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Page 1: Pmp capm exam preparation

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PMP® / CAPM® Exam Preparation Training

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Introductions

• Who are you?• What is the largest project you have managed?• What Project Management Methodologies & Tools have worked

with? – PMBOK® Guide, Agile, Six Sigma, Prince2 or tools MS Project,

Primavera• What benefits do you anticipate from taking this class?

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What is Your Primary Learning Style?

3* Andrew Lothian, Insights, Copyright 2000

www.insightsaustin.com or www.insightsworld.com

Blue-Give me the details-Thorough processing-Research -Data/facts

Red-Action-oriented-Get to the point-Practical action-Immediate and fast

Green-Reflective-Give me time to process and review-Structured activities

Yellow-Experiential-Get me involved-Interactive-Spontaneous

Learning Style

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Learning Objectives

• Understand the 47 processes, 10 knowledge areas and terminology within the PMBOK® Guide, 5th edition

• Practice simulated exam questions

The terminology described herein is the generally accepted standard in the United States and many other countries as outlined in the Project Management Institute’s Guide to the Project Management Body of Knowledge®, Fifth Edition, (PMBOK® Guide)

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External Logistics

• Schedule– 5 days– 9am-5pm– Lunch & Breaks

• Restrooms• Sign-In and Absences

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Ground Rules

We agree to:• Respect others by:

– Actively listen to others– Turning off electronic devices – Putting cell phones on silent mode– Promoting positive feedback– Watching your timing– Using “parking lot” to stay focused

• Create an “Pass the Exam” Plan

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Course Outline

• Welcome• Exam Registration and

Environment• Framework• Integration• Scope• Time• Cost• Quality

• Human Resource• Communication• Risk• Procurement• Stakeholder• Professional and Social

Responsibility• Exam Tips

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Exam Registration and Environment

Chapter 2

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What is PMI® ?

• Founded in 1969• Current Project Management Standard

– A guide to the Project Management Body of Knowledge (PMBOK) version 5.0

Certifications = • Certified Associate in Project Management (CAPM)®• Project Management Professional (PMP)®

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Individual Exercise

What are your reasons for wanting to obtain a PMI® Credential?

Are You a PMP® Candidate?The PMP® is perfect if you have demonstrated experience and competence in leading project teams.

Are You a CAPM® Candidate?The CAPM® is a good entry-level certification if you’re new to project management, or still figuring out your career path.

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Reasons for Earning a PMI® Credential

• Serves as an unbiased endorsement of your PM knowledge and experience on a global level

• Can lead to career opportunities & advancement• Recognition of your knowledge, skills and abilities• Reflects achievement• Prepares you for greater job responsibilities• Builds self-confidence• Allows for greater recognition from peers• Enhances the profession

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PMP® Eligibility Requirements

If your educational background consists of a high school diploma, the requirements for project management experience and project management education are:

– 7500 Hours of Project Management Related Experience– 60 months of Project Management Experience– 35 Contact Hours of Training

A high school diploma is the minimum educational background for PMP® certification. The 7500 hours of experience must be 5 years (60 months) within the last 8 of submitting application.

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PMP® Eligibility Requirements (cont.)If your educational background consists of a bachelor degree or higher, the requirements for project management experience and project management education are:

– 4500 Hours of Project Management Related Experience– 36 months of Project Management Experience– 35 Contact Hours of Training

The 4500 hours of experience must be 3 years (36 months) within the last 8 of submitting application.

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PMP® Exam Format

• 200 questions (175 scored, 25 ‘pretest’ unscored)

• 4 multiple choice possible answers/question

• 4 Hours Maximum Time Allowed

• Scheduled as Time Slots are Available

• Pass/Fail available when complete

Domain % of Items on Test

# of questions

Initiating 13% 26Planning 24% 48Executing 30% 60Monitoring & Controlling

25% 50

Closing 8% 16Total 100% 200

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PMP® Exam Cost

The cost of the exam depends upon whether or not you are a member of PMI® (www.pmi.org)

$405 PMI® Member$555 Non-PMI® Member

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CAPM® Eligibility Requirements

At a minimum, you need a high school diploma or global equivalent. Additionally, the requirements for project management experience and project management education are:

– 1500 hours of professional experience on a project teamOR

– 23 contact hours of formal project management education

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CAPM® Exam Format• 150 Questions (Four Option,

Multiple Choice) which includes 15 pretest questions

• 3 Hours Maximum Time Allowed

• 100% based on the PMBOK® • 4 multiple choice possible

answers/question• Pass/Fail available when

complete

Chapter % of Items on Test Approx. # of ?

1 4% 6

2 4% 6

3 11% 16

4 11% 16

5 11% 16

6 11% 17

7 9% 13

8 7% 11

9 7% 11

10 7% 11

11 11% 16

12 7% 11

Total 100% 150

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CAPM® Exam Cost

The cost of the exam depends upon whether or not you are a member of PMI® (www.pmi.org)

$225 PMI® Member$300 Non-PMI® Member

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Continuing Certification Requirements (CCR) Program

• Maintain the Professional Code of Conduct.

• One Professional Development Unit (PDU) is = one hour of training or other approved activity.

• Collect and report 60 PDUs over a 3-year reporting period.

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Preparing for Exam Day

Studying and Scheduling

• Schedule your exam for a time when you are most alert. Try not to schedule your exam to follow a day's work. • A good night's sleep the night before the exam and eating well a few days before hand will help greatly. • Cramming the day before is not a bad idea, as it can help you detect any final subject areas that need last minute study. • The tables, charts, and other items that we suggest you memorize are "musts" for success. Know them cold and be able to recreate them on your scratch paper in the test room.

Practicing

• Practice tests help you become familiar with the environment as well as the question layout and timing. • When taking practice tests, focus on the speed at which you complete the questions. On average, you have 72 seconds per question. While there are no additional points for completing more quickly than anyone else, being practiced enough to set a good pace can give you an advantage, especially when you hit "the wall" on the exam. Your mind will be accustomed to processing questions at a pace that is above normal. • Take the exam tutorial. It can help give you a better understanding of all your options in the environment.

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Preparing for Exam Day (cont.)

What to Take:

Required

The following are required:• Your eligibility letter with the authorization number on it• A photo ID and two other forms of ID (credit card, etc.)Verify that the names on the IDs and the letter are identical. For example, Anthony and Tony could cause problems.

What to Take:

Recommended

• Dress in layers so you can be comfortable in the room environment whether it be cold, warm, or unstable. A t-shirt with a sweater is a good combination. • Earphones are usually provided, but consider taking some in case they aren‘t. They will shut out the noise around you. • Although you may take food and drink with you, you must leave them in the provided locker. • You may take the locker key, plus the provided calculator, pencils and paper into the test room.

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In and Out of Scope (for the exam)

The exam tests your understanding of the PMBOK® Guide and PMI® processes (across all knowledge areas, regardless of the ones you use and how you use them at work), as well as the ability to know how to deal with these processes in situational questions. You need to:• Know the formulas for each of the knowledge areas• Know the terms and definitions• Be familiar with how to recognize the definition of a given term, as well as

recognize it in a situation• Be familiar with the documents such as the charter, WBS, schedule that

PMI® uses in the methodology

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Review of Materials

PMP Exam Success Series: Bootcamp Manual with Exam Sim Application (Fifth Edition PMBOK® Guide)

– Contains 200 question PMP exam simulation– Contains 560 exam format sample questions – Includes mindmaps for each knowledge area– Presents clear, identifiable formulas with memorization keys

• Fifth Edition PMBOK® Guide • Kaplan Simulated Exam application access• CBT Nuggets

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Other Exam Preparation ResourcesCrosswind Learning Portal• See http://portal.crosswindpm.comPMP Certification Experience Hours Downloadable spreadsheet• http://www.crosswindpm.com/download/crosswindpmpexphours.xlsPMI® member resource eReads and References• See www.pmi.orgEVM Resources: • www.youtube.com

– Search for SirGanttalot – Earned value measurement, video 1,2,3• http://evm.nasa.gov

• NASA EVM• NASA lessons learned• NASA configuration management

• http://www.gantthead.com/presentations/Understanding-Earned-Value-Analysis.html

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PMBOK® GuidePage 61

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What Makes The CAPM®/PMP® Exam Challenging?

• You Must Think LARGE projects– The PMBOK® Guide is written for use with large projects

• > 1 year long and > US $10 Million• The exam assumes:

– You are leading a team of at least 200 people and have 4 sellers. – The PM’s key role is to PREVENT PROBLEMS (aka Risk

Management) by doing adequate planning• You are in a balanced matrix organization• Assume proper project management was done

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Team Exercise

Instructions:• Turn to page 17 of the Bootcamp Manual and review the “PMI

Theory Pills”• Put a star next to the top two that you do not understand or know.

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Brain Dump List

• A brain dump is important information that you write down as you begin your PMP® examination. We recommend that you write down your brain dump during the tutorial of the exam. This tutorial happens in the first fifteen minutes before your four hours actually start. Ensure that you can do this cold in fifteen minutes or less before you take the test.

• Every brain dump is personal and relates to key items people feel they need to have listed in the brain dump.

** Refer to the QUICK REFERENCE GUIDE inserted in your Bootcamp Manual for items to put on your Brain Dump list **

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Black and White vs. Gray

• The PMP® Examination often uses gray words that are not extreme, such as GENERALLY, but can relate to "shades" of the condition. These "gray" words can take a bit of getting used to with sample questions.

• The PMP® Examination can include questions with absolute words such as ALWAYS, NEVER, COMPLETELY, and gray words as SOMETIMES, SHOULD, COULD, GENERAL, and MAY.

• Be very sensitive to these words because absolute words compared to gray words can significantly change the meaning of a question.

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“The Wall”• "The wall" is the point where you find it more difficult to think through the

questions and material. • Everyone who takes the exam eventually hits "the wall." • Some won't hit it until after leaving the test environment, but most hit it

sometime during the exam.• To minimize the impact of "the wall," we recommend that you mentally break

the exam into percentages. – When you have completed the first 50 questions, you are 25% done. – When you have completed 100 questions, consider yourself 50% done. – From that point on, you are on your way to completion.

• Setting milestones gives you a sense that the exam is not so big.

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Marking Questions• The exam lets you mark questions and return later to review them. Studies

show that your initial response to a question is usually the right answer. • Many times, you can second-guess yourself out of the best answer if you

are not careful. • While we suggest marking questions you are unsure about, and perhaps

math questions (if you simply want to go back and double check the math), we recommend that you don't mark too many questions. You may run out of time on the exam.

• Typically, our classroom students who score well on the exam mark about ten to fifteen questions. Those who mark a number more than that usually don't score as well.

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Question Characteristics and Components

The following are the different characteristics and components you must recognize when interpreting questions, especially the situational ones.

Distractor We use this word to reference information that has no value or bearing in a question. We call it “distractor" because it is content that has been inserted to distract you in the exam environment. We also call such content “noise."

Common Terminology

The exam typically uses PMI terminology. A question could have one possible answer commonly connected with the question but not PMI terminology. Another possible answer uses the PMI terminology for the common description (e.g., budget at completion vs. budget). In this example, if you answered “budget" because you weren't familiar with the true definition of “budget at completion," you are technically wrong because “budget at completion" is the better answer.

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Question Characteristics & Components (cont.)

Too Much Information (TMI)

The exam could present questions that contain a great deal of information. For example, you might encounter a situational question in which a number of variables are thrown at you, such as time, cost, scope, and quality. Look at each variable and see how it relates to what the question is asking. For example, if you are given variables associated with time, quality, and scope, and they are all good, or not enough information, and the cost variable listed shows that you are over budget, then that variable is likely the one you are concerned about.

Wrong Area, or Wrong Point in Time

The exam could present questions that have an answer or answers that are from a wrong Knowledge Area or from the correct Knowledge Area but the answer is too early or late in the process to be acceptable. Questions could have references to "what would you do (first, last, before, after) this." In this case, more than one answer is in the general range, but only one is correct.

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Question Formats

Question Format

Description Example

Select This is likely the most straight-forward question format on the exam. It simply asks you to select the best answer. Be aware, however, because it can also include other question formats, including the Chicken or the Egg format questions.

A milestone has what duration?

A. 1 dayB. 0 (no duration) C. 1 hourD. 8 hours

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Question Formats (cont.)Question Format Description Example

Select NOT/EXCEPT

For this the type of question, you must select the answer that does not apply. Generally, this question type is not a big deal unless you have already hit "the wall" that we discussed in the exam environment part of this book. The key to handling this type of question is to determine which three answer selections have something in common. The fourth answer selection is the exception and the answer to choose.

All the following are areas of communication management except…

A. Manage Stakeholders ExpectationsB. Report PerformanceC. Quantitative Analysis D. Distribute Information

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Question Formats (cont.)All (or a Combination of the Answers)

With this question format, all -- or a combination -- of the answers are acceptable. The main thing to consider is that there isn't a bad choice. The odds are that if two of the answers (other than “All the answers") look good, so will the third.

Which of the following are areas of risk management?

A. Identify Risk B. Perform Quantitative Risk AnalysisC. Plan Risk ResponsesD. All the answers

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Question Formats (cont.)Question Format Description Example

Situational This question format is probably the most challenging, and the exam will include at least 75 questions using this format, some in combination with other formats. This question format expects you to leverage your PM experience and understanding of the PMBOK Guide and the PMI way of thinking.

Typically, you will see a Chicken or the Egg (what comes first) -- with whom do you communicate regarding a project, or what is your next action on the project. Keys to success in this area are to understand the chart in the Framework area of this book, plus the key role players in the methodology.

You've taken over an existing project and discover that it has suffered major scope creep because the former Project Manager couldn't say “no” to the sponsor, and it lacked enough supporting documentation. What document do you first want to see (or create if it doesn't exist) about the project foundation?

A. Risk ListB. Project Charter C. Communications PlanD. Budget

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Question Formats (cont.)Chicken or the Egg

With this format, more than one answer is acceptable. The key is to understand their order -- what comes first (last, before, or after something depending on what the question is asking). In this case, look at what the question is asking and determine the best answer based on the timeline of the answers.

What comes before Estimate Activity Durations?

A. Sequence ActivitiesB. Estimate Activity CostsC. Define ActivitiesD. Project Plan Development

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Question Formats (cont.)Question Format Description Example

Calculation This question format typically falls under the Select or the None of the Above (sometimes "not enough information") formats. If you know the formulas for the exam, you shouldn't have a problem with calculation questions. In some, you could encounter possible answers that "add up" correctly if you don't know the formula, but attempt to reverse-engineer the question. An example: you are to calculate CPI (divide EV by AC). You have incorrect answers that total other calculations as well (SV, SPI, CV, or others). It is not uncommon for the exam to have questions that do not give you enough data, such as future value or present value. Therefore, it is important that you know all the components of a formula.

What is the CPI for the following data? AC=$200, PV=$400, EV=$200, BAC=$1,000

A. $200B. -$200C. 1.0 D. 0.5

Earn and actual cost

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Question Translation and Breakdown

The PMP® Examination is known for its long rambling situational questions. Below are our recommendations:•Look at the last part of the question to see what you are being asked

to do, analyze, etc., before you read the complete question•Eliminate the two worst answers•After you have narrowed your selection to two answers, determine the

best answer

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Sample Question #1

You are a Project Manager on an environmental excavating project. As you monitor progress, you determine that the activities are taking longer than estimated on the schedule because of holidays you hadn't planned for in the schedule. What is the best solution to fix this problem?

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Sample Question #1 – Translation & Answer

You are a Project Manager. Your project is behind schedule because you didn't factor holidays into the schedule. What is the best solution to fix this problem?

Answer:Implement a schedule change control and re-baseline the schedule with the holidays factored in.

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Sample Question #1 – Breaking down of QuestionYou are a Project Manager on an environmental excavating project. As you monitor progress, you determine that the activities are taking longer than estimated on the schedule because of holidays you hadn't planned for in the schedule. What is the best solution to fix this problem?

• The first sentence establishes that you are the Project Manager. Unless something specific about the type of project comes up, that should be sufficient (environmental excavating wasn't covered in my version of the PMBOK® Guide!).

• The second statement has two items of value in it. The first is that activities are taking longer than estimated, and the cause is from not planning in holidays into your schedule. The final sentence simply asks the best way to fix this problem.

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Sample Question #2

You have taken over a project from another Project Manager who wasn't having success according to the sponsor. The project is a new type of work at your company. The cost is $50,000 over budget, and the former Project Manager did not view the schedule as a useful tool. What should you focus on first?

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Sample Question #2 – Translation & Answer

Translation:You are a new Project Manager on a project for which you are replacing someone. The project is a new type of work at your company. You don't have a total budget value to tell you if the $50K is a big or small amount over, so assume that is noise. There is either no schedule or not much of a schedule if there is one. What should you focus on first?

Answer:You first focus on seeing what was available for a schedule, and if needed, readjust/modify or create one.

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Sample Question #3

You are halfway through an Internet upgrade project. Presently, you know the following: Activity F has an early start of day 7 and a late start of day 12. The cost performance index (CPI) is 0.92, and the schedule performance index is 0.87. The project has 18 stakeholders. Activity G requires a very experienced resource. What should you focus on first?

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Sample Question #3 – Translation & Answer

Translation:You are 50% done on a project. Because there is not enough information about the network diagram and Activity F, it appears to be noise. The spending efficiency is only getting $0.92 value for every dollar spent. The productivity is 87% of what is planned. The number of stakeholders is insignificant in this question, as is the resource issue on Activity G. What do you focus on first?

Answer:The first area of focus is the schedule because the SPI is 0.87. After that, you focus on the budget because the CPI is 0.92.

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Sample Question #4

You have been involved in a project as a Project Manager. After much analysis, arguing, and debate with the 17 stakeholders, the sponsor has made the decision to outsource a key piece of work on the project because of the risk associated with it. This is an example of what?

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Sample Question #4 – Translation & Answer

Translation:You are the Project Manager. It has been decided that a piece of the work will be outsourced. This is an example of what?

Answer:• This is a situational terminology question. They are describing a

make-or-buy analysis.

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Situational Question #1

You are the Project Manager on a project. It has been discovered that testing will begin a week late. Which is the best solution?

A. Perform analysis about the delay and if it indeed will not impact the scope, time, or cost of the project, approve it and keep the project running.

B. Ask senior management for a choice in a solution. C. Ignore the testing issue because that part of the project hasn't come

up yet. D. Ask the sponsor for an opinion about converging system testing and

user acceptance testing.

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Situational Question #2

You are the Project Manager on a project. It has been discovered that testing will begin a week late, thereby causing the project finish date to slip a week. Which is the best solution?

A. Perform analysis about the week delay and if it will not impact the scope, time, or cost of the project, approve it and keep the project running.

B. After analyzing the problem and potential solutions, alert senior management to the problem and potential solutions, and implement the solution they recommend.

C. Ignore the testing issue; that part of the project hasn't come up yet. D. Ask the sponsor for an opinion about converging system testing and user

acceptance testing.

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Situational Question #3

You are a Project Manager on a project awaiting some new positions to be filled. The schedule is already set to include the work of these new resources. The start date of these resources has passed without hearing back from the client on signing approval for these new resources. Who can best resolve this problem?

A. Senior managementB. Project ManagerC. Sales ExecutiveD. Program Manager

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Situational Question #4

The project is not progressing well. It is behind schedule and over budget. The Project Manager has determined that the schedule was created without adequate team input and needs to be recreated. Reworking the schedule could effect the overall project finish date. Who can best fix this problem?

A. The Project Manager (because the Project Manager needs to put together a new schedule for approval by senior management).

B. Senior management because senior management needs to approve a violation of the triple constraint

C. Functional Manager because the Functional Manager is in control of the resources on the schedule

D. Team member(s) because team members have input to the schedule

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Situational Question #5

The project is behind schedule because the key estimator wasn't available when the schedule was created. Senior management is aware of this and has allowed the Project Manager to re-baseline the schedule. What process will fix this problem?

A. Develop ScheduleB. Sequence ActivitiesC. Work Breakdown StructureD. Control Schedule

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Situational Question #6

The project is behind schedule as the key estimator wasn't available when the schedule was created. Senior management is aware of this and has allowed the Project Manager to re-baseline the schedule. In what process did this problem get created? A. Develop ScheduleB. Sequence ActivitiesC. Work breakdown structureD. Control Schedule

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Chapter Framework

Chapter 3

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3.1 Project Management• Project Management is the application of information, skills, tools, and

techniques to activities involved with a project in order to meet project needs. • It can include:

– developing requirements, – determining realistic goals, – managing the triple constraint, and – adapting the various plans as needed to achieve the goals of the project and

stakeholders. • Project management can start with selection of the suitable processes associated

with completing the work of the project. • In addition, it can involve using an established methodology to align project and

product requirements with the product specifications.

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3.1 Project Management System

• The project management system is a set of procedures, tools and techniques, processes, and methodologies that an individual Project Manager, PMO, or company can use to manage projects.

• This system can be formal or informal in nature. Typically, it is supported by the project management plan as the project work is executed.

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3.1 Project Management Life Cycle (PMLC)

What you do to MANAGE the project

Planning Process Group

Executing Process GroupMonitoring & Controlling

Process Group

Initiating Process Group

Closing Process Group

I

P

EM&C

C

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3.1 Project Life Cycle

Projects vary in size and complexity. All projects can be mapped to the following generic life cycle structure: • Starting the project• Organizing and preparing• Carrying out the project work• Closing the project

See Figure 2-8, Page 39 in the PMBOK Guide

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Project Life Cycle

Project Management Process for a large project

Research Design Test Code Transition

I P

E

M&C

C

I P

E

M&C

C

I P

E

M&C

C

I P

E

M&C

C

I P

E

M&C

C

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Project Life Cycle

Project Management process for a small project

Research Design Test Code Transition

I P

EM&C

C

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3.1 Product Life Cycle

• The product life cycle involves the product or service from concept to divestment (closure).

• This cycle can begin with a business plan, project, transition to operations, and finally the exit or finish of the product or service

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3.1 Life Cycle Interaction

Life Cycle Interaction demonstrates how the three life cycles interrelate. Project Management Life Cycle

(The Project Management of the Project)

Project Life Cycle (The Work of the Project such as Construction)

Product Life Cycle (The Overall Life of the Product, from Initialization

to Rollout to Taking Out of Service)

Timeline

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3.1.1 Progressive Elaboration

• It means to work on a project for which you might not know all the details. You plan based on what you know.

• You begin the work while learning about (and planning) the future details of the unknown work. As you learn more about the work of the project, the plan progresses, becoming more elaborate.

• Typically, you start out in small steps and make multiple increments in the Planning and Executing of the project as work is completed.

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3.1.2 Project

A Project:

• Has a specific purpose• Creates specific results• Has definite start and finish dates• Is temporary• Could be progressively elaborated as more is learned about the

project details• could occur as a result of a business opportunity or market need,

which could have a limited time window.

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3.1.4 Program and Program Management and 3.1.5 Portfolio and Portfolio Management

Programs: • encompasses projects of similar work or

correlated activates • Are managed in a coordinated way to attain

benefits that could not bee achieved separately

Portfolios involves a group of projects/programs that have some degree of interactivity related to an overall strategic business goal.

Portfolio of Projects

Project 2A Project 2B

Program 2Project AProgram 1

Project 1A Project 1B

Company Portfolio

Strategic Planning

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3.1.6 Strategic Planning• Strategic planning is a practice by which a company looks into the future for

products or services it must have, typically three to five years in the future.• Projects are the tools that the company will use to implement these strategic

goals, because the operations of the company typically encompass the day-to-day (repeatable) activities.

• Thus, when the strategic goals are complete, they roll into the operations of the company.

• Projects can be created as a result of market demand, legal needs, technology updates, and customer or organizational needs.

• PMI has a tool and methodology approach called OPM3 (Organizational Project Management Maturity Model) for aligning a company’s goals and strategic planning to project management.

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3.1.7 Project Management Office

• It is a management organization with several possible configurations:• A centralized area for all project management personnel to work and

be assigned to projects as they arise• A centralized area for documentation and process support for project

management throughout the organization• A centralized area for project management support and auditing of

projects in the organization• For a PMO to be successful, project goals must be clearly defined and

backed by strong executive support.

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3.1.8 Project vs. Operations Mgmt.

• Project management deals with the creation of temporary specific initiatives.

• Operations management deals with the ongoing repetitive day-to-day activities of running the business.

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3.2 Triple Constraint

• One of the basic foundations of project management defined by Scope (could be referenced as quality), Time, and Cost.

• All three constraints are of equal importance (unless otherwise stated).

Quality

Scope

Time Cost

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Enhanced Triple Constraint

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3.3. PROCESS GROUPS AND POSITION DESCRIPTIONS

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3.3.1. Process Groups

What are the five process groups in the Project Management Life Cycle (PMLC)?

Planning Process Group

Executing Process GroupMonitoring & Controlling

Process Group

Initiating Process Group

Closing Process Group

I

P

EM&C

C

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Project Boundaries

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InitiatingA high level summary of Initiating:

• In the Initiating stage, the initial work is put into place on a project.• A project can continue or it could be killed at this point.• Typically, when a project moves beyond initiation,• A project manager is assigned• A sponsor is defined• A high-level scope statement is put into place• These items should make it possible for a project to move forward to Planning. This

Initiating stage can also be applied to the beginning of every phase of a project.• Typically, a project charter is created here.

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Planning

A high level summary of Planning:• The Planning Process Group is perhaps the most important of all the stages.• If you plan badly, your project likely will never be better than the plan. • The Project Manager makes a management plan for each of the Knowledge

Areas and integrates them: Scope, Time (schedule), Cost, Quality, Human Resource (staffing), Communications, Risk, Procurement, and Integration.

• The Project Manager also makes a plan for adjusting (controlling) each stage as changes occur.

• The team should be involved in a great deal of this planning. After all, they will be doing the work; they should have input with regard to their efforts.

• The Planning processes develop the overall project management plan.

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Executing

A high level summary of Executing:• It is in the execution stage that the scope of the project is built.• In Planning, you “planned the work.” Now, you “work the plan”.• Throughout the process of executing the plan, the project team will

discover things they hadn’t planned for or forecasted. As a result, the Monitoring and Controlling process stage comes into play, the point at which the team experiences variance from the plan.

• The Executing processes create work results.

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Monitoring & Controlling

A high level summary of Monitoring and Controlling:• In Monitoring and Controlling, the team maintains what it has planned.• By putting a plan (Planning) in place, the team executes the plan, and

when the team encounters variance (as usually happens), the Controlling stage comes into play as a means to adjust the plan to compensate for new discoveries (dates, resources, cost, scope, etc.).

• A key perspective to have in this process area is adherence to the official change control process so that only formally approved changes are implemented.

• Monitoring and Controlling results in corrective actions.

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Closing

A high level summary of Closing:• In Closing, the project ends.• Assuming that the project has been executed and worked to the point of

nearing completion, the bulk of what will be happening in this process stage is closing the project and Close Procurements.

• In the case of Close Procurements, the main goal is to verify that what should have been done in the contract was done, including payment and signoff.

• Closing the project involves Close Procurements, as well as archiving any project records, documents, etc.

• Closing the project results in the product, service, or result transition of the project.

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Comparison of Plan-Do-Check-Act to PMLC

The American Society for Quality (ASQ) defines the plan-do-check-act (PDCA) cycle* as an approach to process development.

* Defined by Shewhart and modified by Deming

Monitoring and Controlling

Initiating Closing

Plannin

g

Execu

ting

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3.3.2. Phase to Phase Relationship

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Overlapping Relationship

An overlapping relationship is typically used if a compression technique such as fast tracking is applied.

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3.3.3 Phase vs. Process Groups

A project phase is a piece of a multi-phase project and all five process groups are often applied to each project phase.3.3.4 Predictive Life CycleAlso known as waterfall or plan driven approaches.

3.3.5 Iterative and Incremental Life CycleUsed when partial project delivery can be of use to the stakeholders

3.3.6 Adaptive Life CycleUsed in rapidly changing project environments where scope is difficult to identify or define in Advance. i.e. Agile, Scrum, Kanban, Lean

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3.3.7 Phase Gate

• A review process undertaken to determine if a project is likely to succeed

• At the end of a program or project phase, an authorized group reviews the work of the phase and either approves to continue the project or makes the decision to stop future work on the initiative

• Projects that are not likely to succeed are “killed” early• Can also be called “kill point”

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3.3.8 Position DescriptionsPortfolio ManagerProvides governance at a high level for assigned programs and projects.

Portfolio Review BoardReviews each project in terms of its value, risks, ROI, and other designated attributes and determine which projects should be pursued.

Program ManagerManages related projects in a manner that will provide enhances benefits and control and to provide support and guidance to the project managers.

Operations Management (or Business Process Manager) Responsible for incorporating the project into normal operations and supporting it over the long term.

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3.3.8 Position Descriptions

Sellers/Business Partners• contracts to provide components or services for the project.• has a special relationship with and provide expertise or a service to the

enterprise.

Project Manager• Describes to the team members what activities need to be done per the plan• Maintains Control Scope of the project• Communicates project status as it evolves• Has the ultimate responsibility to deliver the project

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3.3.8 Position DescriptionsProject Management Team Anyone on the team who is working on project management-related items.

Project CoordinatorAct as communication links to senior management and have limited decision-making abilities.

Project ExpeditorUsed to support the project manager with no decision-making abilities.

Functional ManagerDeals with people and controlling resources.

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Sponsor

The sponsor is the key person or group who has:• Secured financing for the project, • Creates the project charter, and• Signs off upon project completion

Performing OrganizationThe Performing Organization is the company or division of a company that is doing the work of the project.InfluencerThe influencer is a person or group indirectly related to a project, and they can have a negative or positive influence on that project.

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PMO (Project Management Office)

• The PMO (if there is one associated with the project) could have responsibility associated with the completion of the project.

• For a PMO to be successful, project goals must be clearly defined and backed by strong executive support.

Customer/UserThe person or group that makes use of the work of the project

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Senior Management Focus

Senior Management

ProjectManagement

FunctionalManagement

Day-to-Day Business Priorities

Project Priorities

Conflict Over

Priorities

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Stakeholders

Anyone actively involved in, or anyone that can be impacted (negatively or positively) by the project.

Project Team MembersResponsible for doing the work that goes toward meeting the scope of the project.

Stakeholder Management•Provide appropriate input and contribution as the project evolves.•Stakeholder sign off and formal acceptance during closure.

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3.4 ORGANIZATIONAL CULTURES, COMMUNICATIONS AND STRUCTURES

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3.4.3 Functional Organization

This is sometimes called a “silo” organizational structure because the people in the individual groups work among themselves more than with other groups (or silos).

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Projectized Organization

The projectized organization focus is on the project (or operations by project) instead of on the specialization of the individual. This focus greatly increases the team’s ability to optimize focus and performance because the project is the main focus.

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Matrix Organization

• Weak Matrix• Balanced Matrix• Strong Matrix

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3.4.6 Composite Organization

A hybrid type of structure. Composite characteristics include the following:• A flexible configuration for doing

projects in a company• Project management or

leadership vary depending on originator and skills/people on projects

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What are the six key types of organizational structures?

Organizational Structures

Functional

Weak Matrix

Balanced matrix

Strong Matrix

Projectized

Composite

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Organizational Structure: Summary

Characteristics of the different Organizational Systems.Organizational Structure

FunctionalMatrix

ProjectizedProject Characteristics Weak Matrix Balanced Matrix Strong Matrix

Project Manager’s Authority Little, if any Limited Low to Medium Medium to High High to Total

Resources Available for Project Work

Literally None Limited Low to Medium Medium to High High to Total

Who Controls Project Spending

Functional Manager

Functional Manager Mixed Project Manager Project Manager

Person’s Role as a PM Part-time Part-time Full-time Full-time Full-time

Project Management Support Staff

Part-time Part-time Part-time Full-time Full-time

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Exercises

• As a team, Do Framework Terminology Matching Exercise – page 53-54

• Individually, Do Framework Practice Test – Do only 10 questions

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Integration

Chapter 4

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Integration Process TableProcess Group Process Name Main Outputs

Initiating Develop Project Charter Project Charter

Planning Develop Project Management Plan

Project Management Plan

Executing Direct and Manage Project Work

DeliverablesWork Performance Data

Change Requests

Monitoring and Controlling

Monitor and Control Project Work

Change Requests Work Performance Reports

Project Management Plan Updates

Perform Integrated Change Control

Approved Change RequestsChange Log

Project Management Plan Updates

Closing Close Project or Phase Final Product, Service, or Result

Transition

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4.1 Organizational Process Assets (OPA)

OPA can be inputs to many processes because they deal with variables such as plans, processes, procedures and knowledge bases used by the organization. These inputs could include:

Processes and Procedures• Guidelines for tailoring• Templates• Product and Project lifecycles• Process definitions• Change control procedures(see PMBOK Guide pages 27-28)

Corporate Knowledge Base• Lesson learned• Configuration management• Project files from previous

projects• Issue and defect databases

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4.2 Enterprise Environmental Factors (EEF)

EEF refers to conditions that are not under the control of the project team that influence, constrain or direct the project. Examples include:• Organizational governance, structure and culture• Infrastructure• Government or industry standards, • Personnel administration• Marketplace conditions• Stakeholder tolerance for risk • PMIS (Project Management Information Systems)(see PMBOK Guide pages 29)

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4.6 Develop Project Charter I

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4.6.1 Project Charter

A Charter has the following characteristics:• Project justification and purpose• Success criteria• High level scope of the project• Any constraints or assumptions• Time and cost goals• Authority Level of the project manager• Stakeholder definition and level of influence• Organizational information• Project approval requirements

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4.6.2 Kickoff Meeting

Projects generally include a kickoff meeting to start the project. This meeting:• Can be held at the beginning of Planning or Executing, depending on

priority and approach• Helps set expectations of what the project Planning will include and

create when complete• Can include setting expectations on the project and communicating

details of the project management plan to the team members so they know what is expected of them and what should have been created when the work of the project is complete.

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How are Projects Selected by a Company?

Mathematical Models•Constrained Optimization•Linear•Non-linear•Dynamic•Integer•Complex calculation•Algorithms

Benefit Measurement Model•Comparative Approach•Scoring Models•Benefit Contribution•Economic Model

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4.6.3 Project SelectionFinancial Metrics Table

Project Selection Tool Also Known As Option to Select Example

Return on Investment ROI The Biggest Number or Percentage $50,000 or 7%

Internal Rate of Return IRR The Biggest Percentage 15.50%

Net Present Value NPV The Biggest Number(Years are already factored in) $47,500

Benefit Cost Ratio BCR The Biggest Ratio 3.5:1

Opportunity Cost -- The Amounts That Are Not Selected

Project A ($7,000) over

Project B ($5,000)

Payback Period -- The Shortest Duration 7 months

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4.7 Develop Project Management Plan P

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4.7.1 Project Management Plan

The Project Management Plan is a cumulative document that contains all the documents used in the project management approach on the project.

Management Plans in the Project Management Plan DocumentRequirements Management Plan Scope Management Plan

Schedule Management Plan Cost Management PlanQuality Management Plan Process Improvement Plan

Communications Management Plan Human Resource Management PlanProcurement Management Plan Risk Management Plan

Change Management Plan Stakeholder Management PlanConfiguration Management Plan

Also for Consideration in the Project Management Plan Document or Project DocumentsMilestone List Milestone Schedule Resource List and

Calendar (Project) Organizational

ChartRequirements Requirements

Traceability MatrixProject Scope

StatementWork Breakdown

StructureScope Baseline Schedule Baseline Cost Baseline Quality BaselineRisk Breakdown

StructureRisk Register Change Control

SystemsStakeholder Register

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4.7.2 Assumptions

• When doing project management, part of the concept of planning is dealing with items that you simply do not know the characteristics of yet.

• This could be done with scheduling, budgeting, or anything other “unknown” areas of the project.

• The lessons learned are valuable with helping create valid assumptions.

• As the project evolves and we learn more about the project, assumptions will become less in most cases.

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4.7.3 Constraints

• Constraints are used throughout the project.

• Every project has constraints.

• These are things that limit the options on the project.

• This could be the number of people available, amount of time or money available to finish the job, or other resource or asset issues.

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4.7.4 Baseline

• The baseline is the original estimate plus any approved changes.

• The baseline value is that which the work results (sometimes called “actuals”) are compared to.

• There will be a baseline value for any item on the project this is to be measured.

• This includes scope, time, cost and quality at the minimum.

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4.7.5 Project Management Information System (PMIS)

• The Project Management Information System is used for communication and Distribute Information on the project.

• It is not necessarily a high tech system, but whatever is used for communication on the project.

• Normally, it is a mixture of technology and non-technology tools used by various people on the project.

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4.8 Direct and Manage Project Work E

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4.8.1 Work Authorization System

A Work Authorization System:• Is a formal or informal system that is used in project management to

ensure that work is done as planned.• Ensures that the right work is done in the right order, at the right time,

by the right people.• Can help control costs on the project.

– If work is not done in the sequence as planned, it can potentially cause issues that result in rework, which can be anything from checking with the project manager when something is done, to a detailed check in and sequencing system.

• Can also be used to minimize or eliminate Gold Plating.

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4.8.2 The Project Manager’s Role in Integration

• Project Managers start with planning because they are responsible for pulling together all the various people for the planning and completion of the project plan as all the documents are integrated into the project plan.

• Project Managers are also responsible for project integration while various project pieces come together for plan completion.

• Project Managers must be sensitive to the project’s needs, especially at key interface points on the project.

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4.9 Monitor and Control Project Work M&C

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4.10 Perform Integrated Change Control M&C

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4.10.1 Requested Changes Vs. Approved Changes

• In situational questions, a requested change typically isn’t considered as approved unless stated so. It’s important to explain the impact of requested changes to the authorized requestor or sponsor and let that person make the call on approving the changes based on the impact. Unless it’s a situation like that, a requested change is simply a wish list, not likely to impact the outcome of the situation.

• Approved changes are those that have been through the Change Control System and approved; they are now part of the project with any impact changes potentially had now affecting the project.

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4.10.2 Change Control System

• A Change Control System is a documented, formal process that manages the change of project documentation. It is also used to assess the impact and consequences of requested changes on the project. A change is requested, analyzed for impact and consequences, and typically either approved or rejected.

• An overall change control system can address a variety of areas on the project. If the Change Control System is for a specific knowledge area such as scope or cost, it typically addresses only that area, and usually no others.

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4.10.3 Change Control Board

The following are characteristics of CCB:

• Typically used on larger projects• Can represent various areas of the company• Its function is to review (and approve/reject) changes on the project• Can have different rules with the key being that they meet the needs of

the company and the project.

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4.10.4 Configuration Management

The three main goals of a configuration management system are:

1. To develop a consistent process to evaluate changes.

2. To create an environment that can review and approve appropriate changes to modify the project for the better.

3. To establish communication standards for the project management team to be able to communicate those changes to the appropriate Stakeholders.

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4.11 Close Project or Phase C

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4.11.2 Closing the Project

• Close Project or Phase is the point at which the customer agrees to accept the product of the project.

• This closure basically says that the work (product) of the project and the project are complete.

• After Closing the Project, anything else will be warranty work or new work.

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4.11.3 Lessons Learned• Lessons can come along before the end of a project, as an opportunity that

allows the team to learn from something and improve on the project as they are completing it.

• If they come at the end of the project, the closing the project procedures come into play.

• If they come before the end of the project, the closing procedures are not be a factor.

Lessons Learned at the end of the phase or project• Lessons Learned can happen a number of different ways:• Meet with team and discuss what worked and what didn’t work on the project.• Questionnaire can be used to collect detailed feedback.• Combination of the two above to allow greater discovery and quantitative

details.

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4.11.4 Close Project or Phase and Close Procurements

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Exercises

• As a team, use the Integration Mind Map to do Integration ITTO Matching Exercise. (pages 95 and 97)

• Individually, do 10 questions of the Integration Practice Test. (pages 98-99)

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Scope

Chapter 5

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Scope Process TableProcess Group Process Name Main Outputs

Planning

Plan Scope Management Scope Management Plan

Requirements Management Plan

Collect Requirements Requirements Documentation

Requirements Traceability Matrix

Define Scope Project Scope Statement

Create Work Breakdown Structure

Scope Baseline

Monitoring & Controlling

Validate Scope Accepted Deliverables

Change Requests

Control Scope Work Performance Information

Change Requests

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5.1 Plan Scope Management P

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5.1.1 Scope Management Plan

It may include the methods that will be used to:

•Create a scope statement•Create a WBS•Validate project deliverables•Address scope change requests

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5.1.2 Requirements Management PlanThe requirements management plan helps the Project Manager and team analyze, document, and manage the project requirements.• The plan may include:

– Direction for planning, tracking, and reporting requirement activities– Direction for configuration management activities notably how to initiate

changes to the product, service, or result, how to analyze the impact of the changes, and change approval authorization

– Direction for prioritizing requirements– Direction for determining product metrics and usage rational– Direction for the traceability matrix, specifically the requirement attributes to

be included in the matrix and the other project document to which the requirements will be traced

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5.2 Collect Requirements P

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Team Exercise

Directions:• Review the definitions of each of the each of the Key Tools and

Techniques in the Crosswind PM book (pages 120-121)• Create a creative team mnemonic to help you remember the tools

and techniques.• The team with the most creative mnemonic wins!

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5.2.1 Requirements Traceability Matrix

Attributes typically traced in the matrix are: description, unique identifier, owner, source, version, priority, status, completion date, acceptance criteria, and inclusion rationale.

Req. ID Req. Type Requirement Description

Trace from User Req./ Trace to System Req.

Trace to DesignSpecification

Trace to Test Script

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5.3 Define Scope P

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Example Scope Statement

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5.4 Create WBS P

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Scope Baseline

The scope baseline provides details of the planned scope for the project. It includes: • Approved versions of the project scope statement• WBS• WBS dictionary

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5.4.1 Work Breakdown Structure (WBS)

WAN Project Work Breakdown Structure ExampleWAN Project

1.0

Planning1.1

Scope1.1.1

Schedule1.1.2

Cost1.1.3

Requirements1.2

Joint ApplicationRequirements

1.2.1

Joint ApplicationDesigns

1.2.2

Requirements

Signoff1.2.3

Implementation1.3

Testing1.4

Closure1.5

Main pieces of the project are:•Planning•Requirements•Implementation•Testing•Closure

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Figure 5-7: WBS Process Components

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5.4.2 100% Rule

The 100% Rule states that 100% of the work of a project (or program) needs to be represented in the creation of the WBS. • For example, if there are testing activities or meetings and

administrative work associated with a project, the 100% rule would require that all testing and administrative work be included in the WBS. If not, the estimates related to time, money, staff, etc. will be off track by at least the amount of work that is missing in the WBS.

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5.4.3 WBS Numbering

Work breakdown structure numbering lets project team members know where work fits in the project. Look inside the PMBOK Guide and notice the WBS numbering system.

For example, 7.0 is the Cost chapter. 7.1 Plan Cost Management, 7.2 Estimate Costs, and 7.3 Determine Budget are elements of the Cost chapter. In addition, each element has sub-elements that are numbered. 7.1.1, 7.1.2, and 7.1.3 are sub-elements of 7.1. Ultimately, all of these pieces detail the cost of the project.

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WBS Dictionary

The WBS dictionary provides supporting detail that is typically not practical to apply to the graphical format of the WBS (work breakdown structure). It can include items such as the following:

WBS Dictionary Components

Code of account identifier

Description of work Responsible organization

List of scheduled milestones

Associated schedule activities

Resources required

Cost estimates Quality requirements Acceptance criteria

Technical references Contract information

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5.4.5 Various Breakdown Structures

• Organizational breakdown structure (OBS) - The OBS is also known as an organizational chart. It shows how the project organization is structured to accomplish project activities. See the Human Resource chapter.

• Risk breakdown structure (RBS) – The RBS shows the risks that can potentially occur on a project, broken down by risk category. See the Risk chapter.

• Resource breakdown structure (RBS) – The RBS shows the type of resources used on a project. See the Time chapter.

• Bill of materials (BOM) – The BOM includes components, sub-assemblies, and assemblies used to build a product or service.

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5.5 Validate Scope M&C

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5.6 Control Scope M&C

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Exercise

• Individually, answer 20 questions in the Scope Practice Test.

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Time

Chapter 6

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Time Process TableProcess Group Process Name Main Outputs

Planning

Plan Schedule Management Schedule Management Plan

Define Activities Activity List

Milestone List

Sequence Activities Project Schedule Network Diagrams

Estimate Activity Resources Activity Resource Requirements

Resource Breakdown Structure

Estimate Activity Durations Activity Duration Estimates

Develop Schedule

Schedule Baseline

Project Schedule

Project Calendars

Monitoring & Controlling Control Schedule

Work Performance Information

Schedule Forecasts

Change Requests

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6.1 Plan Schedule Management P

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6.1.1 Schedule Management Plan

The schedule management plan establishes:

• The project schedule model development and maintenance practices• The level of accuracy that will be required for activity duration estimates• The units of measure (time and quantity) that will be used for each

resource• Organizational procedures links based on the WBS• Control thresholds for monitoring schedule performance

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6.2 Define Activities P

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Rolling Wave Planning

Rolling Wave Planning

Rolling wave planning is a concept that utilizes the progressive elaboration concept in planning. It defines a low level of detail on the WBS for the immediate work being accomplished while the work to be done in the future is only at a high level of decomposition in the WBS until it is soon to be started.

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Define Activities: Control Account & Planning Package

Control Account helps with estimating when all the details aren’t immediately available at the work package level.Planning Package• The planning package is a piece of

the WBS between the control account and the work package.

• It is used to plan work that has been scoped, but lacks sufficient work package level details.

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6.3 Sequence Activities P

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6.3.1 DependenciesType of Dependencies Definition

Mandatory (Hard Logic) A constraint that must be completed before the subsequent items can start. You must have the roof on before you can begin to apply shingles to it.

Discretionary (Soft Logic)

A constraint that should be completed but is not absolutely required to be completed before the subsequent items can start. You prefer but do not absolutely have to finish System Testing before beginning User Acceptance Testing.

InternalA mandatory or discretionary constraint that originates from within the project or company. You have to wait for the power supply to complete the testing of the computer you are designing.

ExternalA constraint put in place by something external to the project team or organization. The city inspector must approve any construction before issuing a certification of occupancy so the tenant can move in.

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6.3.2 Network Diagram

• The network diagram is a schematic of project activities.

• It shows how various activities are connected as a result of Sequence Activities.

• This diagram gives you a picture of how the work of the project will flow.

• It is also the tool used to evaluation schedule compression techniques such as crashing and fast tracking.

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6.3.3 Diagraming Types

There are two types diagramming methods that are used in network diagramming.

• Precedence Diagramming Method (PDM) uses the Activity on Node, shown below

• Arrow Diagramming Method (ADM) uses the Activity on Arrow or Line.

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Precedence Diagramming Method (PDM)

Sometimes called activity-on-node (AON), the precedence diagramming method (PDM) is what most people use when they use modern project management scheduling software. In this method, the activity is in the box (sometimes called the node) and the arrow connects the activities.

B D

Start

CA

E

F

G Finish

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Arrow Diagramming Method (ADM)

ADM, sometimes called activity-on-arrow (AOA), is older. The activity is on the arrow or line, and the circle or box connects the activities. A dummy is a dashed line that connects two activities where a relationship is needed, but the diagram doesn’t otherwise connect the relationship. The dummy is not an activity and has a zero duration.

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Diagramming Methods: Summary

Full Name Acronym Predecessor Types

Special Diagram Types and Characteristics Application

Precedence Diagramming

Method

Activity-on-node

PDM

AON

Finish-to-startStart-to-start

Finish-to-finishStart-to-finish

No Dummies allowedMost modern

project scheduling software

ArrowDiagramming

Method

Activity-on-arrow

Activity-on-line

ADM

AOA

AOL

Finish-to-start Dummies allowedOutdated

manually drawn mostly

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6.3.4 PredecessorsWhen you create a project schedule, you can use predecessors to establish the sequencing needed to accomplish work.

The different types are:• Finish-to-start• Finish-to-finish• Start-to-start• Start-to-finish

• Finish-to-start is used in both Arrow Diagramming Method (ADM) and Precedence Diagramming Method (PDM) diagramming techniques.

• The other types are used only on the Precedence Diagramming Method (PDM) diagram.

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Predecessor: Finish-to-Start

Predecessor Diagram

Finish-to-Start

With the finish-to-start predecessor, Activity A must be completed before Activity B begins.

It is usually the default predecessor type for modern project scheduling software.

This predecessor is usable in ADM and PDM diagramming techniques.

A

B

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Predecessor: Finish-to-Finish

Predecessor Diagram

Finish-to-Finish

With the finish-to-finish predecessor, Activity B must finish by the time Activity A is finished.

Use this predecessor when two or more teams are developing something, and all activity must finish at the same time to be converged into the total system.

A

B

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Predecessor: Start-to-Start

Predecessor Diagram

Start-to-Start

Under the start-to-start predecessor, when Activity A starts, Activity B can start.

Use this predecessor when multiple activities can start simultaneously.

A

B

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Predecessor: Start-to-Finish

Predecessor Diagram

Start-to-Finish

Under the start-to-finish predecessor, Activity B would start before Activity A finishes.

You would use start-to-finish predecessor in situations where the new system must start before you could finish (shutdown) the old system.

One example that seems to be ideal for this type predecessor is a project in which you are creating a new system to replace an existing system.

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LeadType of Compression

Technique Definition Example

LeadA Lead is an accelerant of an activity. You use a Lead when something can begin before its predecessor is totally complete.

An example would be to begin user testing software if the system testing was significantly complete.

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LagType of Compression

Technique Definition Example

LagA Lag is a delay between activities. You use it where there is some type of constraint in which something must wait before it can continue.

An example would be if you were building the interior of a house, you would have to wait a day for texturing on the walls to dry before you would paint the walls.

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Lead and Lag Displayed in Network Diagram

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Estimate Activity Resources P

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6.4.1 Resource Breakdown Structure

Displays a breakdown by resource type across an organization. This breakdown makes it possible to view where resources are being utilized regardless of what organizational group or division they are in.

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6.4.2 Estimating Methods

What are the pros and cons of each of the four estimating methods?

• Analogous Estimate (Sometimes called Top-Down) - Compare to a previous project.

• Bottom-Up - Individual items are estimated, then summed for the total cost.

• Parametric - Parameters around which the estimate is built.

• Computerized/Monte Carlo – Used to assess risk for individual items estimates, then summed for the total cost.

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PERT and Other Formulas

The formula for PERT is:

In the first formula, O is Optimistic, P is Pessimistic, and M is Most Likely (R, Realistic, could be substituted for M). In the second formula, T is Time, E is Estimated, O is Optimistic, M is Most Likely, and P is Pessimistic.

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6.5 Estimate Activity Durations P

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Overview of the Time Processes

It is good to note that on smaller projects, Define Activities, Sequence Activities, Estimate Activity Resources (EAR), and Develop Schedule may occur as a single overall process.

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Develop Schedule P

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6.6.1 Schedule Examples

• There are a variety of schedule formats. The most common formats are activity lists, bar charts, and network diagrams.

• Activity lists contain all required schedule activities for the project, an identifier for each activity, and a rather detailed scope of work description for each activity.

• Bar charts are an easy to read representation of schedule activities (bars) and denote the start date, end date, and duration of each activity.

• Network diagrams are visual representations of network logic and scheduling. Typically, the diagrams contain date information for critical path activities and are formatted as activity-on-node or logic bar chart.

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6.6.2 Schedule Baseline

A schedule baseline is a specific version of the project schedule that is selected and approved by the project management team as the baseline and includes baseline start and finish dates.

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6.6.3 Critical Path Method (CPM)CPM Pointers:Used with scheduling environments where a:

– Forward Pass is used to establish the earliest the activities can start (ES) and finish (EF)

– Backward Pass is used to establish the latest the activities can start (LS) and finish (LF)

• Allows the calculation of the critical path and the amount of slack on each activity• Any activity on the critical path typically has zero slack• A negative slack is possible if the project is behind schedule• Activities on the critical path are the ones the Project Manager should put more

focus on

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6.6.4 Slack (Also Known as Float)

Slack is the amount of time that an activity can slip or be delayed without delaying the finish date of the project . If an activity has no slack, it is on the critical path Negative or positive float can also exist. This float is a scenario in which the project’s actual finish date extends past a targeted finish date, or the project’s actual finish date comes before the targeted finish date.

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Slack (Also Known as Float) – (Cont.) If a project is scheduled to be done by the end of May and it finishes two weeks early, there are two weeks of positive float. In the same example, if it were to run two weeks over (without approval of a new date), the project has two weeks of negative float.

Slack Type Description

Free SlackThe amount of time that an activity can be delayed without delaying the successor activity. This is calculated by subtracting EF+1 of the current activity from the ES of the successor activity.

Total SlackIt is the latest an activity can start without delaying the project finish date or violating a schedule constraint. Total Slack (Float) does not get added together for the path, but float is shared across the path.

Project SlackThe amount of time something can be delayed without delaying the published finish date. Note that it could be different from what the project is privately anticipating.

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6.6.5 Critical Path

What is the critical path?

• The critical path is:• The longest path on a project network diagram.• It has no float, but can change as the project evolves. • There can be multiple critical paths.• It has the greatest project risk.• The project end date can be delayed if anything on the critical path

has a problem. The increase or slippage of an activity on the critical path can cause the overall finish date to slip.

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6.6.6 How to Calculate the Critical Path

Activity Preceding Activities Duration in Days

A Start 4

B Start 5

C A 4

D B 2

E C, D 6

F D 1

G E, F 5

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What is the critical path?

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Network Diagram Paths and Durations

What are the different paths and time?Path A,C,E,G Duration of 19Path B,D,E,G Duration of 18Path B,D,F,GDuration of 13

What is the critical path?Path A,C,E,G Duration of 19

Start

A

B

C

D

E

F

G Finish

4

5

4

2 1

6

5

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6.6.7 Forward and Backward Pass Calculation

A Forward and Backward Pass Calculation is a standard calculation which:

• Is used to determine the Critical Path of the Network Diagram.

• Shows how much Slack (or Float) there is for an activity, which is the amount of time an activity can slip before delaying the next activity.

• Shows how much total Slack there is, which is how much time an activity can slip before it delays the project finish date.

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Forward Pass Calculation

Forward Pass Provides the early start (ES) and early finish (EF) of each activity on the network diagram.

Forward Pass Formula EF = ES + Duration -1

Variables

Early Start (ES) – The earliest an activity can start based on the Network Diagram logic.Early Finish (EF) – The earliest an activity can finish based on the Network Diagram logic.Duration – The length of the activity.Convergence – Where the output of more than one activity is the predecessor to an activity on the network diagram.

Assumptions A day starts at 8:00 a.m. and finishes at 5:00 p.m.Starting Point At the left of the Network Diagram, typically the start activity

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Forward Pass CalculationHow to Perform a Forward PassWe recommend that you read the section below at least once then try to work the steps on the diagram above.1. Set the early start (ES) of Activity A to 1 because that is the first day of the project.2. Apply the forward pass formula (EF=ES+Duration-1) to the network diagram activity-by-activity from start to finish. If you encounter a convergence (see in step 3), return to the beginning of the diagram and continue this step for all activities leading into the convergence. As you move from one activity to another, increment the early finish (EF) of the current activity by one to give you the early start (ES) of the next activity. For example, Activity A has an early finish (EF) of 3; the early start (ES) of the following activity is 4. 3. Wherever you encounter a convergence, select the larger of the early finish (EF) values and

continue applying the forward pass formula from start to finish on the network diagram. 4. Perform steps 2 and 3 until you have applied the forward pass formula to all activities. The forward pass is complete at this point.

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Forward Pass Calculation

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Forward Pass Calculation

The network diagram should also be complete. The calculations are not part of a typical diagram but are shown for clarification.

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Backward Pass Calculation

Backward Pass Provides the late start (LS) and late finish (LF) of each activity on the network diagram.

Forward Pass Formula LS = LF – Duration + 1

Variables

Late Start (LS) – The latest an activity can start based on the Network Diagram logic.Late Finish (LF) – The latest an activity can finish based on the Network Diagram logic.Duration – The length of the activity.Burst – Where an activity has multiple outputs that are Predecessors to more than one activity.

Assumptions A day starts at 8:00 a.m. and finishes at 5:00 p.m.

Starting Point At the right of the Network Diagram, typically the finish or end activity.

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Backward Pass Calculation (cont.)1. The late finish (LF) becomes the same as the early finish (EF) on the last activity (also, the duration of the critical path). If the network diagram ends with multiple activities, the Late Finish (LF) for all is the greatest Early Finish (EF). 2. Apply the backward pass formula (LF-Duration+1=LS) from the finish (right) to the

start (left) of the network diagram. If you encounter a burst (see Backward Pass Calculation Description in this step), return to the finish (right) of the diagram and continue this step for all activities leading (from the right to the left) into the burst. As you move from one activity to another, decrease the late start (LS) by one to give you the late finish (LF) of the next activity. For example, Activity H has a late start (LS) of 13; the activity that precedes it has a late finish (LF) of 12.

3. At any burst on the network diagram, select the smaller of the late start (LS) values. 4. Perform steps 2 and 3 until all activities are done. At this point, the network diagram should look like the following.

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Backward Pass Calculation (cont.)

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Backward Pass Calculation (cont.)

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6.6.8 Forward & Backward Pass Substitute TechniquePath ABDFH 3+2+2+3+5=15Path ACDFH 3+1+2+3+5=14Path ACEGH 3+1+4+4+5=17 (Critical Path)

• Calculate float for Activity F• Path ABDFH (15 days) and ACDFH (14 days) contain activity F in their paths• Path ABDFH is the longest path for Activity F of 15 days• Subtract the longest path from critical path to calculate the float time. Path ACEGH –

Path ABDFH = 17 – 15 = 2 day float

Start

Activity BDuration 2

Activity CDuration 1

Activity DDuration 2

Activity EDuration 4

Activity FDuration 3

Activity GDuration 4

Activity HDuration 5 FinishActivity A

Duration 3

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6.6.9 Network Diagram Analysis

Alternative method to calculate the slack or float of an activity:Use the formula LF-EF (late finish-early finish) or LS-ES (late start-early start) to calculate the slack of an activity by using the date provided in the exercise. If the difference is zero, the activity is on the critical path.

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6.6.10 Schedule Compression Techniques

Technique

Characteristics

Key Cost Quality Additional

CrashingPutting more

resources on Critical Path activities

Usually increases Cost

Minimal risk exposure

(compared to fast tracking)

Think of this as crashing a party. You have more people than originally

planned.

Fast TrackingDo activities in

parallel that would normally be in

sequence

Flexible, but increase cost from potential rework

Additional risk exposure because of possible rework

Can require additional communication to

coordinate activities

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Schedule Compression Example

The network diagram below shows two paths:• Path ABDEF for a total duration of 13 and Path ACDEF with a total

duration of 12.• Path ABDEF is the critical path with a duration of 13 days.

Start

Activity B2 Days

Activity C1 Day

Activity D2 Days

Activity E4 Days

Activity F2 Days

FinishActivity A

3 Days

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Schedule Compression ExampleIf you need to compress the overall duration of the Network Diagram and wanted to use the fast tracking technique, you could re-sequence the diagram as shown below.

• Path ABEF has a total duration of 11.• Path ABDF has a total duration of 8.• Path ACDF has a total duration of 8.• Path ABEF is the new critical path because it is the longest of the three paths.

• Fast tracking has reduced the critical path from 13 to 11 days.

Start

Activity B2 Days

Activity C1 Days

Activity D2 Days

Activity E4 Days Activity F

2 DaysFinishActivity A

3 Days

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6.6.11 Critical Chain Method

• The critical chain method is a different approach for scheduling. It emphasizes resource flexibility, by using duration buffers for resources, and leveling over the course of the project to accommodate limited resources.

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6.6.12 Resource Leveling• As you create a schedule, you assign resources and when you have your

schedule complete, you usually notice a pattern of peaks and valleys

• These peaks and valleys represent resources that can be applied for 12 hours one day, but only 4 hours the next. Leveling is the process of adjusting these peaks and valleys to create a level usage of resources, as depicted in the post leveling graphics.

• Typically, when you apply resource leveling to your schedule, you do so at the sacrifice of the overall finish date, and it’s not uncommon to see your schedule stretch out a little.

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Resource Leveling (Cont.)Resource leveling and schedule compression techniques are typically used together in several iterations to attain an optimal balance between delivery deadlines and resource utilization.

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6.6.14 Logic Bar ChartDetailed Schedule with Logical (line) Relationships

WBS # Activity (Task) Days Jan Feb Mar Apr May1.1 CRM Application Development Starts 0

1.1.1 Module A 40

1.1.1.1 Requirements A 20

1.1.1.2 Code A 20

1.1.1.3 Test A 20

1.1.2 Module B 40

1.1.2.1 Requirements B 20

1.1.2.2 Code B 20

1.1.2.3 Test B 20

1.1.3 Module C 40

1.1.3.1 Requirements C 20

1.1.3.2 Code C 20

1.1.3.3 Test C 20

1.2 Deployment 20

1.2.1 Production Cut Over 20

Timeline

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6.6.15 Milestone Schedule

A milestone has 0 (zero) duration.

Milestone Schedule

WBS # Activity (Task) Days Jan Feb Mar Apr May1.1 CRM Application Development Starts 01.1.1 Module A 01.1.2 Module B 01.1.3 Module C 01.2 Deployment 01.2.1 Production Cut Over 0

Timeline

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6.6.16 Summary Schedule

The summary schedule is used to show an aggregate, or rolled up view of the various activities at a summary level. It gives senior management, the project management team, and team members a picture of how long the summary level work packages are to take, and in what sequence they occur.

Summary Schedule

WBS # Activity (Task) Days Jan Feb Mar Apr May1.1 CRM Application Development Starts 1001.1.1 Module A 401.1.2 Module B 401.1.3 Module C 401.2 Deployment 201.2.1 Production Cut Over 20

Timeline

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6.7 Control Schedule M&C

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Time Formulas and Variables Review

Description Formula Variable (Component)

Example

Standard deviation is the measurement of variation within a distribution

(P-O)/6 Standard Deviation

(20-4)/6=2.67

The variance is a measure of how spread out a distribution is.

((P-O)/6)2 Variance ((20-4)/6)2=7.11

Weighted Averaging (PERT) represents an estimation technique used to calculate duration estimates. This is used in a beta distribution.

(P+O+(4 x M))/6 Or

tE = (tO + 4tM + tP)/6

PERT (20+4+(4 x 14))/6=13.33

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Time Formulas and Variables Review

Description Formula Variable (Component)

Example

Simple Averaging (three-point estimate). This is used in a triangular distribution.

(P+O+M)/3 Three-Point Estimate

(20+4+14)/3=12.67

Pessimistic estimate is a worse case estimate.

Provided on exam P P=10

Optimistic estimate is a best-case estimate.

Provided on exam O O=4

Most likely (or realistic) estimate Provided on exam M (also could be R, “realistic”)

M=6

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Time Formulas and Variables Review

Description Formula Variable (Component)

Example

Slack represents the amount of time (typically days) an activity can be delayed without causing impact.

Slack=LS-ES or LF-EF Slack (Also called Float)

6-4=2 or 18-10=8

Forward pass formula EF=ES+Duration-1 EF 6+2-1=7 or EF=10

Early Start is the earliest an activity can start

Provided on exam ES ES=4

Late Finish is the latest an activity can finish without causing impact

Provided on exam LF LF=18

Backward pass formula LS=LF-Duration+1 LS 10-5+1=6 or LS=6

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Exercises

• Do 6.11.1 Time Network Diagramming Exercise – Project A (page 197)• Individually, Do Time Practice Test, 10 Questions.

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Cost

Chapter 7

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Cost Process Table

Process Group Process Name Main Outputs

Planning

Plan Cost Management Cost Management Plan

Estimate Costs Activity Cost Estimates

Basis of Estimates

Determine Budget Cost Baseline

Project Funding Requirements

Monitoring and Controlling Control Costs

Work Performance Information

Cost Forecasts

Change Requests

Project Management Plan Updates

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Cost Calculation Rules• The earned value part of this section is not small compared to that in the

PMBOK® Guide. Along with providing various memorization tools in this section, we present the information in such a way that the material helps eliminate any confusion arising from other products that try to explain earned value.

• A quick Algebra review can always help. The calculation rules for formulas are as follows:

• Rule 1: First, perform any calculations inside parentheses.Rule 2: Next, perform all multiplications and divisions, working from left to right.Rule 3: Finally, perform all additions and subtractions, working from left to right.

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7.1 Type of Costs

There are four types of Cost on a project:

Type of Cost Description

Direct Cost Direct cost is directly attributable to the project and spent only on the project work.

Indirect Cost

Indirect cost is cost that is needed for a project but not restricted to it; it could be used by other projects as well. It is likely there are other groups or activities benefiting from such items, and your project pays its part as well.

Fixed CostFixed cost is cost that is consistent on a project regardless of how many are used.

Variable CostVariable cost is one that fluctuates with what is produced. The more of something you produce, the more of this type of cost you incur.

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Cost Based Project Selection Techniques

Project Selection Technique Name

Also Known

AsOption to Select Example

Return On Investment ROI

The biggest number or percentage. Typically the biggest number or percentage among the projects under consideration.

$50,000 or 7%

Internal Rate of Return IRR

Select the biggest percentage.Often used in capital budgeting, interest rate makes the net present value of all cash flow equal zero.

15.5%

Net Present Value NPV Select the biggest number (Years are already factored in) $47,000 US

Benefit Cost Ratio BCR Select the biggest ratio 3.5:1

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Cost Based Project Selection Techniques (cont.)

Project Selection Technique Name

Also Known

AsOption to Select Example

Opportunity Cost

The amounts that are not selected

Choose Project A ($7,000) over Project B ($5000). The opportunity cost is $5000

to select Project A.

Payback Period

Select the shortest duration 7 months

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Cost Based Project Selection Discussions

Project Selection Technique

Discussion

Return On Investment

(ROI)

Return on Investment (ROI) is a general term. You may calculate it a variety of ways. Typically, you would choose the biggest number or percentage among the projects under consideration.

Internal Rate of Return(IRR)

Often used in capital budgeting. Interest rate makes the net present value of all cash flow equal zero. In the case of IRR and project selection, select the larger number.

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Cost Based Project Selection Discussions (cont.)

Project Selection Technique

Discussion

Net Present Value(NPV)

Net Present Value (NPV) is used in capital budgeting where the present value of cash inflows is subtracted for the present value of cash outflows. NPV compares the value of a dollar today versus the value of that same dollar in the future after taking inflation and return into account.

I wouldn’t worry about calculating this, you should know how to select a project using it. For example, with Project A have a NPV of $150,000 and 6 months or Project B having a NPV of $295,000 and 1 year, you would select Project B because it has the bigger number AND the years are already factored into the dollar amount.

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Cost Based Project Selection Discussions (cont.)

Project Selection Technique

Discussion

Benefit Cost Ratio(BCR)

Benefit Cost Ratio (BCR) is the project selection and analysis technique that involves comparing the benefit to the cost of the initiative. The format is 3.65:1 that means that the benefits of the project outweighs the costs 3.65:1.

You should not be concerned about profit in this area. That is simply noise; the benefit, cost, and ratio between them are the main components. There could also be a project that has a BCR of less then one (.75:1) for example. This would mean that the project had a benefit of $.75 for ever $1.00 invested. Typically, you would not approve such a project unless there was some underlying factor such as Y2K issues.

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Cost Based Project Selection Discussions (cont.)

Project Selection Technique

Discussion

Opportunity Cost

Opportunity Cost is associated with taking another opportunity. It is what you give up or leave on the table to take the other opportunity. For example, if you take a $75,000 a year job over a $60,000 a year job, then the opportunity cost of taking the $75,000 is $60,000.

Payback PeriodPayback period is the amount of time needed to earn back the original investment on the project. PMI® suggests that you select the project with the shortest payback period.

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7.3 Future Value (FV)

• Future value is the value of something such as cash or an investment at a specific point in the future. For example, if you had $1,000 now and could get 8% interest over three years, what is the future value?

• The formula is shown below with PV = present value, r = interest rate, n = number of periods, and FV = future value.

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7.4 Present ValuePresent value is the value of something today that you need to create a certain amount of investment in the future. For example: if you wanted to have $2,500 in three years, what amount of money do you need today to produce this amount if the money was earning 8%?

where:

FV = Future ValuePV = Present Valuer = Interest Raten = Number of Periods

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7.5 Sunk Costs

• Sunk Costs are costs that have already been spent on a project.

• Do not consider these costs when making future project decisions.

• Here’s an example: If a project has a budget of $175,000 and has already spent $200,000, the $200,000 wouldn’t be considered when deciding whether to continue on the project or not.

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Expected Present Value: What is Expected Present Value?

• Expected Present Value (EPV) is a present value analysis that takes into consideration the risk of the opportunity being considered. This calculation involves considering and weighting many potential outcomes.

• For example: a 40% chance of making $10,000 and a 60% chance of making $2,000 would create an expected cash flow of $5,200.

• Although there are various ways EPV could be calculated, a common way would be to multiply dollar amount by likelihood and add the outcomes similar to expected monetary value (in Risk section).

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7.6 Depreciation

• Depreciation is the process of devaluing an asset in the tax system. Capital assets are those that are purchased and depreciated over time.

• Over a period of time (Schedule), the worth of an asset decreases until it has no value or a predefined value at the end of its depreciation schedule. Generally, calculating depreciation is a complicated process involving tables, formulas, and more.

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7.6.1 Standard Depreciation• Standard Depreciation is performed with basic division. There are 3 things to

know about something before you can depreciate it.

– What is the start value or purchase price?– What is the scrap value?– What is the depreciation time frame?

• For an example, a $5,000 video editing system has a 5-year depreciation schedule with a scrap value of $0. How much will it depreciate per year?

$5,000 / 5 years = $1,000 / year

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7.6.2 Accelerated Depreciation

• Accelerated Depreciation is a little more complex and generally requires tables of data to calculate.

• For the exam, you must know that there are two main types used:– Sum of the year’s digit– Double declining balance (DDB)

• Accelerated depreciation does what its name implies. It depreciates faster than standard depreciation.

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7.7 Life Cycle Costing

• Life Cycle Costing is the process of examining all the costs associated with a project and its product once it goes into production.

• In this process, you not only consider the project costs, but also the total ownership (operations support) costs of the item created by the project

• By taking production and the post project life into account, you could determine that your strategy to build the project might differ.

• Such an approach could result in an increase in project costs, but a savings in operation costs, which would save company money in the long-run.

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7.7 Life Cycle Costing (Total Cost of Ownership)

• Example: A vendor wants to charge your company $50,000 to create a prototype, then charge $2,000 per item for production

• The $50,000 might be higher than you would like.• You find another vendor that has a lower upfront cost, but charges

$4,000/item for production.

25 Devices 30 Devices

Vendor A 25*($2,000) + $50,000 = $100,000 30*($2,000) + $50,000 = $110,000

Vendor B 25*($4,000) = $100,000 30*($4,000) = $120,000

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7.8 Fixed Formula Progress Reporting (Earned Value Rules)

A technique that creates a consistent status report for project activities. Instead of having a “gut feel” of percent completion from each person on a project, this type of reporting is essentially binary. The project planning process defines the split of percentages

• (e.g., 25% / 75%, 50% / 50%.). This is typically used for activities that are two reporting periods or less.

This process works as follows:• When an activity starts, it receives the initial percentage (e.g., 25%.) It receives the remaining percentage

(e.g., 75%) only when the activity is complete, thereby reporting 100% complete to the activity.

7.9 Weighted Milestone• The weighted milestone approach is utilized for activities that typically are longer than two reporting periods.

• In this case, the work is divided into multiple milestones with a measurable output for each section of work.

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7.10 Plan Cost Management P

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Plan Cost Management (Planning)Key Inputs Project

Management Plan

The project management plan is used to establish the scope baseline, the schedule baseline, and other items related to the management and tracking of project costs.

Project Charter The project charter is the basis for the elaboration of the budget. It establishes cost-related approval requirements.

Key Tools & Techniques

Expert Judgment

Expert judgment is used to establish the information that is considered when estimating project costs.

Analytical Techniques

Analytical techniques are used to create a cost management plan that aligns with the needs of the project and organization. Selection of these techniques impacts project risk.

Key Outputs Cost Management Plan

The cost management plan defines the methods that will be used to prepare, configure, track, and control project costs. It also details the methods that will be used to estimate costs and to establish the budget, the performance baseline, and cost controls.

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7.11 Estimate Costs P

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Estimate Costs Methods: Analogous

Method Description Scenarios

Analogous (Top Down)

This estimate is usually a total time or cost estimate that has no significant detail.

Advantage: Can be created quickly.

Disadvantage: It lacks detail or individual piece estimates.

An executive or someone who is subject matter expert (SME) creates a high level estimate based on experience or past project history with the company.

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Estimate Costs Methods: Bottom Up

Method Description Scenarios

Bottom Up

This is a detailed estimate that usually involves team input.

Advantage: There is detail and accuracy associated with it.

Disadvantage: It can take significant time to create and the team can pad the estimates to compensate for unknowns.

A project manager and the team work together to create a complete estimate from the bottom (Activity level) up and roll it up to the total estimate.

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Estimate Costs Methods: Parametric

Method Description Scenarios

Parametric

Based on existing parameters, this method is usually created by industry standards or past experience.

Advantage: It can be done quickly and is usually accurate.

A house builder quotes a house for $75.00 per square foot. A carpet installer quotes $2 per square foot for installation.

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Estimate Costs Methods: Monte Carlo

Method Description Scenarios

Computerized /Monte Carlo

This estimate involves using a computerized program to simulate different variables associated with project outcome.

Advantages: (1) Accuracy of the estimate; (2) The “what-if” analysis that can be performed

Disadvantages: The ramp-up time and costs associated with the setup of the tool.

Variables simulated could include the overall time and cost estimates as well as the confidence levels of the estimates. Variables could also include the number of people needed to achieve project goals.

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7.12 Cost Range

Rough Order of Magnitude Estimate – 25% to + 75%

Definitive (or Control)Estimate

-5% to +10%

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Cost Range Estimates

The table that follows shows the estimate names, the process areas in which they occur, and the range of estimates. While the table is from a prior PMBOK Guide, you should know the information it contains. A memory tool for the estimate names and process groups are "Oh Boy Dave It’s Pepperoni Pizza."

Estimate Name Process Area Range

Order of Magnitude Initiating -25% to +75%

Budget Planning -10% to +25%

Definitive Planning -5% to +10%

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7.13 Determine Budget P

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7.14 Control Costs M&C

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Exercise: Earned ValueYou have a project to build a new fence. The fence is four sided as shown:Each side is to take one day and is budgeted for US $1,000 per side. The sides are planned to be completed one after the other. Today is the end of Day 3.

Activity Day 1 Day 2 Day 3 Day 4 Status at end of Day 3Side 1 S----------F Complete, spent $1,000Side 2 S------------PF ----F Complete, spent $1,200Side 3 PS----S-----PF 50% done, spent $600Side 4 PS---------PF Not yet started

KEY: S=Actual Start, F=Actual Finish, PS=Planned Start, and PF=Planned Finish

What Is: Calculation Answer Interpretation of the Answer

EV

AC

PV

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Exercise: Earned Value What Is:

Calculation Answer Interpretation of the Answer

PV 1,000 plus 1,000 plus 1,000 3,000 We should have done $3,000 worth of work

EV Complete, complete, half done or 1,000 plus 1,000 plus 500

2,500 We have actually completed $2,500 worth of work

AC 1,000 plus 1,200 plus 600 2,800 We actually spent $2,800

BAC 1,000 plus 1,000 plus 1,000 plus 1,000 4,000 Our project budget is $4,000

CV 2,500 minus 2,800 -300 We are over budget by $300

CPI 2,500 divided by 2,800 0.893 We are only getting 89 cents out of every dollar we put into the project

SV 2,500 minus 3,000 -500 We are behind schedule.

SPI 2,500 divided by 3,000 0.833 We are only progressing at 83% of the rate planned.

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Earned Value

AC

EV PVs

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Cost Variance

ACEV −CV =

Positive= Negative=

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Schedule Variance

PVSEV −SV =

Positive= Negative=

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Cost Performance Index

EV

CPI =AC

›1= ‹1=

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Schedule Performance Index

EV

SPI =PVS

›1= ‹1=

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Forecasting the Future Using Earned Value

• Which of the above means:• How much over budget will we be at the end of the project?

– VAC• As of now, how much do we expect the total project to cost?

– EAC• How much more will the project cost?

– ETC

Estimate at Completion (EAC)

Estimate to Complete (ETC) EAC – AC

Variance at Completion (VAC) BAC – EAC

BACCPI

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7.14.1 Earned Value Management

Earned Value Management is a technique for measuring the progress of a project by looking at its scope, schedule, and cost in an integrated manner.

Determining Earned ValueComponent Definition Calculation/Amount

Budget at Completion (BAC) aka Cost

Performance Baseline

The amount you expect the project to cost

Total the costs of each project activity without regard to

completion status: $100,000

Planned Value (PV) aka Budgeted Cost of Work Scheduled (BCWS)

The value of the work that should have been completed

at a specific point in time, excluding any work started

ahead of schedule

Total the value of each project activity scheduled for completion at a specific point in time: $60,000

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Earned Value Variables (cont.)

Actual Cost (AC)aka Actual Cost of Work Performed

(ACWP)

The cost of the work that has been completed at a

specific point in time, including any work started

ahead of schedule

Total all the project costs at a specific point in time:$80,000

Earned Value (EV)aka Budgeted Cost of Work Performed

(BCWP)

A measurement of the progress of a project and the basis for cost analysis, including any work started

ahead of schedule

BAC multiplied by percentage complete (40%):$40,000

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Earned Value Performance Index VariablesIndex/Variance Formula Result Interpretation

Schedule Performance Index (SPI)

EV / PV = SPI$40,000 / $60,000 = .67

Be able to calculate EV or PV if given SPI and EV or PV. For example: PV x SPI = EV or EV/SPI = PV

An efficiency indicator that denotes the amount of work done at a single point

in time An SPI of .67 means that 67% of the work was scheduled to be done has

been done.

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Earned Value Performance Index Variables

Index/Variance Formula Result Interpretation

Schedule Variance (SV) EV-PV = SV$40,000 - $60,000 = -$20,000

Be able to calculate EV or PV if given SV and EV or PV. For example: PV + SV = EV or EV – SV = PV

A variance indicator that denotes the difference between the value of the work completed and the value of the work that should have been completedIf the result is 0, the project is on track.If the result is greater than 0, the project is under budget.If the result is less than 0, the project is over budget.In this case, the result is less than 0; therefore the project is over budget by $20,000.

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Earned Value Performance Index VariablesIndex/Variance Formula/Result Result Interpretation

Cost Performance Index (CPI) EV / AC = CPI$40,000 / $80,000 = .5

Be able to calculate EV or AC if given CPI and EV or AC. For example: AC x CPI = EV or EV/CPI = AC

An efficiency indicator that denotes the return on each dollar spent at a single point in time.A CPI of .5 means that the project is getting 50 cents of work done for every dollar spent.

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Earned Value Performance Index Variables

Index/Variance Formula/Result Result Interpretation

Cost Variance (CV) EV-AC = CV$40,000 - $80,000 = -$40,000

Be able to calculate EV or AC if given CV and EV or AC. For example: AC + CV = EV or EV – CV = AC

A variance indicator that denotes the difference between the value of the work completed and cost of the work completedIf the result is 0, the project is on track.If the result is greater than 0, the project is under budget.If the result is less than 0, the project is over budget.In this case, the result is less than 0; therefore the project is over budget by $40,000.

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Earned Value Analysis

(ACWP)AC

$80,000

(BCWP)EV

$40,000

(BCWS)PV

$60,000

CPI = EV / AC = .50CV = EV - AC = (-$40,000)

SPI = EV / PV = .67SV = EV - PV = (-$20,000)

Cost Schedule

Unacceptable, as the project has done $40,000 of work (EV), but spent $80,000 (AC) to get that work done

Unacceptable, as the project has done $40,000 of work (EV), but should have done $60,000 of the work at this point in time

How much work is done (EV),

compared to what was paid for it (AC)

How much work is done (EV), compared

to how much work should be done (PV)

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7.14.2 ForecastsForecasts Description Formula

Estimate At Completion (EAC)

The estimate at completion (EAC) represents the current projected final costs based on the current spending efficiency (CPI).If you have a CPI greater than one (>1), the number will be less than the BAC, meaning that the project will likely finish under budget. If you have a CPI of less than one (<1), the number will be greater than the BAC, meaning that the project will finish over budget. If the CPI equals 1, the project will finish on budget. EAC: $200,000 (This is on pace to come in over the BAC of $100,000 in our example on the previous pages.)

EAC = BAC / CPI Or $100,000/.5

=$200,000

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Forecasts

Forecasts Description Formula

Estimate To Complete (ETC)

The estimate to complete (ETC represents the amount needed to finish the project based on the current spending efficiency of the project.) This figure is the EAC without the actual cost to date. ETC: $120,000 (It is on pace to exceed the BAC amount when factoring in what has already been spent in our example in the previous pages.)

ETC = EAC – ACOr $200,000

$80,000=$120,000

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ForecastsForecasts Description Formula

To Complete Performance Index

(TCPI)

An efficiency indicator that denotes the efficiency needed from the remaining resources to meet the cost goals of the project and finish the project on budget.

(BAC - EV) / (BAC - AC) or($100k - $40k) / ($100k -

$80k)=3.0

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Forecasts

Forecasts Description Formula

Variance At Completion (VAC)

The variance at completion (VAC) is the difference between the budget at completion (BAC) and the estimate at completion (EAC). This difference tells how much over or under budget the project finished. Using the sample data above, we see the following values with EAC, ETC, and VAC. VAC: -$100,000 (This figure is the projected over budget amount, based on the current spending efficiency of the project in our example on the previous pages.)

VAC = BAC –EACOr $100,000-$200,000

= -$100,000

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Earned Value Forecast Table

The following Earned Value Forecast Table shows the three formulas above set up as tic-tac-toe table. You can map out where the variables go in the table and see that EAC makes a diagonal line. Use this table as a quick reference for the PMI certification exam.

____EAC

VAC

ETC

CPI

EAC

AC

BAC

BAC

EAC________

__

__

Earned Value Forecast Table

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7.14.3 S Curve

$ (Dollars)

Time

Point of Time for Performance Measurement

EV (BCWP)

AC (ACWP)

PV (BCWS)

Legend

S Curve For Project Performance Measurement with Earned Value

The classis S Curve in the figure below shows the interaction between work, cost, and time over the life of the project.

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S-Curve – Direct Relationship between Cost, Time, and Percentage Complete

Example: a labor-only twelve month long project that was started on January 1st. It employs ten contractors that have agreed to the same rate of pay throughout the contract and to work 40 hours every week from January 1st until the end of the project. In this case, there is a direct relationship between cost, time, and percentage completed.

$ (Dollars)

Time

Point of Time for Performance Measurement

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S-Curve – Large Percentage of Upfront Spending

Example: a technical project that has large upfront spending associated with the work.

$ (Dollars)

Time

Point of Time for Performance Measurement

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S-Curve – Large Percentage of Spending at End of Project

Example: a manufacturing project that begins in design, so the bulk of the project costs are toward the end.

$ (Dollars)

Time

Point of Time for Performance Measurement

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Cost: Calculating the Basics of Earned Value Management (EVM)

The earned value management triangle is ideal to memorize because it deals with the calculation of (cost or schedule) variances or performance indices. To read it, start with EV and follow the arrows. For example EV divided (÷) by PV equals SPI or EV minus AC equals CV.

Earned Value Management Table

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Cost: Calculating the Basics of Earned Value Management (EVM) – (Cont.)

Here are some keys to memorizing the earned value management table.

Performance Indices (CPI, SPI) Variances (CV, SV)

Listed first (vertically) Listed last (vertically)

Calculated by division Calculated by subtraction

If less than one (<1), project is behind schedule or over budget

If negative, project is behind schedule or over budget

If greater than one (>1), project is ahead of schedule or under budget

If positive, project is ahead of schedule or under budget

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Cost: Calculating the Basics of Earned Value Management (EVM) – (Cont.)

Calculations Steps

Planned Value(PV or BCWP)

Determine the date or "complete through" level. Add the planned values of activities that should have

occurred as of the date or "complete through" level. Do not add the planned value of activities that have started, that are ahead of schedule. Ex: Today is June 6th, and there are two activities that should not start until June 8th but have already started.

If an activity should be partially complete at the point you are measuring, the percent (%) complete will have to be provided or assumed. Ex: A four-day activity is generally considered to be 50% done two days into the work.

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Cost: Calculating the Basics of Earned Value Management (EVM) – (Cont.)

Calculations Steps

Actual Cost(AC or ACWP)

Add all "actual costs." Regardless of status of activity (1% to 100%) even if it was started ahead of scheduleAny and all costs related to the project

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Cost: Calculating the Basics of Earned Value Management (EVM) – (Cont.)

Calculations Steps

Earned Value(EV or BCWP)

1. List the planned value (PV) of all the following types of activities: • The activities that should have started and haven't started yet• The activities that should have started and have actually started• The activities that shouldn't have started and have (ahead of schedule)2. Determine the % complete of each activity listed in step 1. 3. Multiply planned value (PV) by the % complete for each activity, giving the

earned value of an individual activity. 4. Add all the earned value measurements (calculated in step 3) from each activity

to get the total earned value for the project or situation.

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Cost: Calculating the Basics of Earned Value Management (EVM) – (Cont.)

Activity Name Day Actual Cost ($)

(AC)Earned Value ($)

(EV)%

CompletePlanned Value ($)

(PV)Activity A Day 1 $300 $300 100% $300Activity B Day 2 $200 $150 100% $150Activity C Day 2 $150 $100 100% $100Activity D Day 3 $225 $200 100% $200Activity E Day 3 $100 $100 100% $100Activity F Day 3 $300 $150 60% $250Activity G Day 4 $140 $130 65% $ 200Activity H Day 4 $100 $80 20% $400Activity I Day 5 $0 $0 0% $300Activity J Day 5 $0 $0 0% $200

(The bolded line between Activities F and G represents the measuring point for the analysis.) † PV x % complete*These activities started ahead of schedule, and the progress must be included.

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Cost: Calculating the Basics of Earned Value Management (EVM) – (Cont.)

Budget At Completion

Calculate this figure by totaling the Planned Values for all the activities. The total Budget at Completion is $2,200.

Planned Value

To calculate Planned Value, add up the Planned Value for each activity through day 3. The total is $1,100 of Planned Value. This value represents the work that should be complete through day 3, meaning that you should have spent $1100 through day 3. When looking at Planned Value in this case, even though some work is ahead of schedule, you should look only at the work that should have been done through day 3.

Actual CostTotal what you have actually spent to date. This total includes any and all costs, even if the work was started ahead of schedule. The Actual Cost is $1,515.

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Cost: Calculating the Basics of Earned Value Management (EVM) – (Cont.)

Earned Value

Earned Value is the Planned Value of each activity (regardless if it should have started or not) multiplied by the percentage complete (%). This value provides the Earned Value (EV) for each activity. The next step is to add the Earned Value (EV) of each of the activities for the total Earned Value (EV) for the project. This value represents the budgeted cost of work performed (BCWP) or Earned Value, and it is $1210.

TranslationTranslation means that through day 3, you should have spent $1100, and Activities A through F should be complete. You have spent $1515 but have an Earned Value (the work to show for what you have spent) of only $1210.

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Cost: Calculating the Basics of Earned Value Management (EVM) – (Cont.)

Using the Earned Value Management table we saw that the project has the following metrics:

CPI: $1,210 / $1,515 = 0.8 CV: $1,210 – $1,515 = -$305SPI: $1,210 / $1,100 = 1.1 SV: $1,210 – $1,100 = $110

• The CPI shows that the project is getting 80-cent value for every dollar spent with a CV that shows that it is presently $305 over budget.

• The SPI shows that the project is progressing at 110% of that rate planned and has accomplished $110 more in work than was scheduled.

• The project is ahead of schedule but over budget.

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Exercises

As a team, answer 7.18.4 Earned Value Exercise, pages 262-263. When complete, compare your answers with other teams.

Individually, do the Cost Practice Test, 10 questions. When complete, review your answers.

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Quality

Chapter 8

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Quality Management Process Interaction

A memory tool is PAC (Plan Quality Management, Perform Quality Assurance, Control Quality).

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Quality Process Table & FigureProcess Group Process Name Main Outputs

Planning Plan Quality Management

Quality Management PlanProcess Improvement Plan

Quality MetricsQuality Checklists

Executing Perform Quality Assurance Change Requests

Project Management Plan Updates

Monitoring and Controlling Control Quality

Quality Control MeasurementsValidated Changes

Verified DeliverablesWork Performance Information

Change RequestsProject Management Plan Updates

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8.1 Definition of QualityQuality is the degree to which a set of inherent characteristic fulfill requirements.• The goal of the quality processes is to align them with the International Organization

for Standardization (ISO).

They should generally align with:• Concepts created by Deming, Juran, and Crosby• TQM (Total Quality Management)• Six Sigma• FMEA (Failure Mode and Effect Analysis)• VOC (Voice of the Customer)• Continuous Improvement• COQ (Cost of Quality)

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8.2 Project Management and Quality Management

Project management and quality management should complement each other as they work together. They both focus on items such as:• Customer satisfaction• Management responsibility• Continuous improvement• Prevention over inspection

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8.3 Total Quality Management (TQM)

W. Edwards Deming’s 14 principles of management were generally viewed as the basis for which Total Quality Management was founded.

The following are the basic principles:• Be proactive, not reactive• Utilize leadership and accountability• Measure and strive for constant improvement

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Quality Philosophies

8.4 Zero defects is a concept created by Philip Crosby. Its basic foundation is to do something right initially and you shouldn’t have to repeat it.

8.5 Fitness for UseThe Fitness for Use concept was created by Joseph Juran. It implies that the needs of the customers and Stakeholders are defined and then attempted to satisfy.

8.6 Continuous Improvement (Kaizen)Continuous improvement takes a proactive stance to development, one that makes improvements throughout a process.

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8.7 Gold Plating

• Gold Plating is the practice of providing more than what the customer requested. Per PMI®, this practice is unacceptable and professionally irresponsible. The project manager and team should provide only that which was approved.

• Give your customers exactly what they ask for and what they approve in the charter, no more or no less.

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8.8 Plan Quality P

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8.8.1 Quality Management Plan• The Quality Management Plan helps the Project Manager and team do the

following:– Establish the definition of quality for the project and work of the project

(Quality Baseline)– Establish any checklists to ensure processes are followed – Define and process steps– Validate the quality processes are working– Test the product of the project– Format project/process data for communication to project stakeholders– Deal with changes to the quality standards and processes on the project

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8.8.2 Process Improvement Plan

A component of the project management plan, the process improvement plan defines how to analyze a process in order to determine the activities that will increase the value of the process. Consideration should be given to:

– process boundaries (process purpose, required data, start date, end date, inputs/outputs, owner, and stakeholders)

– process configuration (graphical depiction of processes and their interfaces)

– process metrics (measurement units and limits of control)– improved performance targets (guide for process improvement

activities)

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8.8.3 Grade vs. Quality

• Grade – deals with the characteristics of the product

• Quality – deals with the stability or predictability of the product– deals more with how well something works.

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8.8.4 Accuracy vs. Precision

• Accuracy – deals with the values being measured aligning with the target

value. • Precision

– deals with consistency of the output. If the test is acceptable or not, the outcome being consistent is the desire if focusing on precision.

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8.8.5 Prevention vs. Inspection

• Prevention – deals with eliminating defects and potential defects from the

process. This is the proactive approach to quality.

• Inspection – deals with fixing errors or defects as they come up in the process

of creating the product or whatever is being tested or evaluated.

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8.8.6 Cost of Quality

Cost Item Conformance(Prevention)

Nonconformance(Inspection)

Proactive analysis of process improvement X

Company training relating to quality and continuous improvement

X

Lower inventory needed X

Reduced warranty support X

Excessive inventory X

Throwing away defective products X

Warranty support X

Reacting to problems after they occur X

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Quality Terms

8.8.7 Design of Experiments (DOE)A statistical process used to determine the factors that can influence variables associated with a process or product.

8.8.8 Just-in-Time (JIT)An inventory management process that lets a company have little or no excess inventory in stock other than what they need to build existing orders.

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8.8.9 Normal Distribution

The project activity met with a typical outcome, resulting in nothing abnormal.

NormalDistribution

Mean

+1

-3-2 +2

-1

+3

68.26%

99.73%

95.46%

-6 +6

99.9997%

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8.8.10 Sigma• Sigma is also known as the standard deviation.• The formula of the standard deviation is: (P-O)/6• P=Pessimistic and O=Optimistic.

Example:• Building 100 widgets, with a 1 Sigma quality standard, you have success as long as 68.26% or more of whatever

you build works.• 31.74% (100%-68.26%) or less of what you build can be tolerated to fail, potentially leading to high costs of

rework or scrap.• By increasing the quality standard to 2 Sigma (95.46%), you increase the quantity of expected passing product to

95.46 units out of 100, or no more that 4.54 units would fail.• This decreases the cost of rework and waste, but there will likely have to spend on quality training and other

proactive activities to achieve this standard.• By increasing the quality standard to 2 Sigma (95.46%), you increase the quantity of expected passing product to

95.46 units out of 100, or no more that 4.54 units would fail.• This decreases the cost of rework and waste, but there will likely have to spend on quality training and other

proactive activities to achieve this standard.

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8.8.11 Probabilities

A probability is the likelihood that something will happen.

It can be expressed:• in a percentage (1%, 75%, 100%) or• in a more conventional number format (0.01, 0.75, 1.0). This decimal

translates to a percentage.

For the exam, it is key for you to understand that the sum of all probabilities equals 100% or 1.0.

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8.8.12 Proprietary Quality Management Methodologies• CMMI• 6 Sigma• Lean 6 Sigma• Quality Function Deployment

8.8.13 6 Sigma• 6 Sigma is a modern quality philosophy made popular by Motorola and other companies in the late

80s.

• It involves setting very high standards of 6 Sigma for products or processes that the company produces.

• In essence, this philosophy states that approximately 99.9997% of everything a company creates or the processes it executes are error-free.

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8.8.14 ISO 9000• The International Standards Organization (ISO) standard is associated with companies that

wish to document their processes and adhere to those processes.

• While quality improvement is not always a given with this standard, the repeatability associated with it typically shows a positive benefit.

• This standard can also be used to ensure that partners a company works with have defined repeatable processes.

ISO comes down to the following three steps:• Document what you do• Do what you document• Document any variance (from the normal processes)

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8.8.15 Quality Responsibility

Describe the different roles and responsibilities:

Role Level of Responsibility Example

Team member or worker

They are responsible for the quality of their own work.

The electrician is accountable to ensure that work on the job is satisfactory.

Project Manager They are responsible for the quality standards on the project.

The Project Manager is responsible for the quality on the networking project.

Senior/ Executive Management

They are responsible for the quality standards at the company.

The CEO and Senior Management are responsible for quality at the company.

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8.8.16 Quality Function Table

Quality Function Plan Quality Quality Assurance Quality Control

Flowcharts

Fishbone/Ishikawa/Cause and Effect Diagram

Benchmarking

Design of Experiments

Inspection

Checklists

Control Charts

Pareto Diagrams

Statistical Sampling

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8.9 Perform Quality Assurance E

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8.10 Quality Control M&C

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Quality Terms: Testing• Quality control involves testing the process output.

There are many items to consider when testing:

• Focus on determining if testing will occur with the population or a sample and what the sample criteria will be.

• During testing, define the attributes and variables that are important.

• Gain an understanding of the concept of Statistical Independence and Mutual Exclusivity.

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Quality Terms: Population vs. Sample

• In population testing every item created is tested (Ex: every airplane built).

• In sample testing you determine how much of something must be tested to ensure that defects are caught.

• Sample testing would typically be done if you didn’t need to test everything, or if testing was too costly or too destructive.

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Quality Terms: Variable vs. Attribute

A variable is the characteristic that the Quality Control process is going to measure such as capacity or height.

An attribute is the specific measurement being recorded such as square feet, inches, or meters.

Remember:– that an attribute is a unit of measurement.– you have to define the variable before you can define the

attribute.

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Quality Term: Attribute

An attribute is the specific measurement being recorded.

• For example, square feet, inches, or meters.

• To remember the difference between a variable and an attribute, remember that an attribute is a unit of measurement.

• It’s also good to know that you have to define the variable before you can define the attribute.

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Quality Terms: Statistical Independence vs. Mutual Exclusivity

Statistical Independence is a state in which the outcomes of processes are separate from one another.

• For example, buying a lottery ticket last week doesn’t increase your odds of winning the lottery this week.

Under mutual exclusivity, one choice will not include any other choices.

• For example, shipping a product air overnight does not overlap with shipping the same product ground saver. They are separate options.

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Quality Terms: Mutual Exclusivity

• Under mutual exclusivity, one choice will not include any other choices.

• For example, shipping a product air overnight does not overlap with shipping the same product ground saver. They are separate options.

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Quality Terms: Heuristic

• Heuristic is a rule of thumb and can apply to a variety of Knowledge Areas.

• It serves as a general rule to use when a rule specific to the situation might be too time-consuming or costly to generate for what is needed.

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8.11.1 Flowchart

New StudentRegistration of

Student in CMSStudent

Information

Explain Registration

Process

E-mail Confirmation of

Registration

Add Data to CMS

Email Confirmation of Shipping Products Ship Products

Yes

No

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8.11.2 Pareto Diagram

The general rule with a Pareto diagram is the 80/20 rule, meaning that 80% of the problems come from 20% of the issues.

Ton

er/In

k E

mpt

y

Pap

er J

am

Cab

le B

roke

n

Driv

er Is

sue

Oth

er

30

20

10

0

100

80

60

40

20

0

Number of Defects

Percentage of Defects

Printer Problems

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8.11.3 Control Chart

Run Chart Diagram Sample shows a control chart and a number of different pieces of it. The mean represents the middle of the chart and the target measurement.

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8.11.4 Scatter Diagram

• Helps to see a correlation (or lack of) between variables.

• The closer the output resembles a diagonal line, the more dependent the variables are

• The less it resembles a diagonal line, the more independent the variables are.

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8.11.5 Quality Check Sheet:Do’s and Don’ts for Taking the Exam

Instructions: Checksheets are good tools you can use to ensure everything that should be done in a process has been completed as planned.

As a team, create two columns providing information for the do’s and don’ts of for preparing to take the PMP/CAPM exam.

Do’s Don’ts

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8.11.6 Histogram

A histogram is a chart that indicates the occurrence of a variable via vertical bars. The columns represent a characteristic and column height represents occurrence frequency

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8.11.7 Cause and Effect Diagram

(a.k.a. Ishikawa, Fishbone) Diagram

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Key Quality Formulas and VariablesStandard Deviation shows how far the measurement is from the mean (average).

St Dev = (P-O)/6 P=Pessimistic EstimateO=Optimistic Estimate

(120-60)/6=10

Sigma (These values represent the pure math value, without factoring in process variance which can be up to 1.5 Sigma.)

N/A 1 Sigma=68.26%2 Sigma=95.46%3 Sigma=99.73%6 Sigma=99.9999998% or 99.9997%Memorize the bolded values on 1, 2, 3, and 6!

1 Sigma=68.26%2 Sigma=95.46%3 Sigma=99.73%6 Sigma=99.9999998%

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Exercise

• As a team, use the Quality Mind Map to complete the Quality ITTO Matching Exercise.

• Individually, do Quality Practice Test, 10 questions.

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Human Resources

Chapter 9

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Human Resource Process TableProcess Group Process Name Main Outputs

Planning Plan Human Resource Management

Human Resource Management Plan

Executing

Acquire Project Team

Project Staff Assignments

Resource Calendars

Project Management Plan Updates

Develop Project Team Team Performance Assessments

Manage Project Team

EEF UpdatesOPA Updates

Change Requests

Project Management Plan Updates

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9.1 Plan Human Resources Management P

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9.1.1 Human Resource Management Plan

• Part of the Project Management Plan, the human resource plan outlines methods for defining, staffing, managing, controlling, and releasing human resources.

• The plan should include, at a minimum:– Documentation of roles and responsibilities with emphasis on role

definition, role authority, and role responsibility.– Project organization charts that define team members and their

reporting hierarchy– Staffing Management Plan that outlines the manner and timing for

meeting human resource needs

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9.1.2 Staffing Management Plan

The Staffing Management Plan helps the Project Manager and team do the following:• Establish the staffing policies for the project• Establish the organizational chart (OBS) for the project• Define position descriptions for the project• Get team members on the project• Develop the group of people into a team• Deal with team issues that arise

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9.1.3 Responsibility Assignment Matrix (RAM) Charts

Activity/Resource Mike Denise Brianne Reanna Cody

Planning R A C C I

Design I R A I C

Development I A R C I

Testing I A C R C

Closure I R A C I

Legend:

Responsible=R, Accountable=A, Consult=C, Inform=I

SCARI Matrix = Sign-Off, Consult, Accountable, Responsible, Inform

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9.1.4 Organizational Charts (Organizational Breakdown Structure)

VP Marketing (Woolard)

Acctg. Assoc.

(Jackson)

Senior Accountant (Williams)

Junior Mktg. Mgr.

(Pasco)

Senior Mktg. Mgr.

(Conners)

CFO(Cooper)

VP Taxation (James)

VP Sales (Smith)

Mktg. Assoc. (Peters)

Mktg. Assoc. (Thomas)

Junior Sales Mgr. (Foley)

Senior Sales Mgr. (Bailey)

Sales Assoc.

(Hunter)

Sales Assoc.

(Novacek)

Tax Accountant (Anderson)

Tax Mgr. (Kerr)

Company ABC Organizational

Breakdown Structure (OBS)

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9.1.5 Organizational TheoryMaslow’s Hierarchy of Needs

SelfActualization

Esteem

Belonging

Safety

Physiological

Self Actualization (could be considered “Achievement”)

Someone who performs a calling, someone with everything going right and feeling that life can’t get much better

Esteem How we are perceived and feel about ourselves

Belonging Friends, finding love, existence, and association

Safety Items or elements that make us feel comfortable or protected

Physiological Basics needed for survival, such as shelter and food

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Herzberg’s Motivational TheoryHerzberg had two main factors for workplace success.

• Hygiene – This focuses mainly on the areas associated with the workplace. Factors such as a safe work environment, steady pay, and a stable job are examples.

• Motivating Agents – This focuses on non-financial characteristics of work. Examples can include the opportunity to improve and do more, education, and responsibility.

• One basic assumption of motivational theory is that in most cases, money does not create motivation. Instead, endeavors like improving the workplace, showing appreciation toward the worker, and additional responsibility typically motivate workers more than simply throwing money at them.

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Herzberg’s Motivational Theory

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McClelland’s Achievement Theory

Achievement Theory: McClelland's theory that revolves around achievement, power, affiliation.

• The achievement focus is on being successful• The power focus is on influencing others, and• The affiliation focus is on belonging.

• These three tie together as a group of people form a project team and work toward common goals.

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McGregor’s Theory X

Theory X is more an “old school” mentality when factories produced the majority of the work and people went to work, were told what to do, and didn’t want to have to evaluate what needed to be done, but wanted the boss to tell them.

Theory XLabor and management Characteristics

Labor wants to be told what to do.

Management feels the need to supervise.

Labor is not necessarily motivated to work.

Labor does not want to work.

X X

X

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McGregor’s Theory Y

Theory Y is a more “modern” perspective on labor and management. It is an environment where management typically lets labor know what needs to be done and when, and direct them toward it. This main difference here stems from motivation.

Theory YLabor and Management Characteristics

Labor can work with an end goal in mind.

Management can minimize supervision.

Labor is motivated to do what is necessary for work.

Labor wants to work and enjoy it.

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9.1.6 Leadership and Management Styles with the Project Management Life Cycle

Stage of Project Management Approach

Early Directing

Gains Momentum Coaching

Significant work complete Facilitating

Closing Supporting

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9.1.7 DelegationFor Consideration to Delegate Not to be Delegated

Technical Activities Evaluating or ranking team members

Cross-training-related work Long term (strategic) planning

Routine activities Monitoring extremely important activities

Enjoyable activities Rewarding team membersWork that breaks the routine of

some jobs Determining policies

Work that others do better Personnel selection

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9.1.8 Management Styles

Be familiar with the eight different Management Styles.

Style Description

Autocratic Autocratic managers have unlimited power and authority.

Charismatic Charismatic managers have an appealing persona that makes team members enjoy working with them.

Coach The Coach brings out the best in the team, coaching members to their potential or where they need to be with regard to the project.

Director The Director drives the direction of the team or team members to accomplish specific activities or goals.

Facilitator The Facilitator helps keep things progressing, making them happen. This style is not super proactive or ownership.

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Management Styles (Cont.)

Style Description

MediatorThe Mediator tries to find a common goal when there is disagreement. This style is ideal when there are varying technical opinions or disagreement among resource managers.

Mentor The Mentor focuses on showing someone how, by example, to improve and be better, helping them take on new skills and roles.

VisionaryThe Visionary sees what can be, where the company or team needs to go, focusing on the big picture of the company, with others focusing on the day-to-day events.

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9.1.9 Roles and ResponsibilitiesConstructive Team Roles

Initiator A proactive role that takes initiatives on a project with contribution and ideas

InformationSeeker

A role that works to enhance information and knowledge associated with the project

InformationGiver

A role that shares information and thus helps enhance communication on the project

Encourager A role that helps the project and team by focusing on what the project is creating, not the challenges of the project

Clarifier A role that helps focus on making sure people on the project understand what the details of the project entail

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Roles and Responsibilities (cont.)Constructive Team Roles

Harmonizer A role that helps evolve information and understanding on the project above the team members

Summarizer A role that relates back to the overall picture of what the project is focusing on

GateKeeper

In project management, a role that helps bring people into the projectIn business school, this term could be viewed differently, including a role that keeps people out of something

Devil's Advocate

A role that contradicts popular views or opinions about the work of the project

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Destructive Team RolesDestructive Team Roles

Aggressor A role with a negative attitude toward the projectBlocker A role that interrupts information flow on the project

Withdrawer A role that is non-participatory on the project regarding information and project issues

Recognition Seeker

A role that looks at the project first to see what they can get out of it

Topic Jumper A role that doesn't stay focused on the primary topics of focus and conversation

Dominator A role that consumes project communication and focus with their own views without considering others

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9.1.10 Power

Five types of PowerType Level of Responsibility Example

Formal

This is legitimate power. It is the type of power that comes from the Senior Management at a company authorizing you to be the Project Manager, and whatever authority comes that.

As you saw at the kickoff meeting, the sponsor said that I am the Project Manager on this project and the team would take direction from me on matters related to the project.

RewardA reward is usually the best form of power to use. With reward, someone receives a benefit (reward) for doing something that is needed.

If you complete your work on the project ahead of schedule, we will send you to that training class you have been wanted to attend.

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Power (Cont.)

Type Level of Responsibility Example

PenaltyA penalty is the worst form of power to use. With a penalty, people experience negative impacts if they don’t do what is desired.

If you don’t complete the work as planned, I will make sure that you don’t get your bonus like the other people will.

Expert

This form of power is one that Project Managers must earn on their own. With expert power, the Project Manager is perceived as an expert on the subject by those on the team or at the company.

We need to listen to what he says regarding project management. He has 20 years experience in it and is a PMP®.

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Power (Cont.)

Type Level of Responsibility Example

Referent

This type of power comes from an attitude or “presence” that a person has and the corresponding type of influence this person has on the team. It could also come from someone who would align with other people in a powerful position at the company or on the team.

Ex. #1: I want to stay late and finish this before the morning like I promised the Project Manager I would. He has always been good to me and the rest of the team and I don’t want to let him down.Ex. #2: We must do what the Project Manager asks. She has lunch with our Vice President every week, and they play golf together a lot. If we let her down, he will definitely hear about it.

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Project Manager Power TypesPower Type Description

Attitude Power

This type of power can involve utilizing a middle person to negotiate for the Project Manager. This arrangement can minimize the "personal" effect or attitude that can arise when, during negotiations, the Project Manager potentially takes some point or issue personally or more seriously than it should be taken.

Commitment Power

This type of power involves utilizing commitment via alliances and partnerships on the project team to tackle challenges to the project as they arise. This has a potential connection with referent power.

Competition PowerThis type of power involves maximizing involvement in the project or idea in the form of competition to help enhance the commitment of those involved to work toward a more successful outcome of the project or idea.

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Project Manager Power Types (Cont.)Power Type Description

Investment Power

This type of power involves an attempt to delay until later a key decision (or decisions) that could cause a stakeholder or party with a different view than yours from having to make a decision until they have made a significant time investment in the project. After this initial investment has been made, they are typically more flexible in their negotiations.

Knowledge of Needs

Power

This type of power involves attempting to realize two things that are negotiated: What the other party says they are after, and what they are after that hasn't been made public. Knowledge of these two items can help the project manager with power focused on a solution instead of a moving target.

Moral or Ethical Power

This type of power involves utilizing a moral or ethical perspective tied to one's values in the negotiation process. Often times this can be asking what is reasonable or fair in the negotiations process instead of an approach which could attempt to maximize opportunity.

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Project Manager Power Types (Cont.)

Power Type Description

Persistence PowerThis type of power involves sticking to the target of the negotiations or project. In a lot of cases people will simply give up after an initial rejection, persistence involves holding on and working toward the target.

Persuasion Power

This type of power involves discounting logic which technical people can often use to sell ideas, and instead focusing on comparisons that relate to the negotiating parties experiences, creating evidence that can't be overlooked, and showing how a solution will meet their needs.

Planning Power This type of power involves using preparation followed by negotiation to effectively plan the project.

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Project Manager Power Types (Cont.)Power Type Description

Precedent Power

This type of power involves utilizing something that has worked before regardless if it is at the current project environment or elsewhere, if the desired result was achieved. This can also include challenging ways things have always been done at a company to see a new way of doing things based on precedent set elsewhere.

Professionalism Power

This type of power involves being professional and practical when working with others. This helps to foster a win/win relationship with those that work with the project manager by allowing the project manager to look at the people and their needs.

Risk PowerThis type of power involves utilizing calculated risks in negotiations to achieve project goals. Avoid getting attached to a position because it could limit you in negotiations. Also, to minimize surprises, know as much about the negotiation environment as possible.

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9.2 Acquire Project Team E

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9.2.1 Halo Theory

Halo Theory is the process (in project management) of assuming that someone would make a good project manager because that person is good in his or her technical field.

This theory: • Could also be used to imply that if someone was not good in his or here

technical field that person wouldn’t be good at project management.• Often becomes reality when someone is promoted to a project manager

from technical or hands on position and hasn’t had the opportunity to receive any project management training.

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9.3 Develop Project Team E

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9.3.1 Form, Storm, Norm, Perform, Adjourn (Team Development Life Cycle)

Team development involves convergence of a group of people into a performing organization.

Form Form refers to the creation of the team, when people on the team are put together per the project organizational Planning

needs.

Storm Storm refers to the chaos that occurs as people start to get accustomed to working together.

Norm Norm refers to the point in time when team behavior starts to normalize and team members are accustomed to each other.

The newness of the group of people has worn out.

Perform Perform refers to the activity that transpires as the team works as a team instead of as a group of people. The group

should be working at an optimal level in this phase.

Adjourn As the team work is complete, the team is disbanded and team members move to new work or assignments.

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9.3.2 Recognition and Rewards

A Reward and Recognition System is needed for team development and for optimizing performance.

Key points for a successful Reward and Recognition System:• Define the system but be adaptable because different things motivate

different people.• Provides compensatory time for overtime hours worked or paying for a

certification test or training.• Management follows through on its promises.• Don’t break your word to you team not only hurts the reward system, but

your creditability as a Project Manager as well.

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9.4 Manage Project Team E

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9.4.1 Sources of Conflict

To minimize conflict, a Project Manager can utilize the following:• Team ground rules• Group norms• Project management practices

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9.4.2 Conflict Resolution

Conflict Resolution Mode Description Example

Problem Solving(Confrontational)

Problem solving is an effort in which attempts are made to solve the actual problem. This is the best type of conflict resolution.

If you can’t do what is needed with your current computer, get an upgrade that lets you accomplish what’s needed for your job.

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Conflict Resolution: CompromiseConflict

Resolution Mode Description Example

Compromise

Compromise is an activity during which an attempt is made to get everyone involved to give (concede) a little to find a common ground and resolution. Compromise is sometimes viewed as undesirable because everyone’s giving something up can (potentially) cause the solution not to meet anyone’s needs.

If we can get labor to give in on benefits a little, and management to increase their raise increase a little, I think we can find agreement that both sides can live with.

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Conflict Resolution: Forcing, SmoothingConflict

Resolution Mode

Description Example

Forcing

Forcing is an action in which a direct order to resolve something is given. It is typically the worst type of Conflict Resolution mode.

You will stop using that software and switch to the authorized version or you will not be around here for long.

SmoothingSmoothing is an attempt to focus on the positive and distract the attention from the negative.

Look at how good the requirements on the project went. We just have to apply that same view to this phase of the project as well.

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Conflict Resolution: Withdrawal

Conflict Resolution

ModeDescription Example

Withdrawal / Avoiding

In withdrawal, the Project Manager ignores the problem and hopes it either fixes itself or disappears. Typically, withdrawal is not viewed by PMI® as a Conflict Resolution mode because it’s not a proactive approach to resolving conflict.

I know he is a pain to work with and takes longer to do his work than we like, but maybe if we leave him be, he will just quit and take a new job.

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Conflict Resolution: Collaborating

Conflict Resolution

ModeDescription Example

Collaborating Collaborating entails considering insights and views from a variety

of sources and leads to consensus management which in

turn leads to commitment.

The suggestions and pertinent information

we obtained from across the enterprise

have been instrumental in

ensuring that the project was successful.

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9.4.2 Interpersonal SkillsInterpersonal skills are utilized by Project Managers to take advantage of each team member’s strengths.Interpersonal skills most commonly used by Project Managers are:• Leadership skills which should be used throughout the project, especially to convey

vision and inspire the project team’s performance• Influencing skills which should be used in a matrix organization to influence stakeholders

on a timely basis, especially clear presentation of information, listening skills, consideration of other viewpoints, and knowledge of critical and relevant information

• Effective decision making skills which should be used to influence and negotiate with members of the project team and the organization and which include focusing on goals, utilizing a decision-making process, knowledge of the environment and its impact on the project, managing opportunities and threats, and stimulating team creativity

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Exercise

• Individually, do Human Resource Practice Test, 20 questions

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Communications

Chapter 10

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Communications Process Table

Process Group Process Name Main Outputs

Planning Plan Communications Management

Communications Management Plan

Executing

Distribute Information Organizational Process Assets

Updates

Manage Communications

Project Communications

Project Management Plan Updates

Monitoring and

ControllingControl Communications

Work Performance InformationChange Requests

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10.1 Communication Skills

Communication skills differ from communication management in project management, but it’s key to successful project integration as the key pieces of the project come together per the Project Management Plan. • Components of communication skills can include:• Sender-receiver model• Feedback• Media format • Writing styles• Management and

Presentation techniques

• encode• decode• message• medium• noise

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10.2 Communication Types

Dimensions of Communication Activity

Type Description

Formal The formal communication should be used for the following: legal communication and project documents (written)when distance or extreme complexity are involved (written)official situations (verbal)presentations (written and verbal)primarily one-directional communication (verbal)

Internal Communication within the project

External Communication with customer, other projects, the media, the public

Vertical Communication up and down the organization

Horizontal Communication with peers

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Dimensions of Communication Activity (cont.)Official Communication that is on the record, such as newsletters and annual

reports

Unofficial Communication that is not on the record

Written and oral Communication in writing or orally

Verbal and Non-Verbal Communication that conveys more than just words (inflection of voice, body language)

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Communication Skills Commonly Used by Management

Communication Skills Commonly Used by Management

Active and effective listening

Questioning to enhance understanding

Educating to increase the project team’s knowledge, leading to increased effectiveness

Fact-finding as a means of identification or confirmation of information

Setting and continuously managing expectations

Using persuasion to elicit desired action

Using negotiation to achieve agreement acceptable to all parties

Using conflict resolution to prevent negative impact

Using summarization, recap, and identification of the next steps to ensure adequate understanding of information

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10.3 Plan Communications Management P

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10.3.1 Communications Management Plan• The communications management plan defines the communication needs

of the stakeholders, the communications format and frequency, and who delivers them. This communication can include reports, meeting schedules, change processes, and contact information for the team. It lets the team members know the communication rules and the project expectations.

• The plan helps the Project Manager and team do the following:– Determine communication requirements for the project– Establish and utilize communication infrastructure for distributing

information on the project– Report performance on the project to the appropriate stakeholders– Deal with communication issues that arise

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10.3.2 Communication Control• Controlling communication is the key to project management success.

• Although Project Managers cannot control all communication, trying to do so should keep them in the communication loop as much as possible.

• You need to know how much Project Managers should want to control communications, and how much they can likely control it (what % of their time is spent on it).

• Remember, approximately 90% of a Project Manager’s job is communication.

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10.3.3 Communication Model

The basics of communication are covered in the Communication Model. The three main components are: • Sender• Message• Receiver

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10.3.3 Communication Model (Cont.)

• The medium is another component to consider because it is the medium that sets the format of the message. Communication can be impacted positively or negatively depending on the medium of the communication.

• Given the global nature of projects and people on projects today, breaks in the model are not uncommon. The key responsibility of the sender is to correctly encode (communicate) the message to the receiver(s) so that they can (do what they are responsible for) correctly decode (understand) it.

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10.3.4 Communication Channels Formula

The formula for this relationship is:Channels = N*(N-1)/2

N = number of people on the project.The following figure show how communication grows quickly as people added to the project.

Person 1 Person 2

Person 3

Person 2Person 1

Person 4Person 3

Person 2Person 1

2 People, 1 Channel

3 People, 3 Channels 4 People, 6 Channels

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Communication Channel Formula (cont.)PM has a team of 6 (count 7 people) The PM is described as “outside” the team, and the

total count must be adjusted to include the PM in the communications channels.

Team has 6 people (count 6 people) The PM is described as within the team. No adjustment to the total count is necessary.

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Communication Channel Formula Example

With a team of 4, there are 6 channels 4 x (4-1)/2=6

If 2 people are added to the team, there is now a team of 6 and a total of 15 channels.

(4+2) x ((4+2-1)/2)=15Or6 x ((6-1)/2)=15

The total number of channels added is 9. New # - Original # = # added15-6=9

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10.3.5 Communication Methods

The methods utilized to share information among stakeholders can be divided into three primary methods:• Interactive which enables an exchange of information between

multiple parties and fosters a common understanding between participants

• Push which distributes information but does not ensure that the information was received or understood

• Pull which provides information in a centrally accessible location such as the internet

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10.3.6 Communication Blockers

Communication blockers are factors disrupting the message that the receiver is trying to interpret from the sender.

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10.3.7 Meeting Rules• Meeting rules are commonly abused. As a result, our perception on how to handle

meetings often comes from not doing it “right” because we never knew any better. Some basic rules for meetings:

• When a meeting is scheduled, an agenda should be created and distributed before the meeting to allow people to review and prepare for the meeting.

• People should review the agenda and prepare for the meeting.• In (or before) the meeting, a leader should be established and that person should lead the

meeting and follow the agenda. The leader doesn’t always need to be the Project Manager.• Anything added to the meeting outside of the agenda should be added at the end or to a

future meeting.• From an exam readiness perspective, if the project is a priority and a meeting were

scheduled, functional issues (generally speaking) would not delay the meeting with the team.

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10.4 Manage Communications E

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10.4.1 Communication Types

Types of Processes used in CommunicationProcess Description

Active Listening

The receiver verifies with the sender that the message was interpreted correctly, by asking for clarification or by providing feedback to the sender.

Effective Listening

The receiver observes visual and vocal clues as well as asking for feedback from the sender.

Feedback The sender receives feedback from the receiver, possibly by asking additional questions or using other methods for clarity.

Nonverbal Body and facial language

Para-Lingual Voice characteristics

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10.4.2 Performance Reports

Reporting on a project can take a variety of formats; interpretations of the formats can vary.

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Progress Reports

Progress reports provide information on what has been done recently on the project. Ex: What have we done in the last week? (The results of the week)

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Progress and Status Reports

Progress reports provide information on what has been done recently on the project. Ex: What have we done in the last week? (The results of the week)Status reports provide information on the present overall state of the project.

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Forecasts Reports

Forecast reports provide information on what is expected to be happening on the project which can include:• Time series which base future outcome estimates on historical information• Causal/econometric which base outcome estimates on underlying factors

(weather impacts outer-wear sales)• Judgment which base outcome estimates on opinion, probability, and

intuitive judgment (scenario building, surveys, Delphi method)• Other methods such as ensemble forecasting, probabilistic forecasting, and

simulation• Forecast reporting associated with cost can include Estimate at Completion

(EAC), Estimate to Complete (ETC), Variance at Completion (VAC).

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Other Types of Reports

Variance Reports• Variance reports show the difference between what was planned to

happen and what actually happened.

Earned Value Reports• Earned Value reports show the state of the schedule, budget, and

scope of the project at various points in time.

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10.5 Control Communications M&C

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Exercise

• As a team, complete the Communications Quick Test, Page 403.

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Risk

Chapter 11

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Risk Processes Interaction Diagram

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Risk Process Table

Process Group

Process Name Main Outputs

Planning

Plan Risk Management Risk Management Plan

Identify Risks Risk Register

Perform Qualitative Risk Analysis Project Documents Updates

Perform Quantitative Risk Analysis Project Documents Updates

Plan Risk Responses Project Documents Updates

Project Management Plan Updates

Monitoring and

ControllingControl Risks

Work Performance UpdatesChange Requests

Project Management Plan Updates

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11.1 What is a Risk• Risk is an event that has some degree of uncertainty.

• It may or may not have occurred.

• The objective of assessing risk is to offset any negative impact it may have and pursue any positive impact. A risk also has good and bad characteristics.

• An example of a negative risk would be relying on a piece of software that is not available when needed or as planned, forcing the team to come up with an alternative.

• An example of a positive risk event might be accommodating the growth that results when the sales of a new product exceeds expectations.

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11.2 Plan Risk Management P

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11.2.1 Risk Management Plan

The plan is used by the project manager and team to:• Define the methodology, tools (such as a risk register) and data sources

used to perform risk management • Identify risk categories (grouping of potential causes of risk) by using a Risk

Breakdown Structure (RBS)• Define the probability and impact matrix, as well as its thresholds• Determine when and how to perform quantitative risk analysis, expected

monetary value (EMV), and decision tree analysis• Establish risk owners and detail the responsibilities of each risk owner• Plan when and how often risk information will be gathered, tracked,

managed and controlled throughout the lifecycle of the project.

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11.2.2 Risk Breakdown Structure (RBS)

The RBS is a decomposition of the risk categorization and the risks within those categories that could occur on a project.

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11.2.3 Risk Impact Scale

The threshold information in the table is an example only. Specific thresholds would be determined by appropriate party.

Low Medium High

Probability 0 to 0.33 0.34 to 0.66 0.67 to 1.00

Project Objective (Impact)

Low Medium High

Scope Minimal changes Significant changes for functionality

Potentially useless product as built

Time 5% or less delay 6% to 15% delay 16% or greater delay

Cost 5% or less increase 6% to 15% increase 16% or greater increase

Quality Quality slippage minimal Slippage requires sponsor sign off

Product is basically useless

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11.2.4 Uncertainty

• Uncertainty is a component of risk that deals with the amount of information known (or unknown) about the outcome.

• This could mean there is very little that is not known about a possible outcome to not having a clue as to what can happen in the case of a risk event.

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11.2.5 Types of Risk

Type Description

Pure RiskPure risk is a risk for which insurance can be purchased, thereby transferring the risk for financial benefit to the party accepting the risk.

Business Risk

Business risk is typically uninsurable. It is what a business does when it opens its doors everyday for business. It’s the process of doing business, for example. Think of it this way: when was the last time you could buy insurance for sales projections?

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11.2.6 Risk and Contracting• There is a belief that if a company outsources a piece of work, the provider assumes the

risk and the purchaser has no risk.

THIS IS NOT THE CASE.

• When outsourcing, a buyer (organization) can minimize risk exposure, but some risk remains plus a new risk exposure.

• An example of the new risk would be the seller not being able to provide the services as promised.

• See the Procurement chapter for more information about risk as it relates to the buyer, seller, and contracting.

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11.2.7 Risk Tolerance and Perspective

Type Description

Risk-Averse Risk-Averse is a mentality of risk avoidance. Selecting the low risk item or the sure thing is typical in this case.

Risk SeekerRisk Seeker is a mentality of looking for risk, or worse case, not being afraid of it. This is typically the early adopter of new products or the person or company this is willing to go for an all or nothing approach to an initiative.

Risk-NeutralRisk-Neutral is a middle ground mentality toward risk. It can shift toward either seeker or averse depending upon the situation but usually falls in the middle.

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11.3 Identify Risk P

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11.3.1 Risk Register

The risk register is a project document created during the risk planning processes. It evolves as the risk management processes and the project evolve, and it contains the following:• Risks• Triggers• Probability (Likelihood) and Impact ($) from risk analysis• Planned Responses• Risk ownersIt evolves as the risk management processes and the project evolve.

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11.3.2 Diagramming Techniques

Diagramming techniques may be used to help decompose or categorize risk. This could result in utilization of a number of techniques to lean an appropriate amount of information about the risk of the project.

Examples could include:• Cause and Effect (Ishikawa) diagrams• System or Process Flow Charts• Influence Diagrams, which show graphical relationships associated

with process timing and interactions.

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11.3.3 Risk Triggers

• Risk Triggers are the characteristics which indicate that a risk event is possible in the near feature.

• Typically, these triggers are identified when the risks are identified.

• As you monitor project progress and notice a trigger, you know that a risk event could occur soon.

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11.3.4 Risk Reviews

• Risk Review is the process of reviewing the documented risks and the project for any new risks.

• This review helps ensure that the documented risks are still risks, and that their ranking, characteristics, probabilities, and impacts haven’t changed.

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11.4 Perform Qualitative Risk Analysis P

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11.4.1 Probability and Impact Matrix

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11.5 Perform Quantitative Risk Analysis P

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11.5.1 Probability• Probability is the likelihood that something will happen.

• Below are characteristics of a Probability:– In non-statistical language, it is: “What are the odds of this

happening?”– It is usually measured in percentages (0 to 100%) or real numbers (0.0

to 1.0)– Its is equal to 100% or 1.0, which means that you are looking at all

possible outcomes– It can also be measured in low, medium, and high or some other non-

numerical method if the numerical detail doesn't fit the situation.

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11.5.2 Impact• Impact is the consequence or amount at stake if something does happen.

• For example, if the government denies a request to approve a new drug for a specific disease, what is the impact on the company?

• Impact can be good as well.

• Think back to the dot-com era when there was a commercial with a company launching its web site, and the team members were all standing around watching the sales counter.

• After jumping into the thousands in the first few seconds, they look at each other wondering what to do. That is a good impact.

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11.5.3 Probability Distributions

Normal distribution is typically used for statistical or scientific computing.

NormalDistribution

BetaDistribution

0.1

0.0

Triangular Distribution

0.1

0.0

0.1

0.0

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11.5.4 Decision Trees and Expected Monetary Value (EMV)

• Decision tree analysis is based on looking at the probability and impact of all potential decisions to determine the potential expected monetary value (EMV), or expected risk value, of the opportunity as a whole.

• This is accomplished by multiplying the probabilities and the impact straight across, then adding the sums of the multiplication for that project or opportunity.

• A rule to consider is: The sum of all probabilities must equal 1.0 (or 100%). For example, 0.4 and 0.6 on Project A equal 1.0 or 100% of all possible outcomes.

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11.5.4 Decision Trees and Expected Monetary Value (EMV) – (Cont.)

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11.5.5 Monte Carlo

• Monte Carlo is a mock-up technique that uses software to simulate project characteristics.

• This simulation is typically done in the scheduling area to allow a reserve to be determined in schedule creation.

• It could be used in other areas of the project where applicable.

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11.5.6 Probabilities Tables

The tables below show the probabilities associated with cost and time parameters for a project. Tables like this can be helpful. Instead of going with the “gut feel” of thinking you will be ahead/behind schedule or a little over/under budget.

$14,50025%$35,00065%

$15,00030%$40,00070%

$17,50035%$40,50075%

$20,00040%$41,00080%

$22,50045%$41,50085%

$25,00050%$42,00090%

$27,50055%$42,50095%

$30,00060%$43,564100%

Total CostTotal CostConfidence

LevelConfidence

Level

Quantitative Analysis For Total Budget Table

05/01/201325%09/01/201365%

05/15/201330%09/15/201370%

06/01/201335%10/01/201375%

06/15/201340%10/15/201380%

07/01/201345%11/01/201385%

07/15/201350%11/15/201390%

08/01/201355%12/01/201395%

08/15/201360%12/15/2013100%

Date Completed

Date Completed

ConfidenceLevel

Confidence Level

Quantitative Analysis For Completion Date Table

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11.5.7 Tornado Diagram

• A graphical representation of risks and their potential impact, as determined by a sensitivity analysis, on the project.

• Sensitivity analysis determines risk impact by considering how much the uncertainty of each project element impacts a particular project objective when the other elements remain at their baseline values.

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11.6 Plan Risk Responses P

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Risk Management Terms: Reserve Types

Risk Management Known and Unknown TableName Created For Description Example

Contingency Reserves

Known Unknowns

For risks events that you know can happen on a project

Something costing more than planned, taking longer than planned, or scope creep

Management Reserves

Unknown Unknowns

For risks events you cannot forecast potentially happening on a project

Something you cannot envision happening on a project, such as a natural disaster or terrorist attack

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Reserves

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11.6.1 Residual Risk

Residual risk is the amount of risk remaining after a risk response (from the risk response plan) has been implemented. 11.6.2 Secondary risk is a jeopardy that results from the implementation of a risk response. In the medical example, it is side effects from a treatment.

11.6.2 Workaround is an action when a risk response and any backup plans don’t work. It is the reactive “wing it” response.

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11.6.4 Risk Owner

• The Risk Owner is the person responsible for a risk event if it happens and is similar to the person responsible for completing an activity.

• Risk Owners know beforehand that they own particular risk events.

• They know that, if those events happen, they are responsible for implementing the response.

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11.6.5 Risk Response Strategies

• The following strategies are those recommended by PMI to use in planning risk responses.

• We recommend that you memorize each response type and be able to recognize it in a situation.

• A memory tool is SEE the ATM, as described in the following tables (share, exploit, enhance, avoid, transfer, mitigate) on the next slides.

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Risk Response Strategies For Positive Risks or OpportunitiesRisk

Response Description Example

Share

The share strategy involves sharing the responsibility (and benefit) of the risk with a third party (or parties) to maximize an opportunity.

The technology company formed a partnership with a marketing company to launch a sales campaign to support the new product being developed.

ExploitThe exploit strategy involves taking steps to ensure the risk and success of the event or project.

The new project had the best resources assigned to maximize the probability of success.

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Risk Response Strategies For Positive Risks or Opportunities (cont.)

Risk Response Description Example

Enhance

The enhance strategy involves taking steps to improve the size or capacity of the risk event by determining the key components of the risk and maximizing those components.

When sales were exceeding projections, the company hired more sales people to ensure that as many customers as possible knew of their products.

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Risk Response Strategies For Negative Risks or Threats

Risk Response Description Example

AvoidAvoid involves modification of the plan so the risk doesn't have to be dealt with.

Selecting alternative potential vendors will keep you from running out of inventory

Transfer

Transfer involves transferring the risk exposure to another party. In doing this, you do not necessarily eliminate all risk, but likely minimize some risk and create some new risk as well.

Example #1: Hiring an outside company to do something instead of doing it yourselfExample #2: Buying insurance for something

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Risk Response Strategies For Negative Risks or Threats (cont.)

Risk Response Description Example

MitigateMitigate minimizes the bad characteristics of the risk.

Eliminating outside sources and doing the work internally would mitigate your risk if another company failed to meet the deliverables on your project.

Acceptance

Acceptance involves tolerating the risk and dealing with it. It is a valid option if there are no other options available.

Determining that if a union goes on strike, the project will have to stop until the strike is settled.

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Contingent Risk Response Strategy

Risk Response Description Example

Contingent Response Strategy

Ideally created to be used only if certain conditions are present. This could be created if conditions change on the project or to accommodate for worst case situations.

The team developed a contingency plan to add staff to the project if the important development milestone was missed.

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11.7 Control Risks M&C

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Exercise

Individually, do Risk Practice Test, 20 Questions.

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Procurement

Chapter 12

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Procurement Process TableProcess Group Process Name Main Outputs

Planning Plan Procurement Management

Procurement Management PlanProcurement Statement of Work

Source Selection CriteriaMake-or-Buy Decisions

Change Requests

Executing Conduct Procurements

Selected SellersAgreements

Resource Calendars

Monitoring and Controlling Control Procurements

Work Performance InformationChange Requests

Project Management Plan Updates

Closing Close Procurements Closed Procurements

Organizational Process Assets Updates

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12.1 Plan Procurement Management P

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12.1.1 Procurement Management Plan

• The Procurement Management Plan helps the Project Manager and team do the following:– Determine make vs. buy with the various needs of the project– Establish what procurement documents (RFP, RFI, RFQ) are needed

for the project– Create the procurement documents for the project– Run bidders conferences– Address single source and sole source procurement– Select vendors to do work– Establish a contract with vendors

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12.1.2 Make-or-Buy

One of the basic keys of procurement is the Make-or-Buy decision. There are a number of considerations a company can use in making this decision. Some of the basic decision point are listed below:

Make Decision Qualities

The buyer owns intellectual property associated with the work and considers doing the work internally in order to maintain control of the information.The buyer has excessive qualified capacity.

Buy Decision QualitiesThe buyer doesn’t possess the skills needed for the work.The buyer doesn’t possess the capacity to do the work.

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12.1.3 Rent or Buy CalculationYou may be quizzed on the calculation area of this topic. It is a straightforward calculation. The components are typically as follows:

• Purchase cost and daily maintenance with the purchase option• Daily (or weekly, monthly) rental fee, which usually includes

maintenance fees

• Typically, you should be prepared to calculate the point where it makes sense to purchase, versus rent, or vice versa.

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12.1.3 Rent or Buy CalculationYou are the project manager for a housing developer. The development requires a skid loader to clean out the lots where the houses will be built. You can rent the skid loader for $100 per day (including maintenance) or you can purchase one for $750, with a $50 per day maintenance cost. What is the maximum time you would want to rent this tool before considering purchasing it?

• To determine the best decision, take the variables and make a formula.• The options are 1) rental at $100 per day or 2) purchasing at $750 with

$50 per day maintenance.

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Rent or Buy Example (cont.)

Translate this data into a formula as follows where you solve for variable X.

The formula is $100X = $750 + $50X and solve for X as the number of days.

Step 1. (-$50X)+$100X = $750 or $50X = $750 Move all of the pieces with the variable X

to one side of the equation.

Step 2. $750/$50 = X Divide to determine the value of X.Step 3. $750/$50 = 15Step 4. X = 15 Here is the maximum number of days you

would want to rent the tool before purchasing it.

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12.1.4 Contract• A Contract is mutually binding legal agreement between buyer and seller. Other

names for a contract could be a:

• You should expect a couple of questions on this, so make sure that you know the components of a contract, plus when a contract is in place.

• A contract has five basic components (listed in the next table).

• Without these components, a contract does not exist.

• purchase order (PO) • subcontract • agreement

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Contract: Five Components

Contract Components

Contract Component Description

Capacity Competency, not a minor, and individual legal entities

Consideration The item to change possession from seller to buyer

Offer A proposition to exchange something, for something

Legal PurposeThe reason for the contract has to be for something legal

Acceptance A buyer willing to accept the offer from the seller

Memory Tool: CCOLA – Capacity, Consideration, Offer, Legal, Acceptance

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12.1.5 Buyer and Seller NamesBuyer Seller

Client Contractor

Customer Subcontractor

Prime Contractor Vendor

Contractor Service Provider

Acquiring Organization Supplier

Government Agency

Service Requestor

Purchaser

The table above shows a number of terms that can be used to describe the buyer and seller. The seller’s title could also change during the project duration.

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12.1.6 Contract Type SelectionThere are four main types of contracts:

• Each of these contracts can involve variations including incentives, fees, and more.

• Selecting the wrong type of contract can spell doom for a project.

• It is imperative that you understand the types of contracts, their differences, where they should (and shouldn’t) be applied, and the risk for both the buyer and seller.

• Purchase Order (PO) • Time and Materials (TM) • Fixed Price (FP) • Cost Reimbursable (CR)

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Contract Types

Contract Risk for Buyer

Risk for Seller Description Example

Purchase Order (PO) Neutral Neutral

A unilateral agreement that requires approval by only one party because the other party has offered the product for the predefined price.Typically, a PO is used for commodity items such as those that can be mass produced. Some consultants have mentioned that the workplace would typically get a contract type sign off and then get a purchase order. PMI® doesn’t view this as the case, seeing a PO as a separate contract type.

19” Computer monitors for $179.00 each

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Contract Types (cont.)

Contract Risk for Buyer

Risk for Seller Description Example

Firm Fixed Price

(FFP) also known as

Lump Sum

Minimal Significant

One of the most common contracts in business today, popular because a company can budget for a fixed price. Because it requires detail for the seller to estimate accurately, an FP contract is typically used when there is a detailed Scope of Work. The downside for seller is cost containment. For the seller, everything after costs are covered is profit.

Purchasing the implementation of a computer network at your company from an outside vendor for $2,000,000 after providing the seller a detailed Scope of Work.

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Contract Types (cont.)Contract Risk for

BuyerRisk for Seller Description Example

Fixed Price Incentive Fee (FPIF)

Minimal Significant

A contract type with the fixed price component described above; includes incentives fees to motivate the seller to produce at a rate greater than the minimum required.A FPIF is usually used to help accelerate a buyer’s need such as a market opportunity. It provides an opportunity for the seller to determine what is needed to make additional profit via the incentive fee.

A city buying services from a construction company to put in a new freeway for $4,000,000. For each week the seller finishes before a given date, it receives $65,000.

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Contract Types (cont.)Contract Risk for

BuyerRisk for Seller Description Example

Fixed Price Economic

Price Adjustment

(FP-EPA)

Minimal Significant

A Fixed Price contract with the similar components listed above; associated with a multi-year contract.To compensate for economic changes from year to year, the Economic Price Adjustment is factored in. The item determining the amount of change from year to year is usually some national economic metric not directly tied to the buyer or the seller.

A city buys services from a construction company to build a new freeway for $4,000,000 over three years. At the start of each year, the amount varies relative to the national cost of living or some other negotiated standard.

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Contract Types (cont.)

Contract Risk for Buyer

Risk for Seller Description Example

Cost Plus Fixed Fee

(CPFF)Medium Minimal

Typically used when the buyer knows generally what is need but lacks detail to know specifically what is needed to built it.The CPFF covers the costs of the seller and includes a predefined fee for the work.

A buyer hires a vendor to produce a video training series but is not yet sure of all the detail needed and agrees to pay the vendor for costs plus a $37,000 fee.

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Contract Types (cont.)Contract Risk for

BuyerRisk for Seller Description Example

Cost Plus Incentive

Fee (CPIF)

Medium Minimal

Typically used when the buyer knows generally what is needed but lacks any details to know specifically what is needed to build it.

Generally, the buyer has some sort of need which requires that something created as soon as reasonably possible. The incentive fee gives the buyer an opportunity to motivate the seller to complete the project quicker, to higher quality standards, or other criteria.

A buyer hires a company to write a manual for publication and sale. Due to a market opportunity, the quicker to market, the higher the sales. The buyer agrees to pay costs plus an incentive fee of $7,500 for each week the project is done before the estimated completion date.

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Contract Types (cont.)

Contract Risk for Buyer

Risk for Seller Description Example

Cost Plus Incentive

Award (CPAF)

Minimal Significant

Covers the seller for legitimate costs, but majority of fee is only awarded based on buyer’s satisfaction with broad subjective criteria detailed in the contract

A buyer agrees to pay for costs incurred for a freeway bridge. Due to the people impacted, if the seller meets the agreed on date and completed the bridge with minimal negative impact to the environment, the buyer will award the seller an additional $500,000.

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Contract Types (cont.)

Contract Risk for Buyer

Risk for Seller Description Example

Cost Plus Percentage

of Costs (CPPC) or Cost Plus Fee (CPF)

Significant Minimal

Covers the seller costs for building something for a buyer and pays them a percentage of the total costs as a fee.

The more the seller spends, the higher the fees. Most companies will not enter into this type of contract because it can negatively impact the buyer if the seller is not ethical.

A buyer hires a company to install a computer network for 500 users and agrees to pay for the costs of the seller and 17% of all costs for a fee.

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Contract Types (cont.)

Contract Risk for Buyer

Risk for Seller Description Example

Time and Materials

(T&M)Minimal Minimal

Typically used for smaller initiatives, staff supplementation, or the initial piece of a project where the discovery occurs before the full details of the project are known; can also be used for materials on an initiative to complement the labor.

Staff supplementation of a technical writer at $75 per hour, or having a bathroom added to your house at $50 per hour and the cost of materials

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Advantages & Disadvantages

Advantages Disadvantages

What Are the Advantages and Disadvantages of a T&M Contract?

What Are the Advantages and Disadvantages of a CR Contract?

What Are the Advantages and Disadvantages of a FP Contract?

Advantages Disadvantages

Advantages Disadvantages

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AnswersFixed Price Time & Materials Cost ReimbursableAdvantages Advantages AdvantagesLess work for buyer to manage Quick Lower cost because no extras added

for riskSeller has a strong incentive to control costs Brief contract Less work to write the Procurement

SOWCompanies have more experience with this form

Good choice when you are hiring “bodies” or people to augment your staffBuyer knows the total price

Disadvantages Disadvantages DisadvantagesSeller may “cut” scope Profit is in every hour billed Requires auditingSeller may charge extra on change orders Seller has no incentive to control costs More work to manage

More work for buyer to write the Scope of Work

Appropriate only for small-size projects

The total price is unknown

More expensive than CR because of additions seller adds for risk

Seller has only a moderate incentive to control costs

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12.1.7 Share

$5000 * 40% = $2,000Seller’s Share$45,000 + $2,000 = $47,000Seller’s Contract Value

$5000 * 60% = $3,000Buyer’s Share

$ 5,000Shared Amount

$45,000Actual Project Cost$50,000Contract Project Price

Calculated Share

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12.1.8 Point Of Total AssumptionPoint of Total Assumption Variables and Calculation

PurposeTo calculate the maximum that a buyer pays in a fixed-price incentive fee (FPIF) contract when taking into consideration the share ratio on cost overruns

Target Cost (TC) The expected cost of the work in the contract. (Ex: $1M)

Target Profit (TP) The expected profit of the work in the contract. (Ex: $200,000)

Profit Rate at Target Cost

The profit margin of the target profit compared to the target cost (target profit/target cost) (Ex: 20%)

Target PriceThe total of the target cost and target profit; should be the total target value of the contract work barring any overruns or under runs (Ex: $1,200,000)

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Point Of Total Assumption VariablesPoint of Total Assumption Variables and Calculation

Ceiling PriceA percentage of the target cost (TC). This is the maximum total amount the work is expected to cost with any cost overruns being considered. (Ex: 140% of cost or $1,400,000)

Share Ratio (SR)

The ratio between the buyer and seller for any cost savings or overruns that impact the total contract amount and profit. (Ex: 70/30)

Point of Total Assumption

(PTA)

The total amount of money the buyer will pay regardless of cost overrun on the contract. The formula is in the cell below. (Ex: $1,285,714.29)

Point of Total Assumption

Formula

PTA=(Ceiling Price-Target Price)/Buyer Share + Target Cost$1,285,714.29=(($1,400,000-$1,200,000)/0.70)+$1,000,000NOTE: The difference between ceiling price and target price is indeed divided by the buyer’s share. This is not an error.

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12.1.9 Scope of Work

• A Scope of Work is the part of the contract that describes what the seller will do for the buyer.

• When the Scope of Work is done or completed, the main work of the project is done and closing can begin.

• Because the level of detail and planning can vary among contracts, you can take several different approaches to develop the Scope of Work in the contract.

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Scope of Work Approach: DesignScope Of Work

Scope Of Work Description Example

Design

A Scope of Work type in which the buyer provides the seller with the exact details of what is required

Design is typically used when buyers know exactly what they want and want no variance from specifications. It typically will works with Fixed Price contracts.

A company hires a vendor to build a prototype cabinet to house telecom equipment. The buyer provides the seller with specifications of what is to be built; it must hold a number of devices already created.

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Scope of Work Approach: FunctionalityScope Of Work

Scope Of Work Description Example

Functionality

A Scope of Work type in which the buyer details to the seller the functionality needed in the new system or development

Functionality allows sellers to propose their own solutions as long as the end-results are achieved.It typically works with Cost Plus (CP) contracts.

A company hires a vendor to implement a phone system for them. It provides the needed functionality requirements to the vendor, and as long as those are met, it allows the vendor the flexibility to build a solution as the vendor sees fit.

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12.1.10 Procurement Documents

Document Type Typical Purpose Description Example

Request for Information

(RFI)

Typically used to solicit information to learn more about a company that could provide service for a buyer

A document requesting information on a service provider’s qualifications so a buyer can review them

A request from a state government to see if a consulting company has the appropriate experience in an area to bid for a potential project.

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12.1.10 Procurement Documents

Document Type Typical Purpose Description Example

Request for Quote (RFQ)

Typically used to solicit proposals for a small dollar amount or used for commodity type of products that do not require a great degree of customization.

A document that requests a price for a standard item.There is a general assumption that negotiation is not associated with this type of procurement document.

A request for prospective sellers wishing to provide pricing for customer-established server criteria: Quantity 50 XYZ Servers with 1Gig RAM, 200G hard drive to be purchased within 90 days of submittal.

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12.1.10 Procurement DocumentsDocument

Type Typical Purpose Description Example

Request for Proposal

(RFP) sometimes

called Request for Tender

(RFT)

Typically used to solicit proposals for bigger, higher priced, customized services or products

Generally, the seller describes the detailed approach to the solution for the buyer, including previous experience in the area.

A document that requests an approach, price, and significant detail about how the seller proposes to do the requested work

The general assumption is that negotiations occur based on scope, time, and cost of what the buyer requested and what the seller suggested.

A request for a proposal to prospective sellers for design, implementation, and training for a data warehouse to consolidate five different enterprise databases at fortune 500 company named Widgets Inc.

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12.1.10 Procurement DocumentsDocument Type Typical Purpose Description Example

Invitation for Bid

(IFB) sometimes

called Request for Bid (RFB)

Used for government sealed bidding processes with characteristics similar to those for a RFP (Request for Proposal)

A document that requests an approach, price and significant detail about how the seller proposes to do the requested work

The general assumption is that negotiations occur based on scope, time and cost of what the buyer requested and what the seller suggested.

A request from a branch of the U.S. government for a proposal to sellers for design, implementation, and training of an Enterprise Reporting System

The selection process is sealed bid and the contract is awarded on May 25, 2008

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Conduct Procurements E

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12.2.2 Bidder ConferenceBidders conferences are meetings during which companies considering bidding on a project can ask a buyer any questions and get clarification on any potential issues before creation of a proposal.

A conference: – Can also include a formal presentation by the buyer– Should allow the potential sellers to be able to ask any questions – Should make all the questions and answers available to anyone considering bidding on the

project.

Buyers representatives need to be sure to make all questions and answers public to all potential sellers as well as take all reasonable steps to ensure that potential sellers do not collude together on unfair pricing. This collusion could include Company A shooting high on a price to allow Company B to get the work for this project with the understanding that their roles will switch on the next project.

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12.2.3 Non-Competitive Form of Procurement• Non-Competitive Procurement is done when there is only one source for

the products, or the buyer has an established relationship with the seller and there are mechanisms in place to ensure that the buyer of the products or services attains a fair price.

• If a vendor is selected without competition, there is a chance of inappropriate selection and unreasonable pricing, so there should be a mechanism in place to assure that appropriate actions are taken in this area.

• The two main categories in this area are: sole source and single source.

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Two Main Non-Competitive Categories

Sole Source Single SourceThis involves using a company that has no other competition for whatever you are acquiring from it.This company could be one that owns a patent or some other type of intellectual property associated with what you are purchasing.

This involves choosing a partner you prefer to work with or deciding not to look for competition. Whatever you are purchasing from them might be available from others, but for whatever reason you have decided not to look at others for providing of the services. This could be a situation where there is a vendor you prefer, or you might not have time to go through the full process to find others to do the work.

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12.2.4 Incentive Fees

• Incentive Fees are those that a buyer of services can use to get the seller aligned to a similar standard of productivity.

• They are typically a premium that the buyer will pay to seller above the base price of the contract.

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12.2.5 Negotiations

Negotiation Strategy Description

Competition Using one seller (fictitious or real) against another to attain the best price or other terms the buyer desires

Deadline Using a fictitious or real deadline to attempt to get a party to sign a contract

The Boss is Missing

Stating that another person who is key to approving something is not there, is busy, or otherwise unable to be involved

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12.2.6 Agreements (Previously called Contract Award)• Each selected seller is awarded a procurement contract which is: • A legally binding agreement obligating the seller to provide one or more

specified products, services, or results• Obligates the buyer to compensate the seller• Subject to remedy in the courts. • Components of a contract may include a statement of work or deliverables,

performance reporting, period of performance, schedule baseline, roles and responsibilities, seller’s place of performance, place of delivery, pricing , payment terms, inspection criteria, acceptance criteria, warranty, product support, liability limits, fees and retainage, penalties, incentives, insurance/performance bonding, approval terms for subordinate subcontractors, handling of change requests, and termination and alternative dispute resolution (ADR) mechanisms.

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12.2.7 Standard Terms and Conditions

• These are typically common (non-negotiable) contract items.

• They can include negotiations but will generally have a tight range of parameters from the company’s legal department.

This range could cover items such as:• Payment options• Intellectual property rights • The ability to sub-contract

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12.2.8 Special Provisions

• Special Provisions are items typically added to account for any Standard Terms and Conditions that will not meet the needs of the work involved.

• The buyer and seller negotiate these provisions, which would complement any workable Standard Terms and Conditions that would already have been defined as acceptable in the contract.

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12.2.9 Contract Interpretation

• Contract Interpretation can keep you out of court or put you right in it.

• Generally, the Contract Administrator should understand what is defined in the contract, with their interpretation in line with general legal opinion.

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12.3 Control Procurements M&C

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12.3.1 Contract Administrator

• The Contract Administrator is the manager of the contract.

• Their main responsibility is to protect the integrity and purpose of he contract.

• Think of the contract as the law and the Contract Administrator as the contract enforcement or police.

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12.3.2 Project Manager in the Administer Procurement Area

• Role of the Project Manager: Helps ensure successful execution of the contract typically work with the Contract Administrator to accomplish the successful execution as the scope, terms, and conditions of the contract are defined and as work results become complete responsible for delivery of the project deliverables BUT they cannot change the contract.

• Only the Contract Administrator has the power to change the contract.

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12.3.3 Centralized Vs. Decentralized

The environments have different positives and negatives for a contract administrator. The characteristics are similar to those of a PMO and being on a standalone project, or being the only project manager in a small company.

Centralized Contracting Decentralized ContractingContract Administrators support each other

Contract Administrator is alone on a project without support of other Contract Administrators

They have career paths The position is viewed more as a need instead of a career type position

They have a great degree of shared expertise

The Contract Administrator is the only one on the project.

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12.4 Close Procurements C

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Exercises

• As a team, do the Procurement Quick Test• Individually, do Procurement Practice Test, 10 Questions.

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Stakeholder

Chapter 13

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Stakeholder Process Table

Process Group Process Name Main Outputs

Initiating Identify Stakeholders Stakeholder Register

Planning Plan Stakeholder Management Stakeholder Management Plan

Executing Manage Stakeholder Engagement

Issue LogChange Requests

Project Management Plan Updates

Monitoring and Controlling

Control Stakeholder Engagement

Work Performance InformationChange Requests

Project Documents Updates

OPA Updates

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13.1 Stakeholder Management

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13.1.1 Balancing Stakeholder Interests

The really challenging questions could go to the point of determining if the project actually continues, or is radically altered. In these cases, refer to the following rules in this order:

•Why is the project being done? What is the market condition or business need? Why is it a priority compared to other projects?

•What does the project charter and foundation of the project describe to do?

•What does the project management plan say?

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13.1.2 Dealing with Project Change RequestsWith regard to addressing project-specific changes, the following order should help ensure success:

1. Never tell the customer/sponsor “no” when asked about a request. If the customer/sponsor is willing to encounter a delay or pay more to implement the change, it is the decision of the customer/sponsor2. Listen to the customer/sponsor regarding their requests3. Involve the appropriate team members to determine the options associated with the request and their impact 4. Communicate them to the customer/sponsor 5. Let the customer/sponsor make the final decision based on the options you have provided them

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13.2 Identify Stakeholders I

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13.2.1 Stakeholder Analysis Methods

The power/interest grid graphically illustrates which stakeholders need to be kept satisfied, managed closely, monitored, or kept informed based on the level of their power and their interest in the outcome of the project.

High

Power

Low

InterestLow High

Keep Satisfied

Manage Closely

Monitor (minimum effort)

KeepInformed

Stakeholder A Stakeholder C

Stakeholder BStakeholder D

Stakeholder E

Stakeholder F Stakeholder G

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13.2.2 Stakeholder Register

• The stakeholder register is used to manage an increase in the positive impact of and a decrease in the negative impact of stakeholders.

• A typical register includes the stakeholder name, level of interest in the project, level of impact on the project, and strategies to gain support or minimize negative impact.

Stakeholder Level of Interest Impact Assessment Strategies

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13.3 Plan Stakeholder Management P

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13.3.1 Stakeholder Management Plan

The plan helps the project manager and team:

• Compare the current and desired level of key stakeholder engagement

• Identify interrelationships between stakeholders• Identify stakeholder communications requirements• Update the stakeholder management plan when needed

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13.3.2 Stakeholder Engagement Assessment Matrix

The stakeholder engagement assessment matrix is used to compare the current and desired level of stakeholder engagement. The matrix helps focus the team on stakeholder interaction. As the project evolves, the objective is to have the C (current) and D (desired) in the same cell for each stakeholder.

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13.4 Manage Stakeholder Engagement E

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Manage Stakeholder Engagement – (Cont.) Key Tools & Techniques

Communication Methods

Communication methods are determined for each stakeholder in the communications management plan. The project manager reviews each stakeholder’s communications needs and determines which methods will be used, how they will be used, and the frequency with which they are used. The methods include interactive, push, and pull communications.

Interpersonal Skills

Interpersonal skills are used to manage stakeholder expectations. They include the establishment of trust, the settlement of conflict, active listening, and the mastery of resistance to change.

Management Skills

Management skills are used to ensure the adaption of the group to accomplish project goals. Management skills include facilitation, negotiation, influence, and the ability to modify behavior.

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13.5 Control Stakeholder Engagement M&C

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Exercise

• As a team, use the Stakeholder Mind Map to do the Stakeholder ITTO Matching Exercise.

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Professional and Social Responsibility

Chapter14

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PMI® Code of Ethics and Professional Conduct

TIP: What YOU would do in the real world may not align with the PMI® Code of Ethics and Professional Conduct. Answer EACH question by considering “What does PMI® say to do?”

Applies to all: • PMI members• Non-members who:

– hold a PMI® certification. – apply to commence a PMI® certification process.– serve PMI® in a volunteer capacity.

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Structure of the Code

The Code of Ethics and Professional Conduct is divided into sections that contain standards of conduct which are aligned with the four values that were identified as most important to the project management community.

• Responsibility• Respect• Fairness• Honesty

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Responsibility

Responsibility is our duty to take ownership for the decisions we make or fail to make, the actions we take or fail to take, and the consequences that result. • We inform ourselves and uphold the policies, rules, regulations and

laws that govern our work, professional, and volunteer activities. • We report unethical or illegal conduct to appropriate management

and, if necessary, to those affected by the conduct

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Respect

• Respect is our duty to show a high regard for ourselves, others, and the resources entrusted to us.

• An environment of respect engenders trust, confidence, and performance excellence by fostering mutual cooperation. – We negotiate in good faith. – We do not exercise the power of our expertise or position to

influence the decisions or actions of others in order to benefit personally at their expense.

– We do not act in an abusive manner toward others. – We respect the property rights of others.

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Respect Differences in Diverse Cultures• Global competition

– Global marketplace– Heightened awareness of cultural influences and customary practices of

host country– Practice the golden rule, “Do unto others as you would have done to

you”• Culture shock

– Expect disorientation when normal events may be different from your culture

– Study the culture of the country you will be visiting– When in doubt, ask questions

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Respect Confidential Information

• Company data– Non-disclosure agreements– Uphold personal and organizational privacy– Personnel information– Trade secrets

• Intellectual property– Copyrighted material– Ideas– Patents

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Fairness

• Fairness is our duty to make decisions and act impartially and objectively. Our conduct must be free from competing self interest, prejudice, and favoritism.

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Honesty

• Honesty is our duty to understand the truth and act in a truthful manner both in our communications and in our conduct.

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How to Take the Exam

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What Are The Risks For Taking the PMI® Exam?• Delay in taking the exam• Confusing myself when trying to answer the questions.• Changing my mind at the last minute• Not passing and not being able to take it again before my application expires• Not knowing the inputs and outputs of each process• Panicking and getting everything confused• Forgetting everything! Freezing up!• Concern about fully understanding the context of the question• Not having enough time to complete the exam• Remove myself from the seller’s perspective

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How to Take The Exam

• Attack the exam by being in attack mode• Mark and skip questions relating to your gaps and do

them later• Mark and skip questions you cannot understand but

always choose an answer• Do not let emotions get in your way• Feel in control• Do not let your surroundings distract you

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It’s Time to Take a Test

Instructions:• Close or put away all papers and books except your

score sheet in the supplemental materials• Take a breath and pretend it is the real exam• Be quick, as the questions will not stay on the screen

for very long• Go!

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Did You Remember How to Take the Exam?

1. Attack the exam; do not let it control you2. Read the question only once3. Read all the choices4. Look for two right answers5. Mark and skip questions you cannot understand but

select an answer

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What Is Going on in Your Head?

• I’m not fast enough• I will never get this• I will fail• Oh no, a formula question• That other question still bugs me• I am sure I got that other question wrong

Thoughts like these waste brain power and hurt you on the exam!

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Common Exam Fears

• Running out of time• Questions with two right answers• Unknown unknowns• Test anxiety/panic• Inputs and outputs• Remembering the formulas

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Running Out of Time

• Almost no one runs out of time because you have the Exam Simulation software to practice timing.

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Questions with Two Right Answers

• Everyone has difficulty with questions with two right answers, but you will be less bothered if you notice these when using the exam simulation and work to reduce the problem for you.

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Unknown Unknowns

• So, what if there are two questions that are out of the blue on the exam? Do you actually expect that taking a major exam like this will ever be easy?

• Expect questions that are not understandable and just say to yourself, “What sick, demented person wrote this one?” Mark it, and move on to the next question.

• You will also see topics on the exam that you do not know. You would need to study for three years to cover everything. Is this a good use of your time?

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Test Anxiety/Panic

• Panic is a personal issue. Did you panic here? If you think panic is a concern for you, make sure you simulate the actual exam in your mind when using the exam simulation software.

• If you felt yourself panicking during this exercise, take tests in a situation similar to the actual testing environment. Try a library.

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Inputs and Outputs

• Use the Mindmap Charts and realize that if you know project management most inputs and outputs are just common sense.

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Remembering the Formulas

• Most test takers report that there are only about eight calculations on the exam.

• Most formulas relate to earned value. • In most cases, if you take the exam within three

months, you already know enough about earned value to answer most of those questions.

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What You Should Remember

#1 - Pick a target date to take the exam -Take the exam within three months after this class#2 - Create a study plan and follow it!#3 - Focus, Focus, Focus - Get into a study group• Understand your own learning style and use the most appropriate

materials – Crosswind Bootcamp Manual, PMBOK® Guide v5.0 including Page 61 & Glossary of Terms, Mindmaps, Flashcards, ITTO Matching Exercises, Quick Reference Guide, “Brain Dump” Sheet, Exam simulators

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Good Luck! On your PMP® / CAPM® exam

Don’t forget to fill out your evaluation of this class