor and Supplier Performance
Demand & Supply Management Monitoring
Supplier Performance Monitoring Contract Administration
Logistics, Inventory and Warehouse Payment Terms & LC Documentation
Management Basic Project Management & Project
Supply Chain Management Execution
Supplier Assessment & Selecting Right Project Communication
Suppliers Project Administration Management
Requisitions and Purchase Orders Project Principles & Implementation
Cost Reduction Strategies & Target Costing Project Scheduling & Cost Planning Skills
Budgeting and Budget Management PMP Certification Management
Effective Budgeting & Operational Cost Risk Management & Mitigation Strategies
1120
Control
Contact Details:
SN Panigrahi
0091- 9652571117
snpanigrahi1963@gmail.com 1121

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SN Panigrahi, Essenpee Business Solutions,

• Project Integration Management

• Project Cost Management

• Project Communications Management

• Project Stakeholder Management

Have a Strong Determination

➢Project based work–One-fifth of world’s GDP ($12 trillion ) - Source -

PM professionals are high in demand, as discussed earlier. Due to emerging

Report highlights include:

SN Panigrahi, Essenpee Business Solutions,

Provides Industry Recognition:

SN Panigrahi, Essenpee Business Solutions,

SN Panigrahi, Essenpee Business Solutions,

60 -80% of Project Failures attributed to Poor Requirement

80% of Budgets Consumed Fixing Self-inflicted Problems (Dynamic

PMI® (Project Management Institute) is the most prominent body on the

Founded in 1969 in USA as a not-for-profit professional membership

PMI advances careers, improve organizational success and further mature

Membership in PMI provides PMP Aspirants with:

SN Panigrahi, Essenpee Business Solutions,

• Expand the project management body of knowledge through research projects,

PMI® Certifications in Existence

➢Demonstrates Proof of Professional Achievement

SN Panigrahi, Essenpee Business

Why should I go for PMP certification?

SN Panigrahi, Essenpee Business Solutions,

You will gain:

•Enhanced leadership skills

SN Panigrahi, Essenpee Business Solutions,

PMBOK PMBOK PMBOK PMBOK PMBOK PMBOK

There may be other industry-specific project management practices prevalent

At least three years of project At least five years of project

+ 35 hours of formal Project + 35 hours of formal Project

•Please read the pmphandbook.pdf from the http://www.pmi.org

PMI® Membership Non PMI

SN Panigrahi, Essenpee Business Solutions,

SN Panigrahi, Essenpee Business Solutions,

Education Technical skill (8)

Skill Area Definition

The 6th Edition was released on September 22nd, 2017

SN Panigrahi, Essenpee Business Solutions,

SN Panigrahi, Essenpee Business Solutions,

SN Panigrahi, Essenpee Business Solutions,

 Most Common Causes of Project Failure:

 Top Contributors to Large IT Project Failure:

✓ Unrealistic schedule/reactive planning

✓ Shifting requirements/technical complexity

✓ Unaligned team/missing skills

➢ Has emerged as a Professional Practice on its own – Project Management Professionals

➢ Technical Knowledge and competence alone is not sufficient to MANAGE projects.

➢ “Accidental” Project Managers are a RISK in the business of Project Execution

➢ For Effective management of projects, Managers MUST be trained.

➢ Project Management is a SKILL - not a talent

➢ Project Managers are MADE .. Not BORN

SN Panigrahi, Essenpee Business Solutions,

SN Panigrahi, Essenpee Business Solutions,

Input Process Output

Feedback SN Panigrahi, Essenpee Business Solutions,

SN Panigrahi SN Panigrahi, Essenpee Business Solutions,

Schedule • Manage the Timely Completion of the Project 6

SN Panigrahi, Essenpee Business Solutions,

SN Panigrahi, Essenpee Business Solutions,