Certified Associate in Project

®
Management (CAPM )
Certification
Fourth Edition
 Certified Associate in Project
Management (CAPM®) Certification -
Fourth Edition
Part Number: NH85061(IGEE)
Course Edition: 1.0

ACKNOWLEDGMENTS
Project Team
Content Developer: Anuradha Krishnan and Karthik Subramanian • Content Manager: • Graphic Designer: • Project Manager:
• Media Instructional Designer: • Content Editor: Peter Bauer • Materials Editor: Frank Wosnick • Business Matter Expert: •
Technical Reviewer: • Project Technical Support: Mike Toscano

NOTICES
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ii Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 CONTENTS
CERTIFIED ASSOCIATE IN PROJECT
MANAGEMENT (CAPM®) CERTIFICATION-
FOURTH EDITION

LESSON 1 - UNDERSTANDING PROJECT MANAGEMENT FUNDAMENTALS

A. Define Project Management Basics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Subprojects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Project Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Strategic Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PMO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Project Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Types of Project Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Enterprise Environmental Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
B. Examine Organizational Influences on Project Management . . . . . . . . . . 12
Organizational Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Organizational Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Organizational Structure Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Relative Authority in Organizational Structures . . . . . . . . . . . . . . . . . . . . 13
Organization Charts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The Project Management System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Organizational Cultures and Styles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Organizational Culture’s Influence on Projects . . . . . . . . . . . . . . . . . . . . 16
Organizational Process Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Contents iii
CONTENTS
C. Examine the Project Management Context . . . . . . . . . . . . . . . . . . . . . . . . . 19
Program Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Portfolio Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Relationships Among Project, Program, and Portfolio Management . . 20
Operations Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Project and Operations Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Agile Project Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

LESSON 2 - IDENTIFYING PROJECT MANAGEMENT PROCESSES

A. Examine the Project Life Cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
The Project Life Cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
General Characteristics of a Project Life Cycle . . . . . . . . . . . . . . . . . . . . 29
Project Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Governance Activities in the Project Life Cycle . . . . . . . . . . . . . . . . . . . . 30
Phase-to-Phase Relationships in a Project. . . . . . . . . . . . . . . . . . . . . . . . . 30
Progressive Elaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
B. Recognize Process Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Project Management Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Project Management Inputs, Tools and Techniques, and Outputs . . . . 33
Project Management Process Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
The Initiating Process Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
The Planning Process Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
The Executing Process Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
The Monitoring and Controlling Process Group . . . . . . . . . . . . . . . . . . . . 34
The Closing Process Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Project Management Process Group Interactions . . . . . . . . . . . . . . . . . 35
The Project Management Knowledge Areas . . . . . . . . . . . . . . . . . . . . . . 35

iv Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 CONTENTS
LESSON 3 - INITIATING A PROJECT
A. Examine Project Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Business Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Project Selection Criteria. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Project Selection Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Project Selection Decision Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Capital Budgeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Scoring and Rating Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Feasibility Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Cost-Benefit Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
B. Prepare a Project Statement of Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Project Statement of Work (SOW) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
C. Create a Project Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Project Charters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
The Develop Project Charter Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Develop Project Charter Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Develop Project Charter Tools and Techniques . . . . . . . . . . . . . . . . . . . . 56
Develop Project Charter Output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Business Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Business Case Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
D. Identify the Elements of a Project Management Plan . . . . . . . . . . . . . . . . . 61
The Project Management Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
The Develop Project Management Plan Process. . . . . . . . . . . . . . . . . . . 63
Develop Project Management Plan Inputs . . . . . . . . . . . . . . . . . . . . . . . 63
Develop Project Management Plan Tools and Techniques . . . . . . . . . . 64
Develop Project Management Plan Output . . . . . . . . . . . . . . . . . . . . . . 64

Contents v
CONTENTS
LESSON 4 - MANAGING PROJECT SCOPE
A. Document Stakeholder Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
The Collect Requirements Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Collect Requirements Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Collect Requirements Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . 71
Collect Requirements Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Facilitated Workshops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Group Creativity Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Group Decision Making Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Requirements Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Requirements Management Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
The Requirements Traceability Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
B. Create a Scope Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
The Project Scope Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Components of the Scope Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
The Define Scope Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Define Scope Inputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Define Scope Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Define Scope Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Product Analysis Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Techniques for Alternatives Identification . . . . . . . . . . . . . . . . . . . . . . . . . 83
Project Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
C. Develop a Work Breakdown Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Work Breakdown Structures (WBS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
The Create WBS Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Create WBS Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Create WBS Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Create WBS Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Code of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

vi Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 CONTENTS
D. Review Deliverables and Work Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
The Verify Scope Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Verify Scope Inputs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Verify Scope Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Verify Scope Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Inspection Report Components. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
E. Control the Project Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
The Control Scope Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Control Scope Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Control Scope Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Control Scope Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

LESSON 5 - ESTIMATING PROJECT TIME

A. Create an Activity List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Work Package . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
The 8/80 Rule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Schedule Management Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
The Define Activities Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Define Activities Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Define Activities Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Define Activities Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

Contents vii
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B. Create a Project Schedule Network Diagram . . . . . . . . . . . . . . . . . . . . . . . . 116
The Sequence Activities Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Sequence Activities Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Sequence Activities Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . 117
Sequence Activities Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Activity Dependencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Types of Activity Dependencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Precedence Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Precedence Relationship Types. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Lag . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Lead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Project Schedule Network Diagrams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
The Precedence Diagramming Method (PDM) . . . . . . . . . . . . . . . . . . . . 122
Summary Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Conditional Diagramming Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
C. Estimate Activity Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Project Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
The Estimate Activity Resources Process . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Estimate Activity Resources Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Estimate Activity Resources Tools and Techniques . . . . . . . . . . . . . . . . . . 129
Estimate Activity Resources Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
D. Estimate Duration for Project Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
The Estimate Activity Durations Process . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Estimate Activity Durations Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Estimate Activity Durations Tools and Techniques . . . . . . . . . . . . . . . . . . 134
Estimate Activity Durations Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

viii Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

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LESSON 6 - DEVELOPING AND CONTROLLING A PROJECT SCHEDULE
A. Draft a Project Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Project Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
The Develop Schedule Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
Develop Schedule Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
Develop Schedule Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . 144
Develop Schedule Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
Standard Schedule Diagramming Notations . . . . . . . . . . . . . . . . . . . . . . 145
The Critical Path . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Float . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Total Float . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Free Float . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Schedule Network Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
The Critical Path Method (CPM). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
The Critical Chain Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
The What-If Scenario Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
Resource Leveling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
Schedule Formats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
B. Identify the Critical Path . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
Critical Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
C. Optimize the Project Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
Schedule Compression . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
Fast-Tracking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
Crashing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
Crash Cost Plotting Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
D. Establish a Schedule Baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Schedule Baselines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167

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E. Control the Project Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
The Control Schedule Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
Control Schedule Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
Control Schedule Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . 171
Control Schedule Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
Earned Value Management (EVM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
EVM Variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
Planned Value (PV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
Earned Value (EV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
Actual Cost (AC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
EVM Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
Schedule Performance Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
Schedule Variance (SV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
Schedule Performance Index (SPI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
SPI Trend Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
Working with EVM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

LESSON 7 - ANALYZING PROJECT COST

A. Estimate Project Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
The Estimate Costs Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
Estimate Costs Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
Estimate Costs Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
Estimate Costs Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
Common Estimate Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
Analogous Estimating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
Bottom-Up Estimating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192
Parametric Estimating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192
Estimating Techniques Advantages and Disadvantages . . . . . . . . . . . . 193

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B. Establish the Cost Baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
Cost Baselines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
The Determine Budget Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198
Determine Budget Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198
Determine Budget Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . 199
Determine Budget Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
Funding Limit Reconciliation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
Contingency Allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
Cost Assignment Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
C. Reconcile Funding and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
D. Control Project Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208
The Control Costs Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208
Control Costs Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
Control Costs Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
Control Costs Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210
Cost Variance (CV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210
The Cost Performance Index (CPI). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
Performance Measurement Analysis Techniques . . . . . . . . . . . . . . . . . . 212
Performance Reporting Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212
Budget at Completion (BAC) Calculations . . . . . . . . . . . . . . . . . . . . . . . 213
Estimate to Complete (ETC) Calculations . . . . . . . . . . . . . . . . . . . . . . . . . 213
Estimate at Completion (EAC) Calculations. . . . . . . . . . . . . . . . . . . . . . . 213
To-Complete Performance Index (TCPI) . . . . . . . . . . . . . . . . . . . . . . . . . . 214

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LESSON 8 - MEASURING PROJECT QUALITY
A. Create a Quality Management Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226
Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226
Quality Management Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226
The Plan Quality Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
Plan Quality Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
Plan Quality Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
Plan Quality Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228
Process Improvement Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229
Process Improvement Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229
Total Quality Management (TQM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
Standards and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231
The ISO 9000 Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232
Cost of Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232
Checklists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233
Flowcharts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234
Control Charts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235
Benchmarking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237
Design of Experiments (DOE) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237
B. Execute a Quality Assurance Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241
Quality Assurance Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241
The Perform Quality Assurance Process . . . . . . . . . . . . . . . . . . . . . . . . . . 241
Perform Quality Assurance Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242
Perform Quality Assurance Tools and Techniques . . . . . . . . . . . . . . . . . . 243
Perform Quality Assurance Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244
Quality Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244
Topics of Quality Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244

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C. Perform Quality Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248
The Perform Quality Control Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248
Perform Quality Control Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248
Perform Quality Control Tools and Techniques . . . . . . . . . . . . . . . . . . . . . 249
Perform Quality Control Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250
Variance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
Causes of Variance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
The Analyzing Variances Task . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252
Tolerances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252
The 6-Sigma Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253
Variability Indications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253
Pareto Diagrams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253
The 80/20 Rule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254
Statistical Sampling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254
The Statistical Sampling Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
Attribute Sampling Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
Variable Sampling Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256

LESSON 9 - ORGANIZING HUMAN RESOURCES FOR A PROJECT

A. Document the Project Roles, Responsibilities, and Reporting
Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264
The Develop Human Resource Plan Process . . . . . . . . . . . . . . . . . . . . . . 264
Develop Human Resource Plan Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . 265
Develop Human Resource Plan Tools and Techniques . . . . . . . . . . . . . . 265
Develop Human Resource Plan Outputs . . . . . . . . . . . . . . . . . . . . . . . . . 266
Project Interfaces. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266
The Responsibility Assignment Matrix (RAM) . . . . . . . . . . . . . . . . . . . . . . . 267
Staffing Management Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269
Staffing Management Plan Components . . . . . . . . . . . . . . . . . . . . . . . . . 269

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B. Acquire the Project Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272
The Acquire Project Team Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272
Acquire Project Team Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273
Acquire Project Team Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . 274
Acquire Project Team Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275
Virtual Teams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275
C. Develop the Project Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278
The Develop Project Team Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278
Develop Project Team Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279
Develop Project Team Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . 279
Develop Project Team Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280
Team Development Stages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280
Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281
Team-Building Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282
Co-Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282
Reward and Recognition Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282
Rewarding Individual Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283
D. Manage the Project Team. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286
The Manage Project Team Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286
Manage Project Team Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287
Manage Project Team Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . 288
Manage Project Team Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288
Causes of Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289
Conflict Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289
Conflict Management Approaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290
Tasks of Performance Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290

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LESSON 10 - DEVISING EFFECTIVE COMMUNICATION METHODS
A. Identify Project Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298
The Identify Stakeholders Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298
Identify Stakeholders Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298
Identify Stakeholders Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . 299
Identify Stakeholders Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299
Stakeholder Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300
Stakeholder Registers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300
The Stakeholder Analysis Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301
Stakeholder Management Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301
B. Create a Communications Management Plan . . . . . . . . . . . . . . . . . . . . . . 305
Communications Management Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 305
The Plan Communications Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306
Plan Communications Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306
Plan Communications Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . 307
Plan Communications Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307
Communications Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308
Communications Requirements Analysis . . . . . . . . . . . . . . . . . . . . . . . . . 308
Communications Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309
C. Distribute Project Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313
The Distribute Information Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313
Distribute Information Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314
Distribute Information Tools and Techniques. . . . . . . . . . . . . . . . . . . . . . . 314
Distribute Information Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314
D. Manage Stakeholder Relationships and Expectations . . . . . . . . . . . . . . . . 318
The Manage Stakeholder Expectations Process . . . . . . . . . . . . . . . . . . . 318
Manage Stakeholder Expectations Inputs . . . . . . . . . . . . . . . . . . . . . . . . 318
Manage Stakeholder Expectations Tools and Techniques . . . . . . . . . . . 319
Manage Stakeholder Expectations Outputs . . . . . . . . . . . . . . . . . . . . . . 320

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E. Report on Project Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323
The Report Performance Process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323
Report Performance Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323
Report Performance Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . 324
Report Performance Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324
Forecasting Methods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325
Benefits of Creating Performance Reports . . . . . . . . . . . . . . . . . . . . . . . . 326

LESSON 11 - ANALYZING PROJECT RISKS

A. Examine a Risk Management Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334
Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334
Project Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334
Business Risk vs. Insurable Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335
Types of Business Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335
Types of Insurable Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335
Risk Management Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336
The Plan Risk Management Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336
Plan Risk Management Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336
Plan Risk Management Tools and Techniques . . . . . . . . . . . . . . . . . . . . . 337
Plan Risk Management Output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337
Risk Management Plan Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338
Risk Breakdown Structure (RBS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338
Effect-Based Risk Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339
Source-Based Risk Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339
Probability Scales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340
Impact Scales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340
Levels of Uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341
Risk Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341
Risk Tolerance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342
Levels of Risk Tolerance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342

xvi Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 CONTENTS
B. Identify Project Risks and Triggers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346
Triggers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346
The Identify Risks Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346
Identify Risks Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347
Identify Risks Tools and Techniques. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348
Identify Risks Output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348
Information-Gathering Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349
Risk Registers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350
Risk Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350
C. Perform Qualitative Risk Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353
Qualitative Risk Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353
The Perform Qualitative Risk Analysis Process . . . . . . . . . . . . . . . . . . . . . . 354
Perform Qualitative Risk Analysis Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . 354
Perform Qualitative Risk Analysis Tools and Techniques . . . . . . . . . . . . . 355
Perform Qualitative Risk Analysis Output. . . . . . . . . . . . . . . . . . . . . . . . . . 355
Risk Data Quality Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356
Probability and Impact Risk Rating Matrix . . . . . . . . . . . . . . . . . . . . . . . . . 356
Components of Risk Registers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357
The Ongoing Risk Assessment Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358

Contents xvii
CONTENTS
D. Perform Quantitative Risk Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362
Quantitative Risk Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363
The Perform Quantitative Risk Analysis Process . . . . . . . . . . . . . . . . . . . . 363
Perform Quantitative Risk Analysis Inputs . . . . . . . . . . . . . . . . . . . . . . . . . 363
Perform Quantitative Risk Analysis Tools and Techniques . . . . . . . . . . . . 364
Perform Quantitative Risk Analysis Output . . . . . . . . . . . . . . . . . . . . . . . . 364
Quantitative Risk Analysis Update Components . . . . . . . . . . . . . . . . . . . 365
Project Risk Ranking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365
Basics of Probability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366
Probability Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367
Uniform Distribution PDF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368
Normal Distribution PDF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368
Triangular Distribution PDF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369
Decision Making Under Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370
Quantitative Analysis Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371
Simulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372
Monte Carlo Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372
E. Develop a Risk Response Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376
The Plan Risk Responses Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376
Plan Risk Responses Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377
Plan Risk Responses Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . 377
Plan Risk Responses Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377
Negative Risk Strategies (Threats) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378
Positive Risk Strategies (Opportunities) . . . . . . . . . . . . . . . . . . . . . . . . . . . 379
Contingency Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379
Contingency Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380
F. Monitor and Control Project Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383
The Monitor and Control Risks Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383
Monitor and Control Risks Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384
Monitor and Control Risks Tools and Techniques . . . . . . . . . . . . . . . . . . . 384
Monitor and Control Risks Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385
The Project Risk Response Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385

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 CONTENTS
LESSON 12 - PROCESSING PROJECT PROCUREMENTS
A. Plan Project Procurements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394
The Plan Procurements Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394
Plan Procurements Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395
Plan Procurements Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . . 396
Plan Procurements Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396
Procurement Management Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397
Teaming Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397
Risk-Related Contract Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397
B. Prepare a Procurement Statement of Work . . . . . . . . . . . . . . . . . . . . . . . . . . 401
Procurement Statements of Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401
Specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402
Outsourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402
Make-or-Buy Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403
Factors in Make-or-Buy Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403
Lease, Rent, or Buy Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403
C. Prepare a Procurement Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407
Procurement Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407
Types of Procurement Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 408
Components of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 408
Types of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409
Source Selection Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412
D. Examine the Conduct Procurements Process . . . . . . . . . . . . . . . . . . . . . . . 416
The Conduct Procurements Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416
Conduct Procurements Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 417
Conduct Procurements Tools and Techniques . . . . . . . . . . . . . . . . . . . . . 418
Conduct Procurements Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419
Qualified Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420

Contents xix
CONTENTS
E. Obtain Responses from Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423
F. Determine Project Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 426
Weighting Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 426
Procurement Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427
Term vs. Completion Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 428
G. Administer Project Procurements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431
The Administer Procurements Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431
Administer Procurements Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431
Administer Procurements Tools and Techniques . . . . . . . . . . . . . . . . . . . 432
Administer Procurements Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433
The Duties of the Procurements Administrator . . . . . . . . . . . . . . . . . . . . . 434
Changes to Contract Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 435
Legal Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 435
Types of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436
Types of Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436
Breaches of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436
H. Close Project Procurements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 440
The Close Procurements Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 440
Close Procurements Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441
Close Procurements Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . . . 441
Close Procurements Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441
Procurement Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442
Elements of Procurement Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443
Procurement Audit Lessons Learned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444

xx Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 CONTENTS
LESSON 13 - INTEGRATING PROJECT WORKFLOW
A. Identify the Direct and Manage Project Execution Process . . . . . . . . . . . . 452
The Direct and Manage Project Execution Process . . . . . . . . . . . . . . . . . 452
Direct and Manage Project Execution Inputs. . . . . . . . . . . . . . . . . . . . . . 452
Direct and Manage Project Execution Tools and Techniques . . . . . . . . 453
Direct and Manage Project Execution Outputs . . . . . . . . . . . . . . . . . . . . 453
Project Management Information Systems (PMIS). . . . . . . . . . . . . . . . . . 454
Common PMIS Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454
Work Authorization Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455
Work Performance Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 456
Project Execution Direction and Management Techniques. . . . . . . . . . 456
B. Identify the Monitor and Control Project Work Process . . . . . . . . . . . . . . . . 459
The Monitor and Control Project Work Process . . . . . . . . . . . . . . . . . . . . . 459
Monitor and Control Project Work Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . 460
Monitor and Control Project Work Tools and Techniques . . . . . . . . . . . . 460
Monitor and Control Project Work Outputs . . . . . . . . . . . . . . . . . . . . . . . . 461
Monitor and Control Project Work Process Best Practices . . . . . . . . . . . . 461
C. Develop an Integrated Change Control System . . . . . . . . . . . . . . . . . . . . . 463
Integrated Change Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463
Change Control Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463
Causes of Project Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464
Configuration Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464
Process Control Structures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466
D. Utilize the Integrated Change Control System . . . . . . . . . . . . . . . . . . . . . . . 469
The Perform Integrated Change Control Process . . . . . . . . . . . . . . . . . . 469
Perform Integrated Change Control Inputs . . . . . . . . . . . . . . . . . . . . . . . 470
Perform Integrated Change Control Tools and Techniques . . . . . . . . . . 470
Perform Integrated Change Control Outputs . . . . . . . . . . . . . . . . . . . . . 471
Change Management Advantages . . . . . . . . . . . . . . . . . . . . . . . . . . . . 471
Formal Acceptance of Project Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472

Contents xxi
CONTENTS
E. Close the Project or Phase Administratively . . . . . . . . . . . . . . . . . . . . . . . . . 474
The Close Project or Phase Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 474
Close Project or Phase Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475
Close Project or Phase Tools and Techniques . . . . . . . . . . . . . . . . . . . . . . 475
Close Project or Phase Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475
Administrative Closure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 476
Project Records to Archive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 476
Lessons Learned Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477
Considerations of Lessons Learned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477
Closeout Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478

APPENDIX A - CODE OF ETHICS AND PROFESSIONAL CONDUCT

APPENDIX B - INTERPERSONAL SKILLS REQUIRED FOR A PROJECT

MANAGER

APPENDIX C - UPDATES TO THE PMBOK® FOURTH EDITION GUIDE

APPENDIX D - PROJECT MANAGEMENT PROCESSES

LESSON LABS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 511
ADDITIONAL INSTRUCTOR NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551
GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553

INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573

xxii Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 INTRODUCTION

ABOUT THIS COURSE

You successfully participated in projects and planned things up-front to deliver them on time.
It’s time now to move from participating in projects to managing projects. Your ability to
become a project manager to demonstrate best practices in project management—both on the
job and through professional certification—is becoming the standard to compete in today’s
fast-paced and highly technical workplace. In this course, you will identify the generally recog-
nized practices of project management acknowledged by the Project Management Institute
(PMI®) to successfully manage projects.
Project management is one of the hottest careers in the world today. Project managers with
proven skills and experience can find exciting, high-visibility opportunities in a wide range of
fields. This course is specifically designed to provide you with the proven, practical body of
project management knowledge and skills that you need to demonstrate project management
mastery on the job. Additionally, this course can be a significant part of your preparation for
the Certified Associate in Project Management (CAPM®) Certification Exam. The skills and
knowledge you gain in this course will help you avoid making costly mistakes and increase
your competitive edge in the project management profession.

Element K is a Registered Education Provider (REP) for the CAPM certification examination.

Course Description
Target Student
This course is designed for persons in a variety of job roles who currently contribute to project
teams in various ways, including providing subject matter expertise (e.g., marketing, finance,
customer care, processing, fulfillment) and serving as project team sponsors, facilitators, liai-
sons, or coordinators, but who do not function as project managers and who have little or no
formal exposure to or training in standardized project management terminology and processes.

Course Prerequisites
To ensure your success, we recommend you first take the following New Horizons courses or
have equivalent knowledge:
• Microsoft Word 2000, 2002, 2003 or Microsoft Office Word 2007, Level 1
• Project Management Fundamentals: Second Edition

Introduction xxiii
INTRODUCTION
How to Use This Book
As a Learning Guide
Each lesson covers one broad topic or set of related topics. Lessons are arranged in order of
increasing proficiency with project management; skills you acquire in one lesson are used and
developed in subsequent lessons. For this reason, you should work through the lessons in
sequence.
We organized each lesson into results-oriented topics. Topics include all the relevant and sup-
porting information you need to master project management, and activities allow you to apply
this information to practical hands-on examples.
You get to try out each new skill on a specially prepared sample file. This saves you typing
time and allows you to concentrate on the skill at hand. Through the use of sample files,
hands-on activities, illustrations that give you feedback at crucial steps, and supporting back-
ground information, this book provides you with the foundation and structure to learn project
management quickly and easily.

As a Review Tool
Any method of instruction is only as effective as the time and effort you are willing to invest
in it. In addition, some of the information that you learn in class may not be important to you
immediately, but it may become important later on. For this reason, we encourage you to
spend some time reviewing the topics and activities after the course. For additional challenge
when reviewing activities, try the ″What You Do″ column before looking at the ″How You Do
It″ column.

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

Course Objectives
In this course, you will apply the generally recognized practices of project management
acknowledged by the Project Management Institute (PMI®) to manage projects successfully.
You will:
• describe project management fundamentals.
• identify project management processes.
• initiate a project.
• manage project scope.
• estimate project time.
• develop project schedules.
• analyze project cost.
• measure project quality.

xxiv Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 INTRODUCTION
• organize human resources for a project.
• devise effective communication methods for resources involved in the project.
• analyze risks and plan risk responses.
• process project procurements.
• integrate project workflow.

Course Requirements
Hardware
• A PC with a Pentium processor, at least 300 MHz.
• A minimum of 64 MB of RAM with 1.0 GB of free hard disk space.
• A CD-ROM drive.
• Super VGA recommended (set at least to 800 x 600 screen resolution) with 256 colors.
• An Internet connection with access to the World Wide Web.

Software
A licensed copy of the following software for the instructor and each student:
• Microsoft® Office® 2003 or later.

Class Setup
1. Install Microsoft® Office® 2003 or later according to the software manufacturer’s installa-
tion instructions.
2. Insert the CD-ROM that accompanies this course book into your CD-ROM drive.
3. On the course CD-ROM, locate the self-extracting file 085061dd.exe.
4. Open 085061dd.exe. It will write your files to the C:\085061Data folder.

List of Additional Files

Printed with each activity is a list of files students open to complete that activity. Many activi-
ties also require additional files that students do not open, but are needed to support the file(s)
students are working with. These supporting files are included with the student data files on the
course CD-ROM or data disk. Do not delete these files.

Introduction xxv
NOTES

xxvi Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 1

LESSON 1 Lesson Time

1 hour(s), 40 minutes

Understanding Project
Management
Fundamentals
In this lesson, you will describe project management fundamentals.
You will:
• Identify the basic concepts of project management.
• Describe the organizational influences on project management.
• Describe the project management context.

Lesson 1: Understanding Project Management Fundamentals 1

LESSON 1
Introduction
Sound knowledge of project management is essential for you to manage projects more effec-
tively in your organization. In this lesson, you will identify the best practices of project
management and its concepts and terminologies, so that you can move forward strategically
with confidence.
As an aspiring CAPM practitioner, you need to be aware of effective project management pro-
cesses and practices. Obtaining a CAPM credential helps you gain proficiency in your career.
It provides you with the opportunity to demonstrate your ability, thereby increasing your vis-
ibility within the organization. To gain the professional recognition you deserve, you need to
develop a solid understanding of project management and its underlying structure and ele-
ments, which include stakeholders, organizational cultures, and so on.

TOPIC A
Define Project Management Basics
In this lesson, you will identify and describe the fundamentals of professional project manage-
ment. In order to do that, you will need to start with the basics of project management so that
you have a solid understanding of standard project management vocabulary and common prac-
tices. In this topic, you will identify the basic concepts in project management.
To manage a wide range of projects across application areas and industries, it is important to
have a thorough knowledge of the key concepts that form the basis of project management.
Knowledge about the fundamental concepts of project management will help you become a
successful project management practitioner.

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

Example: The Solar Car Project

An automobile manufacturing company designed a new car that works on solar energy.
The company initiated a project to build solar powered cars. It plans to complete the
project by the end of this year and distribute the cars to the market next year.

Characteristics of a Project
Every project has certain characteristics that differentiate it from other projects. A few
characteristics are listed in the table below.

2 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 1
Characteristic Description
Temporary A project:
• Is undertaken to create a lasting outcome.
• Has clearly defined beginning and end points.
• Has a finite time frame to produce the expected
outcome.
• Has resources allocated according to need. The team is
disbanded when the project ends.
Unique products, services, or A project creates unique deliverables. It can:
results • Produce products or artifacts that become the end item
or a component item.
• Deliver services to business functions supporting pro-
duction or distribution.
• Produce results as outcomes or documents.
Progressive elaboration A process of development in which additional layers of
detail are defined over the course of a project.

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

Example: Subprojects in the Solar Car Project

The project team working on the interior design of the solar powered car decided to
subcontract the designing of seats and the air-conditioning system to two individual
external vendors as subprojects.

Project Management
Definition: Project Management
According to the PMI®, project management is defined as “the application of knowl-
edge, skills, tools, and techniques to project activities to meet project requirements.”
Managing projects typically involves scheduling; identifying requirements; establishing
objectives; balancing quality, scope, time, and cost; and addressing the concerns and
expectations of the stakeholders.
Project management is different from the management of routine, ongoing work initia-
tives. Projects generally involve temporary initiatives, unique circumstances, and cross-
functional teams. Projects may involve new or specially formed teams taking on new
tasks and attempting unfamiliar skills, processes, or work efforts.

Lesson 1: Understanding Project Management Fundamentals 3

LESSON 1
Example: Project Management at a Mobile Telecommunications Company
A leading mobile telecommunications company has several divisions that deal with
different services such as voice, data, and software integration and multiple device sup-
port. It plans to launch a telecommunications network in Canada, a new market for this
company. Every service is treated as a project and project management skills are
required to manage these service launch activities. It is the responsibility of the project
manager to communicate cross-functionally; manage efforts of resources who are exter-
nal or internal to the company; and deliver work on time, within the allotted budget
and specifications for quality.

PMBOK Reference
For more information on project management, refer to the PMBOK® Guide Fourth
Edition 2008, p. 6 and 7. The name PMBOK® Guide or PMBOK® refers to the book,
A Guide to the Project Management Body of Knowledge, published by the Project
Management Institute, Inc. The PMBOK® is considered the definitive text for informa-
tion about the practice of project management.

Areas of Expertise
An effective project management team is expected to draw upon a comprehensive
working knowledge of five recognized areas of expertise, although a team member will
not typically be an expert in all areas. Areas of expertise include:
• The Project Management Body of Knowledge.
• Application area knowledge, standards, and regulations.
• Project environment knowledge.
• General management knowledge and skills.
• And, interpersonal skills.

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

Strategic Planning
Strategic Planning
Projects are often used as the means of achieving the organization’s strategic plan. Some of the
strategic considerations that authorize a project are market demands, organizational needs, cus-
tomer requests, technological advancements, or legal requirements.

Programs
Programs Definition:
A program is a set of related projects that may have a common objective. It offers
great control over the constituent projects and delivers benefits that the organization
can use to meet its goals. A program is managed by a program manager, and the indi-
vidual projects are managed by project managers who work for the program manager.
However, all projects need not always be a part of programs. Projects that do not have
a common objective, but still are managed in a group, are generally known as “mul-
tiple projects.”

4 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 1
Example: The Everything for Coffee Retailers Chain Expansion Program
Everything For Coffee, a retail company that sells multiple coffee-related products,
launched a new program that aims at expanding a retail chain. This expansion program
consists of many projects, such as market research to establish demand, construction of
new stores, franchise selection, designing the marketing campaign, and consolidation
of the customer base by establishing loyalty programs.

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

Figure 1-1: A portfolio and its content.

Example: The Automobile Company Portfolio

The automobile company designed a breakthrough technology on capitalizing solar
energy. The company’s strategy is to exploit the technical know-how in all possible
areas to generate revenue and become a trend setter. It initiated various projects to
identify the potential use of this technology in power generation, all modes of transpor-
tation, and domestic and industrial markets. The portfolio also included other
operational work such as administration- and logistics-related activities. It is essential
for the company to ensure that these operational works continuously support the
projects and programs.

Programs vs. Portfolios

Whereas program management includes related and interdependent projects, a portfolio
is a collection of several unrelated projects that support a significant product line or
major goals.

Lesson 1: Understanding Project Management Fundamentals 5

LESSON 1
Operations
Operations Definition:
Operations are ongoing and repetitive tasks that produce the same outcome every time
they are performed. The purpose of operations is to carry out day-to-day organizational
functions, generate income to sustain the business, and increase the value of organiza-
tional assets. Operational processes are aligned with the business requirements of the
organization. Therefore, when organizations update or adopt new objectives based on
organizational needs, customer requirements, or market demand, these processes are
continuously revised to accommodate the changes. Such process revisions can be con-
sidered to be an internal project.

Example: Operations in a Petrochemical Industry

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

PMO
PMO Definition:
A Project Management Offıce (PMO) is a centralized, permanent, ongoing administra-
tive unit or department that serves to improve project management performance within
an organization. The people in the PMO provide support on project management con-
cepts, tools, training, and mentoring to project managers; they may or may not actually
do hands-on project management themselves. The PMO will try to maintain standards
across projects and improve efficiency. It has the authority to make key decisions in
the projects. In some organizations, the project managers are provided or assigned by
the PMO.
PMOs function differently in different organizations, depending on the business needs.
Unlike programs, the projects supported by the PMO may not be related to each other.
The structure and function of the PMO depends upon the respective organizational
requirements. The PMO may be referred to in some organizations as the “project
office,” “program office,” “central project office,” “project management center of excel-
lence,” or “program management office.”
Some organizations may have PMOs that are exclusively assigned to handle large
projects and programs. These PMOs are sometimes called Autonomous Project Teams
(APT).
Some of the primary functions of the PMO include:
• Maintaining project historical information.
• Managing shared resources across projects managed by the PMO.
• Monitoring project timelines, budget, and quality at an enterprise level.
• Identifying and implementing new project management methodologies.
• Creating effective project policies and templates.
• Helping project managers develop estimates and schedules.
• Managing communication across projects.

6 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 1
Example: PMO of the Automobile Company
The automobile company established a PMO to manage the entire project of designing
a solar car in a coordinated way. The PMO will manage communication across all
projects; monitor timelines, budget, and quality; and allocate resources. In this case,
the PMO introduced standardized processes for calculating, leveling, loading, and
developing project budgets and helped project managers to update the project sched-
ules. The PMO also planned to develop project data references and organized a best
practices sharing session every month.

Project Stakeholders
Definition: Project Stakeholders
A project stakeholder is a person who has a business interest in the outcome of a
project or who is actively involved in its work. Stakeholders take on various roles and
responsibilities; their participation in the project will have an impact on its outcome
and its chances for success.
Stakeholders may have competing interests, needs, priorities, and opinions. They may
have conflicting visions for the project’s successful outcome. Project managers must
identify the internal as well as external stakeholders as early as possible, learn what
their needs are, and secure their participation in defining the project’s parameters and
success criteria. While it may be difficult to negotiate to a consensus early in the
project, it is far less painful and costly than getting to the end of the project only to
learn that someone’s needs were not met or were misunderstood.

Example: Stakeholders of the Solar Car Project

The automobile company decided to start the solar car plant in a new location. The
stakeholders for the project include the project manager, project sponsor, government
automobile regulatory agency officials, staff and employees of the company, manage-
ment, production team, company’s vendors, local environmental and political groups,
and also the residents.

Types of Project Stakeholders

Project stakeholders can be of different types. Types of Project Stakeholders

Project Stakeholder Description

Customers or users The customers, or users, may be multiple individuals or companies
with varying requirements and specifications. Some of their responsi-
bilities include:
• Defining the need for the project output.
• Taking the delivery of the project output.
• Paying for the project output.

Lesson 1: Understanding Project Management Fundamentals 7

LESSON 1
Project Stakeholder Description
Sponsors Sponsors may be individuals or groups that provide financial assis-
tance to the project. If the sponsor is outside of the company, such as
a customer, the duties listed here may be the responsibility of the
project manager:
• Facilitates the financial resources for the project.
• Signs and publishes the project charter.
• Has ultimate responsibility for the success of the project.
• Signs off on all planning documents and change requests.
• Authorizes teams to use resources.
• Champions and supports the project manager and team.
• Reviews progress and quality.
• Cuts through red tape and expedites activities.
Portfolio managers or portfolio Portfolio managers or the executives in the portfolio review board are
review board a part of the project selection committees and belong to the high-level
project governance side of the organization. Their review consider-
ations may include:
• Gauging the Return on Investment (ROI) of the project.
• Identifying the value of the project.
• Analyzing the risks involved in taking up the project.
• Identifying the factors that may influence the project.
Program managers Program managers in coordination with project managers monitor
related projects in a program to obtain maximum benefits. They also
provide guidance and support to every individual project.
Project Management Office A PMO is an administrative unit that supervises and coordinates the
(PMO) management of all projects in an organization. It focuses on provid-
ing:
• Administrative support services such as processes, methodologies,
policies, standards, and templates.
• Training and mentoring support to project managers and project
team members.
• Support and guidance in managing projects and usage of tools.
• Support for resource allocation.
• Assistance in better communication among project managers, spon-
sors, and other stakeholders.
Project managers Project managers are individuals responsible for managing all aspects
of the project. The project manager:
• Works with stakeholders to define the project.
• Plans, schedules, and budgets project activities with team input.
• Works with the team to carry out project plans.
• Monitors performance and takes corrective action.
• Identifies, monitors, and mitigates risks.
• Keeps the sponsor and stakeholders informed.
• Requests and documents scope changes.
• Provides timely report on project metrics.
• Acts as a liaison between the project team and other stakeholders.

8 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 1
Project Stakeholder Description
Project management team Resources who perform project management activities.
Project team The project team comprises the manager and team members. The
team members perform project work and may not be involved in the
management side of the project. The team contains resources from
different groups who possess knowledge on specific subjects or have
unique skill sets to carry out project work.
Functional managers Functional managers are individuals who are a part of the manage-
ment in the administrative or functional side, such as human
resources, finances, accounting, or even procurement of the business
in the organization. They sometimes act as subject matter experts or
may provide services needed for the project.
Operations managers Operations managers manage the core business areas such as design-
ing, manufacturing, provisioning, testing, research and development,
or the maintenance side of the organization. Some of their functions
include:
• Directly managing the production and maintenance of the final
products and services that the organization provides.
• Handing off technical project documentation and other records to
the operations management group upon project completion.
Sellers and business partners Sellers are external parties who enter into a contractual agreement
with the organization and provide components or services needed for
the project. In the same way, business partners are external to the
company and provide specialized support in tasks such as installation,
customization, training, or support.

Positive and Negative Stakeholders

Positive stakeholders usually benefit from the successful outcome of a project, while
negative stakeholders are keen on the negative outcome of a successful project. A good
example of positive stakeholders is business leaders from a community who benefit
from an industrial expansion project because it involves economic growth for the com-
munity. The negative stakeholders in this scenario will be the environmental groups
who are more concerned about the harm this project might cause to the environment.
Furthermore, the positive stakeholders can go to the extent of getting the needed per-
mits to proceed with the project because they are more interested in the project’s
success. But, the negative stakeholders can block the progress of the project by
demanding more environmental reviews.

The Role of a Project Manager

Project managers are responsible for meeting project objectives and their job role is
different from that of a functional or operations manager. Based on the organizational
structure, a project manager may report to a portfolio or program manager. The project
manager works in tandem with his or her manager to meet the project objectives and
ensure that the project plan is in alignment with the overall program plan.
A project manager should have the following characteristics.
• Knowledge: Having an in-depth knowledge of project management.
• Performance: Performing well in projects through the application of project man-
agement practices.

Lesson 1: Understanding Project Management Fundamentals 9

LESSON 1
• Personal effectiveness: Includes the project manager’s attitude, personality, and
leadership skills.

Enterprise Environmental Factors

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

Other Enterprise Environmental Factors

Some of the other factors that influence a project’s outcome include external factors
such as industrial standards or governmental regulations, commercial databases, and
internal factors such as infrastructure, personnel administration, work authorization sys-
tems, and communication channels established within the organization.

ACTIVITY 1-1
Understanding Project Management Basics
Scenario:
You are a project lead in an engineering and construction company that focuses mainly on the
oil and gas industry. Your current project involves designing a technologically advanced off-
shore oil rig for a new customer. The project should be completed within eight months,
including the testing phase. A junior engineer has been assigned to your team and you want to
ensure that the engineer understands the importance of project management. As a project lead,
you take the role of a mentor and introduce the engineer to the basics of project management
and the processes around it.

1. The requirement for a technological advancement refers to:

a) Issues that need to be managed in the project plan.
b) Environmental factors that usually have a detrimental effect on the project.
c) Risks that have to be managed by the project manager.
✓ d) Stimuli that arouse the need for a new project that may be authorized by an organi-
zation.

2. You are explaining the difference between a project and operations to the junior engi-
neer. Which characteristic is unique to operations?
a) They are performed by resources.
b) They are constrained by limited resources.
✓ c) They are ongoing.
d) They are planned, executed, and controlled.

10 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 1
3. How will you define project management to the engineer?
a) A work process with definite start and end dates.
b) A temporary endeavor undertaken to create a unique product, service, or result.
✓ c) The application of knowledge, skills, tools, and techniques to project activities to
meet project requirements.
d) Projects are used as means of achieving an organization’s strategic plan.

4. Based on the scenario, who is the most important stakeholder involved in the project?
a) The project manager
b) The project sponsor
c) The CEO
✓ d) The customer

5. Which statement best describes a program?

a) A set of repetitive ongoing tasks.
✓ b) A set of related projects that have a common objective.
c) A collection of related and unrelated projects that are grouped to achieve the strate-
gic business objectives of an organization.
d) A temporary endeavor that is undertaken to create a unique product, service, or
result.

6. Based on the scenario, which is the best example of ongoing work?

✓ a) Providing oil and gas to a community.
b) Designing an offshore oil rig for a new company.
c) Building a new oil refinery as a source for oil.
d) Informing the public about the innovative technological changes at the oil and gas
company.

7. Who provides the software, templates, and standardized policies for a project?
✓ a) The PMO
b) Customers
c) Human resource department
d) The project budget

Lesson 1: Understanding Project Management Fundamentals 11

LESSON 1
TOPIC B
Examine Organizational Influences
on Project Management
You identified the characteristics of project management. Before assuming project management
responsibilities, you need to have knowledge of how an organization can influence a project
and its management. In this topic, you will examine the organizational influences on project
management.
An organization with its system, culture, style, and structure greatly influences project manage-
ment. Every organization around the world—government agencies, corporations, professional
associations, or others—will have systems that determine the execution and growth of projects.
As an aspiring project manager, having a clear idea on these influences will help you initiate a
project and execute project tasks efficiently.

Organizational Systems
Organizational Systems
A project management team is responsible for maintaining a sound organizational system for
all the projects in an organization. Organizations can be of two types: project-based and non-
project-based. Project-based organizations fall into two categories. One implements projects for
customers on a contract basis and derives revenue from them. The other adopts management
by projects that have established management systems.
The non-project-based organizations often lack project-oriented management systems that
effectively or efficiently deliver projects. Sometimes, these organizations will have subunits or
departments that work as project-based organizations with management systems to support
them.

Organizational Structures
Organizational Structures
An organizational structure dictates how the various groups and individuals within the organi-
zation interrelate. The organizational structure also impacts how the project team is structured.
The type of organizational structure often limits the availability of resources and the terms
under which those resources are available to the project.

Figure 1-2: A sample organizational structure.

12 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 1
Organizational Structure Types
There are four types of organizational structures: functional, projectized, matrix, and compos- Organizational Structure Types
ite.

Organizational Structure Characteristics

Functional organization • Each department is responsible for carrying out a specific, simi-
lar set of activities.
• Multiple resources perform each type of activity.
• Reporting is hierarchical, with each resource reporting to a
single manager.
• The project manager’s authority is low, relative to the functional
manager’s authority.
Projectized organization • The project manager and a core project team operate as a com-
pletely separate organizational unit within the parent
organization.
• Core team members are typically responsible for the work of
extended team members in their functional area.
• Team members are often co-located.
• The project manager typically reports to a program manager and
has a significant amount of authority and independence.
• Some organizations may contain their own support systems,
such as a separate procurement or personnel department, or
share support systems with the parent organization.
Matrix organization • A blend of functional and projectized structures in which indi-
viduals still report upward in the functional hierarchy, but they
also report horizontally to one or more project managers.
• The matrixed reporting scheme may be a permanent one.
• May be characterized as weak, balanced, or strong, depending
on the relative authority of the project manager to the functional
manager. An organization is said to have a strong matrix when
the project manager’s authority is higher than that of the func-
tional manager.
Composite organization Most modern organizations involve all the above structures at vari-
ous levels. It is a combination of all the other types of
organizations.

Relative Authority in Organizational Structures

Definition: Relative Authority in
Organizational Structures
Relative authority refers to the project manager’s authority relative to the functional
manager’s authority over the project and the project team. In a purely functional orga-
nizational structure, the project manager’s authority is low relative to the functional
manager. Conversely, in the projectized organizational structure, the opposite is true.

Lesson 1: Understanding Project Management Fundamentals 13

 LESSON 1
Example: Relative Authority in Different Organizations
The automobile company has a functional organizational structure, and its management
is hierarchical. A project manager coordinating the company’s participation in a trade
show will have engineers, designers, and sales and marketing executives assigned to
the project, but he does not have functional authority over those resources; they all
report to their functional managers in their own departments. His authority is low rela-
tive to the functional managers’ authority. Conversely, a web design company has a
projectized organizational structure, with independent project teams working indepen-
dently on their own projects. A project manager in this organization has much more
autonomy and authority.

Organization Charts
Organization Charts (3 Slides) Definition:
An organization chart is a visual representation of a project’s organizational structure.
Its purpose is to show both the reporting relationships within the project and the
project’s relationship to the parent organization.
The complexity of the organization chart will vary with the complexity of the project.
Finally, the organization chart must clearly assign project tasks to team members.
A traditional functional organization chart is hierarchical and organized by department.
In a projectized organization chart, the functional team members report directly to the
project managers rather than the functional managers. An organization chart for a com-
pany using the matrix structure shows that the team members report vertically to a
functional manager and horizontally to a project manager.

Example: Different Organization Structure Charts

Sample functional, projectized, and matrix organizational charts are given below for
your reference.

Figure 1-3: A functional organization chart.

14 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 1

Figure 1-4: A projectized organization chart.

Figure 1-5: A matrix organization chart.

Position Descriptions
To effectively create an organization chart, each team member must have a position
description that clearly delineates what his or her responsibilities are. Templates and
checklists, often obtainable from human resources, are good tools for creating position
descriptions.

The Project Management System

Definition: The Project Management
System
The project management system is a defined approach for effective project manage-
ment. This system is a combination of tools, techniques, methodologies, resources, and
procedures to manage a project. It formally or informally helps a project manager to
effectively complete a project. The content of a project management system can vary
depending on the organizational influence, application area, complexity of the project,
and the availability of existing systems.

Lesson 1: Understanding Project Management Fundamentals 15

LESSON 1
Example: Project Management System of the Automobile Company
The automobile company decided to adopt the PMBOK® guide for all project manage-
ment processes, use Microsoft Office Project for planning and scheduling a project, and
ensure that all project team members with more than 12 months of experience must
have CAPM certification.

Organizational Cultures and Styles

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

Factor Description
Policies The organizational policies and procedures influence the projects the com-
pany undertakes. For example, the organizational procedures will determine
how to implement new strategies and if the work environs will be formal or
informal.
Values The values, beliefs, and expectations of an organization have a major impact
on the organizational culture. For example, the organization’s strategic
decision-making choices, preferences, and approach will vary based on its
values and beliefs.
Management style The management style of the organization is another factor that affects the
organizational culture. For example, factors such as managers following a
coaching style of management or controlling style of management, the
employees being allowed to give feedback, and the implementation of their
feedback, are all dependent upon the different styles followed by manage-
ment.
Work environment The work ethics followed by the organization also constitute the organiza-
tional culture. For example, some organizations may allow employees to
work anytime from 7:00 A.M. to 7:00 P.M., and some others may want them
to work strictly from 8:00 A.M. to 5:00 P.M. and work late nights if their
workload is high.

Organizational Culture’s Influence on Projects

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

Project Aspect Description

Project policies and proce- The project policies and procedures should reflect that of the organiza-
dures tion’s because they are interdependent.
Project selection The criteria for the selection of projects are determined by the organi-
zational culture. For example, a competitive, ambitious, and assertive
organization will select projects with high risks while a highly rigid
and authoritarian organization may not take projects with high risks.

16 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 1
Project Aspect Description
Project management style The project manager should adopt to the management style of an orga-
nization. For example, a project manager cannot follow a permissive
management style in an autocratic organization where all decisions are
made unilaterally.
Team performance assess- A project manager should adhere to a company’s prospects when
ments assessing the performance of a team. For example, an employee should
not be promoted to the next level unless he or she meets all the stan-
dards set by the organization.

Organizational Process Assets

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

Category Description
Processes and procedures These are the processes and procedures an organization uses for per-
forming project related tasks. Examples may include:
• Policies, product and project life cycles, and quality policies and
procedures.
• Standard guidelines, proposal evaluation criteria, work instructions,
and performance measurement criteria.
• Templates such as work breakdown structures, project schedule
network diagrams, and contract templates.
• Tailored guidelines and criteria for organizational processes that
will satisfy specific project needs.
• Organizational communication requirements and project closure
guidelines.
• Procedures to control finance such as time reporting, required
expenditure and disbursement reviews, accounting codes, and stan-
dard contract provisions.
• Issue and defect management procedures that define, identify,
resolve, and control issues and defects, and then track the action
items.
• Procedures to control changes to any project documents and risks
that might occur.
• Procedures for prioritizing, approving, and issuing work authoriza-
tions.

Lesson 1: Understanding Project Management Fundamentals 17

LESSON 1
Category Description
Corporate knowledge base This is a corporate knowledge repository for storing and retrieving
information. Examples may include:
• Process measurement databases that provide measurement data on
processes and products.
• Project files such as scope, cost, schedule, and quality baselines;
performance measurement baselines; project calendars; and risk
registers.
• Lessons learned knowledge bases and historical information.
• Issue and defect management databases.
• Configuration management knowledge bases.
• Financial databases.

ACTIVITY 1-2
Examining the Organizational Influences on Project
Management
Scenario:
A project lead in a company is expected to train new team members about various aspects of
the organizational structure of the company. The company predominantly does projects for
other associations while managing its own functional departments. Apparently, there was non-
compliance in one of the projects that was led by the trainer who was also acting as the
project lead.

1. In which organizational structure does a project manager have maximum influence?

a) Functional organization
b) Weak matrix
c) Strong matrix
✓ d) Projectized organization

2. In which form of organization do projects receive the least attention?

✓ a) Functional
b) Matrix
c) Composite
d) Projectized

18 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 1
3. A frequent complaint about matrix organizations is that communications are:
a) Hard to automate
b) Closed and inaccurate
✓ c) Dual reporting relationship
d) Misleading

4. Which type of organization is the best for managing complex projects involving cross-
disciplinary effort?
a) Projectized
b) Functional
c) Complicated
✓ d) Strong matrix

5. Who has greater power in a strong matrix?

✓ a) The project manager
b) Senior management
c) The sponsor
d) The functional manager

TOPIC C
Examine the Project Management
Context
You described the organizational influences on project management. There are concepts and
terminologies related to managing projects that will help you understand project management.
In this topic, you will describe the project management context.
Understanding project management in a broader context will help you gain insight to your role
as a project management practitioner. If you want to work effectively within the hierarchy of
centralized project management efforts, you need to be conversant with the project manage-
ment context: the overlapping ways in which people use project management within the
workplace.

Lesson 1: Understanding Project Management Fundamentals 19

 LESSON 1
Program Management
Program Management Definition:
Program management is the centralized, coordinated process of managing a program in
accordance with the business’ strategic objectives. It helps realize benefits that cannot
be obtained from managing individual projects. The distinguishing characteristic of
program management is that it requires managers to manage related and interdependent
projects by allocating resources, prioritizing efforts, resolving issues, and maintaining
the related projects’ alignment with business objectives in an integrated manner.

Example: Program Management by a Coffee Retailing Company

Samantha Richmond, the program manager at the Everything For Coffee retailing com-
pany, identified the various projects that need to be executed for the retail chain
expansion. She assigned a priority level to each project, and decided to conduct market
research to determine store locations and identify franchisees.

Portfolio Management
Portfolio Management Definition:
Portfolio management is the effective management of programs and independent
projects to achieve strategic goals of an organization. Portfolio management allows
managers a global, top-down view of the health and viability of all the projects in the
group. The projects collected in a portfolio and managed together may or may not be
interdependent, but they are grouped together to give management the long view of the
organization’s projects and their adherence to organizational objectives.

Example: Portfolio Management by the Automobile Company

The senior management of the automobile company uses portfolio management to
manage several unrelated projects in the areas of power generation, transportation sec-
tor, and domestic and industrial markets. Part of their portfolio management effort
includes ensuring that all the projects in the portfolio are aligned with the business’
strategic objectives and priorities.

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

Relationships Among Project, Program, and

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

20 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 1
Portfolios, programs, and projects interact with each other, and this interaction is considered
when initiating a project or program, updating the constituent programs and projects with
changes made to the portfolio, conducting project and program governance, and providing
information to the portfolio or program during the program or project life cycle. The relation-
ships among individual projects, programs, and portfolios are interrelated with the strategies
and priorities of the organization. Organizational planning, therefore, focuses on this interrela-
tion and determines the prioritization, directs project funding, and provides support to
constituent projects.

Comparative Overview of Project, Program, and Portfolio Management

The table provides a comparative overview of project, program, and portfolio manage-
ment.

Characteristic Project Program Portfolio

Scope Project objective Program scope is usu- The business scope of
or scope is defined ally comprehensive the portfolio changes
when the project and provides signifi- with the strategic orga-
starts and is pro- cant benefits to nizational goals.
gressively business objectives.
elaborated
throughout its life
cycle.
Change Project managers Changes can occur Changes in the broad
must identify and both inside and outside environment are moni-
implement pro- the program. Program tored by the portfolio
cesses to manage managers are respon- managers.
and control sible for managing and
changes in the controlling these
projects. changes and guiding
the project managers
to manage project
changes.
Planning Project planning A program plan is Portfolio managers
occurs throughout developed during the manage the required
the project life initial stages of the processes and commu-
cycle. As a project program. Detailed nication related to the
progresses, high- high-level plans are portfolio.
level information created later—at the
is introduced into component level.
the detailed
project plans.
Management Project managers Program managers Portfolio managers
handle or manage provide vision and manage the portfolio
their respective overall leadership for management staff.
project teams. their constituent
projects and also man-
age program staff.

Lesson 1: Understanding Project Management Fundamentals 21

LESSON 1
Characteristic Project Program Portfolio
Success Success is mea- Success is measured Success is measured in
sured by the by the degree to which collective performance
quality of the the program attains the of all components in
product, compli- benefits, fulfills the the portfolio.
ance to project needs for which it was
timelines, budget, undertaken, and
and degree of cus- achieves business
tomer satisfaction. objectives.
Monitoring Project managers Program managers Portfolio managers
monitor the pro- monitor the progress monitor collective per-
duction of of a program’s con- formance and value
products or ser- stituent projects, and indicators.
vices that the ensure that the pro-
project is intended gram components meet
to produce. the overall goals,
schedules, budget, and
the expected program
benefits.

Operations Management
Operations Management Definition:
Operations management is the management of resources and processes involved in
producing and delivering products and services. It ensures that business operations are
efficient and effective and that the quality of goods or services produced is optimal.
The operational processes and products are aligned with the business requirements of
the organization. Therefore, the operations manager must ensure that these processes
and products are continuously revised to accommodate the changes made to the busi-
ness and organizational requirements. Operations management also includes identifying
the best practices and implementing them in the existing processes and systems.

Example: Operations Management in a Petrochemical Company

A petrochemical company has assigned Steven Edwards as the operations manager of
its new refinery. Steven has been handling the operations of the new facility since last
month. He has identified the roles and responsibilities required to effectively carry out
the identified operational works and defined the processes and procedures to be fol-
lowed by each team. He also talked with the operations managers of other plants to
identify the best practices they follow. In addition to this, Steven is also involved in
managing daily production activities; administering routine maintenance of the plant;
handling wage increases; and supervising raw material purchases, grievance-handling,
logistics, and supply of finished products to the market. He also ensures that his work
is in line with the current organizational strategies and procedures.

Project and Operations Management

Project and Operations
In an organization, projects and operations complement each other in order to achieve organi-
Management zational goals and objectives. This is primarily done by splitting the management of activities
into project and operations management. Project management involves planning, organizing,
and managing resources involved in a project and thus ensuring the successful completion of

22 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 1
specific project goals and objectives. Projects are undertaken to meet a specific objective and
are time bound and temporary in nature. On the other hand, operations management involves
managing ongoing endeavors that produce repetitive outputs. Organizations may change their
operations based on any change in the business or organizational objectives.
During the project life cycle, project management and operations management interact at vari-
ous points such as:
• When developing new products, upgrading existing products, or expanding outputs.
• When improving the operations or the product development process.
• During the closeout phases.

Agile Project Management

Agile project management refers to taking an iterative approach to managing a project through- Agile Project Management
out its life cycle. It allows the project manager to continually re-evaluate progress,
development, and priorities and make adjustments as needed. It is a fluid, dynamic process that
emphasizes face-to-face communication.

Figure 1-6: The Agile project management process.

Lesson 1: Understanding Project Management Fundamentals 23

LESSON 1
ACTIVITY 1-3
Describing Project Management Context
Scenario:
You are hired as a project manager in a $2 billion company established in the United States.
Its annual turnover has been increasing consistently; there are several programs under the five
portfolios that meet the company’s strategy. You are required to oversee the assigned projects
for various programs. Periodically, the senior management reviews the projects and takes
action if they do not meet the strategic goals.

1. Based on the scenario, who is responsible for portfolio management within the organi-
zation?
a) Project managers
b) Project sponsors
c) Stakeholders
✓ d) Senior management

2. What is a portfolio?
a) It may include elements of related work outside the scope of discrete projects in the
program.
✓ b) It is a collection of projects, or programs, and work that are grouped together to
facilitate effective management of work to meet strategic business objectives.
c) It includes components of a project that are often contracted out to an external
enterprise or to another functional unit in an organization.
d) It is a group of related projects managed in a centralized and coordinated way to
obtain benefits.

3. Who is responsible for a group of similar projects?

a) The portfolio manager
b) The general manager
c) The project manager
✓ d) The program manager

4. One goal of portfolio management is to:

a) Manage various elements of the project including scheduling; identifying require-
ments; establishing objectives; and balancing quality, scope, time, and cost.
b) Manage the levels of financial authority to facilitate decision making in projects.
✓ c) Maximize the value of the portfolio by carefully selecting only those projects and
programs that meet the organization’s strategic objectives.
d) Apply resource-leveling heuristics across all the organization’s projects.

24 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 1
Lesson 1 Follow-up
In this lesson, you identified the fundamentals of project management. This enables you to
enhance your chances of success as an aspiring project management practitioner, and apply
your knowledge in handling a wide range of projects across application areas and industries.
1. How will understanding the project management context help you in professional
project management?
Answers will vary, but may include: that the insight into your role as a project manage-
ment practitioner, identification of the management organizational structure within your
organization, and the application of this knowledge to managing your project would
ensure the adherence to professional management practices that meet your organiza-
tional objectives successfully.
2. Do you think organizational structures will influence your projects? How?
Answers will vary, but may include: that the organizational structure that is prevalent in
your organization determines how resources are available to your project and also indi-
cates the reporting relationship of these resources in the company hierarchy. Having
suitable control and communication with project resources ensures the success of any
project manager.

Lesson 1: Understanding Project Management Fundamentals 25

NOTES

26 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 2

LESSON 2 Lesson Time

1 hour(s), 10 minutes

Identifying Project
Management Processes
In this lesson, you will identify project management processes.
You will:
• List and describe the phases and characteristics of the project life cycle.
• List and describe project management processes and process groups.

Lesson 2: Identifying Project Management Processes 27

LESSON 2
Introduction
You have identified project management fundamentals, and you can now apply this knowledge
to more complex aspects of project management. Project management requires the application
of a number of processes defined by process groups. In this lesson, you will identify the
project management processes.
Managing a project is no simple task. Following well-defined processes to manage and execute
a project can significantly boost the chances of its successful completion. Knowledge of these
processes and how they are applied to a project will help you plan the project efficiently and
ensure smooth execution.

TOPIC A
Examine the Project Life Cycle
In this lesson, you will identify the project management processes that are considered stan-
dards for excellence. Before moving on to the processes, you need to know what constitutes a
project. In this topic, you will list and describe the phases and characteristics of the project life
cycle.
To have better control over the project as a whole, you must understand the different phases in
the life of a project. Identifying the critical and the noncritical aspects of the project becomes
easier and gives you a better idea of where your time and money should go. It is also easier to
track the progress of the project. Therefore, the knowledge of the project life cycle will help
you to effectively define the project management processes for your project.

The Project Life Cycle

The Project Life Cycle
In order to improve management control, projects are typically broken down into manageable,
sequential phases of work activities. Those project phases, taken together, are referred to as the
project life cycle. Project life cycles may have four or five phases, which can vary as the life
cycle is customized to meet the needs of specific projects. The project life cycle is marked by
the beginning and the end of the project. During the initial phase, the project’s general scope
and timing are determined. During the intermediate phases, detailed planning occurs along with
the actual work activities. In the final phase, project-closing activities occur.

Figure 2-1: The project life cycle.

Product vs. Project Life Cycle Relationships

Product development typically takes place in several stages, which include introduc-
tion, growth, maturity, and decline. These stages constitute the product life cycle.
A product life cycle contains product phases that are determined based on the manu-
facturing and control needs of the organization. In this life cycle, product phase-out
generally happens at the last phase. Normally, a project life cycle is included within
one or more product life cycles. So it is important to differentiate the project life cycle

28 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 2
from that of a product. If a project produces a service or result as its outcome, then it
will have a project life cycle and not a product life cycle. But if the outcome is a
product, then it may have many possible relationships to the project life cycle. For
example, developing a new product can be a project by itself, or if an existing product
has new functions or features, then developing a new model of the product can be a
project of its own.
There are many facets to a product life cycle that can run as projects. Some of the
examples include conducting market research, performing a feasibility study, running
an ad campaign, and installing a product. In these cases, a product will have many
projects associated with it and the product gains only when they are handled collec-
tively.

General Characteristics of a Project Life Cycle

Though projects differ in nature, size, and complexity, they display certain common character- General Characteristics of a
istics. At the beginning of the project, the cost and staffing levels are quite low. They reach the Project Life Cycle
peak once the work is carried out and drop rapidly upon project completion. The influences,
uncertainties, and risks involved with stakeholders are high at the project start and diminish
over the life of the project.
Likewise, the ability to influence the characteristic of the final product, without impacting the
project cost, is high during the initial phases of a project and is lower towards project comple-
tion.

Figure 2-2: The variance of project cost and stakeholder influence, risk, and uncer-
tainty based on project time.

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

Lesson 2: Identifying Project Management Processes 29

 LESSON 2
Governance Activities in the Project Life Cycle
Governance Activities in the
At the beginning of each phase, it is a good practice to verify and validate the former assump-
Project Life Cycle tions made to the project, analyze risks, and explain in detail the processes required to achieve
a phase’s deliverables. After the key deliverables of a particular phase are produced, a phase-
end review is necessary to ensure completeness and acceptance. Even though this method
signifies the start of the subsequent phase, a phase can be closed or the project terminated
when huge risks are involved for the project or when the objectives are no longer required.

Phase-to-Phase Relationships in a Project

Phase-to-Phase Relationships
Projects that are multi-phased generally follow a sequential process that ensures greater control
in a Project over the project and aids in achieving the desired product, service, or result. There are three
types of phase-to-phase relationships: sequential, overlapping, and iterative. Sometimes, multi-
phased projects will have more than one phase-to-phase relationship occurring during the life
cycle of a project. In such cases, factors such as the level of control, effectiveness, and the
degree of uncertainty decide the relationship that can be applied between phases. Based on
these factors, all three types of relationships can be applied between different phases of a
project.
Each of the phase-to-phase relationships has specific characteristics.

Relationship Type Description

Sequential This type of relationship:
• Contains consecutive phases.
• Starts only when the previous phase is complete.
• Reduces the level of uncertainty, which may eliminate the option for
shortening the schedule.
Overlapping This type of relationship:
• Contains phases that start prior to the completion of its preceding
phase.
• Increases the level of risk and can cause rework if the subsequent
phase begins before it receives accurate information from the previous
phase.
Iterative This type of relationship:
• Includes one phase at a time that will be planned and carried out.
• Requires planning for the next phase as the work in the current phase
progresses.
• Is largely helpful in environments that are quite uncertain and unde-
fined.
• Reduces the chances for long term planning.
• Helps in minimizing project risk and maximizing the business value of
the product.
• Is an extension or corollary of the overlapping relationship, but in this
case the same phase repeats itself multiple times—once in every itera-
tion.

30 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 2
Progressive Elaboration
The phases of the project life cycle are arranged to allow for progressive elaboration, in which Progressive Elaboration
successive layers of detail are added to the plans as the project progresses. Usually, the
sequence of the phases defined by most project life cycles involves some type of handoff or
deliverable. Most often, deliverables from one phase are approved before work begins on the
next phase. For example, design specifications are approved and handed off before the design
phase begins. However, a subsequent phase may begin before approval is gained on the
deliverables of a previous phase if the risks are considered acceptable. It helps the project
management team plan work to a greater level of detail as the project progresses.

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

Figure 2-3: Detail is added to plans in progressive elaboration.

ACTIVITY 2-1
Examining the Project Life Cycle
Scenario:
You are hired as the project manager for a large global service provider. Your organization
wants your team to design an electrical grid for a new customer within a stipulated time. As a
project manager, you also want to ensure that your team members understand the concept of a
project life cycle and how it applies to the current design project. In this regard, you want to
conduct a training session for your team members. Before conducting the session, you want to
check your understanding of the project life cycle.

1. Which best describes project governance?

a) A relationship type that starts only when the previous phase is complete.
b) A relationship type containing phases that start prior to the completion of the pre-
ceding phase.
c) A process of development in which additional layers of detail are defined over the
course of a project.
✓ d) A comprehensive methodology to control a project and ensure its success.

Lesson 2: Identifying Project Management Processes 31

LESSON 2
2. Which best describes progressive elaboration?
a) A relationship type that starts only when the previous phase is complete.
b) A relationship type containing phases that start prior to the completion of its preced-
ing phase.
✓ c) A process of development in which additional layers of detail are defined over the
course of a project.
d) A comprehensive methodology to control a project and ensure its success.

3. True or False? A sequential phase-to-phase relationship type is an extension or corol-

lary of the overlapping relationship type.
True
✓ False

TOPIC B
Recognize Process Groups
You are familiar with the project life cycle. To apply appropriate processes to every phase of
the project, you need to know the various process groups and the processes within them. In
this topic, you will list and describe the project management processes and the process groups.
To efficiently manage a project, you need to follow defined processes that help you organize
the project workflow. The knowledge of various processes and their groups will help you apply
them to the project phases appropriately.

Project Management Processes

Project Management
A process is a sequence of activities designed to bring about a specific result in response to a
Processes business need. Project management processes are all the activities that underlie the effective
practice of project management; they include all the phases of initiating, planning, executing,
monitoring and controlling, and closing a project. Project management processes may produce
project deliverables, such as schedules and performance reports, or product deliverables, such
as software interface specifications or a building’s foundation.
Project management processes are recognized within the profession as good practice; applying
them appropriately improves the chances of success on nearly any project. Since not every
process takes place on every project, determining which processes are appropriate for a given
project is referred to as tailoring. The project manager and the project team are responsible for
tailoring the applicable processes to meet the needs of a specific project or phase.

Figure 2-4: The project management processes.

32 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 2
Project Management Inputs, Tools and
Techniques, and Outputs
Project management processes are implemented through inputs, tools and techniques, and out- Project Management Inputs,
puts. Inputs are the information and data that project managers draw on, create, or gather to Tools and Techniques, and
guide their work for a specific process to achieve project goals; inputs can be new information Outputs
or information that has been derived during the course of the project. Tools and techniques are
the methods, templates, or approaches that project managers employ within a particular pro-
cess, using a combination of inputs, to achieve stated goals. Outputs are the end results and
deliverables achieved during project management processes and can become inputs into subse-
quent processes.

Figure 2-5: The relationship between project management inputs, tools and tech-
niques, and outputs.

Project Management Process Groups

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

Process Group Description

Initiating Initiating processes involve defining the need for a new project or the
new phase of an existing project, and obtaining a commitment to move
forward.
Planning Planning processes are used to create the project scope, refine objectives,
and develop a strategy to accomplish the work in the project or phase.
Executing Executing processes involve carrying out the work mentioned in the
project management plan in order to meet project specifications.
Monitoring and controlling Monitoring and controlling processes include regular monitoring of
project performance and track progress that was made in the project or
phase. They also include changes that are to be made to the plan when
required and make corrective actions needed to get back on track.
Closing Closing processes involve finalizing the project activities, handing off the
project or phase output, gaining formal acceptance, tying up administra-
tive and contractual loose ends, and finally closing the project or phase.

Product-Oriented and Project Management Processes

The project processes fall into one of two major categories:
• Product-oriented processes: These processes specify and create the project’s
product. They are defined by the project life cycle and vary by application area.
The scope of the project can be defined only with some basic understanding of
how the product can be created.

Lesson 2: Identifying Project Management Processes 33

 LESSON 2
• Project management processes: These processes ensure the effective flow of the
project throughout the project’s life cycle.

The Initiating Process Group

The Initiating Process Group
The initiating process group includes processes to develop a project charter and identify stake-
holders. The process of developing the project charter involves developing a document that
formally authorizes a project or a phase. In addition, this process involves documenting initial
requirements that satisfy the stakeholder’s needs and expectations. The process of identifying
stakeholders involves identifying and documenting information related to their interests,
involvement, and impact on project success. This process group also leads to determining the
high-level strategies to manage stakeholders depending on the varied combinations of interests,
influence, power, and so on.

The Planning Process Group

The Planning Process Group
The planning process group involves processes that help plan and manage a project. Informa-
tion is gathered from all sources about the project and is used to construct a project
management plan. The project scope, schedules, and costs are further refined depending on the
new information that is gathered. The planning process group includes processes for develop-
ing the project management plan, collecting requirements, defining the scope, creating a Work
Breakdown Structure (WBS), defining and sequencing activities, estimating activity resources
and durations, developing schedules, estimating costs and determining budget, planning quality,
developing the human resource plan, and planning communications. In addition, processes for
planning risk management, identifying risks, performing qualitative and quantitative risk analy-
sis, planning risk responses, and planning procurements are also performed in this process
group.

The Executing Process Group

The Executing Process Group
The executing process group involves processes that help accomplish tasks defined by the
project management plan. The processes applied to a project are defined by the project require-
ments. These include directing and managing project execution; performing quality assurance;
acquiring, developing, and managing a project team; distributing information; managing stake-
holder expectations; and conducting procurements. All these processes are used to coordinate
the people and resources involved in the project and execute the project as outlined by the
project management plan.

The Monitoring and Controlling Process Group

The Monitoring and
The monitoring and controlling process group involves processes that monitor the project
Controlling Process Group execution, and it identifies any potential problems that can be rectified. These processes con-
tinually monitor work progress and performance of a project and reveal variances from the
project plan. Processes include performing an integrated change control, verifying and control-
ling the project scope, controlling the schedule, controlling project costs, performing quality
control, reporting performance, monitoring and controlling risks, and administrating procure-
ments.

34 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 2
The Closing Process Group
The closing process group involves processes that are used to formally close all project activi- The Closing Process Group
ties. Processes include closing a project or phase, and closing procurements. This process
group ensures that every process within each process group is complete before the formal
project closure.

Project Management Process Group Interactions

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

Figure 2-6: The process group interactions.

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

The Project Management Knowledge Areas

Each of the nine knowledge areas is an identified area of project management described in The Project Management
terms of its component processes and defined by its knowledge requirements. Knowledge Areas

Lesson 2: Identifying Project Management Processes 35

LESSON 2

Figure 2-7: Overview of project management knowledge areas and project manage-
ment processes.

Knowledge Area Description

Project integration management Ensures that the various elements of the project are properly
coordinated.
Project scope management Ensures that the project includes all work required, and only
work required, to successfully complete the project.
Project time management Ensures timely completion of the project.
Project cost management Ensures that the project is completed within the approved budget.
Project quality management Ensures that the project will satisfy the needs for which it was
undertaken.
Project human resource management Ensures the most effective use of project team members.
Project communications management Ensures timely and appropriate generation, collection and dis-
semination, storage, retrieval, and ultimate disposition of project
information.
Project risk management Identifies, analyzes, and responds to project risks.
Project procurement management Ensures the purchase or acquisition of the products, services, or
results needed to perform project work external to the project
team.

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

36 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 2
Process Groups Mapping
The mapping of the project management process groups to the knowledge areas is as
given below.

Figure 2-8: Project management process groups and knowledge areas mapping.

Lesson 2: Identifying Project Management Processes 37

 LESSON 2
ACTIVITY 2-2
Recognizing Process Groups
Before You Begin:
From the C:\085061Data\Identifying Project Management Processes folder, open the OGC
Business Transformation Scenario Overview document and the Project Management Framework
image.

Scenario:
Our Global Company (OGC) is a large telecommunications company that provides mobile net-
work services across the northeast corridor. You are one of 10 project managers within your
organization who will be involved in implementing a business transformation strategic plan
that calls for acquiring large, successful competitors in the high-growth, high-population-
density metropolitan areas of North America.
The competitors that are identified for acquisition must have a unique, creative business model
that can be integrated into a synergistically superior overall OGC model. The development and
rollout of this business model is the focus of this expansion program. The plan is backed by
funds from banks, shareholders, and OGC’s capital investments and as such has some very
high expectations in specified time frames. Your company wants you to plan the strategic
expansion strategies. As a project manager, you need to identify the project deliverables and
processes that will help you save time for the project and apply them suitably to your project.
Review the OGC Business Transformation Scenario Overview document before answering the
questions in this activity.
You may also find it helpful to review the Project Management Framework image before
answering the questions in this activity.

It may be helpful for students

to have a hard copy of the
1. You have reviewed the OGC Business Transformation Scenario Overview document.
OGC Business Transformation
You are at which point in the project management process?
Scenario Overview document
to refer to throughout this ✓ a) Initiating
course. See the Additional
b) Planning
Instructor Notes for more
presentation suggestions. c) Executing
d) Monitoring and controlling

See Additional Instructor

e) Closing
Notes
2. Based on the OGC Business Transformation Scenario Overview document, who are the
appropriate stakeholders for the business transformation program?
✓ a) Senior executives
✓ b) Investment principals
✓ c) CEOs and CFOs
✓ d) Program IT staff
e) OGC BPO

38 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 2
3. Which project management process will you apply to refine program objectives and
the courses of action the project team will take to meet program objectives?
a) Initiating
✓ b) Planning
c) Executing
d) Monitoring and controlling
e) Closing

4. Which project management process group will you apply to regularly measure progress
and identify variances from the project management plan?
a) Initiating
b) Planning
c) Executing
✓ d) Monitoring and controlling
e) Closing

5. Which project management process group will you apply to integrate people and other
resources to fulfill the project management plan for the program?
a) Initiating
b) Planning
✓ c) Executing
d) Monitoring and controlling
e) Closing

Lesson 2 Follow-up
In this lesson, you identified project management processes. By understanding these processes,
you can plan the project efficiently and ensure smooth execution.
1. Which processes will you use often while executing a project?
Answers will vary, but may include: when executing a project, you may use processes such
as directing and managing project execution, performing quality assurance, acquiring
project team, and managing stakeholders.
2. Which activities will you perform frequently during the initial phase of a project life
cycle?
Answers will vary, but may include: while you are in the initial phase of a project life
cycle, you may perform activities such as identifying the project’s objectives and deter-
mining the project time.

Lesson 2: Identifying Project Management Processes 39

LESSON 2
3. How do you think that developing the ability to tailor each of the five project manage-
ment process groups to meet the needs of a specific project or phase will improve your
chances of success?
Answers will vary, but may include: the five project management process groups are a
recognized worldwide standard that was created over time by experienced project man-
agement professionals. These process groups have been tried and tested and have found
immense success in the area of project management. Project managers can tailor these
processes to meet their specific requirements or needs of a project or phase.

40 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 3

LESSON 3 Lesson Time

2 hour(s), 45 minutes

Initiating a Project
In this lesson, you will initiate a project.
You will:
• Identify factors in the project selection decision-making process.
• Prepare a project statement of work.
• Create a project charter.
• Identify and list the items in a project management plan.

Lesson 3: Initiating a Project 41

LESSON 3
Introduction
Project management is an integrated endeavor composed of five interlinked process groups and
their component processes. The first of the five process groups is initiating a project. In this
lesson, you will identify the methods and processes involved in this group, and initiate a
project.
Starting a project is like taking a new job—the more you know about the company, the team
members, and what is expected of you, the more likely you are to hit the ground running and
make a good impression. Ensuring that your project starts out right will save you time and
resources. It will also eliminate the need to backtrack once your project is officially under way.

42 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 3

Figure 3-1: The project management framework.

The Project Management

Framework (2 Slides)

Lesson 3: Initiating a Project 43

LESSON 3
TOPIC A
Examine Project Selection
Now that you have a sound understanding of how project management functions within an
organization, you need to identify the ways in which decision makers make critical choices
among competing projects. In this topic, you will identify some of the most significant compo-
nents of project selection, which include project selection criteria, project selection methods,
and project selection decision models. You will also identify some of the different approaches
for conducting analyses, such as capital budgeting and feasibility analysis.
In increasingly competitive business environments, there will always be projects competing for
funding, resources, and priority. As a project team member, you will not be responsible for
selecting the projects that your organization will pursue, but you need to understand the meth-
odologies behind making sound choices about which projects to pursue, prioritize, and fund.
Applying appropriate project management methodology to this area will increase your chances
for success.

Business Requirements
Business Requirements Definition:
Business requirements are the pressing organizational needs or market stimuli that
drive decision-makers to sponsor projects and to prioritize competing projects. They
may also be referred to as “problems” and “opportunities.” Business requirements
force management to make critical choices about which projects to authorize, and
when.

Example: Business Forces

Business requirements may include forces such as:
• Market demands.
• Organizational needs.
• Customer requests.
• Technological advances.
• Legal requirements.
• Social needs.

Project Selection Criteria

Project Selection Criteria Definition:
Project selection is the act of choosing a project from among competing proposals.
Project selection criteria are the standards and measurements an organization uses to
select and prioritize projects. The organization’s strategic goals provide a source for at
least one dimension of selection criteria. Any project selected should be clearly linked
to one or more strategic goals. Other selection criteria may be qualitative or quantita-
tive. Qualitative criteria deal with the project’s fit with the organization’s capabilities.
Quantitative criteria may specify financial targets that the project must meet.

44 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 3
As a professional project manager, you will typically not be responsible for selecting the projects that
your organization will pursue, but you need to understand the methodologies that decision makers use
when choosing which projects to pursue, prioritize, and fund.

Example: Project Selection Criteria at a Financial Services Organization

A financial services organization considering a project proposal to integrate their cus-
tomer and financial databases may develop the following project selection criteria:
• Links to the organization’s strategic goal of obtaining a technological advantage
over the competition.
• Qualitative criteria—Feasible to produce using only internal resources.
• Quantitative criteria—Meet or exceed the defined internal goal of increasing new
sales revenue by 10 percent.

Project Selection Methods

Definition: Project Selection Methods
Project selection methods are any systematic approaches that decision makers use to
analyze the value of a proposed project. These evaluations may be formal and very
detailed or informal “guesstimates,” depending on the organization and its needs. Ide-
ally, they should take into account the organization’s strategic objectives, as well as
historical information about past successes and failures.

Example: Selecting Projects

A professional services firm with a business need of maximizing their profit has the
opportunity to implement two new projects, but has resources for only one by the end
of the fiscal year. So they might perform an analysis of the projected cost, projected
duration, and projected financial benefits to prioritize the one that will give the greater
financial return within a short period of time.

Project Selection Decision Models

A project selection decision model provides a framework for comparing competing project pro- Project Selection Decision
posals by helping decision makers compare the benefits of one project alternative with another. Models

Method Description
Benefit measurement models Analyze the predicted value of the completed projects in different
ways. They may present the value in terms of forecasted revenue,
Return on Investment (ROI), predicted consumer demand in the mar-
ketplace, or the Internal Rate of Return (IRR).
Mathematical models Use different types of mathematical formulas and algorithms to deter-
mine the optimal course of action. They may consider variables such
as business constraints, the highest possible profit that could be made
on a project, and the laws and safety regulations that govern business
operations.

Lesson 3: Initiating a Project 45

LESSON 3
Project Selection Factors
Project selection can be difficult because each project may present a complex array of
seemingly incomparable selection criteria. Economic and technological considerations
often influence project selections. In many application environments where ecological,
health, and ethical impacts are increasingly important, often the only way to choose
from many different project alternatives is by relying on unsubstantiated professional
judgment or past experience. To improve the efficiency and effectiveness of the assess-
ment, many organizations use formal decision models to select the appropriate project
to initiate.

Capital Budgeting
Capital Budgeting
Capital budgeting helps senior executives make determinations about when and whether to
make significant investments in capital expenditures such as new equipment, machinery, and
facilities. Capital budgeting is often used if a project is large or if it is likely to involve the
purchase of fixed assets. In these cases, the decision makers may use formal methods such as
payback period, discounted cash flow, and Net Present Value (NPV).

Scoring and Rating Systems

Scoring and Rating Systems
A scoring and rating system is used to find the best available solution or outcome.

Rating System Description

Decision tree In a decision tree model, selection criteria are arranged along the
branches of a tree flowchart. The project is evaluated against criterion
#1 on branch #1. If the project meets the criterion, it travels down to
branch #2, where it is evaluated against criterion #2, and so on. If the
project fails to meet any one criterion, it is removed from consider-
ation.
Criteria profiling This is similar to the decision tree in that the project is evaluated
using one criterion at a time. However, in this model, the project con-
tinues to be considered even if it fails to meet some of the criteria. At
the end of consideration, the project is scored on the number of crite-
ria met. The score is then compared to other projects also under
consideration. The standard format of criteria profiling is considered an
unweighted factor model because the same score is assigned to each
criterion in the profile.
Weighted factor This type of model is similar to criteria profiling, but different criteria
may be weighted and factored into the scoring. For example, a project
may get one point for meeting a low-priority criterion and three points
for meeting a high-priority criterion.
Q-sorting In a Q-sorting model, groups of people rate the relative priority of a
number of projects. The process begins by determining rating criteria.
Each group member is given a deck of cards with a different project
listed on each card. Each group member sorts the deck into high,
medium, and low priority, based on the pre-determined criteria. The
high priority projects are further sorted to identify very high priority
projects. The group compares their high priority project selections.
Any projects they decide to pursue would be chosen from among the
consensus of high priority projects.

46 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 3
Rating System Description
Delphi technique The Delphi technique allows experts to be located remotely and
remain anonymous, yet still participate in group decision making.
People participating in a Delphi process are given criteria, asked to
rate a project on a zero-to-ten scale, and provide reasons for their rat-
ings. The resulting statistics are fed back to the participants along with
a summary of the group’s reasoning. Participants can then revise their
rating based on the group findings. The process repeats until some pre-
determined score is reached.

Feasibility Analysis
Definition: Feasibility Analysis (2 Slides)
A feasibility analysis gives management the technical and operational data they need to
make a decision about project selection. In many cases, the feasibility analysis is based
on expert judgment about current technological developments, in-house technical capa-
bilities, and historical data relating to previous project phases.
If the feasibility analysis is a formal study, it should include:
• Description of the problem that the project is expected to solve.
• Summary of relevant historical data about previous project phases.
• Summary and evaluation of available technologies that could be used to solve the
problem, including the potential output quality of each.
• Evaluation, based on current assessment of the organization’s technical capability
and readiness to use each technology.
• Estimate of the costs and time to implement each alternative.
• Statement of assumptions or constraints used to derive the previous evaluations
and estimates.
• Recommendation as to the best alternative to pursue, based on projected cost,
time, and quality.
• Statement of project goals and major development milestones.

Example: Feasibility Analysis Report for Portal Development

A fast moving consumer goods (FMCG) company proposed to create an online portal
to improve its sales by reaching out to online shoppers. It conducted a feasibility
analysis, which included the following:
• Historical data such as e-commerce market evaluation, growth trend, consumer
patronage, and technology used.
• Financial and economic data such as detailed information about projected costs,
capital expenditures, and operational and management costs.
• Analysis and determination of the available e-commerce models, web technology,
and safety margins with a detailed risk analysis.
• A summary of the additional costs that include licensing, domain registration, web
hosting, and other variable costs.
• A summary of impacts on the company’s conventional sales network and its cus-
tomer support strategies.

Lesson 3: Initiating a Project 47

LESSON 3
• A conclusion, which summarized the analyst’s findings and made a recommenda-
tion regarding the B2C portal feasibility.

Cost-Benefit Analysis
Cost-Benefit Analysis Definition:
A cost-benefit analysis presents a project’s estimated costs alongside its predicted ben-
efits to help decision makers make informed decisions about project selection. Cost-
benefit analyses may be formal or informal. Although they contain quantitative
information, they are merely forecasted expectations, rather than hard data. It is impor-
tant to recognize and document any assumptions used to derive the cost and benefit
forecasts.
The costs include current operating costs and expected project costs related to the
function under analysis. The benefits include quantifiable benefits, such as increased
sales or reduced costs expected as a result of the project, and intangible benefits, such
as enhanced image or brand awareness that can only be described subjectively.

Example: Cost-Benefit Analysis for an Advertisement Campaign

The vice president of a consumer goods company proposed an innovative marketing
campaign across the country involving a famous sports personality to improve their
market share. He also estimated that the campaign would result in a 10 percent
increase in its sales revenue. But before agreeing to the proposal, the CEO of the com-
pany wanted to study the financial feasibility.
The CEO requested their advertisement agency to come up with the estimated produc-
tion and publishing cost of the campaign. The agency came up with a cost estimate of
$150 K.
Given the company’s current sales revenue of $4 million, the estimated 10 percent
improvement would result in an additional $400 K in sales. With the $150 K in
up-front costs for the marketing campaign, the net benefit is estimated to be $250 K.
The cost-benefit analysis results in a rough estimation of the company’s net gain.

48 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 3
ACTIVITY 3-1
Reviewing Project Selection
Scenario:
There are several programs under the five portfolios that meet OGC’s business strategy. You
are a project manager at OGC and are required to oversee projects from different programs.
You will attend a meeting with OGC’s senior management that reviews the projects and takes
action if they do not meet the strategic goals. Before the meeting, you wish to test your knowl-
edge on the standard project selection processes.

1. Match the rating and scoring system on the left with its description on the right.
a Decision tree a. A type of screening system decision
model that uses a branch diagram to
choose among two different alterna-
tives.
e Criteria profiling b. A decision model using groups of
people to rate the relative priority of
a number of alternatives.
d Weighted factor c. A group technique that allows experts
to be located remotely and remain
anonymous, yet still participate in
group decision making.
b Q-sorting d. A decision model that applies a mul-
tiplier based on importance to each
criterion, which is factored into the
scoring.
c Delphi technique e. A decision model used to evaluate
and score alternatives on each crite-
rion.

2. Which option should be linked to OGC’s project selection criteria?

✓ a) Strategic objectives
b) Cost-benefit analysis
c) Feasibility analysis
d) Capital budgeting

Lesson 3: Initiating a Project 49

LESSON 3
3. In OGC’s decision-making methodology, there are 10 weighted project criteria that
yield a score which determines the project’s priority. One of those criterion is purely
subjective for those times when an emphasis on go-with-your-gut is appropriate. The
resulting statistics are fed back to the participants along with a summary of the
group’s reasoning. Participants can then revise their rating using a zero-to-ten scale.
The process repeats until some pre-determined score is reached. Which combination
of scoring and rating systems is being used?
a) Decision tree and weighted factor
b) Decision tree and Q-sorting
c) Weighted factor and Q-sorting
✓ d) Weighted factor and Delphi technique

4. You have moved into the feasibility analysis and cost benefit analysis of project selec-
tion. One project budgeted for $100,000 came out of the selection process. This is the
company-wide training initiative to be implemented for all project managers to adhere
to PMO project management standards and guidelines. The intent of the training is to
ensure that each member of the project management team understands the scope,
time, and costs in managing competing project requirements. The program will include
specific technology training in the use of a software tool that OGC recently purchased
that totaled $20,000 so that managers can create, manage, and track their projects.
Currently only 10% of the project managers are using the software. One senior man-
ager is questioning the need for the budget to be as high as $100,000. What are your
justifications for the allotted budget? What are the benefits?
The justifications include: 1 — There will be a higher return on software investment by
increasing efficiencies in team members’ use of the tool. 2 — Compare the cost of the
software with the current 10% usage of the managers in the company. 3 — Knowledge of
this tool will ultimately provide better reporting on the status of each individual sub-
project to the overall business transformation project.The benefits include: 1 —
Consistency can be maintained across all projects that are included in the portfolio. 2 —
Provides an opportunity for all managers at all levels in identifying what is involved in
managing competing project requirements. 3 — Provides reinforcement of the company’s
strategic objective before project initiation.

50 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 3
TOPIC B
Prepare a Project Statement of Work
As a project manager looking for efficiencies and performance improvement in your projects,
you need to plan how to acquire project resources by crafting effective statements of work,
which provide enough detail that internal resources and potential sellers can evaluate their
capability to perform it. In this topic, you’ll focus on creating an effective statement of work.
Effective project management requires you to reduce costs, avoid rework, and streamline
efforts to the extent possible. An effective statement of work describes the work being sought
in sufficient detail so that potential sellers and internal resources can evaluate their capability
to perform it appropriately. This saves time, effort, and money, and increases your project’s
chances of meeting the requirements of the business.

Project Statement of Work (SOW)

Definition: Project Statement of Work
(SOW)
A Project Statement of Work (SOW) is a document that describes the products or ser-
vices that the project will supply, defines the business need that it is designed to meet,
and specifies the work that will be done during the project.

Example: A Project Statement of Work

Figure 3-2: Project statement of work for the OGC PM Training Roll-Out
project.

Internal or External SOW

A SOW may be internal, supplied by the project’s sponsor in response to an organiza-
tional need, or external, supplied by a potential client during a bidding process. An
external project SOW could be included with a request for a proposal or as part of a
contract.

Lesson 3: Initiating a Project 51

LESSON 3
How to Prepare a Project Statement of Work
How to Prepare a Project
An effective statement of work describes the work being procured in sufficient detail so that
Statement of Work (2 Slides) internal resources and potential sellers can evaluate their capability to perform this work. In
addition, the SOW will serve as a basis for developing the procurement documents during the
solicitation process.

Guidelines:
To prepare an effective statement of work, follow these guidelines:
• Review the product description to ensure that you fully understand the scope of
the work being procured.
• Consult technical experts to define specifications clearly, concisely, and com-
pletely.
• Determine appropriate SOW format.
— If your organization has a preferred or mandated SOW format, be sure to use
it and comply with any standards and policies regarding content.
— If there is no standard SOW format for your organization, you may be able
to modify a SOW from a previous, similar project.
• Present the information in a logical sequence.
• Use consistent terminology and level of detail throughout the SOW.
• Determine if any collateral services are required from a seller external to the orga-
nization as a part of the contract.
— What are the seller’s performance reporting requirements?
— Will the seller be required to provide any post-project operational support?
• Determine the acceptable criteria for the product or service.
• Make sure your SOW includes the following key elements:
— Clear identification of the project name and deliverable name or identification
number.
— A summary of work requested and benefits.
— The major deliverables or key events anticipated.
• List all major identifiable results of the work being performed on the
project.
• List the estimated date of completion for each deliverable.
— All resource requirements.
• List every person, work group, or material that will perform or be used
to perform actual work on the project.
• Provide a brief description of what they will be doing.
• Estimate the actual hours of work they will devote to the project.
— A description of the expected commitments from other departments or people
and how they will impact the project.
— A list of all risks and concerns.
• Include any event or activity that has the potential of affecting the
timeline for completion.
• Pay attention to any assumptions made in identifying work and scope.
— A description of the project completion criteria.

52 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 3
— A list of outstanding issues.
• Have the SOW reviewed by a knowledgeable third party to ensure that it is com-
plete, correct, and understandable.

Example: Preparing a SOW for Portal Development

An FMCG company initiated a project to build an online portal of its own to sell its
products online. James Kling was appointed as project manager for this project. He
enlisted the help of his organization’s sales and marketing head to create a SOW for
the project. He also hired a consultant to define the specifications of the various soft-
ware tools that would be required to develop the portal. One of the work packages was
to develop a front-end interface for the web user to view and do online shopping. The
team decided to outsource the development of this tool to an external software
vendor—an expert in developing interface software.
The organization had no existing preferred SOW format, so the project team
researched SOWs used by other companies for similar events. They ensured that the
SOW was laid out in a logical sequence and used consistent terminology throughout.
The statement also defined acceptable service criteria and included key elements such
as a schedule and acceptance standards. Before sending this SOW to prospective bid-
ders, the project team had the document reviewed and validated by an independent
legal firm.

DISCOVERY ACTIVITY 3-2

Preparing a Project Statement of Work
Data Files:
• Blank OGC Project Statement of Work

Before You Begin:

Review the Prepare a Statement of Work guidelines and then read the scenario.

Scenario: You can either have the

The Business Transformation Project is the first time that OGC has undertaken such a large students do this activity
individually or divide the class
enterprise-wide project. For this reason, the senior executives and core individuals of the Busi- into groups of three or four.
ness Transformation PMO will be selecting key individuals to create a project charter to Since this scenario is lengthy,
provide project management training for all team members. The intent of this training is to you may choose to review the
allow team members the ability to efficiently use a recently purchased software tool to create key points of the scenario with
and manage all project schedules. The training will also include internal process training for the students before asking
the Business Transformation Project with an overview of the management system that has been them to complete the activity.
developed for tracking and reporting on multiple, simultaneous projects. The goal of OGC is to Allow up to 15 minutes to
complete the activity, then
complete this high-priority training before the initiation of the primary Business Transforma-
discuss the answers with the
tion Project. whole class for approximately
• Without exception, all managers will use the project management scheduling and 10 minutes.
tracking software tool. OGC plans to use a local training center to provide train-
ing on the standard features of the software. The goal is to locate a training
provider that can accommodate at least 12 individuals at a time; that can offer
basic, intermediate, and advanced training for the software; and that can provide
after-training support.

Lesson 3: Initiating a Project 53

 LESSON 3
• OGC will also provide internal training on the use of customized reporting fea-
tures and customized views that stray from standard software training. There are
high expectations that the scheduling and tracking capabilities of this software
will provide senior management with the most up-to-date information on the sta-
tus of each individual project and its impact on the business transformation.
• Only 10 percent of the project managers in OGC have actually used the software
tool to manage their projects. There are approximately 50 managers who will take
the training, and three members of the PMO have been selected to create the
project Statement of Work (SOW).

The format of the Project SOW used in this activity is just an example of how a Project SOW can be
formatted.

1. What might be a logical first step in preparing the SOW?

✓ a) Verify if you should use the standard OGC SOW format.
b) Present the information in a logical sequence.
c) Provide a description of the project completion criteria.
d) List every person or work group that will perform actual work on the project.

2. Based on the scenario, which one or more of the following should be included in the
SOW?
✓ a) A clear description of what is required for the internal and external training.
✓ b) The specifications as to how both the internal and external training will be produced
and methods for ensuring that the specifications have been met.
c) A detailed breakdown of all deliverables that will be required to complete the
project.
✓ d) A list of the human resources or work groups that will perform actual work for the
training project.
✓ e) The estimated date of completion for both the internal and external training classes.

3. Yes or No? Based on the scenario, do you think that it will be necessary for OGC to cre-
ate an additional external SOW for this training project?
✓ Yes
No

4. From the C:\085061Data\Initiating a Project folder, open the List of Deliverables and
Resources document to use as a guide while creating the project statement of work.
You may want to display the
C:\085061Data\Initiating a 5. From the C:\085061Data\Initiating a Project folder, open the Blank OGC Project Statement
Project\Solutions\Completed of Work document and, based on the scenario, complete the project statement of work.
OGC Project Statement of
Work document rather than
having the students take the 6. Compare your Project Statement of Work document with the Completed OGC Project
time to complete the SOW on Statement of Work document, in the C:\085061Data\Initiating a Project\Solutions folder.
their own. The goal is to
allow students to see a com-
pleted Project SOW.

54 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 3
TOPIC C
Create a Project Charter
Determining the appropriate project management processes to apply to your project is an
important step in the initiating process. However, before you can apply organizational
resources to project activities, you need formal authorization to do so, through a project char-
ter. In this topic, you will create a project charter.
To accomplish project objectives, you need the support of the organization behind you. With-
out it, you may be unable to convince anyone that your project is valuable to the organization
or obtain the resources you need. An effective project charter ensures that you gain your orga-
nization’s support for the project and the authority to apply resources to project activities.

Project Charters
Definition: Project Charters
The project charter is a document that provides a clear, concise description of the
business needs that the project is intended to address. It makes a project official; it
authorizes the project manager to lead the project and draw on organizational resources
as needed. The project charter documents initial assumptions about the project, any
known constraints, and the expected results.

Example: A Project Charter

Figure 3-3: Project charter for the OGC PM Training Roll-Out project.

Sample Project Charter

To view a sample project charter, open the C:\085061Data\Initiating a Project\
Solutions\Completed Project Charter document.

The Develop Project Charter Process

Develop project charter is the first process in the project integration management knowledge The Develop Project Charter
area. The purpose of developing a project charter is to formally launch and authorize a new Process
project or to authorize an existing project to continue into its next phase. A project receives
authorization when the initiator signs the project charter. To be successful, the project must

Lesson 3: Initiating a Project 55

LESSON 3
link to the ongoing work of the organization and it must match its goals and capabilities with
business requirements. The project charter may be developed by an initiator such as a sponsor
or it may be delegated to the project manager. If the project charter is created by the sponsor,
it is advisable that the project manager is also involved in the development process.

Figure 3-4: The develop project charter process.

Develop Project Charter Inputs

Various components provide input into the develop project charter process.

Input Description
Project statement of work A document describing the products or services to be delivered by the
project.
Business case A document that justifies the investment made on a project and deter-
mines the benefits expected from the project. The reasons for creating
the business case include market demand, organizational and social
requirements, and customer requests.
Contract If the project is commissioned for an external customer, a contract
from the customer’s organization is an input for project charter devel-
opment.
Enterprise environmental fac- These are internal or external influences that affect project success.
tors For project charter development, these items include company culture,
government or industry standards, stakeholder risk tolerances, market
conditions, human resources, and information systems.
Organizational process assets The processes and procedures for accomplishing work and the corpo-
rate knowledge base for storing and retrieving information. For project
charter development, organizational process assets include policies,
procedures and guidelines, templates, methods for approving and issu-
ing work authorization, and communication requirements. The
corporate knowledge base may include a process measurement data-
base, project files, configuration management, financial data, and
historical information.

Develop Project Charter Tools and Techniques

Only one tool and technique is used in developing the project charter.

56 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 3
Tool and Technique Description
Expert judgment Knowledge provided based upon expertise in a knowledge area, an
application area, an industry, or discipline relevant to the project char-
ter development process. Expert judgment may be from internal or
external sources such as stakeholders, professionals, subject matter
experts, industry groups, PMO, and functional units.

Develop Project Charter Output

The only output from the develop project charter process is the project charter.

Output Description
Project charter Documents information such as project purpose, project objectives, high-level
project requirements, description, risks, and summary milestone schedule and bud-
get. Responsibility for the creation of a project charter varies widely from
organization to organization. In many companies, the project manager is respon-
sible for its creation, but it is issued by the sponsor.

Business Cases
Definition: Business Cases
A business case is a brief document that justifies the investments made for the project
and describes how a particular investment is in accordance with the organization’s
policy. It outlines the technical, investment, and regulatory factors that influence a
project. The business case provides a framework to link an investment proposal to the
achievement of an organizational objective.

Example: Business Case for the Geothermal Energy Project

Senior management at a power generation company called a meeting to review project
selections by the PMO. As project manager, Barbara Tolliver is required to present a
business case that outlines the technical, investment, and regulatory factors influencing
the geothermal energy project. Barbara used a cost estimate to justify the investments
made for the project.

Business Case Components

A number of components need to be added to a business case. Business Case Components

Component Description
Business need Substantiates the business reason for conducting the project.
Project contribution Determines the project’s contribution toward the organization’s objec-
tives.

Lesson 3: Initiating a Project 57

LESSON 3
Component Description
Stakeholders Lists the project stakeholders, their expectations, and contributions toward
the project.
Constraints Compiles the limitations of the project.
Strategic risks Lists the risks that the project may face and the possible risk manage-
ment measures.
Benefits evaluation Analyzes and outlines the key benefits to be obtained.
Project roles Lists the members of the project team and their respective job roles in
the project.
Benefits realization plan Provides an outline of the benefits that have been realized.
Contingency plan Outlines the alternate solutions for unplanned events.

How to Create a Project Charter

How to Create a Project
An effective project charter clearly communicates the project’s importance to the organization
Charter and formally authorizes the project.

Guidelines:
To create an effective project charter, follow these guidelines:
• Use a corporate template, if one is in existence at your company.
• Include the project and authority identification information:
— Title of the project and the date of authorization.
— Name and contact information of the project manager.
— Name, title, and contact information of the initiating authority (usually the
customer or sponsor).
• Include a clear, concise description of the business need, opportunity, or threat
that the project is intended to address:
— What are the circumstances that generated the need for the project?
— What is the market demand for the product or service?
— Consider any legal requirements associated with the project.
• Include summary descriptions of the product or service of the project:
— What is the required outcome of the project?
— What are the critical characteristics of the product or service?
• Include a description of the project’s relationship to the business need it is
intended to address:
— Why is it important to do the project now?
— How will this project address the business need, opportunity, or threat for
which it is intended?
• Consider any known constraints and/or assumptions:
— Are there any known time, cost, scope, quality, or resource issues or factors
that will limit the way you and your project team can approach the project?
— Are there any factors or issues that you and your project team will presume
to be true, real, or certain in order to begin planning your project?

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 LESSON 3
• Ensure the person with the required knowledge and authority signs the project
charter.
• Distribute the signed charter to the appropriate project stakeholders:
— Project team members.
— Customer and, if relevant, sellers (vendors).
— Relevant functional managers.
— Finance, accounting departments, or both.

Example: Creating the Portal Development Project Charter

Based on the feasibility study for the online portal project, management authorizes
Mark Kelly, Marketing Director, to initiate the development of the portal. He creates a
charter to formally authorize the project and establish its priority. The project name is
mentioned in the charter and the charter’s date serves as the authorization date. He
appoints Mary James as the project manager and mentions her name as the project
manager with her contact information. Mark also includes his contact information
because he is the project sponsor who has the authority to allocate budget and provide
resources and materials required for the project. He also outlines the following:
• Business need for developing the B2C portal
• Final product
• Known constraints
• Assumptions made
Mark signs the charter and distributes it to all the stakeholders and project managers
involved in this project and asks them to lend their support.

DISCOVERY ACTIVITY 3-3

Creating a Project Charter
Data Files:
• Blank Project Charter

Before You Begin:

From the C:\085061Data\Initiating a Project folder, open the Blank Project Charter document.

Lesson 3: Initiating a Project 59

 LESSON 3
Scenario:
Your project SOW is completed and you have just finished another meeting with Vicky Morris,
who requested that you create the project charter for the training initiative. Vicky will sign the
authorization for the project upon its completion. The project has been given the name “OGC
PM Training Roll-Out.” The PMO has allocated a budget of $100,000 for this project. The
project must finish no later than September 18, 2009 due to the start of phase one of the busi-
ness transformation.
Before creating the project charter, you decide to review your notes from previous meetings.
You can either have the
students do this activity • The training will include an overview of the management system that has been
individually or divide the class developed for tracking and reporting on multiple, simultaneous projects. One of
into groups of three or four. the organizational goals is to complete this training before the initiation of all
Since this scenario is lengthy,
you may choose to review the
other business transformation projects.
key points of the scenario with • There are high expectations that by initiating this project, the scheduling and
the students before asking tracking capabilities of this software will provide senior management with the
them to complete the activity.
most up-to-date information on the status of each individual project and its impact
Allow up to 15 minutes to
complete the activity, then on the business transformation project.
discuss the answers with the • All managers will be required to use the project management scheduling and
whole class for approximately tracking software when managing their future projects.
10 minutes.
• OGC plans to use a local training center to provide training on the standard soft-
ware due to classroom and computer limitations within OGC.
• The training provider must be able to provide the application training at a basic,
intermediate, and advanced level.
• The training provider must be able to offer support after training.
• OGC will provide in-house additional training tailored for the business transfor-
mation program.
• There are approximately 50 managers who will need to complete the training.
• The supervisors of these managers would like to know their performance in the
training.
• Development of a pre- and post-assessment is required.

1. How would you describe the goals and objectives of this project?
All Business Transformation team members must provide consistency in developing
project schedules in order to efficiently manage the many projects that will fall under
the Business Transformation umbrella. Team members must be able to identify all new
internal processes that are the direct result of the Business Transformation acquisitions.

2. How would you describe the project’s impact to the organization?

The newly combined companies are depending on integrating project management best
practices and all project managers becoming proficient with a new scheduling and track-
ing software tool. Without these significantly enhanced skills, the business
transformation initiative will fail. The impact to the organization is extremely high and
cannot be overstated.

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 LESSON 3
3. Are there any assumptions that you would include? If so, describe them.
Since the company cannot provide the software training due to classroom and computer
limitations, it is expected that the company will need outside help from a training pro-
vider who has expertise with the project software and can manage the classroom
training. Internal training will be developed by the Business Transformation PMO team.

4. Based on what you know at this point, how would you describe the primary
deliverables for this project?
Internal Training—for all new internal processes that are the direct result of the Business
Transformation acquisitions. External Training—outsourced training provider to conduct a
basic, intermediate, and advanced level of training on the project software.

5. Yes or No? At this time, are there any real constraints in the project charter?
✓ Yes
No

6. Open the file C:\085061Data\Initiating a Project\Blank Project Charter and, based on the You may want to display the
scenario, complete the project charter. C:\085061Data\Initiating a
Project\Solutions\Completed
Project Charter document
7. Compare your Blank Project Charter document with the C:\085061Data\Initiating a Project\ rather than having the stu-
Solutions\Completed Project Charter. dents take the time to
complete the project charter
on their own. The goal is to
allow students to see a com-
pleted project charter.

TOPIC D
Identify the Elements of a Project
Management Plan
You have a project charter and formal authorization to apply organizational resources to project
activities. Planning how the project team manages the project to its successful completion is
essential to make progress in a project. In this topic, you will identify the elements of a project
management plan.
Developing a realistic, usable, and dynamic project management plan helps the project team
stay focused on the objectives and purpose of your project. Continually updating your project
management plan as new information becomes available will help you to circumvent problems
before they develop and ensure project work goes according to the plan.

The Project Management Plan

Definition: The Project Management Plan
(2 Slides)
A project management plan is a plan that details how a project will be executed to
achieve its objectives. A well-defined plan consists of certain components, including:
• A list of the project management processes that will be utilized and the level of
implementation for each.

Lesson 3: Initiating a Project 61

LESSON 3
• A description of the tools and techniques that will be used to complete those pro-
cesses.
• An extensive description of the tasks to be completed to fulfill the objectives.
• Plans for monitoring and controlling changes to the project.
• Details on configuration management.
• Performance measurement baselines.
• Techniques for communication with stakeholders.
• A definition of the project life cycle.
• A plan for identifying, documenting, and addressing open issues.
Project management plans may be very detailed or a simple summary, and might
include any number of subsidiary management plans.

Subsidiary Plan Description

Scope management plan Provides guidance on how project scope will be defined,
documented, verified, managed, and controlled.
Requirements management plan Documents how requirements will be analyzed, docu-
mented, and managed throughout the project.
Schedule management plan Describes the scheduling methodology, the scheduling
tool(s) to be used, and the format and established criteria
for developing and controlling the project schedule.
Cost management plan Describes the format and establishes the criteria for plan-
ning, structuring, estimating, budgeting, and controlling
project costs.
Quality management plan Describes how the performing organization’s quality
policy will be implemented by the project management
team throughout the project.
Process improvement plan Details the steps for analyzing processes to identify
activities that enhance their value.
Human resource plan Provides guidance on how the human resources required
for a project should be defined, staffed, managed, con-
trolled, and eventually released.
Communications management plan Provides details that document the approach to communi-
cate efficiently and effectively with the stakeholders.
Risk management plan Describes how risk management is structured and per-
formed on the project.
Procurement management plan Describes how the procurement processes will be man-
aged from developing procurement documents through
contract closure.

The subsidiary plans may be formal or informal, highly detailed or broadly framed, and are created based on the
requirements of the project.

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 LESSON 3
Example: Project Management Plan for a Supermarket Chain
A national supermarket chain sought to reduce the average amount of time its custom-
ers spent waiting in the checkout lines. The project management plan listed the
management processes thought to be necessary and the tools used to complete those
processes.
The plan also included the tasks to be completed (hiring more clerks, expanding
checkout areas), plans for controlling changes to the project (a designated change con-
trol board), details on configuration management, performance measurement baselines,
stakeholder communication plans (weekly regional manager meetings), a project life
cycle (implementation, evaluation, and analysis), and the plan for addressing open
issues.
The plan also contained a cost management plan and a quality assurance management
plan.

The Develop Project Management Plan Process

The develop project management plan process involves documenting the appropriate actions to The Develop Project
define, create, integrate, and coordinate the subsidiary management plans as one single plan. Management Plan Process
The project management plan is created and modified through a series of integrated processes
until the project closes. Therefore, the process results in the progressive elaboration of the
project management plan that is updated with changes, which are controlled and approved
through the perform integrated change control process.

Figure 3-5: The develop project management plan process.

Develop Project Management Plan Inputs

There are four inputs to a successful project management plan; they will be defined by the
organization’s infrastructure and culture, the type of project, and how complicated the project
is.

Lesson 3: Initiating a Project 63

LESSON 3
Input Description
Project charter The project charter formally authorizes the project, provides authority
to the project manager to commit resources, and is the starting point
for the project management plan. It also provides information on the
results that it is expected to satisfy such as project purpose or justifi-
cation, project objectives and success criteria, project requirements,
project description, summary milestone schedule, and summary bud-
get.
Outputs from planning processes Baselines and subsidiary management plans that are outputs from
other planning processes are inputs to the develop project manage-
ment plan process. The baselines and subsidiary management plans
are integrated to create the project management plan and any updates
to these in the respective planning processes would require the
project management plan to be updated.
Enterprise environmental factors Factors that may influence the project’s success should always be
considered during plan development. These could include anything
from existing assets (information systems, human resources) to exter-
nal factors (governmental regulations, marketplace conditions).
Organizational process assets Existing processes that may impact a project’s success. These may
include policies, guidelines, historical information, or knowledge
gained from previous projects.

Develop Project Management Plan Tools and

Techniques
The tool and technique commonly employed in the creation of the project management plan is
expert judgment.

Tools and Techniques Description

Expert judgment Insight in specialized areas that will generate valuable technical and
management content for the project management plan.

Develop Project Management Plan Output

The sole output from the develop project management plan process is the project management
plan.

Output Description
Project management plan A formal document that defines how the project is executed, monitored
and controlled, and closed. This includes all the subsidiary management
plans and baselines.

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 LESSON 3
ACTIVITY 3-4
Identifying the Elements of a Project Management Plan
Data Files:
• OGC Project Management Plan

Before You Begin:

From the C:\085061Data\Initiating a Project folder, open the OGC Project Management Plan
document.

Scenario:
As one of the project managers of OGC’s Business Transformation project, you will be
responsible for putting together a project management plan. Before you begin, you have
decided to review the elements that the OGC PMO requires all project managers to include in
any project that has a budget of $10,000 or more.

1. As you review the OGC Project Management Plan outline, identify the elements that
your organization requires, if any, for your project management plans.
Answers will vary, but may include: the table of contents, templates for making Revision
History, Deliverable Approval Authority Designations, and Project Team Roles and Respon-
sibilities entries, Glossary, and Definitions.

2. Match the project management plan input with the appropriate description.
d Project charter a. This input uses baselines and subsid-
iary management plans that are
integrated to create or update the
project management plan.
a Outputs from planning b. This input uses existing processes
processes that may impact a project’s success
such as policies, guidelines, or
knowledge gained from previous
projects.
c Enterprise environmental c. This input includes factors that influ-
factors ence the project’s success, such as
anything from existing assets to exter-
nal factors that should always be
considered during plan development.
b Organizational process d. This input authorizes and provides
assets vital information relating to the
project based on which the project
management plan is built.

Lesson 3: Initiating a Project 65

LESSON 3
3. Which subsidiary plan of the project management plan deals with closure of contracts?
a) Scope management plan
✓ b) Procurement management plan
c) Process improvement plan
d) Communications management plan

Lesson 3 Follow-up
In this lesson, you explored the significant elements of initiating a project. By effectively initi-
ating your project and laying a solid foundation for the work that follows, you will increase
your chances of success.
1. Consider the importance of making sound decisions about project selection. How do
you think this will affect your eventual chances for success?
Answers will vary, but may include: making sound decisions during project selection helps
you prioritize the projects and concentrate on projects that are of highest priority.
Selecting the right project among competing projects helps you produce the intended
benefits and satisfies project stakeholders.
2. What are the benefits of developing a project charter?
Answers will vary, but may include: it provides a clear idea of the business needs to be
met by the project, authorizes the project manager to start the project, keeps the team
aware of any known constraints, and so on.

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 LESSON 4

LESSON 4 Lesson Time

3 hour(s), 30 minutes

Managing Project Scope

In this lesson, you will manage project scope.
You will:
• Document stakeholder requirements.
• Create a scope statement.
• Develop a Work Breakdown Structure (WBS).
• Review deliverables and work results.
• Control the project scope.

Lesson 4: Managing Project Scope 67

LESSON 4
Introduction
You discovered how to initiate a project, the first critical step in laying the foundation for your
project’s success. Now that the project work is progressing, you need to control changes to the
project scope using scope control inputs and tools. In this lesson, you will manage project
scope.
Since the nature of any business is to procure the best quality products at the lowest price and
in the least time possible, customers sometimes drive the project scope beyond its limits.
Because changes to the project scope have an impact on performance baselines, it is important
to control the project scope. Managing project scope changes helps you reduce the impact on
project time, cost, and quality commitments.

68 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 4

Figure 4-1: The project management framework.

The Project Management

Framework (2 Slides)

Lesson 4: Managing Project Scope 69

LESSON 4
TOPIC A
Document Stakeholder
Requirements
The primary focus of any project is to meet the stakeholder’s requirements. In the process of
finalizing your project management plan, you need to be aware of the project stakeholder
requirements and document them so as to avoid missing critical requirements. In this topic,
you will document stakeholder requirements.
Analyzing the project stakeholder’s needs is critical to the project’s success. A clear and
authentic documentation of those needs will help identify probable solutions, and assure the
stakeholders that none of their needs are being overlooked.

The Collect Requirements Process

The Collect Requirements
In the collect requirements process, the project manager defines and documents the stakehold-
Process ers’ needs and expectations to meet the project objectives. The requirements need to be
elicited, analyzed, and recorded in sufficient detail from the sponsor, customer, and other stake-
holders of the project to enable measurement during project execution.
The collected requirements form the basis for planning the cost, schedule, and quality for the
project.

Figure 4-2: The collect requirements process.

Project and Product Requirements

Requirements are further categorized into project requirements and product require-
ments depending on the needs of the project. Project requirements could typically
include the business, project management, and the delivery requirements of the project.
Product requirements could typically include the technical, security, and performance
requirements of the product.

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 LESSON 4
Collect Requirements Inputs
The collect requirements process uses two inputs to identify the requirements of the project
stakeholders.

Input Description
Project charter Provides the high-level project or product descriptions that are used to
develop the detailed project requirements.
Stakeholder register Identifies stakeholders who can provide information on the detailed project
or product requirements.

Collect Requirements Tools and Techniques

Project or product requirements are captured and managed using a variety of tools and tech-
niques.

Tools and Techniques Description

Interviews Used to get information from stakeholders by talking to them directly. It
aids in identifying and defining the features and functions or the desired
project deliverables.
Focus groups A trained moderator guided interactive discussion that includes
prequalified stakeholders and subject matter experts to elicit their expecta-
tions and attitudes towards the proposed product, service, or result of the
project.
Facilitated workshops Interactive group focused sessions that bring together key cross-functional
stakeholders to define the project or product requirements. It is a primary
technique to define cross-functional requirements and reconcile stakeholder
differences to the project much faster than individual discussions.
Group creativity techniques Group activities that are organized to identify project and product require-
ments, and include brainstorming and the Delphi technique.
Group decision making An assessment process of multiple alternatives to generate, classify, and
techniques prioritize project or product requirements.
Questionnaires and surveys Written sets of questions designed to quickly accumulate information from
a broad audience. It is used when statistical analysis is appropriate for the
collect requirements process.
Observations A direct way of viewing individuals in their work environment or while
using the product to identify the project or product requirements. Also
referred to as job shadowing.
Prototypes A method of obtaining feedback on requirements by providing a working
model of the expected product.

Collect Requirements Outputs

There are several outputs from the collect requirements process.

Lesson 4: Managing Project Scope 71

LESSON 4
Output Description
Requirements documentation Describes how the individual requirements would meet the busi-
ness need for the project. Its format ranges from a simple
document listing all the requirements categorized by stakeholder
and priority to more elaborate forms containing executive sum-
mary, detailed descriptions, and attachments.
Requirements management plan Documents how the project requirements will be analyzed, docu-
mented, and managed throughout the project life cycle.
Requirements traceability matrix A table that links the requirements to their origin and tracks them
throughout the project life cycle.

Facilitated Workshops
Facilitated Workshops Definition:
Facilitated workshops are group sessions that bring together key multidisciplinary or
cross-functional stakeholders to define the project or product requirements for the
project. Facilitated workshops are an important technique to quickly define cross-
functional requirements of the various stakeholders of the project. It helps to build
trust, foster relationships, reconcile differences, and improve communication among the
stakeholders, thereby leading to enhanced stakeholder consensus. Because multiple per-
spectives are available, the issues or questions related to the requirements are resolved
quickly.

Example: Conducting Facilitated Workshops for OGC’s Warehouse Management

Software Project
Vicky Morris, the project sponsor, has approved the project charter for OGC’s Ware-
house Management Software project. The project charter lists stakeholders from
various departments such as the Process Development and Implementation department
and the key project managers and administration personnel, especially those arranging
the training logistics. It also includes key PMO staff, and the Chief of the Business
Transformation team. To build stakeholder consensus, Mark Anderson, the project
manager of OGC’s Warehouse Management Software project, decides to conduct a
facilitated workshop rather than holding one-on-one discussions with the key stake-
holders. He invites the key project stakeholders for a “Warehouse Management
Essential Requirements” workshop.
Mark coordinates discussions with key stakeholders during the workshop to define the
requirements of this project. Discussions in the workshop highlight the differences
among various stakeholder requirements. Mark is not only able to reconcile the stake-
holder differences, but also to obtain a consensus on all the project requirements.

Group Creativity Techniques

Group Creativity Techniques
Group creativity techniques are group activities organized within organizations to identify
project or product requirements for a project.

72 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 4
Group Creativity Technique Description
Brainstorming Used to generate and create multiple ideas related to project and
product requirements.
Nominal group technique A voting process is used in this technique to rank the most useful
ideas obtained through brainstorming. This ranking allows for fur-
ther brainstorming or for prioritization.
The Delphi technique A group technique that extracts and summarizes anonymous expert
group input to choose among various alternatives.
Idea or mind mapping Ideas created through brainstorming are consolidated into a map
that reflects the commonality, differences in understanding, and
generation of new ideas.
Affinity diagram This technique enables the sorting of a large number of ideas col-
lected during brainstorming into distinct categories for review and
analysis.

Group Decision Making Techniques

Group decision making techniques are assessment processes that assess multiple alternatives to Group Decision Making
arrive at an expected outcome. These techniques are used to generate, classify, and prioritize Techniques
project or product requirements. The outcome is the resolution of future action for the project.
Various methods are adopted to reach a group decision.

Method Description
Unanimity Everyone in the group agrees on a single course of action.
Majority Requires support from more than 50% of the members of the group to indicate
the selected decision.
Plurality The largest batch in the group decides for the group even if a majority is not
achieved.
Dictatorship One individual makes the decision for an entire group.

Requirements Documentation
Definition: Requirements Documentation
(2 Slides)
Requirements documentation describes how individual requirements meet the business
requirements of the project. The requirements that are documented in the requirements
documentation must be unambiguous, traceable, complete, consistent, and acceptable to
key stakeholders of the project.

Lesson 4: Managing Project Scope 73

LESSON 4
Example: Requirements Document

Figure 4-3: A requirements document for the OGC PM Training Roll-Out

project.

Sample Requirements Document

To view a sample requirements document, open the C:\085061Data\Managing Project
Scope\Solutions\Completed OGC Requirements Document document.

Requirements Management Plans

Requirements Management Definition:
Plans
A requirements management plan is a plan that describes how the project requirements
will be analyzed, documented, and managed throughout the project life cycle. Phase-
to-phase relationships between various phases of the project strongly influence how
requirements are managed. Components of the requirements management plan require
project managers to choose the most effective relationships to aid the success of the
project and document this approach in the plan.
Components of the requirements management plan include:
• Methods to plan, track, and report requirement activities.
• Configuration management related activities.
• Process for requirements prioritization.
• Project or product related metrics.
• Traceability matrix for requirements.

74 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 4
Example: Requirements Management Plan for OGC’s Warehouse Management
Software Project
Mark Anderson, the project manager for OGC’s Warehouse Management Software
project, prepares the requirements documentation for the project. Mark documents the
requirements collected during the “Warehouse Management Essential Requirements”
workshop and through subsequent interviews conducted with each stakeholder. He cre-
ates the requirements management plan with information on how these requirements
will be analyzed, documented, and managed throughout the project life cycle.

The Requirements Traceability Matrix

Definition: The Requirements Traceability
Matrix (2 Slides)
A requirements traceability matrix is a tabular document that links the project or prod-
uct requirements to their origin and traces them throughout the project life cycle. The
requirement traceability matrix links each requirement to the business and project
objectives, WBS, product design and development, and test scenarios. It also ensures
that approved requirements in the requirements documentation are met at the end of
the project. It also provides a structure for managing changes to the project or product
scope.

Example: A Requirements Traceability Matrix

Figure 4-4: Requirements traceability matrix for the OGC Warehouse Manage-
ment Software project.

Forward traceability in the figure implies that it is possible to trace a requirement to elements in the
outputs of later phases in the project life cycle.

Requirement Attributes
Each requirement in the requirements traceability matrix can be further defined by add-
ing key information or attributes. Some of the attributes normally used in the matrix
include:
• A unique identifier
• A description of the requirement
• The reason for inclusion
• Owner
• Priority

Lesson 4: Managing Project Scope 75

 LESSON 4
• Current status
• Date of completion

How to Document Stakeholder Requirements

How to Document Stakeholder
The success of a project depends on the effective capture and management of the various
Requirements project and product requirements. Care should be taken in defining and documenting the needs
and expectations of various project stakeholders in order to meet the project objectives.

Guidelines:
To effectively define and manage project and product requirements, follow these guide-
lines:
• Study the project charter to identify the high-level project requirements and prod-
uct descriptions.
• Examine the stakeholder register to identify stakeholders who can provide infor-
mation on detailed project and product requirements.
• Use various methods to collect project or product requirements. These methods
include:
— Interviews
— Focus groups
— Facilitated workshops
— Group creativity techniques
— Group decision making techniques
— Questionnaires and surveys
— Observations
— Prototypes
• If possible, provide a working model or prototype of the expected product to
obtain feedback on requirements.
• Create the requirements documentation to describe how individual requirements
meet the business need for the project. Ensure that the requirements are measur-
able, testable, traceable, complete, consistent, and acceptable to key stakeholders.
• Review and validate the requirements management plan along with the key stake-
holders and make sure it:
— Describes methods to plan, track, and report requirement activities.
— Describes configuration management related activities.
— Includes process for requirements prioritization.
— Includes project or product related metrics.
— Provides a traceability matrix for requirements.

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 LESSON 4
Example: Identifying the OGC Warehouse Management Software Project
Requirements
Mark, the project manager for OGC’s Warehouse Management Software project, is
defining and documenting the requirements for the project. From the project charter
authorized by Vicky Morris, he lists the high-level project requirements and product
descriptions. He interviews the key stakeholders of the project who provide him with
the detailed project and product requirements. He also analyzes the stakeholder register
to determine the other stakeholders of the project and enhances his list of project
requirements by conducting a facilitated workshop to determine the remaining needs
and expectations of the stakeholders.
Mark gets the project team to develop a prototype for the Warehouse Management
software and distributes it to key stakeholders for their review and obtains their feed-
back on the functional requirements of the project.
Using the requirements obtained from the stakeholders, Mark creates the requirements
documentation for the project. He also creates the requirements management plan,
which includes the requirements traceability matrix that documents how the require-
ments will be analyzed, documented, and managed throughout the project life cycle.

DISCOVERY ACTIVITY 4-1

Documenting Stakeholder Requirements
Data Files:
• OGC Project Charter
• WIP OGC Requirements Document

Before You Begin:

From the C:\085061Data\Managing Project Scope folder, open the OGC Project Charter docu-
ment.

Scenario:
Vicky Morris, the sponsor, has authorized the project charter and named you as the project
manager for the OGC PM Training Roll-Out project. As project manager, you are responsible
for documenting the various needs and expectations of the stakeholders of the project.
Before interviewing and documenting stakeholder requirements, you decide to review your
You can either have the
notes from earlier meetings with key stakeholders: students do this activity
• The training will include an overview of the management system that has been individually or divide the class
developed for tracking and reporting on multiple, simultaneous projects. One of into groups of three or four.
Since this scenario is lengthy,
the organizational goals is to complete this training before the initiation of all
you may choose to review the
other business transformation projects. key points of the scenario with
• There are high expectations that by initiating this project, the scheduling and the students before asking
tracking capabilities of this software will provide senior management with the them to complete the activity.
Allow up to 15 minutes to
most up-to-date information on the status of each individual project and its impact complete the activity, then
on the business transformation project. discuss the answers with the
• All managers will be required to use the project management scheduling and whole class for approximately
10 minutes.
tracking software when managing their future projects.

Lesson 4: Managing Project Scope 77

LESSON 4
• OGC plans to use a local training center to provide training on the standard soft-
ware due to classroom and computer limitations within OGC.
• The training provider must be able to provide the application training at a basic,
intermediate, and advanced level.
• The training provider must be able to offer support after training.
• OGC will provide in-house additional training tailored for the business transfor-
mation program.
• There are approximately 50 managers who will need to complete the training.
• The supervisors of these managers would like to know their performance in the
training.
• Development of a pre- and post-assessment is required.

1. What would you do to identify the internal stakeholders for the OGC PM Training Roll-
Out project?
Answers will vary, but may include: you will interview the sponsor, Vicky Morris, to iden-
tify the various internal stakeholders for the project. These internal stakeholders will
belong to departments such as Legal, Administration , and IT Infrastructure. You can
interview the supervisors of these departments to know the high level details of approxi-
mately 50 managers who will need to complete the training.

2. Where would you start the process of finding the external stakeholders for the OGC PM
Training Roll-Out project?
Answers will vary, but may include: you will interview the sponsor, Vicky Morris, to iden-
tify the various external stakeholders of the project. Further, some of the internal
stakeholders you identify will most likely be in touch with the external stakeholders, and
can be of great help to you as you identify appropriate external stakeholders.

3. Which is the method used to identify requirements by studying the individuals in their
work environment or while using the product?
a) Surveys
b) Facilitated workshops
✓ c) Observations
d) The Delphi technique

4. For the OGC PM Training Roll-Out project, which one or more of these tools and tech-
niques could you use initially to identify the requirements of the stakeholders?
✓ a) Interviews
✓ b) Focus groups
✓ c) Facilitated workshops
d) Prototypes

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 LESSON 4
5. In which output document would you store the guidelines on requirements
prioritization along with product related metrics for the OGC PM Training Roll-Out
project?
a) Requirements documentation
b) Requirements traceability matrix
✓ c) Requirements management plan
d) Idea/mind map

6. Which documents can you use as a basis for your requirements documentation?
You can use the project charter and your notes from discussions with stakeholders given
in the scenario as a basis for the requirements documentation.

7. Open the C:\085061Data\Managing Project Scope\WIP OGC Requirements Document docu-

ment and based on the scenario, complete the requirements documentation.
You may want to display the
8. Compare your WIP OGC Requirements Document with C:\085061Data\Managing Project C:\085061Data\Managing
Scope\Solutions\Completed OGC Requirements Document. Project Scope\Solutions\
Completed OGC Requirements
Document document rather
than having the students take
the time to complete the
requirements document on
their own. The goal is to
allow students to see a com-

TOPIC B pleted project requirements

document.

Create a Scope Statement

You have collected and documented stakeholder requirements for your project. Now you can
focus on the define scope process, a critical planning process essential to achieve project suc-
cess. In this topic, you will create a scope statement.
A clear and concise scope statement will guide your project processes efficiently. Without a
strong scope statement, you could end up spending valuable time and resources on work that
isn’t part of your project.

The Project Scope Statement

Definition: The Project Scope Statement
(2 Slides)
A scope statement defines the project and what it does and does not need to accom-
plish. A project scope statement is created at an early stage in the project to reflect the
stakeholders’ common understanding of major activities to be performed in the project,
and to provide a basis for future project decisions about what should and should not be
included in the project.
Depending upon the size and scope of the project, a project scope statement should
typically include:
• Project objectives, deliverables, and requirements.
• Project constraints and assumptions.
• Product acceptance criteria.

Lesson 4: Managing Project Scope 79

LESSON 4
It may also include initial project organization, defined risks, schedule milestones, ini-
tial work breakdown structure, and approval requirements.
The project management team refines the project scope statement in the define scope
process.

Example: A Project Scope Statement

Figure 4-5: Project scope statement for the OGC PM Training Roll-Out project.

Sample Project Scope Statement

To view a sample project scope statement, open the C:\085061Data\Managing Project
Scope\Solutions\Completed Project Scope Statement document.

Components of the Scope Statement

Components of the Scope
There are several components of the scope statement.
Statement

Component Description
Project objectives These are the measurable success criteria for the project. Project objectives
are called critical success factors in some organizations.
Product description The characteristics of the product, service, or result of the project under-
taken.
Project requirements The conditions or capabilities the deliverables of the project must meet to
satisfy a standard, contract, specification, or government or industry regu-
lation.
Project deliverables Any tangible, measurable result or outcome required to complete a project
or portion of a project. The scope statement should include a list of the
summary-level subproducts that, taken together, constitute completion of
the project.
Project exclusions The parameters of what is and what is not included within a project.
Product acceptance criteria The process and criteria for accepting finished products or services result-
ing from a project.

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 LESSON 4
Component Description
Project constraints Factors that limit the way that the project can be approached. These limita-
tions may concern time, cost, scope, quality, resources, and others. For
example, you may be given a project deadline or overall budget that your
project must work within.
Project assumptions Statements that must be taken to be true in order for the planning to begin.
For example, if your project requires that you incorporate energy costs into
your budget, you may want to make the assumption that the price of oil on
the project start date will remain the same as it is today in order to create
project cost estimates.

The Define Scope Process

During the define scope process, the project manager defines the scope of the project and final- The Define Scope Process
izes a project scope statement. Scope definitions are shaped by the deliverables, assumptions,
and constraints that are documented during project initiation.

Figure 4-6: The define scope process.

Triple Constraints
Triple constraints are limitations that concern scope, time, and cost. These factors are
interrelated and exist in a state of equilibrium. As the project progresses, if one of
these factors is altered, the other two factors should be balanced to accommodate the
change without compromising the quality of the product or service.

Define Scope Inputs

There are several common inputs for scope definition.

Input Description
Project charter The scope statement will be derived from the project charter. There-
fore, if a charter is not used in a performing organization, then
comparable information must be generated.
Requirements documentation Describes how the individual requirements would meet the business
need for the project.

Lesson 4: Managing Project Scope 81

LESSON 4
Input Description
Organizational process assets Any relevant, existing process assets such as procedures, and tem-
plates that are likely to impact the define scope process.

Define Scope Tools and Techniques

A well-defined scope statement can be created using a variety of tools and techniques.

Tools and Techniques Description

Expert judgment Experts in different areas across the project may contribute to the
project scope statement.
Product analysis The process of translating high-level product objectives into tangible
deliverables and requirements. It includes techniques such as product
breakdown, system analysis, and value analysis.
Alternatives identification The process of creating different plans to achieve project goals.
Facilitated workshops Help to quickly define the cross-functional project or product require-
ments of various stakeholders.

Define Scope Outputs

There are two outputs from the define scope process.

Output Description
Project scope statement Details, either directly or by reference, the project deliverables and
the work to be performed to meet the deliverables. It helps the
project team to make detailed plans, guides in project execution, and
provides the baselines with which the change requests can be evalu-
ated.
A detailed project scope statement includes the project scope descrip-
tion, product acceptance criteria, project deliverables, project
exclusions, project constraints, and project assumptions.
Project document updates The scope definition may necessitate changes to the initial project
documents that include the stakeholder register, requirements docu-
mentation, and the requirements traceability matrix.

Product Analysis Techniques

Product Analysis Techniques
There are several product analysis techniques, each of which is an evaluation of the project’s
end product and what it will take to create this product.

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 LESSON 4
Technique Description
Functional analysis Analyzing all of the things that a product does, including primary
and related functions, to identify unnecessary functions that might
drive up cost on a product.
Value engineering and value Identifying and developing the cost versus benefits ratio for each
analysis function of a product. A method for controlling costs while main-
taining performance and quality standards. Very common in military
and construction contracts.
Quality function deployment Identifying what the customer’s needs are, and translating those
needs into technical requirements. Appropriate for each stage of the
product development cycle.
Systems engineering Analyzing products holistically, integrating factors such as users,
usage environment, and related hardware or software with which
the product must function.

Techniques for Alternatives Identification

Alternatives identification techniques are methods for generating as many alternative solutions Techniques for Alternatives
and plans as possible during project planning. Identification

Technique Description
Lateral thinking A creative approach to problem solving in which the team attempts to
think about a problem in new ways and generate a fresh solution.
Brainstorming A general creativity technique for generating possible alternatives. Brain-
storming methods can be structured or unstructured in approach. The goal
is to generate as many ideas as possible from as many team members as
possible.
Delphi technique A group technique that extracts and summarizes anonymous expert group
input to choose among various alternatives. Often used to arrive at an esti-
mate or forecast.

Project Objectives
Definition: Project Objectives
Project objectives are the criteria used to measure whether a project is successful or
not. Objectives must be:
• Specific in terms of scope.
• Quantifiable in terms of time, cost, and quality.
• Realistic and attainable.
• Consistent with organizational plans, policies, and procedures.
• Inclusive of at least one objective.
Projects may have one or several objectives, and subobjectives may be added to the
project in order to further clarify the project goals.

Lesson 4: Managing Project Scope 83

LESSON 4
Example: Objective of Desalination Plant Construction
Consider the project of a desalination plant for supplying drinking water of 30 million
gallons per day (MGD) that meets the EPA standards for drinking water quality. The
plant must be operational by December 2009, supplying water for less than $80 mil-
lion.
Note how the objective has the characteristics of a quantifiable objective:
• The objective specifies the scope: A desalination plant to supply drinking water of
30 MGD.
• It is quantifiable in terms of time: by December 2009.
• It is quantifiable in terms of cost: less than $80 million.
• A quality measurement is specified: To meet the EPA specifications.

How to Create a Scope Statement

How to Create a Scope
A well-defined scope statement provides a basis for project stakeholders to make future deci-
Statement sions about the project’s scope. It also serves as a baseline for monitoring the scope during
execution.

Guidelines:
To create an effective detailed scope statement, follow these guidelines:
• Refine the project objectives, deliverables, and product scope description from the
requirements documentation.
• Re-examine the project requirements. Do they need to be re-prioritized with
respect to the results of the stakeholder analysis?
• Review the project boundaries. If the stakeholder analysis revealed expectations
that are out of alignment with the project objectives, it may be necessary to add
these expectations to the list of excluded items.
• Update the preliminary project constraints, risks, and assumptions. As the project
scope comes more into focus, the constraints, risks, and assumptions will most
likely need to be reconsidered.
• Create schedule milestones so that the client and project team have dates for set-
ting goals and measuring progress.
• Include a revised overall cost estimate and define any cost limitations.
• Identify and document known risks.
• Map out the internal organization with regard to personnel, including manage-
ment, project teams, and stakeholders. Be sure to include the management
requirements, which will define how the project scope and changes therein are
managed.
• Document project specifications and approval requirements.
• Finalize the procedure for accepting completed products.

Example: Creating a Scope Statement for Food Processing Unit Construction

As project manager for the construction of a new food processing unit, Lisa Brown
reviewed the project objectives, deliverables, and product scope description from the
requirements documentation. There was not much change. However, Lisa elaborated
the project requirements to include a new, more aggressive deadline in response to
stakeholder needs.

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 LESSON 4
Lisa amended the project boundaries to encompass several new parameters, including
that it would not be possible to incorporate an expensive, but innovative processing
technology for food processing. Incorporating the technology was a stakeholder expec-
tation that was not feasible and fell outside the project scope.
Lisa reviewed the preliminary constraints, risks, and assumptions and made required
changes. She also included milestones that marked the projected completion dates for
major project components. Meanwhile, Lisa’s team prepared a revised cost estimate.
To keep the project focused, Lisa put together a list of management requirements.
This document defined how the project scope would be managed.
Finally, Lisa worked with the team to review and refine the project specifications,
approval requirements, and procedure for accepting the completed product.
Once the scope statement was completed, she distributed it to the project team and
stakeholders.

DISCOVERY ACTIVITY 4-2

Creating a Scope Statement
Data Files:
• Blank Project Scope Statement

Scenario:
It is now time for you to create the detailed scope statement that will be included in the Scope
Management Plan for the OGC PM Training Roll-Out. Vicky Morris, the PMO director, has
provided you with the PMO’s scope statement template.
To create the scope statement, you gather the following information:
You can either have the
• All managers will be assessed at 75% or higher in their understanding of OGC students do this activity
project management methodologies and best practices. All managers will be individually or divide the class
assessed at 75% or higher in their understanding of the OGC project management into groups of three or four.
Since this scenario is lengthy,
software. you may choose to review the
• Development of the OGC Project Management Plan reference manual and devel- key points of the scenario with
opment and implementation of the internal training content and instruction for all the students before asking
them to complete the activity.
project managers is required. Project management software training is to be com-
Allow up to 15 minutes to
pleted by all project managers within the organization. complete the activity, then
• All training must be completed on or before September 18th. The training pro- discuss the answers with the
vider will provide the pre-and post-assessment for assessing managers at 75% or whole class for approximately
10 minutes.
higher in their understanding of the project management software. The OGC Inter-
nal Training Team will create a pre-and post-assessment for assessing managers at
75% or higher in their understanding of OGC project management methodologies
and best practices.
• Development of the OGC Project Management Plan guidelines that will be the
focus of the internal training is required. A project management plan reference
document will be developed to be used by all project managers during the busi-
ness transformation program.

Lesson 4: Managing Project Scope 85

 LESSON 4
• OGC project management methodologies and best practices must be implemented
by all project managers who are involved in the Business Transformation Pro-
gram. These methodologies and best practices also help to increase the knowledge
of all project managers in the use of the project management software.
You are now ready to create the scope statement.

1. Which documents can you use as a basis for your scope statement?
You can use the Requirements Documentation and the Project Charter as a basis for your
scope statement.

2. From the C:\085061Data\Managing Project Scope folder, open the Blank Project Scope
Statement document and based on the scenario, complete the scope statement.
You may want to display the
C:\085061Data\Managing 3. Compare your completed document with the C:\085061Data\Managing Project Scope\
Project Scope\Solutions\ Solutions\Completed Project Scope Statement document.
Completed Project Scope
Statement document rather
than having the students take
the time to complete the
project scope statement docu-
ment on their own. The goal
is to allow students to see a
completed project scope state-
ment document. TOPIC C
Develop a Work Breakdown Structure
You developed a scope statement that clearly states the objectives and lists your project’s
major deliverables. Now you can break down the major deliverables into smaller, manageable
pieces. In this topic, you will develop a Work Breakdown Structure (WBS).
It’s always easy to successfully complete a project by breaking it down into smaller, manage-
able chunks. Creating an effective WBS helps improve the accuracy of your time, cost, and
resource estimates.

Work Breakdown Structures (WBS)

Work Breakdown Structures Definition:
(WBS)
A Work Breakdown Structure (WBS) is a logical grouping of project deliverables
arranged in a hierarchical structure. A WBS defines the total scope of work required to
complete the project. The deliverables and their component sub-deliverables are repre-
sented on the WBS in levels of descending order. The smallest, most granular
deliverable that cannot be further subdivided is called a work package. A work pack-
age must describe a deliverable that can be adequately scheduled, budgeted, and
assigned to an individual person or group.

86 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 4

Figure 4-7: A work breakdown structure.

Thorough work breakdown structures feature several input elements, such as organiza-
tional process elements, the project scope statement, the project scope management
plan, and approved change requests.

Deliverables listed at each level on the WBS equal the sum of all of the items on the level directly
beneath them.

Example: Work Breakdown Structure in Movie Making

Movie making is a great example of a process that commonly employs work break-
down structures. A film director is responsible for the coordination of several different
departments, such as the set designers, photographers, and editors.
Creating a robust WBS allows the director to more easily manage the numerous crews
working on the film. It will organize every component of the film into separate work
packages, each with its own deliverables, deadlines, and budget.

Organization of Work in a WBS

In a WBS, major components of work can be grouped by:
• Major project deliverables.
• Life cycle phases.
• Organizational or functional responsibility.
• Geographical location.

The Create WBS Process

The create WBS process is the method of dividing the project deliverables into smaller, more The Create WBS Process
manageable components. This helps create a deliverable-oriented hierarchical decomposition of
work to be executed by the project team.

Lesson 4: Managing Project Scope 87

LESSON 4

Figure 4-8: The create WBS process.

For more information on WBS, refer to Project Management Institute, 2008, “Practice Standard for Work Break-
down Structures – Second Edition,” —Newton Square, PA: PMI.

Create WBS Inputs

There are several common inputs for creating a WBS.

Input Description
Project scope statement The deliverables listed in the WBS will all be drawn from the project
scope statement.
Requirements documentation Describes how the individual requirements would meet the business
need for the project.
Organizational process assets Existing process assets are likely to impact project WBS creation.
These include policies, procedures, and templates for the WBS, project
files, and lessons learned from previous projects.

Create WBS Tools and Techniques

There is only one tool and technique for creating a WBS.

Tools and Techniques Description

Decomposition The subdivision of the project work, separating deliverables and their
required work into manageable, measurable, assignable, and more spe-
cific work packages.
Decomposition of the project work involves activities such as:
• Identification and analysis of deliverables and related work.
• Structuring and organization of the WBS.
• Breaking down the upper WBS levels into lower level detailed com-
ponents.
• Development and assignment of identification codes for the WBS
components.
• Verification of the decomposed work.

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 LESSON 4

Create WBS Outputs

A well-executed WBS yields several outputs.

Output Description
WBS The primary result of the WBS process, it will organize deliverables and work
packages into a manageable hierarchy.
WBS dictionary An auxiliary document containing details about each element in the WBS;
may contain information such as description of work, code of accounts identi-
fication, milestones, contract information, cost, quality requirements, resource
requirements, time estimates, acceptance criteria, or resource information for
measuring performance and completeness.
Scope baseline Includes the detailed project scope statement, the WBS, and the WBS dictio-
nary.
Project document Project documents such as requirements documentation should be updated to
updates include any approved changes introduced when creating the WBS.

Code of Accounts
Definition: Code of Accounts
A code of accounts is any system for numbering the elements in a WBS. A code of
accounts system allows project managers to more easily track individual WBS compo-
nents, which is especially helpful in the areas of performance, reporting, and cost.

Example: Code of Accounts Specified by a School District

A school district requires its schools to comply with a uniform code of accounts so
that it can easily record, track, and document specific types of revenues and expendi-
tures in every school. The code of accounts could be shown as Function/Category/
Program. If functions include administrative salaries (30), teacher salaries (31), and
consultants’ fees (32); categories include para-professional expenditures (100) and pro-
fessional expenditures (101); programs include regular instructional (411), special
education (417), and languages (419); then the fee paid to a consultant leading a
teacher training workshop in special education services would be coded 32/101/417.

How to Develop a Work Breakdown Structure

Procedure Reference: Develop a Work Breakdown Structure (WBS) How to Develop a Work
Breakdown Structure
To develop a WBS:
1. Gather the reference materials and other inputs you will need. Some of the mate-
rials needed include:
• The scope statement.
• The requirements documentation.
• A WBS template, if available.
• Constraints and assumptions.

Lesson 4: Managing Project Scope 89

LESSON 4
• Relevant historical information.
• Other planning inputs that may impact scope definition.
2. Determine how you are going to organize the work of your project. Regardless of
the organization, these elements represent the level directly below the project
name on your WBS. The WBS can be created using various methods.
• Subdividing the project into phases as the first level of decomposition and
then subdividing the phases into product and project deliverables as the sec-
ond level of decomposition.
• Subdividing the project into major deliverables, which can be the first level
of decomposition.
• Making the subprojects conducted outside the organization the first level of
decomposition and the supporting contract work the second level of decom-
position.
3. Identify the major deliverables, or subprojects, for the project. The major
deliverables should be listed in the scope statement or contract, but your team
may think of more deliverables that are necessary to achieve the project’s objec-
tives.

If you are organizing your project work by major deliverables, this step will rep-
resent the level directly below the project name. If you are organizing your work
by some other method, the major deliverables will probably be two levels below
the project name.

The PMI® recommends that you include project management as a major deliverable on the WBS.

4. Analyze each element to determine whether it is sufficiently decomposed. Can

each deliverable be adequately scheduled, budgeted, and assigned to an individual
person or group? If yes, you’ve reached the work package level; decomposition
for this element is complete. Skip the next step and go to Step 6. If no, further
decomposition is required for this element. Move on to Step 5.
5. Break down each WBS element into subdeliverables until you reach the work
package level. For each element, ask yourself, “In order to create this deliverable,
what subdeliverables will we have to produce?” Repeat Step 4.
6. Validate your WBS using a bottom-up approach. Starting at the work package
level, ensure that:
• The lower-level components are necessary and sufficient for the completion
of each decomposed item.
• Each element is described as a deliverable (preferably as a noun), and is dis-
tinguishable from all other deliverables.
• Each element can be adequately budgeted, scheduled, and assigned to an
individual person or group.
Remember that, although it is not necessary to have the same number of lev-
els for each deliverable, a disproportionate number of levels may indicate
that the deliverable is inappropriately decomposed. Analyze the element to
determine whether one of the higher-level components should be broken into
two subdeliverables or whether two or more subdeliverables should be com-
bined.
Make any necessary modifications before moving on to Step 7.

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 LESSON 4
7. Using your organization’s or project’s code of accounts, assign a unique numeric
cost code for each element, indicating its branch and level on the WBS for cost
performance tracking and reporting.

DISCOVERY ACTIVITY 4-3

Developing a Work Breakdown Structure
Data Files:
• OGC WBS

Before You Begin:

From the C:\085061Data\Managing Project Scope folder, open the OGC WBS document.

Scenario:
You have been asked to create a high-level Work Breakdown Structure for the PM Training
Roll-Out. It has been decided that all WBS codes for the business transformation projects will
start with a 3-character prefix. The prefix is being used to track deliverables across all business
transformation subprojects. The 3-character prefix for the PM Training Roll-Out is TRN. Based
on this project’s SOW, you have listed the following deliverables.

• Assemble Internal Training Team

— Identify Resources
• Needs Assessment
• Determine External Training Provider
— Create SOW
• Content and Training Delivery Planning
• Training Development
• Develop Training Delivery
Review the deliverables in the OGC WBS document and answer the questions in this activity.

1. When creating the WBS for the OGC Training Roll-Out, what types of reference materi-
als and other inputs could you use?
You can reference the requirements documentation, project charter, project statement
of work, and the project scope statement. You should also determine if there is an exist-
ing WBS template that can be used.

Lesson 4: Managing Project Scope 91

LESSON 4
2. Based on the scenario, which work breakdown structure in Group 1 of the OGC Work
Breakdown document follows PMI recommendations for the OGC Training Roll-Out
project?
a) WBS A
✓ b) WBS B
c) WBS C
d) WBS D

3. As the project manager, you are asked to decompose the WBS deliverables. Which
activities would you perform during decomposition?
✓ a) Assign unique ID numbers to each deliverable.
✓ b) Break the deliverables down into smaller components.
c) Arrange the deliverables into categories, based on risk.
d) Organize the deliverables, based on which project team is responsible for their
completion.

4. The scenario shows two deliverables that have been partially decomposed during a
recent meeting. Which of these activities are decomposed?
✓ a) Assemble Internal Training
b) Identify Resources
c) Needs Assessment
✓ d) Determine External Training Provider

5. In Group 2, which WBS would most resemble the inclusion of the decomposed
deliverables?
a) WBS A
✓ b) WBS B
c) WBS C
d) WBS D

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 LESSON 4
TOPIC D
Review Deliverables and Work
Results
You developed the WBS for your project. The proposed WBS should be in accordance to the
deliverables committed to your stakeholders; therefore, you need to verify that they meet
project requirements and stakeholders’ expectations. In this topic, you will review deliverables
and work results.
As the project manager of the project, you have to prove to the stakeholders that you are
delivering what you agreed to deliver. While this may sound simple, it is often overlooked by
inexperienced project managers. The stakeholders should not find omissions that you could
have corrected by inspecting the deliverables and work results. Therefore, it is important for
you to provide a proper review to ensure completed project results are delivered to ensure
stakeholder satisfaction.

The Verify Scope Process

Verify scope is the process of demonstrating to stakeholders that they have received what they The Verify Scope Process
have been promised in a given deliverable and formalizing their acceptance. The verify scope
process usually involves reviewing the deliverables with the project customer or sponsor to
ensure that they are satisfied with the final deliverable and securing their formal acceptance for
the completeness of the deliverable. Scope verification is generally done after quality control to
ensure that only the correct deliverables are validated for completeness based on criteria as
described in the official project plans and product documentation.

PMI® considers scope

verification to be the
“completeness” and not
“correctness” test of the
deliverable.

Figure 4-9: The verify scope process.

Verify Scope Inputs

Several inputs are used for scope verification.

Input Description
Project management plan Contains the project scope baseline of all planning processes. The
scope baseline components include the project scope statement, WBS,
and WBS dictionary.

Lesson 4: Managing Project Scope 93

LESSON 4
Input Description
Requirements documentation Lists the project, product, technical, and other project requirements
and their acceptance criteria.
Requirements traceability matrix Links the identified requirements with their source and helps track
them throughout the project. This also helps ensure that all approved
requirements are delivered at the end of the project.
Validated deliverables Deliverables that are completed and validated for correctness by the
perform quality control process.

Verify Scope Tools and Techniques

Only one tool and technique is used to verify project scope.

Tools and Techniques Description

Inspection Used for scope verification. Inspection refers to measuring, examining, and
verifying to be sure that work and deliverables meet requirements and accep-
tance criteria. It is sometimes referred to as reviews, product reviews, audits,
or walkthroughs. These terms have specific meanings in some application
areas.

Verify Scope Outputs

There are several outputs from scope verification.

Output Description
Accepted deliverables The verify scope process keeps track of all deliverables that are
completed, accepted, and formally signed-off. The deliverables that
have been formally signed-off or acknowledged by the sponsors or
customers are moved to the close phase or project process.
Change requests Any deliverable that has not been accepted formally is documented
along with the reasons for rejection. These deliverables may undergo
change requests for defect repairs. Change requests can be developed
for review through the perform integrated change control process.
Project document updates Documents that define the product or report status on project
completion may need to be updated as a result of project scope veri-
fication.

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 LESSON 4
Inspections
Definition: Inspections
An inspection is an official examination of work results to verify that requirements are
met. It is sometimes referred to as a review, product review, audit, or walkthrough. The
inspection may be conducted by an internal or external inspection team. During scope
verification, an inspection typically involves:
• Comparing the baseline specifications and any approved changes to the actual
project results.
• Determining the likelihood that remaining deliverables will be completed as prom-
ised.
• Identifying actions that may be needed to ensure that the work results will meet
specifications, scope, or schedule and budget goals.

Example: Inspection at a Construction Project

As project manager of a construction project, you established the specifications, accep-
tance criteria, and inspection method for the final product as well as intermediate status
deliverables. The key deliverables include machine foundations, industrial paintings,
and construction drawings including a detailed drawing of the underground ducts for
laying electrical cables.
The inspector validates the deliverables for completeness and finds that the drawings
did not include the underground ducts for the north side of the building. The inspector

E
suggests that the construction be put on hold until the drawings are complete.

AT
Inspectors
In some cases, your team will be asked to conduct the inspection. In other cases,

IC
stakeholders may decide to ask an outside entity to either conduct the inspection, or to
participate with you in conducting it.
PL
Inspection Report Components
DU

Inspection reports are necessary and contain several components. Inspection Report Components

Component Description
T

Project baseline and status This is the comparison of the baseline specifications, schedules, and
NO

comparison budgets to the actual project results for the project phase or deliver-
able.
Overall project status This is a discussion of whether the project as a whole is on track, or
DO

whether it is likely to deviate in some way from the project plans.

Change recommendations Based on the inspection result, you may want to recommend changes
that will be needed in order to meet specifications, scope, or schedule
and budget goals.
Scope and methodology of the This section should explain what the audit attempted to prove, how it
inspection went about proving it, what measurements were used to determine
conformance to requirements, and what assumptions or limitations
influenced the way that data was collected.

Lesson 4: Managing Project Scope 95

LESSON 4
Some application areas and organizations have specific expectations for scope verification inspections and will
probably have documented guidelines and procedures for preparing and conducting them.

How to Review Deliverables and Work Results

How to Review Deliverables Procedure Reference: Review Deliverables and Work Results
and Work Results
To ensure that deliverables are complete:
1. Prepare for a scope verification inspection.
a. Establish the scope and boundaries of the inspection.
b. Establish and/or approve measurements to be used in the inspection.
c. Establish and/or approve the methodology of the inspection, including a
methodology for double-checking data or measurements.
d. Gather all relevant scope documentation (for example, WBS, scope state-
ment, and requirements documentation).
e. Communicate with all team members in advance so they can prepare for the
inspection in a timely fashion.
2. Conduct an inspection to review deliverables and work results to ensure satisfac-
tory completeness.
3. Prepare an inspection report.
4. Provide the inspection report to key stakeholders to obtain complete or conditional
formal acceptance of the deliverables and work results.
5. Distribute formal acceptance documentation to project stakeholders according to
the communications management plan. If the project is terminated early, document
the level and extent of deliverables completed and distribute the documentation to
project stakeholders.

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DISCOVERY ACTIVITY 4-4
Reviewing Deliverables and Work Results
Scenario:
You have just received the draft assessments from the training provider. You need to verify that
they meet project requirements and stakeholders’ expectations.

1. Your team has been designing a plan that calls for testing and verification of the
assessment questions. The team has determined the criteria for acceptability for each
assessment question. What should be your next step in the inspection process?
a) Establish the scope of the review.
✓ b) Determine the methodology of the review.
c) Conduct the review.
d) Prepare a review report for stakeholders.

2. Your team has decided to use a checklist and job aid in combination for the assess-
ment review. Before beginning the actual review, what else would you consider doing?
Before you begin the review, you should first gather all relevant scope documentation,
including the WBS, scope statement, and requirements documentation. You should also
communicate with the team members who will participate in the test, so they can pre-
pare for the review.

3. The draft assessments have passed the inspection. What should be included in your
review report, and why?
1. The project baseline and status comparison. This part of the report compares baseline
specifications, schedules, and budgets to the actual project results. 2. Overall project
status. This part of the report discusses whether or not the project as a whole is on track
with the project plan. 3. Change recommendations. Recommending changes would be nec-
essary if the review indicated that the product specification, scope, schedule, or budget
goals would not be met. 4. Scope and methodology of the inspection. This part of the
report explains the purpose and details of the review.

4. You receive formal approval for the assessments. How will you inform stakeholders?
Provide written documentation to project stakeholders indicating formal acceptance in
accordance with the communications management plan.

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LESSON 4
TOPIC E
Control the Project Scope
Now that the project work is progressing, you need to control changes in the project scope
using the control scope inputs and tools. In this topic, you will describe the control scope pro-
cess and control project scope.
Since the nature of business is to get products for the lowest price, customers will sometimes
add new requirements. As the changes to project scope have an impact on performance
baselines, you should control the project scope. Controlling changes in project scope helps
avoid unapproved changes being incorporated in the project performance baselines.

The Control Scope Process

The Control Scope Process
Control scope is the process of monitoring project scope and holding changes to the project
scope baseline in check by:
• Evaluating change requests to determine the need and impact of the change to project
objectives.
• Making sure changes are agreed upon.
• Managing the actual changes to ensure that they are implemented correctly and that they
are effective.
Scope change control must be integrated with the other controlling processes to prevent unau-
thorized changes that result in scope creep.

Scope creep refers to uncontrolled changes made to the project scope. The changes are made without taking into
consideration the effects on time, costs, and resources, or without customer approval.

Figure 4-10: The control scope process.

Control Scope Inputs

Several inputs are used to control project scope.

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 LESSON 4
Input Description
Project management plan Includes several components such as:
• Scope baseline: Used in determining if a change or if a correc-
tive or preventive action is required by comparing the scope
baseline with the actual results.
• Scope management plan: Includes guidelines for managing and
controlling the project scope. The project management team fol-
lows these guidelines when controlling the project scope.
• Change management plan: Details the process of change man-
agement.
• Configuration management plan: Provides information on ele-
ments that can be configured, those that need to undergo formal
change control, and the process of controlling such changes.
• Requirements management plan: Provides information about
how requirements activities should be planned, tracked, and
reported and how changes to the product requirements must be
initiated.
Work performance information Periodically collected information about project activities that are
being performed to accomplish the project work.
Requirements documentation Documents how each project requirement meets the overall busi-
ness need of the project. Requirements documentation components
include the project’s business needs, functional requirements such
as business processes and information, and nonfunctional require-
ments such as performance, safety, and supportability.
Requirements traceability matrix Links project requirements to the business and project objectives
and ensures that the requirements add business value to the project.
It also helps track requirements throughout the project life cycle
and ensures that the approved requirements are delivered when the
project ends.
Organizational process assets Includes existing formal and informal policies, procedures, and
guidelines that are related to scope control and the necessary moni-
toring and reporting methods.

Control Scope Tools and Techniques

There is only one tool and technique used for controlling project scope.

Tools and Techniques Description

Variance analysis The analysis of variance from the original scope baseline or the quan-
tification of departure from expected results. Scope control includes
determining the cause of variance relative to the baseline, and decid-
ing if corrective or preventive action is necessary.

Control Scope Outputs

Several outputs result from scope control.

Lesson 4: Managing Project Scope 99

LESSON 4
Output Description
Work performance measurements Include measuring the variance between the planned and
actual, technical or other scope performance measurements.
The results are documented and communicated to the
project stakeholders.
Organizational process assets updates Any causes of variances, reasons for corrective actions, and
any other types of lessons learned from project scope con-
trol are documented in the organizational process assets
database.
Change requests Project scope performance analysis may cause changes such
as defect repairs or preventive or corrective actions, which
are then processed for review and disposition in compliance
with the integrated change control process.
Project management plan updates If any change requests impact the project scope or project
baselines, then the project scope, the scope statement, the
WBS, the WBS dictionary, and any corresponding cost
baseline and schedule baselines of the project management
plan need to be updated and reissued to accommodate the
approved changes.
Project document updates Project documents such as requirements documentation and
the requirements traceability matrix may need to be updated
when controlling project scope.

How to Control the Project Scope

How to Control the Project
Continually monitoring and controlling changes to the project scope enables you to maintain
Scope the original project scope definition. In addition, controlling changes to project scope ensures
that cost, schedule, and quality performance baselines are maintained.

Guidelines:
To effectively control project scope, follow these guidelines:
• Develop and implement a scope change control system. Make sure that your sys-
tem:
— Is integrated with the project’s integrated change control system.
— Includes the paperwork, tracking systems, and approval levels necessary for
authorizing scope changes.
— Complies with any relevant contractual provisions when the project is done
under contract.
— Complies with the guidelines specified in the scope management plan.
• Evaluate change requests by asking questions:
— What is the magnitude of the change when compared to the scope statement
and WBS?
— What is the impact of the change on project cost, schedule, and quality
objectives?
— What are the potential risks and benefits of the change?

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 LESSON 4
• Identify and document corrective action to take to bring expected future project
performance in line with planned performance.
• Make sure that formal agreements are reached and new specifications detailed
when project scope is expanded to include either additional work that is clearly
outside the original scope, or else additional work that is required as a result of
scope boundary clarifications.
• Depending upon the nature of the change, you may need to revise the cost, sched-
ule, or quality performance baselines to reflect the changes and to form a new
baseline against which future performance can be measured. Notify project stake-
holders of any changes made to project baselines.
• Use performance measurement techniques to monitor the changes.
— Are the changes being properly implemented?
— Do the changes bring about the desired results?
— Are new risks being introduced as a result of implementing the changes? It
would be very unusual for additional risks to not appear or for the nature of
existing risks to not change significantly. Structuring a risk review after any
change in scope is considered prudent practice.
• Document lessons learned during scope change control for use on future projects.
The documentation should include:
— Causes of variances.
— Performance baselines affected by the changes.
— Rationale behind the recommended corrective action.
— Any other lessons learned during scope change control.

Example: Control the Scope of the Sports Facility Construction Project

Two months into the execution phase of a sports facility construction project, one of
the stakeholders, an expert in crowd control, suggests a change to the seating frame-
work. As a project manager, you help him to create a formal design change request
and submit it through the change control system. You then discuss the proposed change
with your team and ask them to study the impact of the change on the schedule, bud-
get, and resources as well as the potential risks and benefits.
The technical architect agreed that the change could be implemented easily and would
not require additional resources and cost. The construction team estimates that it would
require an additional week. The project team does not foresee any added risk to the
project. You provide this information along with the change request to the Change
Control Board (CCB) for a decision.
Given this information, the CCB approves the change request and documents the deci-
sion. Based on this approved change request, you update the scope statement, the
WBS, and the project schedule baseline. In addition, you document the decision and
monitor the implementation of the change carefully to ensure that it is properly imple-
mented and that no new risks are introduced.

Lesson 4: Managing Project Scope 101

LESSON 4
DISCOVERY ACTIVITY 4-5
Controlling Project Scope
Scenario:
Vicky Morris, the PMO director of OGC, has resigned. The new PMO director has spent sev-
eral weeks reviewing the business transformation project. Due to the complexity of such a
large company-wide initiative, the director has received authorization for all project managers
to attend a one week comprehensive project management workshop. This workshop is to be
incorporated into the PM Training Roll-Out project. No cost or schedule contingency was allo-
cated for such a change to the project scope.

1. You have various inputs available to manage a scope change, such as the one in the
scenario. Match the input with its description.
a Configuration manage- a. Provides information on elements that
ment plan can be configured, those that undergo
formal change control, and the pro-
cess of controlling such changes.
c Work performance infor- b. Links project requirements to the
mation business and project objectives and
ensures that the requirements add
business value to the project.
d Requirements documenta- c. Periodically collected information
tion about project activities that are being
performed to accomplish the project
work.
b Requirements traceability d. Documents how each project require-
matrix ment meets the overall business need
of the project.

2. A scope change request recommending additional cost documentation has been sub-
mitted to the CCB for analysis. This change might impact the project finish date. What
should be the first step of the CCB?
✓ a) Evaluate the request.
b) Ensure that new specifications are detailed.
c) Monitor changes.
d) Identify corrective action to take.

3. The CCB informs you that the additional costs for the workshop will be adjusted in the
project budget. However, the project finish date must remain the same. As the project
manager, what could you do to ensure that the project finishes on time?
Consider assigning additional resources to effort-driven activities on the critical path.

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 LESSON 4
Lesson 4 Follow-up
In this lesson, you described the importance of effective project scope management. You exam-
ined the various components of a successful management plan, including the finalized scope
statement. You also created the requirements document, which records your stakeholder
requirements. Using these components, you developed a work breakdown structure and orga-
nized your project management plan accordingly. With this knowledge and these skills, you are
better prepared to not only create a strong project plan, but also to manage it successfully.
1. What factors of the define scope process are the most important to your organization?
Answers will vary, but may include: the accurate definition of the project objectives,
clear definition of boundaries, stable definition of requirements, deliverables, accep-
tance criteria, constraints, and assumptions. The define scope process could also include
descriptions of the product, service, or result of the project, and involvement of the key
stakeholders. Alternatives identification on product or project outcome processes also
provides clearer understanding of the project scope.
2. In your experience, what are the most critical inputs to developing a WBS?
Answers will vary, but may include: the project scope statement, requirements documen-
tation, and organizational process assets, namely policies, procedures, templates, and
also project files and lessons learned from previous projects.

Lesson 4: Managing Project Scope 103

NOTES

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 LESSON 5

LESSON 5 Lesson Time

3 hour(s)

Estimating Project Time

In this lesson, you will estimate project time.
You will:
• Define activities.
• Create a project schedule network diagram.
• Estimate activity resources.
• Estimate activity durations.

Lesson 5: Estimating Project Time 105

LESSON 5
Introduction
You implemented ways to manage project scope. Now, you need to move on to the next area
in project management, which is determining appropriate activities required to complete the
project, determining the resources, and estimating the duration for the activities in a project. In
this lesson, you will estimate project time.
Managing time is one of the most important criteria for effective project management. As an
upcoming project manager, you need to hone your skills for proper management of resources
and estimating activity duration so that you will be able to deliver the project within the speci-
fied timeline.

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 LESSON 5

Figure 5-1: The project management framework.

The Project Management

Framework (2 Slides)

Lesson 5: Estimating Project Time 107

LESSON 5
TOPIC A
Create an Activity List
Listing all the project activities is the first step in estimating project time, so you should ensure
that the activities are tied to the project scope. In this topic, you will create an activity list
while referring to the WBS and other relevant information.
The activity list is a fundamental building block for an effective project schedule and budget.
Defining the activities helps ensure all project activities remain within the project scope so you
can avoid missing critical activities. If you define exactly what needs to be done, you can
avoid performing unnecessary work.

Activities
Activities Definition:
An activity is an element of project work that requires action to produce a deliverable.
Activities lay the foundation for estimating, scheduling, executing, and monitoring and
controlling the project work. The characteristics of an activity are:
• It has an expected duration.
• It consumes budget, human resources, or both.
• It is named in verb-noun format.

Example: Activity Examples

Some examples of activities are:
• Revising a user manual.
• Making a sales presentation.
• Reserving a conference room.
Each of these items requires action to produce a deliverable. Each has an expected
duration and will consume budget and human resources. Finally, they are all named in
verb-noun format.

Activity Components
Activities can be broken down into smaller components. For example, the activity
“reserve conference room,” could be broken down in the following way:
• Determine budget.
• Determine size requirement.
• Determine date needed.
• Identify possible room alternatives.
• Select room.
• Call to reserve room.
• File confirmation when received.

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 LESSON 5
Activity vs. Task
Although the words “activity” and “task” may be interchangeable in common usage
and in many organizations, they are not considered synonyms in the PMBOK®. One of
your goals as a professional project manager seeking certification should be to align
your language with the PMBOK’s® language whenever possible. Use the word “activ-
ity” to refer to the components of work performed during the course of a project. Use
the word “task” sparingly, typically only in reference to brands of project-management
software.

Work Package
Definition: Work Package
Work package refers to the planned work or the deliverables that are contained in the
lowest level component of the work breakdown structure. The work package can be
described as a manageable work effort, or a level at which the cost and schedule for
the work can be easily estimated. A work package can be decomposed into smaller
components called activities that represent the work required to complete the work
package.

Because activity definition is the first step in the schedule development process, activities are also
referred to as schedule activities.

Note that every single component of work is not typically tracked on the master
project schedule. However, work package owners—those responsible for the comple-
tion of the work packages—may develop a schedule containing the itemized
components of work necessary to complete the activities in the work package.

Example: Sample Work Packages

Figure 5-2: A work breakdown structure showing the work packages.

Lesson 5: Estimating Project Time 109

 LESSON 5
The 8/80 Rule
The 8/80 Rule
The 8/80 rule refers to a general guideline regarding work packages: they require more than 8,
but fewer than 80, hours of effort to complete. The 8/80 rule helps project managers create the
work package list by identifying which work components should be considered work packages.
Any work component that can be completed in fewer than 8 hours does not rise to the level of
a work package. Any work component requiring more than 80 hours of work is too monumen-
tal to be categorized that way.

While the 8/80 rule may be a useful guideline on small projects, it would be impractical to apply it to large
projects, which would necessitate tracking millions of work packages.

Schedule Management Plans

Schedule Management Plans Definition:
(2 Slides)
A schedule management plan, one of the subsidiary plans in the overall project plan, is
an approach to developing, maintaining, and managing the project schedule.
A typical schedule management plan describes:
• The purpose of the plan.
• Approved schedule development tools and techniques, such as a particular project
management software.
• The number, types, and purposes of the project schedules to be developed and
maintained.
• How changes to the schedule baseline will be managed.
• Who is responsible for developing and maintaining the project schedules.
• How and when schedule performance will be reported.

Example: Schedule Management Plan for the Arithmetic on a Stick Project

The Schedule Management Plan document contains the schedule management plan for
the Arithmetic on a Stick project. It clearly describes the project team’s approach to
developing the schedule and for making changes to the schedule baseline. The plan
names the person responsible for maintaining the project schedules and contains a
policy for schedule performance reporting.

You can open the Schedule Management Plan document from the C:\085061Data\Estimating Project
Time folder.

The Define Activities Process

The Define Activities Process
The define activities process is the identification and documentation of the specific activities
that must be performed to produce the project’s deliverables. Activities are usually defined by
decomposing the work packages. Defining specific activities at this level gives the project team
a tool with which to effectively estimate, schedule, and monitor the progress, cost, and execu-
tion of project work. Defining activities is achieved through a variety of different methods,
such as the reuse of existing project templates.

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 LESSON 5

Figure 5-3: The define activities process.

Example: Defining Activities During Movie Production

Film studios routinely use work breakdown systems and activities definition during the
production of their movies. In fact, movies are essentially just large projects. The origi-
nal film treatment is like a project charter and the screenplay is really just a set of
deliverables.
Before a scene can be shot, for instance, the filmmakers must engage in detailed activ-
ity definition. The location must be scouted, the set must be prepared, and the crew
must be assembled. As a result, each activity can be effectively managed, ensuring the
work package is successfully completed.

Define Activities Inputs

Several inputs are commonly used to define activities.

Input Description
Scope baseline A component of the project management plan. It includes the detailed
project scope statement, the WBS, and the WBS dictionary that provide
information on the project scope, deliverables, constraints, and assump-
tions.
Enterprise environmental Include external variables such as availability of software or Project
factors Management Information Systems (PMIS).
Organizational process assets Include existing policies or rules for defining activities and the lessons-
learned document that provides historical information regarding similar
activities in previous projects.

Define Activities Tools and Techniques

Several tools and techniques are used to define activities.

Tools and Techniques Description

Decomposition Breaking down WBS work packages into separate activities. The WBS
and the WBS dictionary serve as a base to create the activities.

Lesson 5: Estimating Project Time 111

LESSON 5
Tools and Techniques Description
Rolling wave planning Method in which short-term planning is in-depth (for example, detailed
WBS work packages) and long-term plans are less defined.
Templates Activity lists from previous projects can be used as a model for new
projects. Templates may also contain related activity attributes informa-
tion such as resource skills and the hours of effort required.
Expert judgment Information sourced from subject matter experts or team members with
relevant experience in developing the project scope statements, WBS,
and project schedules can be used to define activities.

Define Activities Outputs

Thorough definition of activities will result in several outputs.

Output Description
Activity list A definitive list of activities that must be completed to produce deliverables.
Activity attributes Information describing the activities by listing the different components associ-
ated with the activities, which include responsible team members and
manpower required. Activity attributes are used to develop project schedules,
and to select, order, and sort planned activities.
Milestone list Helps identify and prioritize activities during scheduling by indicating if the
milestones are mandatory or optional.

How to Define Activities

How to Define Activities
Accurately defining project activities ensures that all project activities are tied to the project
scope, which will mitigate the potentially damaging effects of scope creep.

Guidelines:
To define activities and create an activity list, follow these guidelines:
• First, gather the inputs and resource materials you will need. These may include:
— The WBS.
— An activity list template.
— The scope statement.
— Relevant historical information.
— Constraints and assumptions.
• Analyze and decompose each work package of the WBS into activities that will
be required to produce the deliverable.
— Conduct brainstorming sessions with the project team to ensure that no
required activities are overlooked.
— Consult the scope statement to ensure that activities will enable you to meet
the project objectives.
• Consult records of similar projects to identify possible activities.

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 LESSON 5
• Consult subject matter experts about unfamiliar material.
• Evaluate all constraints and assumptions for their possible impact on activity defi-
nition.
• Once you have decomposed each work package into activities, evaluate your
activity list:
— Ensure that the descriptions accurately reflect the actions to be performed.
— Verify that the activity descriptions are as specific as possible. For example,
if the desired outcome is a revised user manual, describe the activity as
“revise user manual,” rather than “produce new user manual.”
— Confirm that the activities listed for each work package are necessary and
sufficient for satisfactory completion of the deliverable.
— Verify that the list is organized as an extension of the WBS.

Example: Creating an Activity List for a Web Design Project

A project team for a web design company used their WBS and an activity list from a
previous, similar project to create an activity list for their initial design work package.
The team used historical records of that project to help identify the activities that
might be required to complete the deliverable. Depending on which they select, the
length of time may be lengthened or shortened.
Additionally, an outside multimedia expert was consulted about activity identification.
Finally, to make sure the activities supported the project objectives, the team reviewed
the scope statement.
The project team gathered inputs and resource materials to create this activity list for
the work package.

DISCOVERY ACTIVITY 5-1

Creating an Activity List
Scenario:
You are now ready to create the activity list for the Assessing Needs WBS. You are reviewing
your notes from a recent brainstorming meeting with your team where you documented the
following:
• All WBS codes for this project start with the prefix TRN0002.
• Conduct training needs review with key resources such as Business Transforma-
tion Strategic Planning group and the PMO Steering Committee. You can either have the
students do this activity
• From the Strategic Planning group, gather high-level business transformation individually or divide the class
project management needs that the content should address. into groups of three or four.
Since this scenario is lengthy,
• From the PMO Steering Committee, identify new project management processes you may choose to review the
that should be included in the content. key points of the scenario with
• Review the training content based on the information gathered for deficiencies and the students before asking
them to complete the activity.
get feedback from both the Strategic Planning group and the PMO Steering Com- Allow up to 15 minutes to
mittee. complete the activity, then
• Review existing documentation for OGC project management methods. discuss the answers with the
whole class for approximately
• Document all findings to complete the training material review. 10 minutes.

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LESSON 5
1. The first step in creating an activity list is to gather your resource materials. Which
items below will be helpful in creating your list?
a) Cost-benefit analysis
✓ b) The WBS
✓ c) The scope statement
✓ d) Activity lists from similar projects

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2. In the provided table, list the activities and the appropriate WBS codes that are neces-
sary and sufficient for the successful completion of the Assessing Needs work package.

The completed activity list should look like this.

Completed WBS Table

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LESSON 5
TOPIC B
Create a Project Schedule Network
Diagram
You created an activity list for your project. Now you can sequence the project activities and
establish the relationship between them. In this topic, you will delve into the sequence activi-
ties process and create a project schedule network diagram. You will also examine the
sequencing process and helpful scheduling tools.
You are the project manager for the launching of a new product line. If you do not understand
the sequence in which the project work must occur, you cannot develop an effective schedule.
You will end up with rework and additional costs. Creating a project schedule network dia-
gram for your project will help you uncover the true nature of the relationship between tasks,
avoiding unnecessary work and expense.

The Sequence Activities Process

The Sequence Activities
The sequence activities process is a planning process that involves identifying and document-
Process ing interactivity dependencies among project activities for the purpose of creating the project
schedule. All activities, except the first and the last, have at least one predecessor and succes-
sor. Activities may be sequenced manually, or automatically using project management
software or other automated techniques.

Figure 5-4: The sequence activities process.

Example: Sequencing Activities Using Flow Chart

A basic example of activity sequencing is the common flow chart: a simple list of
activities that must occur in a specific order for the desired outcome to occur. Project
activity sequencing is really a matter of determining the optimum order to begin work
on each activity.

Sequence Activities Inputs

There are several inputs for sequencing activities.

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Input Description
Activity list Includes all activities that must be sequenced to create a project
schedule.
Activity attributes Describe the sequence of events or their defined predecessor and
successor relationships.
Milestone list Serves as a logical starting point for sequencing of activities. It
may also list the scheduled dates for some milestones.
Project scope statement Contains the product description, which could affect sequencing. It
is therefore recommended that the product scope be reviewed for
accuracy during activity sequencing.
Organizational process assets Inputs that can influence the sequence activities process. For
example, files from a corporate knowledge base can be used for
scheduling methodology.

Sequence Activities Tools and Techniques

There are several tools and techniques for sequencing activities.

Tools and Techniques Description

Precedence Diagramming Method Creates a project schedule network diagram with boxes, or
(PDM) nodes, representing activities, and arrows representing dependen-
cies.
Dependency determination Establishes dependencies among the activities, creating logical
sequences.
Applying leads and lags Allows for the acceleration or delay of successor activities to
accurately define the logical relationship affecting the overall
project schedule.
Schedule network templates Existing models can speed the preparation of the project activi-
ties.

Sequence Activities Outputs

There are two common outputs of activity sequencing.

Output Description
Project schedule network dia- Show the sequence of all project activities and the logical relation-
grams ship that exists between them.
Project document updates Documents that need to be updated after activity sequencing
include activity lists, activity attributes, and the risk register.

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 LESSON 5
Activity Dependencies
Activity Dependencies Definition:
An activity dependency is a logical relationship that exists between two project activi-
ties. The relationship indicates whether the start of an activity is contingent upon an
event or input from outside the activity. Activity dependencies shape the sequence
among project activities.

Example: Activity Dependencies for Designing Room Layouts

An architect has designed a residence and has a vision for the room layouts. However,
he will not be able to assess the functionality of the design until the builders have
framed in the structure with walls, windows, and a roof. Once the structure is in place,
he will be able to reassess the plans to determine if modifications are necessary.

Types of Activity Dependencies

Types of Activity Dependencies
There are three common types of activity dependencies.

Dependency Description
Mandatory A mandatory dependency is inherent to the work itself. They are usually
affected by physical constraints. Activities must be done in a specific
sequence for the work to be successful. Also known as “hard logic.”
Example: Books can’t be bound before they’re printed.
Discretionary A discretionary dependency is defined by the project and project manage-
ment team at their discretion. It is defined based on the best practices
followed in a specific application area or on specific requirements. If there
is no mandatory or external dependency between two activities, the team
has some flexibility in activity sequencing. Also known as “soft logic,”
“preferential logic,” and “preferred logic.”
Example: The sponsor would like to see the book’s cover design as soon
as possible, so the team may decide to have the cover artwork done before
the inside illustrations.
External An external dependency is contingent on inputs from outside the project
activities.
Example: The books can’t be printed until the shipment of paper arrives.

Precedence Relationships
Precedence Relationships Definition:
A precedence relationship is the logical relationship between two activities that
describes the sequence in which the activities should be carried out. Each activity has
two open points: Start and Finish points. Precedence relationship considers appropriate
logic while connecting these points. Precedence indicates which of two activities
should come first (the predecessor activity) and which should come later (the successor
activity). Precedence relationships are always assigned to activities based on the depen-
dencies of each activity.

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Example: Precedence Relationship Between Two Activities
An example of the precedence relationship can be: Drywall installation must finish
before painting can begin.

Precedence Relationship Types

Precedence relationships may vary in the way they start and finish. Precedence Relationship Types

Precedence Relationship Type Description and Example

Finish-to-Start (FS) The precedence relationship between two activities where the
predecessor activity must finish before the successor activity
can start. Can be expressed as, “Activity A must finish before
Activity B can begin.”
Example: The foundation for the house must be finished
(Activity A) before the framing can start (Activity B). The
total time for these two activities is the sum of A + B.
Finish-to-Finish (FF) The precedence relationship between two activities where the
predecessor activity must finish before the successor activity
can finish. Can be expressed as, “Activity A must finish before
Activity B can finish.”
Example: Construction must be finished (Activity A) before
the building inspection can be finished (Activity B). The total
time to complete both activities is based on when B begins.
Start-to-Start (SS) The precedence relationship between two activities where the
predecessor activity must start before the successor activity
can start. Can be expressed as, “Activity A must start before
Activity B can start.”
Example: The building design must start (Activity A) before
the electrical layout design can start (Activity B). As with the
FF example, the total time for activities A and B will vary,
depending on when Activity B starts. But in SS, there is a
longer window of time during which Activity B can begin.
Start-to-Finish (SF) The precedence relationship between two activities where the
predecessor activity must start before the successor activity
can finish. Can be expressed as, “Activity A must start before
Activity B can finish.”
Example: The electrical inspections must start (Activity A)
before you can finish the drywalling (Activity B). The total
time for Activities A and B can vary widely, depending on the
relative duration of each activity. This type is rarely used.

Lag
Definition: Lag
A lag is a delay in the start of a successor activity. Some relationships require a lag
before a subsequent activity can begin. Lags are determined by an external or manda-
tory dependency and may affect activities with any of the four precedence
relationships.

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LESSON 5
Example: Effects of Lag in an FS Relationship
When lag is introduced into a finish-to-start (FS) relationship, the overall elapsed time
required for the chain of activities increases. The start and finish dates of the successor
activity are delayed when there is a lag.

Figure 5-5: FS relationship with lag.

Possible Lags
There are several reasons why lags occur. Examples of two possible lags are:
• The permit application takes six weeks to process.
• The adhesive must dry until it becomes tacky before the laminate can be installed.
In the first example, the activity that follows the submission of the permit application
is delayed by six weeks due to an external dependency of the application processing
time. In the second example, the installation of the laminate activity is delayed by the
amount of time the adhesive takes to dry. This is a lag due to a mandatory depen-
dency, because the delay is inherent to the work itself.

Lead
Lead Definition:
A lead is a change in a logical relationship that allows the successor activity to start
before the predecessor activity ends in an FS relationship. A lead is implemented when
you need to accelerate a successor activity in order to shorten the overall project
schedule.
Leads will vary in length, depending on the acceleration required by the amended
schedule. Sometimes, a lead introduces a risk of rework as the successor activity starts
before the completion of the predecessor activity, and the complete, comprehensive
inputs may not be available.

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Example: Effects of Lead in an FS Relationship

Figure 5-6: FS relationship with lead.

Possible Lead
The programmer for a website may decide to start programming the home page four
days before the interface design is approved. Starting the programming may shorten
the overall project schedule by four days. However, if the design is not approved, there
may be significant rework for the programmer, resulting in the loss of some or all of
the four-day gain.

Project Schedule Network Diagrams

Definition: Project Schedule Network
Diagrams
A project schedule network diagram is a graphical representation of the sequence of
project activities and the dependencies among them. Project schedule network dia-
grams read from left to right or top to bottom and are typically accompanied by
summary information. The diagram can either include the entire project or just specific
parts of it. Parts of a schedule network diagram may be referred to as a subnetwork or
a fragmented network.

The summary information describes the basic approach used to sequence project activities.

Project schedule network diagrams may differ in that they may be:
• Very detailed or more high level.
• Generated manually or with software.
• Constructed using a variety of methods.
• Of several types, including the precedence diagramming method.

Example: A Project Schedule Network Diagram

Figure 5-7: A project schedule network diagram representing the project

activities.

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 LESSON 5
The Precedence Diagramming Method (PDM)
The Precedence Diagramming Definition:
Method (PDM) (2 Slides)
The Precedence Diagramming Method (PDM) produces a project schedule network
diagram that uses rectangular boxes, or nodes, to represent activities, and arrows to
represent precedence relationships between activities. This type of diagram:
• Always reads from left to right.
• Shows duration only in the nodes.
• May be created manually or with software.
• May report a group of related activities as an aggregate activity.
• May use all precedence relationship types.

The PDM method is also referred to as Activity-On-Node (AON) and is used in several project manage-
ment software packages.

Example: A Project Schedule Network Diagram Using PDM

A project has ten activities, which are represented by the letters A through J, and the
project team has determined the precedence relationships for each activity. The follow-
ing table shows the precedence relationships.

Figure 5-8: The precedence relationships.

This figure shows the project schedule network diagram that was constructed using the
precedence diagramming method.

Figure 5-9: A project schedule network diagram using the precedence dia-
gramming method.

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Summary Activities
Definition: Summary Activities
A summary activity is a group of related activities that, for reporting purposes, is
shown as a single aggregate activity in a bar chart or graph. It may also be called a
“hammock activity.” Some summary activities have their own internal sequence of
activities, but others include separate activities. A summary normally spans several
activities and encompasses fixed resources or costs associated with one type of activity.

Example: A Summary Activity

Figure 5-10: A summary or hammock activity.

Conditional Diagramming Methods

Definition: Conditional Diagramming
Methods
Activity sequences that must be revisited or repeated are called loops, while activities
that will be implemented only under specific conditions are called conditional
branches. A conditional diagramming method is any network diagramming method that
allows for nonsequential activities such as loops or conditional branches. Typically,
activities in these types of diagrams are represented by rectangles, decision points are
represented by diamonds, and directional flow is indicated by arrows.
Conditional diagramming methods will vary based on which method is used. The most
common conditional diagramming methods are the Graphical Evaluation Review Tech-
nique (GERT) and system dynamic models.

When creating a network diagram, you may want to create a “Start” node that connects by arrows to PMI® has discarded the usage
all of the nodes for activities with no dependencies. of GERT in its PMBOK®
editions. However, it is better
to be aware of this technique
as well.

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LESSON 5
Example: GERT Network Diagrams

Figure 5-11: A GERT network diagram with loop.

The following graphic illustrates a GERT network diagram with conditional branch.

Figure 5-12: A GERT network diagram with conditional branch.

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How to Create a Project Schedule Network
Diagram
Procedure Reference: Create a Project Schedule Network Diagram How to Create a Project
Schedule Network Diagram
To create a project schedule network diagram using PDM, one of the most commonly
used types, with all the activities having the most common precedence relationship,
Finish-to-Start (FS):
1. Determine the dependencies among project activities using your activity list and
product descriptions.
2. Identify predecessor and successor activities.
a. Create a table with two columns.
b. In the first column, list each activity to be sequenced. Identify each with a
letter.
c. In the second column, write the letter of the predecessor activities for each
activity.
3. Create nodes for all activities with no predecessor activities or dependencies.
4. Create nodes for all activities that are successor activities to the nodes already
created.
5. Draw arrows from the predecessor activities to the successor activities.
6. Continue drawing the network diagram, working from left to right until all activi-
ties are included on the diagram and their precedence relationships are indicated
by arrows. Include any known lags or leads.
7. Verify the accuracy of your diagram. Check to ensure that:
a. All activities on the activity list are included in the diagram.
b. All precedence relationships are correctly indicated by arrows going from the
predecessor activities to the successor activities.
c. Any known lags or leads are indicated on the diagram.

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 LESSON 5
DISCOVERY ACTIVITY 5-2
Creating a Project Schedule Network Diagram
Data Files:
• OGC Activity List

Before You Begin:

From the C:\085061Data\Estimating Project Time folder, open the OGC Activity List docu-
ment.

You may want to have the Scenario:

students do this as a group Your activity list for Assembling Internal Training Team (WBS TRN0001) and Assessing
activity because it produces a
much more comprehensive
Needs (WBS TRN0002) is complete. You have evaluated the discretionary, mandatory, and
outcome, raises the awareness external dependencies and have entered the precedence relationships into a table in the OGC
of project team members Activity List document.
about the overall structure,
flow, and complexity of the You have scheduled a meeting with your team to discuss the project activities. To prepare for
project, and begins developing the meeting, you will use the OGC Activity List document to create a network diagram for the
a sense of responsibility as activities starting with WBS TRN0001, Assembling Internal Training Team.
activity dependencies are
identified.

1. During a recent meeting with your team, a decision was made to add five days
between identifying the team lead and identifying resources due to other commit-
ments that some members of the team need to address in other projects. Will this be a
lag or lead relationship that you should account for? Please explain.
There will be a five day lag between identifying the resources and defining roles and
responsibilities.

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 LESSON 5
2. Referring to the OGC Activity List document, for the Assessing Needs activity, which of
the following activities are summary activities? Choose all that apply.
✓ a) Training needs review with key resources
b) Identify high-level BT PM needs
✓ c) Training needs review with PMO Steering Committee
d) Review current documentation for deficiencies

3. Referring to the OGC Activity List document, draw your network diagram for WBS
TRN0001, Assembling Internal Training Team. Make sure that all the required activities
are included in your network diagram. Make sure your diagram shows the sequence
constraints from left to right. Check to make sure the activities that are connected by
arrows correctly indicate their precedence relationship. Include inside each node the
WBS Code, duration, and lag or lead time.

The completed network diagram should look like this.

Completed Network Diagram

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LESSON 5
TOPIC C
Estimate Activity Resources
You identified the logical dependencies and precedence relationships between the project
activities and created a project schedule network diagram for your project. Now you can deter-
mine the types and quantities of resources needed to accomplish project work. In this topic,
you will estimate activity resources.
If your project team lacks the required skills or materials to perform an activity, your project
may fail to meet intermediate and final milestones, or both. Costs may skyrocket. Your reputa-
tion as a project manager who can meet deadlines to which you have committed could be at
stake. On the other hand, effective activity resource estimating will help increase the chances
of you having all the resources needed to meet your designated milestones and ensure project
success and stakeholder satisfaction.

Project Resources
Project Resources Definition:
Project resources refer to any useful material object or any person needed for the
project work to be completed.
Project resources will vary greatly in size, cost, and function. They typically fall into
one of the following categories: labor, materials, facilities, equipment, consultants, ser-
vices, supplies, or utilities. Project resources are almost always limited in quantity, and
therefore require thoughtful allocation.

Example: Resources Required to Organize a Seminar

A project for a Human Resources team could be to present an annual employee health
and wellness seminar. Resources would include the conference room, which would be
used for the seminar; the tangible information materials, such as brochures and pam-
phlets that would be given to employees; the visiting consultants, who would be hired
to make presentations and answer employees’ questions; and the vendors, who would
participate in the seminar and offer their services.

The Estimate Activity Resources Process

The Estimate Activity
The estimate activity resources process involves determining specific resources necessary for
Resources Process completing project activities. Such estimates should also include the quantities and availability
of each resource. Numerous factors can affect which resources are available and which
resources you need to complete your project.

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 LESSON 5

Figure 5-13: The estimate activity resources process.

Example: Activity Resource Estimation for Hosting a Training Session

Every project requires activity resource estimating. Before you can host a training ses-
sion, you need to identify the supplies and materials that will be necessary, how many
people will be attending, and what ancillary materials are necessary to complete the
task. Will you need to prepare handouts? Are there other supplementary materials you
want to make available? Have you reserved a room large enough to accommodate all
the participants?

Estimate Activity Resources Inputs

There are several common inputs for estimating activity resources.

Input Description
Activity list Lists the activities that are in need of resources to complete a
project successfully.
Activity attributes Contain the fundamental information about all the activity
resources in the activity list.
Resource calendars List availability of resources for each activity. Composite calendars
will list additional information such as the available list of
resources and the skills and capabilities of human resources.
Resource calendars are used to estimate resource utilization.
Enterprise environmental factors Include factors that can influence the estimate activity resources
process such as resource availability and skillsets.
Organizational process assets Include organization’s policies, procedures, and guidelines about
hiring procedures and resource acquisitions. It also includes histori-
cal information about resources used in previous projects.

Estimate Activity Resources Tools and Techniques

There are several tools and techniques for estimating activity resources.

“Bottom-up estimating” will be

covered in detail in Lesson 7.

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LESSON 5
Tools and Techniques Description
Expert judgment May be necessary to consult outside experts if resource inputs are out-
side the project team’s knowledge sphere.
Alternatives analysis Identifies different ways of accomplishing activities and the different
resources required by each method.
Published estimating data Studies and commercial publications about production rates, resource
cost, and labor requirements, for different countries and regions.
Bottom-up estimating Decomposes work in an activity to the last executable level and gener-
ates activity resource estimates by adding the resources required by
each activity. This technique is used when a detailed understanding of
the project or part of the project is available to decompose the activi-
ties into more depth. The accuracy of the estimates received using this
technique is generally very high.
Project management software Can generate and organize resource information, such as cost esti-
mates and breakdown structures, which helps optimize resource
utilizations.

Estimate Activity Resources Outputs

There are several possible outputs for the estimate activity resources process.

Output Description
Activity resource requirements Description of identified resources (and quantities) necessary
to complete project activities.
Resource breakdown structure Hierarchy of identified resources, organized by category and
type. Category includes labor and equipment, and type
includes resource skills and grade levels. The resource break-
down structure helps organize and report the project schedule
information along with the resource utilization data.
Project document updates Documents that are updated when estimating activity
resources. Updated documents include activity lists, activity
attributes, and resource calendars.

How to Estimate Activity Resources

How to Estimate Activity
Accurate estimations of the resources required to complete project deliverables are vital in
Resources (2 Slides) developing a realistic project schedule and budget.

Guidelines:
To determine the resource requirements for your project, follow these guidelines:
• Determine what resources are necessary to complete each activity in the work
packages.
• Determine what quantity of resources is necessary to complete each activity.
• Generate possible alternatives for unavailable resources and areas where:

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 LESSON 5
— Resources are known to be constrained.
— The work is new to your organization so new resources will need to be
brought in.
— Many different resourcing options are known to exist.
— There have been disagreements about resource requirements in the past.
— Certain activities are high risk.
• Analyze the scope statement to ensure you’ve identified all the resources required
to perform the project work.
• Consider organizational policies that could affect resource acquisition and usage.
— Can you use contract labor to take advantage of lower hourly rates for cer-
tain types of work?
— Is renting equipment preferred over purchasing?
— Must suppliers be selected only from a list of those approved and qualified?
— Are there any resource usages that require authorization from upper manage-
ment?
• Identify and use expert judgment resources. Consider the following sources:
— Knowledge base on your project team.
— Organizations within your company.
— Colleagues in the industry.
— Technical or professional associations.
— Subject matter experts.
— Other project managers of projects with aspects similar to your project.
• Analyze the resources already available to you.
— Does the available in-house staff have the required skills and experience or
will you have to procure some resources?
— Will you have access to the materials, facilities, and equipment you need to
perform the work when it is scheduled to be done?

Most project managers use a spreadsheet program to capture the resource requirements
for their projects. This allows flexibility in formatting the information and lets you output
the columns you want for a particular purpose.

Example: Determining Resources for the Website Design Project

Robert is trying to determine the resources required for the initial design work package
for a website project. The art director has provided him with a list of resources he will
need. Since there are no in-house graphic designers available, Robert authorizes him to
hire a contractor.
The computer and workstation and black-and-white printer are overhead items that are
already available to the art department. However, there is no color printer on site and
the software program will need to be purchased. The company’s policies require that
this equipment be rented rather than purchased. As an alternative, Robert directed the
art department to utilize a commercial printing facility for presentation items that
require color.

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LESSON 5
DISCOVERY ACTIVITY 5-3
Estimating Activity Resources
Scenario:
You now have all of the appropriate activities listed with their unique WBS codes, and you
have established the appropriate relationships with each predecessor for the OGC PM Training
Roll-Out. It is now time to estimate the activity resources for your project. During previous
meetings, it was determined based on the work packages that the following resources will be
required for these roles:
• Training Manager
• Four Team Members
• OGC Lead Trainer
• OGC Trainer
• OGC Business Transformation SME
• OGC Instructional Design Lead
• OGC Content Developer
• External Training Coordinator
• Software Training Vendor
One area of concern is based on recent discussions as to whether OGC has the instructional
expertise to design the content for the internal training. This is something that will need to be
determined quickly if the project should meet the deadline.

1. What are some additional factors that you would consider when identifying the
resources to fill the identified roles?
Answers will vary, but may include: resource availability, reporting structure, experi-
ence, and costs.

2. What would you consider when determining the software training vendor?
Answers will vary, but may include: OGC’s organizational policies that could affect
resource acquisition and usage, availability, industry expertise, travel distance, and
costs.

3. As the project manager, what factors would you consider to make a decision on
whether to outsource development of the internal training content?
Answers will vary, but may include: verifying the project scope statement and considering
resource availability, resource experience, costs, and time for development.

4. What other types of resources, other than people, would you list for this project?
Answers will vary, but may include: availability of an internal classroom to accommodate
the number of people to be trained, an external copy center, and necessary equipment
such as computers, software, and overhead projector.

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TOPIC D
Estimate Duration for Project
Activities
You have identified the activity resources that will be needed for each scheduled activity in a
work package. Now it is time for you to determine how long each activity will take. In this
topic, you will estimate activity durations.
Estimating activity durations is important because missing delivery dates almost always results
in cost overruns. Leaping in with a can-do attitude is one thing, but the practical challenges lie
on realistic assessments of what must be done and how long it will take. Therefore, without
accurate activity duration estimates, you cannot create a meaningful, realistic, and useful
schedule.

The Estimate Activity Durations Process

The estimate activity durations process involves the act of estimating the duration of work that The Estimate Activity
will be needed to complete individual project activities using the available resources. It uses Durations Process
information on factors such as activity scope of work and resource calendars. The inputs for
estimating activity durations are collected from people or groups who are familiar with the
work an activity involves. The resulting activity duration estimates will shape the preliminary
project schedule. They contain assumptions made when making the estimate—for example, the
availability of required resources—and a range of variance for the provided estimate, such as
plus or minus ten percent, or plus or minus two days.

Figure 5-14: The estimate activity durations process.

Example: Estimating Activity Durations for Training an Assistant

Your department head asks how long you think it will take to train a new assistant.
You have never worked with this assistant before, so you are unsure how to estimate
the activity duration.
In this case, you might make a comparison with previous projects at your company. If
your company has trained other people in the past for similar positions, you can use
the old training duration as a model for the new training project. The more similar two
projects are, the more similar their durations are likely to be.

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LESSON 5
Elapsed Time
Elapsed time is the actual calendar time required for an activity from start to finish. An
activity that requires two weeks to complete would take four calendar weeks of
elapsed time if there’s a two-week plant shutdown in the middle.

Effort
Effort is the number of person-hours or person-days required for completion of an
activity. The estimates of effort provide the basis for cost estimating and resource allo-
cation.

Estimate Activity Durations Inputs

There are several inputs to the estimate activity durations process.

Input Description
Activity list Lists activities for duration estimation.
Activity attributes Contain details about activity resources, which help estimate
duration.
Activity resource requirements Resource availability will influence how easily and quickly the
required quantities of resource requirements can be met, thus
impacting the overall activity duration.
Resource calendars Contain information about resource availability and capability,
which affects duration.
Project scope statement Contains constraints and assumptions such as availability of
information and existing conditions that could affect activity
durations.
Enterprise environmental factors Include existing duration estimation databases, whether internal
or commercial, productivity metrics, and contract terms and
requirements. These factors may provide estimates and refer-
ence data.
Organizational process assets Include existing policies or files such as project calendars and
lessons learned from past projects, which may prove useful.

Estimate Activity Durations Tools and Techniques

There are many tools and techniques for estimating activity duration.

Tools and Techniques Description

Expert judgment Helps estimate durations for each activity. It will most often come
from work package owners with relevant experience or from histori-
cal information documentation. However, if the activity is outside
the organization’s knowledge sphere, it may be necessary to confer
with external contractors or consultants for their expert judgment.
Analogous estimating A top-down estimating technique using durations of previous similar
activities to estimate future durations.

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Tools and Techniques Description
Parametric estimating Some durations can be estimated by multiplying a productivity rate
by the quantities to be performed for a specific work category.
Three-point estimates Incorporate three types of estimates into a singular duration estimate
scenario: most likely, optimistic, and pessimistic.
Reserve analysis Extra time added to duration estimates that can serve as a buffer as
recognition of scheduled risk (contingency reserves).

PERT Analysis “Analogous estimating” and

The three-point estimates technique is based on Program Evaluation and Review Tech- “parametric estimating” will be
covered in detail in Lesson 7.
nique (PERT) analysis, which uses a weighted average of the three estimate types
(most likely, optimistic, and pessimistic) to calculate the expected activity duration.
The formula is as follows: [optimistic time + 4(most likely time) + pessimistic time]/6.

Estimate Activity Durations Outputs

There are two possible outputs for estimating activity durations.

Output Description
Activity duration estimates Approximate number of work units required to complete project activi-
ties. Lags are not considered when estimating activity durations.
Project document updates New activity attributes and assumptions may be added as a result of
duration estimation.

How to Estimate Duration for Project Activities

Accurate activity duration estimates form the basis of an accurate project schedule. How to Estimate Duration for
Project Activities
Guidelines:
To ensure your estimates are as accurate and realistic as possible, follow these guide-
lines:
• Involve the work package owners or others who are very familiar with the work
of the activity.
In general, the people responsible for doing the work are the ones who can best
estimate the effort and duration for the activities under their control. The project
manager will, however, be responsible for actually making the estimates, based on
numbers provided by the experts. In some cases, the project manager may take
sole responsibility for making the duration estimates. Some examples are:
— Small projects in which the project manager is very familiar with the activi-
ties required.
— Projects with activities that are well defined, and for which there is good his-
torical information from very similar past projects.
• Consult historical information.

Lesson 5: Estimating Project Time 135

LESSON 5
— Are there any detailed records from previous, similar projects that you could
use to derive your estimates?
— Are there any relevant commercial duration estimating databases?
— Do any project team members have experience with similar activities?
• Determine how you want to quantify the work that needs to be done: in terms of
the estimated hours of labor that will be needed, the number of units to be pro-
duced, and the number of customers to be served.
• Consider resource requirements and capabilities.
— Which people will be assigned to this activity?
— How will the skills of the assigned staff affect the duration estimates?
• Determine the appropriate estimation method to use.
— If it is early in the planning phase or if there is good historical data, consider
using analogous estimating.
— If there is inadequate historical data, consult subject matter experts.
— Use quantitatively based durations to estimate activities when quantities of
work units can be multiplied by the productivity rate.
— If you are using the three-point estimating technique, ask the estimators for
the best-case, most likely, and worst-case estimates.
• Modify the constraints and assumptions from the other planning processes.
• Verify the accuracy of your estimates.
— What is the probability associated with this estimate?
— What was this estimate based upon?
— Are there any risks associated with this estimate?
• Consider the need for reserve time.

As more information becomes available about the activity or work package, the reserve time can
be modified.

• Include the list of assumptions made in the creation of the estimates.

• Include a range of variance for each estimate.

Example: Estimating Activity Duration for a Website Project

Paul, the project manager for the company’s website project, asked his work package
owners to provide estimates for each of their activities.
Tracy, the art director, needs to hire a contractor to do the design work. Also, she is
unsure how long the design reviews will take. Based on these factors, she submitted an
activity duration estimate to Paul. Tracy’s estimate defines work units as days, accord-
ing to Paul’s specifications.
Her estimate also specifies who will be used on the project and how their skills will
affect the duration. She has used a quantitative method for her estimate and included
relevant assumptions made earlier. Finally, Tracy’s estimate includes a range of vari-
ance for each duration.

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DISCOVERY ACTIVITY 5-4
Estimating Activity Durations
Data Files:
• Estimating Activity Duration

Before You Begin:

From the C:\085061Data\Estimating Project Time folder, open the Estimating Activity Duration
document.

Scenario:
After determining the resources that you will need to complete the OGC PM Training Roll-Out
project, you are now ready to estimate the durations for each activity:
• Assemble Internal Training Team—This team will be responsible for identifying
internal training needs and managing the effort to fulfill those needs. External
resources representing both the need areas and the audience are identified and
incorporated into the team.
• Assessing Needs—Identifies potential areas of training that would be most benefi-
cial to the Business Transformation Program. Beneficial is defined by the
organizational components represented in the team.
You have given the group a list that includes each activity’s WBS, name, predecessor relation-
ship, and assigned resource. The goal of the meeting is to determine the durations for these
activities.

1. For the summary task, Resources Identification, the team members explained that,
based on past experience, the interviews would be complete in a week, if all of the
managers were available to conduct the interviews during that week. When asked how
many hours they expected to work during the week, they responded with 10 hours.
Based on their response to this question, what will the elapsed time be for these
activities? Please note that a week refers to five days.
a) 10 hours
✓ b) One week
c) 50 hours
d) A day and a half

2. When the team members determined how long they thought it would take to complete
the manager interviews, what type of duration estimating technique were they prob-
ably using?
a) Parametric estimating
b) Analogous estimating
c) Reserve analysis
✓ d) Expert judgment

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LESSON 5
3. In the Estimating Activity Duration document, what will be the total duration for the
summary activity, Training Needs Review with Key Resources?
a) 1 day
✓ b) 1.25 days
c) 4 days
d) 11 days

4. Do you find it helpful in the activity list to have milestones represented with a zero
duration? Why or why not?
Answers will vary, but may include: yes, it is helpful, because a zero duration activity
will immediately indicate a milestone. A milestone indicates a significant event that does
not need time for completion, but should be tracked for completion.

Lesson 5 Follow-up
In this lesson, you identified effective methods to assign resources and calculate the activity
timings for your project. This will help you track project performance and the project will be
delivered on time without any delay.
1. Consider the importance of creating an activity list. How do you think that creating an
activity list for your projects will help ensure that your project activities are tied to
the project scope?
Answers will vary, but may include: each activity is checked for the completion criteria,
which in turn facilitates the project manager’s task of validating the contribution of the
planned activities. This may result in adding, modifying, and eliminating the activities
from the list and making the list more refined. Fundamentally, activities are derived
from the WBS and the scope statement of the project. These two documents describe the
scope of the project.
2. Reflect on the advantages of creating a project schedule network diagram. How do you
think this will help you organize your project more effectively?
Answers will vary, but may include: the project schedule network diagram depicts the
flow of project execution. This helps identify any flaws in the flow of project activities
and rectify them immediately.

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 LESSON 6

LESSON 6 Lesson Time

3 hour(s), 30 minutes

Developing and Controlling

a Project Schedule
In this lesson, you will develop project schedules.
You will:
• Develop a project schedule.
• Identify the critical path.
• Optimize the project schedule.
• Establish a schedule baseline.
• Control the project schedule.

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LESSON 6
Introduction
You estimated the project time. To ensure that the project is completed on time, you need to
develop a schedule for all the project tasks and understand the ways to control the project
schedule. In this lesson, you will develop the project schedule and control it.
A project often contains tasks that need to be assigned to many resources. As the project man-
ager, you need to ensure that all these activities are completed on time and proper coordination
exists among the resources for on-time project delivery. However, managing all this can be a
tedious task. Developing a project schedule that details the work assigned to the project
resources and attaching a timeline to each task will allow you to track the progress of work at
every stage of the project cycle.

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 LESSON 6

Figure 6-1: The project management framework.

The Project Management

Framework (2 Slides)

Lesson 6: Developing and Controlling a Project Schedule 141

LESSON 6
TOPIC A
Draft a Project Schedule
In this lesson, you will develop the project schedule. This is an iterative process that begins
with creating a schedule draft that you will refine later. In this topic, you will draft a project
schedule.
The project schedule is one of the most important tools for keeping the upper management and
project stakeholders informed about the project’s status and for tracking performance. Given its
importance and high visibility, you want to make sure that the schedule you create is realistic.
If you don’t take the time to establish realistic start and finish dates, it is unlikely that your
project will finish on time.

Project Schedules
Project Schedules Definition:
A project schedule is the project team’s plan for starting and finishing activities on
specific dates and in a certain sequence. The schedule also specifies planned dates for
meeting project milestones.
With its supporting detail, the schedule is the main output of the develop schedule pro-
cess. The purpose of the project schedule is to coordinate activities into a master plan
in order to complete the project objectives on time. It is also used to track schedule
performance and to keep upper management and project stakeholders informed about
project status.

Example: A Project Plan Listing the Project Schedule

Figure 6-2: A project schedule for a website design project (deliverable cat-
egories in bold).

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 LESSON 6
The Develop Schedule Process
The develop schedule process is the act of defining specific start and end dates for each project The Develop Schedule Process
activity. The end result of the develop schedule process is the project schedule. The project
manager analyzes the activity sequences, durations, resource requirements, and schedule con-
straints to create the schedule. As the project progresses, the project schedule is revised or
modified continuously to accommodate the changes in the project work.

Figure 6-3: The develop schedule process.

Develop Schedule Inputs

In order to develop a well-constructed project schedule, several elements should be included.

Input Description
Activity list Lists activities that are the building blocks of project schedules.
Activity attributes Include information about responsibility assignment, location of the
work, and type of work to be performed. These details are impor-
tant when assigning dates to activities.
Project schedule network diagrams Show the sequence of all project activities.
Activity resource requirements Affect project schedules depending on how difficult the require-
ments are to fulfill.
Resource calendars Provide information about when work can be performed and which
resources are available.
Activity duration estimates Include information on approximate number of work units required
to complete project activities.
Project scope statement Contains assumptions and constraints, both of which can affect the
project schedule.
Enterprise environmental factors May include schedule development software.
Organizational process assets May include a project calendar or a scheduling methodology.

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LESSON 6
Develop Schedule Tools and Techniques
There are many tools and techniques available for use in developing a project schedule.

Tools and Techniques Description

Schedule network analysis Produces the project schedule through a mix of analysis methods.
Critical path method Analysis that calculates early and late start and finish dates for all
activities in the project.
Critical chain method Alters the project schedule to accommodate limits on resources.
Involves adding buffer activities to keep focus on activity durations.
Resource leveling Assists in making scheduling decisions when there are resource man-
agement concerns.
What-if scenario analysis Analysis that involves creating a scenario (“What if X happens?”),
and then calculating various possible project durations. This analysis
is helpful in assessing different schedules under adverse conditions.
Applying leads and lags Leads and lags may need to be applied to accommodate other sched-
uling elements. Improper use may distort the project schedule.
Schedule compression Involves shortening the schedule without affecting the scope of the
project.
Scheduling tool Automates or accelerates the schedule development process. May be
used along with commercial project management software or
in-house, custom-built applications.

Develop Schedule Outputs

In addition to the project schedule and its supporting detail, the develop schedule process can
produce several outputs.

Output Description
Project schedule Includes the start and finish dates for each activity. Project schedule
outputs may include:
• A resource histogram, milestone charts, table, or network diagram
showing resource requirements by time period.
• Alternative schedules, such as high-level, detailed, and best-case
or worst-case schedules, with or without imposed dates.
• Contingency reserves.
• Optionally, additional items including cash-flow projections, and
order and delivery schedules.
Schedule baseline Includes version of the schedule created through schedule network
analysis. This output also features approved baseline start and finish
dates.
Schedule data Includes the schedule milestones, schedule activities and their
attributes, and documentation of all identified constraints and assump-
tions. Schedule data could also include items such as resource
histograms, cash-flow projections, and order and delivery schedules.

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 LESSON 6
Output Description
Project document updates Include:
• Activity resource requirements: May be impacted and require
updates if resource leveling is used to develop the schedule.
• Activity attributes: May be altered, especially if resource require-
ments are updated.
• Calendar: Used as a basis for project scheduling. The calendar
units may change for each project.
• Risk register: Updated with opportunities and threats that arise
while scheduling assumptions.

Standard Schedule Diagramming Notations

Project network diagrams use standard diagramming nomenclature. Standard Schedule
Diagramming Notations

Figure 6-4: Standard schedule diagramming notations for an activity.

Notation Description
ES Early start. The earliest time an activity can start. Usually, the ES of the first
activity in a network diagram is zero. The ES of all other activities is the latest
Early Finish (EF) of any predecessor activities (assuming that any successor
activity starts as soon as all its predecessor activities are finished).
EF Early finish. The earliest time an activity can finish. The EF for the first activity
is the same as its duration. For all other activities, EF is the latest EF of all of an
activity’s predecessor activities plus its duration.
LF Late finish. The latest time an activity can finish. The LF for the last activity is
the same as its EF time. The LF for any predecessor activity is the earliest LS of
any of its successor activities.
LS Late start. The latest time an activity can start. The LS for the last activity is its
EF minus its duration. The LS for any predecessor activity is its LF minus its
duration.
DU Duration. The number of work periods required for completion of an activity.

Lesson 6: Developing and Controlling a Project Schedule 145

LESSON 6
The Critical Path
The Critical Path Definition:
The critical path is the network path that has the longest total duration. Activities on
the critical path cannot be delayed or the whole project will be delayed unless subse-
quent activities are shortened.
The critical path is calculated by doing a forward pass to calculate the ES and EF for
each activity and then a backward pass to calculate the LS and LF for each activity.
The path with the longest total duration and no scheduling flexibility is the critical
path.

Although it is easy to calculate the critical path by using software, students preparing for the CAPM
certification exam should be aware that they may be asked to calculate a critical path with paper and
pencil during the exam.

Example: Critical Path of Activities

Figure 6-5: A network diagram showing the critical path of activities.

Float
Float Definition:
Float is the amount of time an activity can be delayed from its ES without delaying
the project finish date or the consecutive activities. Float occurs only in activities that
are not on the critical path. Float is also called “slack.” There are two types: total float
and free float.

Example: Float in Project Activities

Figure 6-6: A schedule network diagram showing float.

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 LESSON 6
Total Float
Definition: Total Float
Total float is a type of float where the total amount of time an activity requires can be
delayed without delaying the project finish date. Total float for an activity can be cal-
culated by subtracting its EF from its LF or its ES from its LS.

When you see the term “float” by itself, it generally refers to total float.

Example: Total Float in Activities

In this CPM diagram, Activity C has an ES of 25 days. However, should it begin on
its Late Start (LS) date, the value is 36. Therefore, the amount of time the start date
can be delayed without affecting the finish date is 11 days. The Total Float (TF) value
is 11 (36 – 25 = 11).

Figure 6-7: CPM network diagram with total float.

Free Float
Definition: Free Float
Free float is the amount of time an activity can be delayed without delaying the ES of
any activity that immediately follows it. It allows flexibility of the start or finish time
within that activity only. If there is a string of activities with float, free float will be
available only for the activity at the end of the string. Free float on the activity is cal-
culated by subtracting the EF of an activity from the ES of its successor activity.

Example: Free Float in Activities

In the CPM diagram, the free float for activity E can be calculated by subtracting the
EF from the ES of the successor activity, which in this case is Activity H. The free
float value is Activity H’s ES (61) – Activity E’s EF (50), or 61 – 50. The free float is
11.

Lesson 6: Developing and Controlling a Project Schedule 147

LESSON 6

Figure 6-8: CPM network diagram with free float.

Schedule Network Analysis

Schedule Network Analysis Definition:
Schedule network analysis is a technique used to calculate the theoretical early and late
start and finish dates for all project activities. In other words, it helps create a project
schedule. This method also generates float or slack.
Schedule network analysis may be achieved using one of four methods:
• Critical Path Method (CPM)
• Critical chain method
• What-if scenario
• Resource leveling

Example: Developing a Schedule for a Marketing Campaign Project

You are trying to craft a schedule for the creation of a new marketing campaign, which
will involve finding a new advertising agency, creating the advertisements, and produc-
ing marketing materials. Because the project contains so many different work
packages, you decide that schedule network analysis is necessary. Using a project man-
agement software application, you are able to define the network path from “request
for proposals” to “launch campaign.” From there, you can estimate the points in the
schedule where there is slack and adjust the activities accordingly.

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 LESSON 6
The Critical Path Method (CPM)
Definition: The Critical Path Method
(CPM)
The Critical Path Method (CPM) is a schedule network analysis method that uses a
sequential finish-to-start network logic and calculates one early and late start and finish
date for each activity using a single duration estimate. The longest path through the
network—the critical path—is identified. Then float is calculated to identify activities
where there is some scheduling flexibility. CPM is the mathematical analysis technique
used in most types of project management software.

Example: A Project Schedule Showing the Critical Activities

Figure 6-9: Critical Path Method involves calculating one early and late start
and finish date for each activity.

The Critical Chain Method

Definition: The Critical Chain Method
The critical chain method is a schedule network analysis method that allows you to
consider resource limitations and adjust the schedule as appropriate to work within
those limitations. The critical chain is established by analyzing the critical path along-
side the resources that are actually available. The critical chain method is also used to
plan and manage reserves or buffers and helps mitigate possible cost and schedule
risks.

Example: A Project Schedule

Figure 6-10: A project schedule allows you to consider resource limitations

and adjust the schedule.

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 LESSON 6
The What-If Scenario Analysis
The What-If Scenario Analysis Definition:
The what-if scenario analysis method allows you to consider different situations that
might occur and influence the schedule; it assesses the feasibility of the schedule under
various adverse conditions. It allows you to compute different schedules based on
potential delays, or the unplanned events that are a normal part of business life, such
as key employees resigning during a project. The outcomes are also used to mitigate
the impact of unexpected situations when preparing risk response plans. This method
helps in selecting the optimum plan.

Example: What-If Scenario for Planned Move of Corporate Headquarters

A project manager could use the what-if scenario analysis method to compute different
schedules for a planned move of corporate headquarters to a new facility. He would
base his computations on several scenarios, such as: What if the contractor for the new
building brings the goods in late? What if key decision makers are allocated elsewhere
during the planning process? What if there is a union strike affecting the construction
workers?

Resource Leveling
Resource Leveling Definition:
Resource leveling is used to analyze the schedule model. It allows you to readjust the
work as appropriate so that people are not overly allocated. It is also used to address
scheduling activities when critical resources are only available at certain times.
Resource leveling is normally done after the critical path has been initially identified.
The critical path frequently changes as a result of resource leveling. Resource leveling
tools are found in many types of project management software.

The most common scheduling conflicts are under-allocation of resources to a critical task and over-
allocation of a critical resource.

Example: Resource Leveling at a Construction Company

Daniel, a project manager who worked for a construction company, always managed
several simultaneous projects. His project resources included construction workers who
were paid varying hourly wages. By using the resource leveling method via a tool in
his project management software, Daniel could make sure that the most expensive
hourly workers, including electricians and stone masons, were appropriately and con-
sistently allocated.

Automated Leveling
Most project management software packages have resource leveling capabilities. How-
ever, make sure you analyze the results before accepting them. Automated leveling
often pushes out the project’s completion date. Resources may be reallocated to work
at times that are inappropriate due to other constraints.

Schedule Formats
Schedule Formats (3 Slides)
The project schedule can be presented in several different formats, depending on the circum-
stances.

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 LESSON 6
Graphical Format Characteristics
Bar chart • Shows the start and end dates, expected durations, and the dates and
order of project milestones.
• Can show precedence relationships between activities.
• Can show the percentage of an activity completed to date and actual
progress in relation to planned progress.
• Typically lists activities or work packages vertically on the left. Time
is represented with horizontal bars that correspond to the activities
and show projected start and end dates.
• Often used for project status presentations to upper management.
• A detailed view is effective in reviewing project status with the
project team.
Milestone chart • Provides a summary level view of the project’s schedule in terms of
its milestones.
• Uses an icon or symbol to show scheduled milestone events.
• Milestones are typically listed from the left to right of the chart.
• Time intervals—divided into hours, days, weeks, or months—are usu-
ally presented horizontally across the top or bottom of the chart.
• Effective in demonstrating the project’s overall schedule to project
team members, stakeholders, and upper management.
Project schedule network • Helps assign start and finish dates to activities on the project schedule
diagram with dates network diagram.
• Useful when you need to communicate project status in terms of
activity precedence relationships.

Examples for Different Schedule Formats

The following figures show a bar chart, a milestone chart, and a project schedule net-
work diagram with dates assigned to each activity.

Figure 6-11: A bar chart.

Lesson 6: Developing and Controlling a Project Schedule 151

LESSON 6

Figure 6-12: A milestone chart.

Figure 6-13: A network diagram with dates.

How to Draft a Project Schedule

How to Develop a Project Procedure Reference: Draft a Project Schedule
Schedule (2 Slides)
To develop a draft project schedule:
1. Perform a mathematical analysis to determine the time periods within which
activities could be scheduled once resource limits and other known constraints are
applied.
2. Evaluate the possible impact of any constraints and assumptions on schedule
development.
3. Consider the availability of your resources.
• Will you have the staff you need to perform the work when it is scheduled to
be done?
• Will you have access to the materials, facilities, and equipment you need to
perform the work when it is scheduled to be done?

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 LESSON 6
4. Consult project calendars and assign dates to activities.
• Are there any holidays during which your project team will not conduct work
activities?
• Will your project team conduct work activities on weekends?
• When will your key project team members be taking vacations?
• Are there any unmovable milestone dates that must be met?
5. Assess the feasibility of the schedule under adverse conditions by conducting
what-if scenario analysis.
6. Consider external resource date constraints, if applicable.
• Are there any regional or national holidays not previously accounted for?
• Do you need to make considerations for travel time for meetings?
7. Select project management software that best meets the needs and budget of your
project. If your organization does not require the use of a particular software pro-
gram, ask yourself the following questions to make the selection:
• How complex is the project?
• Do I need to manage more than one project at a time?
• How easy will the software be to learn and to use?
• How well will the software adapt to projects that vary greatly?
• What type and depth of analyses do I need to perform?
• What is the reputation of the software company?
• What do other project managers in the field use and what do they recom-
mend?
8. Review rough drafts of the schedule with the project team, sponsor, and customer.
You may also need to review the rough drafts with functional managers to ensure
that there are no conflicts with functional resources.
9. Choose the format in which you’ll publish the schedule.
• If your audience only requires a summary-level view of the project’s
progress in terms of milestones, consider using a milestone chart.
• If you are reviewing the schedule with your project team, consider publishing
a detailed bar chart or a network diagram with dates.
• If you are preparing a presentation for key project stakeholders or upper
management, consider printing the schedule in several different formats to
show various views of the project’s progress versus planned progress.
10. Distribute the preliminary schedule to all program office personnel, functional
team members, functional management, and the customer or sponsor to obtain
approval.
11. Following approval, baseline the schedule and distribute to the team.

Example: Developing a Project Schedule for the Website Project

As project manager for your company’s website project, you perform mathematical
analysis without regard for resource limits. This helps you determine the time periods
within which project activities can be scheduled. Next, you evaluate the constraints and
assumptions from earlier planning processes.

Lesson 6: Developing and Controlling a Project Schedule 153

LESSON 6
After reviewing your resource pool, you consult the project calendars. Using project
management software, you enter all holidays, weekends, and vacation days of key
team members into the schedule.
Next, you print a rough draft of the schedule in a Gantt chart format and call a review
meeting with the project team, sponsor, and affected managers.

DISCOVERY ACTIVITY 6-1

Drafting a Project Schedule
Data Files:
• May 2009 Calendar

Before You Begin:

From the C:\085061Data\Developing a Project Schedule folder, open the May 2009 Calendar
document.

Scenario:
Now that you have the list of activities, estimated durations, and estimated resources, it is time
to draft the project schedule to determine the start and finish dates for the project activities.
The project is scheduled to start on May 11, 2009 and must finish no later than September 18,
2009.
To draft the schedule, refer to the May 2009 Calendar document.

In this activity, you will develop the project schedule for a work package, and not the entire project.

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 LESSON 6
1. What other inputs will you need to have available before developing the project sched-
ule?
✓ a) Resource calendars
b) Schedule baseline
✓ c) Project scope statement
✓ d) Specific milestone dates that must be met

2. Use the supplied table to draft the project schedule for WBS TRN0001, Assembling
Internal Training Team.
Saturdays and Sundays need
not be included when drafting
this schedule.

The completed project schedule should look like this.

Completed Project Schedule

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LESSON 6
TOPIC B
Identify the Critical Path
Now that you have drafted a project schedule, you have established the start and finish times
for each of the activities in your project. You will need to know the critical path through your
project activities. In this topic, you will identify the critical path.
Identifying the critical path allows you to determine the activities that do not have scheduling
flexibility before you complete your project schedule. This also indicates the activities that
have scheduling flexibility.

Critical Activities
Critical Activities Definition:
Critical activities are the activities that are on the critical path. Generally, for all
activities along the critical path, ES = LS and EF = LF. There can be no flexibility in
the start time or the finish time for these activities. Activities that are not on the criti-
cal path usually have some flexibility in their start and finish times.

Example: Critical Activities in a Project

Figure 6-14: Critical activities lie on the critical path (Activities A, B, F, G,

and H).

How to Identify the Critical Path

How to Identify the Critical Procedure Reference: Identify the Critical Path
Path
To identify the critical path for a project with finish-to-start precedence relationships:
1. Conduct a forward pass to determine ES and EF times for each activity.
a. Use zero (0) for the first activity’s ES.

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 LESSON 6
Other methods for identifying the critical path may also suggest using one (1) for the first
activity’s ES. The calculations may differ in such cases.

b. Enter the first activity’s duration as its EF.

c. Calculate the ES for each successor activity using the latest EF from any of
its predecessor activities plus or minus any leads or lags.
d. Calculate the EF for each successor activity by adding its duration to its ES.
e. Move through all the activities until you have an ES and EF for each one.
2. Perform a backward pass to determine LS and LF times for each.
a. Enter the last activity’s EF for its LF time.
b. Subtract the last activity’s duration from its EF to determine its LS.
c. Calculate the LF for each predecessor activity using the earliest LS from any
of its successor activities plus or minus any leads or lags.
d. Calculate the LS for each predecessor activity by subtracting its duration
from its LF.
e. Move backward through all the activities until you have the LF and LS for
each one.
3. Calculate float.
a. For each activity, subtract its EF from its LF to determine total float.
b. For each string of activities with float, calculate the free float for the last
activity in the string by subtracting its EF from its successor activity ES.

There is software available that will quickly compute these elements, including the critical path,
but you may be expected to perform these calculations yourself, on paper, in order to pass the
CAMP certification exam.

4. Identify the critical path as the path with the longest total duration and zero float.

Example: ES, EF, LS, LF, and Float Calculations

This figure shows a CPM network diagram with ES, EF, LS, LF, and float calculated
and its critical path identified. The activities in the network all have FS relationships.

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LESSON 6

Figure 6-15: Identifying the critical path.

Note the following characteristics in the CPM figure:
• The ES for the first activity (A) equals zero.
• The EF for the first activity is its ES plus its duration (0 + 10 = 10).
• The ES for all successor activities is the latest EF of any of its predecessor activi-
ties plus or minus any leads or lags between the two activities.
For example, the ES for activity D is the same as the EF for activity C (29), and
the ES for activity G is the EF for activity F (41) plus an 8-hour FS lag, which is
indicated as FS 8 (41 + 8 = 49).

Although the ES of the first activity can be zero, it can also have the value one. But when the ES
of the first activity is one, then the duration should be calculated as ES + DU - 1. The ES of the
successor activity will then be the EF of the predecessor activity plus one.
For example, if the ES of the first activity is one, then its EF would be 1 + 10 - 1 = 10 and the
ES of the second activity would be 11.

• The EF for all subsequent activities is its ES plus its duration. For example, the
EF of activity B (25) is its ES (10) plus its duration (15).
• The LF for the last activity is the same as its EF time (66).
• The LS for the last activity (61) is its EF (66) minus its duration (5).
• The LF for any predecessor activity is the same as the earliest LS of any of its
successors plus or minus any leads or lags between the two activities.
For example, the LF of activity E is the same as activity H LS (61), and the LF
for activity F (41) is the LS for activity G (49) minus the 8-hour FS lag (49 - 8 =
41).
• The LS for any predecessor activity is its LF minus its duration. For example, the
LS for activity E (48) is its LF (61) minus its duration (13).
• Only the three activities that are not on the critical path (C, D, and E) have total
float (TF = 11).
• Only the last activity in that string (activity E) has free float (FF = 11).

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 LESSON 6
• The critical path is indicated by bold lines with arrows and includes activities A,
B, F, G, and H. It is the path with the longest total duration and zero float.

DISCOVERY ACTIVITY 6-2

Identifying the Critical Path
Data Files:
• OGC Critical Path

Before You Begin:

From the C:\085061Data\Developing a Project Schedule folder, open the OGC Activity List and
the OGC Critical Path documents.

Scenario:
You have listed the activities, estimated durations, estimated resources, and drafted the project
schedule. Next you are going to calculate the critical path to document in the network diagram
any float that you currently have in the schedule. At this point, you will focus on the first two
phases of the OGC PM Training Roll-Out project.

When students have

completed the activity, have
1. Perform a forward pass to determine the early start (ES) and early finish (EF) for each
them open the OGC Critical
activity. Enter your answers in the appropriate place in the network diagram. What is
the ES for activity TRN1.1, Identify Team Lead? Path Solution document from
the C:\085061Data\Developing
The ES for the first activity is assumed to be zero. a Project Schedule\Solutions
folder, to see a comparison.

2. What is the EF for activity TRN1.1?

The EF is 1. The EF for the first activity is the same as its duration.

3. What is the ES for activity TRN1.2.1, Human Resources?

The ES is 6, because the relationship with its predecessor is FS with a five-day lag.
Five days need to be added to
the activity 1.2.1—Identify
4. What is the EF for activity TRN1.2.1, Human Resources? Resources from the Human
Resources Department, to
The EF is 11, its ES + duration. accommodate the one-week
lag in the activity.
5. Calculate the ES and EF for the remaining activities. Why is the ES for activities
TRN1.2.3 and TRN1.2.4 the same as the ES for TRN1.2.2?
They all have the same relationship with the predecessor activity TRN0001.2.1.

6. Determine the floats for the activities in this network. Which activities have total float
in this network?
Activity TRN2.1.1.1, Identify High-level BT PM Needs, has 4.25 days of total float.

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LESSON 6
7. What is the critical path?
Critical path = 1.1 + 5 day lag +1.2.1 / 1.2.2 / 1.2.3 / 1.2.4 + 1.3 + 1.4 + 2.1.2.1 + 2.2.1 +
2.2.2 + 2.2.3 + 2.2.4 + 2.2.5 = 17.25
Other path = 1.1 + 5 day lag +1.2.1 / 1.2.2 / 1.2.3 / 1.2.4 + 1.3 + 1.4 + 2.1.1.1 + 2.2.5 =
13

TOPIC C
Optimize the Project Schedule
You drafted your project schedule and identified the critical path. You are ready to begin the
hands-on management of the schedule, which involves successfully negotiating organizational
constraints on time and resources. To do so, you must identify the tools that project managers
use to respond to resource fluctuations, ordinary setbacks, and delays while responding to the
perennial business need of bringing in the project on time. In this topic, you will optimize the
project schedule.
Setbacks, delays, constraints on time and resources, and competing priorities are all part of
everyday life in business, and they will affect every project you work on. You want to be able
to work effectively in the face of these challenges by optimizing your project schedule, which
means using project management tools to work around these problems so that you can support
the needs of the business.

Schedule Compression
Schedule Compression Definition:
Schedule compression is the shortening of the project schedule without affecting the
project scope. Setbacks or revised deadlines can cause production problems, in which
there is little time to do a lot of work. When these issues occur, product quality is
often sacrificed. Schedule compression alleviates the pressure of completing too many
activities in too little time without negatively affecting the project scope. Compression
may be achieved in one of two ways: fast-tracking and crashing.

Example: Schedule Compression when Building and Installing Cabinets

A carpenter and his sub-contractor are building and then installing cabinets in a new
housing development. The realty company has a higher demand than expected and asks
the carpenter to move up his finish date by three weeks. In order to meet this deadline,
the carpenter decides to change the order of assignments for the remaining carpentry
work. He tells the sub-contractor to work on the installation of the cabinets while he
finishes building the cabinets. This changes the precedence. Instead of finishing the
building of all the cabinets and then installing them, the installation is able to start
before the building of the cabinets is complete as in the original schedule. Due to the
increase in production, the carpenter finishes a week ahead of schedule, rather than
three weeks behind.

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Fast-Tracking
Definition: Fast-Tracking
Fast-tracking is the process of compressing total project duration by performing some
activities concurrently that were originally scheduled sequentially.
Typically, fast-tracking involves identifying FS relationships that could be done in par-
allel, either as FF, SF, or SS relationships, or by simply adding some leads to FS
activities.
Some fast-tracking may entail looking very creatively at the network diagram to see if
some discretionary dependencies could be done completely independently. Usually no
added costs are incurred from fast-tracking; however, it can result in increased risk and
rework.

Example: Fast-Tracking Activities to Produce a New Product

Sponsors are pressuring Carol to bring a new product to market quickly. Carol decides
to fast-track some activities by putting a lead relationship between the development of
the new product and the writing of the associated user manual. The total duration of
the two activities is shortened, since writing the manual can start before the product
development is completed. Consequently, the project duration is shortened, as well.

Crashing
Definition: Crashing
Crashing is a schedule compression method that analyzes cost and schedule trade-offs
to determine how to obtain the greatest schedule compression for the least incremental
cost. Crashing typically involves allocating more resources to activities on the critical
path in an effort to shorten their duration and thereby increases project costs. In addi-
tion, crashing involves approving overtime and paying to expedite delivery to activities
on the critical path.
To crash a schedule, analyze:
• Duration estimate under normal (for example, not compressed) conditions.
• Cost associated with the normal condition.
• Duration estimate under the crash condition.
• Cost associated with the crash condition.
The formula for calculating crash costs per week is (crash cost – normal cost) / (nor-
mal time – crash time).

Example: Crashing the Company Website Project

As a project manager for the company website project, you are asked to compress the
schedule for the design deliverable. There are 11 activities, five of which are on the
critical path. Using the formula (crash cost – normal cost) / (normal time – crash
time), you calculate the crash costs per week for each of the five activities to deter-
mine which activities would provide the greatest duration reduction for the least
incremental cost. Your calculations are:

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 LESSON 6
Normal Crash Time Normal Cost Crash Cost Crash Cost/Wk
Time (wk) (wk) ($) ($) ($)
A 10 8 15,000 23,000 4,000
B 12 11 10,000 14,500 4,500
C 8 6 5,000 8,000 1,500
D 6 3 6,000 7,500 500
E 9 6 12,000 18,000 2,000
Totals 45 34 48,000 71,000 -

While you haven’t yet analyzed the effect of crashing the activities, you can determine
from your calculations that:
• Activities D and C are the best candidates for crashing.
— Activity D has a net gain of three weeks at a cost of just $500 per week.
— Activity C reduces the schedule by two weeks at a cost of only $1,500 per
week.
• Activity E is another possible candidate with a three-week reduction at a cost of
$2,000 per week.
• Activity B, which has a crash cost of $4,500 per week and a reduction of only
one week, is the worst candidate for crashing.
• The order in which the activities should be crashed is D, C, E, A, and B.
• The total number of weeks by which the project could be shortened if all of the
activities on the critical path are crashed is 11 (45 – 34).
• The total additional cost if all activities on the critical path are crashed is $23,000
($71,000 – $48,000).

Crash Cost Plotting Methods

Crash Cost Plotting Methods Definition:
Crash cost plotting methods are techniques for analyzing the crash costs through creat-
ing a graph or a visual representation that clearly illustrates those costs. With the X
axis showing the duration and the Y axis showing the cost, the activities are plotted on
the grid from right to left, starting with the activity with the lowest crash cost per
week. Activities with flatter slopes are the activities with relatively larger time savings
for the associated cost. Crashing may result in increased risk and rework; the project
team needs to identify the point where it becomes impractical to crash the schedule
any further.

Example: Presenting a Project’s Crash Costs

In this example, the project manager has plotted the crash costs against total project
costs and total project duration in weeks. Notice that the crash cost plotting illustrates
the activities that have the greater savings of time as well as savings of associated
costs.

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 LESSON 6

Figure 6-16: Plotting crash costs on a graph.

How to Optimize the Project Schedule

Procedure Reference: Optimize the Project Schedule How to Optimize the Project
Schedule
To compress the schedule when necessary:
1. Consider your resource leveling options.
— Can you pull needed resources from activities with float and apply them to
critical activities?
— Can you authorize overtime or comp time to meet your project requirements?
— Is shift work possible?
— Can an activity be contracted out to free up resources during a critical
period?
2. Consider fast-tracking the project.
— Can any activities on the critical path be done concurrently that were origi-
nally scheduled sequentially?
— Are there any discretionary dependencies that could be done completely inde-
pendently?
— Are there any increased costs associated with fast-tracking activities?
— What are the associated risks?
3. Analyze activities on the critical path to determine if crashing the schedule will
produce a viable option.
— Are there any activities on the critical path that can be shortened if more
resources are added?
— What are the costs associated with crashing those activities?
— Which activities will provide the biggest duration decrease while incurring
the least amount of incremental cost?
— What are the resource allocation implications of crashing the activity? Will
some key resources be overextended? Will all resources be available when
needed?
— Are there any quality implications associated with crashing the activities?

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LESSON 6
4. Analyze each activity on the critical path to determine whether reducing scope is
a viable option for reducing duration.
5. Recalculate the critical path after compressing the schedule.
6. Review any schedule changes with key stakeholders.
7. Revise the schedule and distribute to the team.

Example: Optimizing the Schedule for the Company’s Website Project

You have created a draft schedule for your company’s website project. At the draft
schedule review meeting, the sponsor informs you that the schedule must be com-
pressed by a week so that the new website will go live in time to coincide with a
major industry conference.
You analyze the critical path and discover that two activities could be performed con-
currently, instead of sequentially. You fast-track the activities and gain the needed
week, then review the critical path and confirm that it has not been altered.
You review the revised schedule with the project sponsor and obtain approval. The
schedule becomes the baseline for the project.

DISCOVERY ACTIVITY 6-3

Crashing a Project Schedule
Scenario:
You are assisting the project manager in crashing the schedule due to some recent contractor
delays. You have transferred the normal activity durations from the network diagram to a table
along with the normal cost estimates. Together you have determined how much each activity
can be crashed and the associated crash cost estimates. You are just about done, but you are
having trouble evaluating the real impact crash costs will have on this project.
To calculate the project durations, use the following graphic.

Crashing a Project Schedule

(3 Slides)

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 LESSON 6
1. Which activity has the highest crash cost per week? Which has the lowest?

Activity A has the highest crash cost per week ($6,000 per week). D has the lowest ($250
per week).

2. Which activities are on the critical path for this project?

Activities A, B, C, F, and G are on the critical path.

3. What is the project duration?

Project duration is 50 weeks.

4. Which activities are the best candidates for crashing, and in what sequence?
Consider crashing in the sequence G, B, F, C, and then A. G or B will compress the sched-
ule by 2 weeks, at a cost of $1,000 per week; F will compress the schedule by 7 weeks at To see additional examples of
a cost of $2,000 per week; C will compress the schedule by 1 week at a cost of $2,000 per crashing, refer to the Crashing
week; A will compress the schedule by 3 weeks at a cost of $6,000 per week. Carefully document in the C:\
085061Data\Developing a
examine any possible crashing because another network path might emerge as the critical
Project Schedule folder.
path.

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LESSON 6
5. Plot the slope for crashing each activity on the critical path. Use the graph to make
your plots.

The result should look like this.

6. Which activity is the best candidate for crashing? Why?

Activity B or Activity G. This is because the best candidates are those with the flattest
slope, meaning they incur the least cost per incremental unit of time saved.

7. If you crashed all the activities identified on the original critical path, what would hap-
pen to the duration for that network path?
It would go from 50 weeks (normal) to 35 weeks (10 + 4 + 5 + 13 + 3), a net decrease of 15
weeks.

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 LESSON 6
8. If you crashed all activities identified on the original critical path, what would happen
to the total project cost?
It would increase from $92,000 to $130,000, a net increase of $38,000.

9. What would happen to the total project cost if you decided to crash every activity in
the project?
Total project cost would increase to $137,000.

10. What other factors would you need to consider when deciding whether to crash this
schedule?
Answers will vary, but may include: consider resource allocation under normal and crash
conditions. Consider also the possible quality and risk implications of compressing the
duration of each of those activities.

11. What should you do if the normal time and the crash time for an activity are the same?
Nothing. You can’t crash that activity.

TOPIC D
Establish a Schedule Baseline
You are familiar with drafting and optimizing your project schedule. Now, you need to create a
schedule baseline in order to get management approval for your project schedule. In this topic,
you will establish a schedule baseline.
As a project manager, it is your responsibility to get management approval for your project
schedule so that you can begin your project on the right footing, setting the stage for proper
monitoring and measuring of schedule performance throughout the life cycle of the project.
The schedule baseline is the key mechanism for gaining that approval and so your ability to
generate the appropriate baseline will be critical to project success.

Schedule Baselines
Definition: Schedule Baselines
A schedule baseline is the management-approved version of the project schedule; it is
drawn from the schedule network analysis and includes baseline start and finish dates.
It provides the basis for measuring and reporting schedule performance. It is a formal
part of the project management plan.

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LESSON 6
Example: A Schedule Baseline

Figure 6-17: A chart showing a schedule baseline.

How to Establish a Schedule Baseline

How to Establish a Schedule
Obtaining approval from the stakeholders for your project will be vital as you move through
Baseline the project life cycle and monitor schedule performance. By establishing a schedule baseline,
you will further enhance the project’s integrity by securing approval from the project manage-
ment team and stakeholders.

Guidelines:
To establish the schedule baseline, follow these guidelines:
• Gather your preliminary project schedule, which includes the project’s start and
finish dates. Make sure that all of its components are accurate and up-to-date,
including resources, durations, calendars, predecessor dates, task dependencies,
cost estimates, and constraints. Confirm that resources have not been over-
allocated.
• Distribute the proposed schedule baseline to the appropriate stakeholders and
project management team for approval. This approval is a formal requirement, and
as such, it should be received in writing from the project sponsor.
• Incorporate any changes to the schedule baseline as required by the management
team.
• Changes to your schedule baseline may require additional resources or more time;
these changes will affect the project cost and will require you to update your cost
baseline as well.
• Revisions made to the schedule baseline after it has been approved will need to
be made through a formal change process approved by management.
• Save the original schedule baseline. During the life cycle of the project, changes
will be made as the schedule baseline is updated and revised; you will need to
preserve the historical data included in your original schedule baseline.

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 LESSON 6
Example: Establishing the Schedule Baseline when Launching a New Line of
Products
A cosmetics company is launching a new line of products. The project manager needs
to establish a schedule baseline and secure approval from both company management
and the group of stakeholders, which includes the company’s sales and marketing
teams. The project manager will begin by distributing the preliminary product rollout
schedule along with resource calendars, cost estimates, and any related constraints. He
will distribute the schedule to the appropriate parties for formal approval.
Before the team members give their approval, they will submit changes to the sched-
ule; the project manager will be responsible for incorporating those changes. Making
these changes will impact the cost baselines as well, and the project manager will need
to follow the organization’s formal change process and secure approval from manage-
ment before continuing. Finally, he will save the original schedule baseline and
preserve the historical data related to this product launch.

DISCOVERY ACTIVITY 6-4

Establishing a Schedule Baseline
Scenario:
As the project manager for the PM Training Roll-Out project, you have completed all prelimi-
nary project work. All stakeholder requirements have been collected; project scope has been
defined; the WBS has been created; activities have been defined and sequenced; and activity
resources and durations have been estimated. You are preparing to baseline the project sched-
ule.

1. What should be done before establishing the schedule baseline?

a) Distribute the stakeholder register templates to the project management team for
approval.
b) Distribute the procurement documents to the appropriate stakeholders and project
team for approval.
✓ c) Distribute the proposed schedule baseline to the appropriate stakeholders and
project management team for approval.
d) Distribute the project charter to the appropriate stakeholders and project manage-
ment team for approval.

2. How would you describe the difference between the draft schedule and the schedule
baseline?
Answers will vary, but may include: the draft schedule evolves through the planning
cycle. However, once the draft schedule is committed to by the project stakeholders, the
scheduled activities’ start and finish dates, durations, and calculated work are set in the
schedule baseline data, which can be used as a comparison once the project is underway.

Lesson 6: Developing and Controlling a Project Schedule 169

 LESSON 6
3. Which tasks will you be able to do once the schedule baseline has been established and
project execution has begun?
✓ a) You will be able to determine project or activity slippage.
✓ b) You will be able to determine a variance in the start and finish dates for the project.
c) You will be able to determine if resources are over-allocated.
✓ d) You will be able to determine if the amount of scheduled work for each work pack-
age has changed.

4. True or False? When the schedule baseline is first saved, the schedule variance for
each activity should be equal to zero.
✓ True
False

TOPIC E
Control the Project Schedule
When you planned your project, you developed a schedule to serve as a baseline during
project execution, monitoring, and controlling. Now you need to determine how much variance
exists between the actual work completed and the work scheduled. In this topic, you will
examine the control schedule process and control the project schedule.
“When was the work scheduled to be completed?” “Can we change the project end date?”
“Are we going to finish the project on time?” Answering questions like these is what project
schedule control is all about. Effective schedule control ensures that you complete your project
on time according to the project schedule.

The Control Schedule Process

The Control Schedule Process
Control schedule is a process of monitoring schedule performance and controlling changes to
the schedule baseline. During this process, the project manager continually monitors schedule
performance by comparing actual work completed to the amount of work that was planned to
be completed. In addition, the project manager, along with a CCB, monitors, coordinates, and
implements changes to the project schedule and evaluates the impact of those changes on other
performance baselines and the original scope definition.

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 LESSON 6

Figure 6-18: The control schedule process.

Control Schedule Inputs

There are several inputs used in the control schedule process.

Input Description
Project management plan Contains the schedule management plan, which sets up guidelines
on how the project schedule will be administered and directed. It
also contains the schedule baseline that is used for comparing
actual results and determining the type of corrective action that is
needed.
Project schedule Contains the up-to-date version of the project schedule with details
on completed activities and activities that are yet to commence,
with their respective start and end dates.
Work performance information Provides information on project progression, such as activities that
are started, in progress, or finished.
Organizational process assets Include schedule control related policies, procedures, and guide-
lines, schedule control tools, and monitoring and reporting methods
that are to be followed.

Control Schedule Tools and Techniques

There are several tools and techniques a project manager can use to control schedules.

Tools and Techniques Description

Performance reviews Reviews to measure, analyze, and compare schedule perfor-
mance. This includes comparing the actual start and finish dates,
percent complete, and the time needed to complete the work in
progress.
Variance analysis Determines the cause and degree of variance compared to the
schedule baseline and helps you decide whether corrective or
preventive action is required.

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LESSON 6
Tools and Techniques Description
Project management software Provides ways of tracking planned dates vs. actual dates, and to
forecast effects of changes to the project schedule.
Resource leveling Assists in making scheduling decisions when there are resource
management concerns and enables optimum distribution of work
among the available resources.
What-if scenario analysis Analysis that involves the review of multiple scenarios and then
calculating various possibilities of project durations, activity
sequences, and resource loading to bring the schedule in align-
ment with the plan.
Adjusting leads and lags Brings the project activities, which are behind or ahead of sched-
ule, in alignment with the plan. Working out possibilities of
accelerating (adding leads to) or decelerating (adding lags to) the
schedule to meet the demands of the plan.
Schedule compression Shortens the schedule so as to align the project activities to the
project plan without affecting the project scope.
Scheduling tool Uses updated schedule data and the scheduling tool with the
project management software or other methods to perform sched-
ule network analysis and generate an updated project schedule.

Control Schedule Outputs

There are several outputs from the control schedule process.

Output Description
Work performance measurements Schedule Variance (SV) and Schedule Performance Index (SPI)
values calculated for WBS components are documented and
communicated to the respective stakeholders.
Organizational process assets updates Items documented in the organizational process assets include
lessons learned about the causes of variance, the reason why
corrective actions are chosen, as well as other types of lessons
learned from schedule control.
Change requests Any changes requested to the project schedule baseline can
originate from schedule variance analysis, review of progress
reports, results of performance measures, and modifications to
the project schedule.
Project management plan updates Contains updated components such as the schedule baseline,
schedule management plan, and cost baseline to reflect changes
caused by the schedule adjustments.
Project document updates Contains updated project documents such as schedule data and
project schedule.

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 LESSON 6
Earned Value Management (EVM)
Earned Value Management (EVM) is a method of measuring project progress by comparing Earned Value Management
actual schedule and cost performance against planned performance as laid out in the schedule (EVM)
and cost baselines. Assessing the value of work requires first determining what work has actu-
ally been performed and therefore what value it has contributed to the project.
Cost variances occur when the actual cost of the project (AC) and its flexible budget differ.
The benefit of using EVM as opposed to just a flexible budget is the time dimension associ-
ated with earned value.
During planning, project work is broken down into work packages and activities. Each work
package is assigned a budget and a schedule. Since each increment of work is time-phased, a
Schedule Variance (SV) results when work is not completed when it was scheduled to be com-
pleted. It is always better to understand the monetary value of work contribution, whether it is
less or more to the project. Therefore, the SV is often expressed in terms of monetary value.

Developed primarily by the Department of Defense, earned value is a metric for achieving meaningful compari-
sons between planned and completed work.

Cost and Schedule Performance

The EVM approach to monitoring cost and schedule performance provides metrics that
show variances from the baselines. Armed with this information, the project manager
can identify appropriate corrective actions. When cost and schedule variance analysis is
conducted at the appropriate time intervals and levels, it can be effective in controlling
against further cost and schedule problems.

EVM Variables
EVM involves calculating three independent variables to assess and monitor project cost and EVM Variables
schedule performance progress. The variables include:
• Planned Value (PV).
• Earned Value (EV).
• Actual Cost (AC).
These three variables are used to provide measures of whether or not work is being accom-
plished as planned and to forecast project cost at completion.

Planned Value (PV)

Definition: Planned Value (PV)
Planned Value (PV) is the budgeted portion of the approved cost estimate to be spent
during a particular time period to complete the scheduled project work. This amount is
specified in the project’s cost baseline. In simpler terms, PV indicates the value of
work to be done during a particular time period.

Planned Value was formerly referred to as the Budgeted Cost of Work Scheduled (BCWS).

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LESSON 6
Example: Evaluating Planned Value
A project to build a shed was proposed. It involved three tasks to be done: flooring,
drywalling, and roofing. Flooring was budgeted for $200 and will take two days to
complete. The task of drywalling was budgeted for $800 and will take four days to
complete. Roofing was budgeted for $600 and will take three days to complete. The
total budget for building the shed came to $1,600. The total budget calculated for the
first six days of work, involving two days of flooring and four days of drywalling, will
be $200 + $800 = $1,000. Therefore, the PV of this project for six days is $1,000.

Earned Value (EV)

Earned Value (EV) Definition:
Earned Value (EV) is a composite measurement of both cost and time performance in
relation to scheduled or planned cost and time performance. EV is calculated by multi-
plying the percentage of work completed by the budgeted cost for the activity as laid
out in the cost baseline.
In order to determine the EV of the project work to date, you will have to look back at
the cost baseline to determine how costs were assigned originally. If the PV was deter-
mined by the percentage completed to date method, you would apply the same method
of assessing the EV. In other words, EV indicates the value of work actually performed
during a particular time period.

Earned Value was formerly referred to as the Budgeted Cost of Work Performed (BCWP).

Example: Evaluating Earned Value

The manager of the shed building project receives a project report at the end of day
six, which says that the flooring task ($200) is 100% complete and the drywalling task
($800) is 75% complete. To calculate the earned value for the completed work:
EV = (100% x Flooring budget) + (75% x Drywalling budget)
EV = (100% x 200) + (75% x 800)
EV = 200 + 600
EV = $800
Therefore, the calculated EV for the project at the end of day six is $800.

Actual Cost (AC)

Actual Cost (AC) Definition:
Actual Cost (AC) refers to the total amount of costs incurred while accomplishing
work performed, either during completion of a schedule activity or during the comple-
tion of a work breakdown structure component. Actual cost is calculated and
documented once the work is complete. In other words, AC indicates the actual money
that has been spent for work that has been completed.

Example: Evaluating Actual Cost

The shed building project report also states that the actual money spent on flooring is
$180 and on drywalling is $700. So, the actual cost for the project as of day six is
$880.

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EVM Measures
The most commonly used EVM measures are: EVM Measures
• Schedule Variance (SV = EV - PV).
• Schedule Performance Index (SPI = EV / PV).
• Cost Variance (CV = EV - AC).
• Cost Performance Index (CPI = EV / AC).

Content related to schedule and costs has been dealt with as separate topics in this course. For detailed informa-
tion on Cost Variance (CV) and Cost Performance Index (CPI), refer to the “Control Project Costs” topic.

Schedule Performance Measurement

Definition: Schedule Performance
Measurement
Schedule performance measurement is any technique used to determine how the
project is performing in terms of time as compared to its planned performance. Sched-
ule performance measurement tells the project manager how much variance exists
between the actual work completed and the work scheduled.
Performance measurement techniques such as Schedule Variance (SV), Schedule Per-
formance Index (SPI), trend analysis, and variance analysis are used to help determine
if the schedule variance is potentially detrimental to the project and if corrective
actions are needed to ensure on-time deliverables.
Using the approved schedule baseline as the standard for measuring progress, the
project manager collects reporting information for each activity and uses a Gantt chart
to summarize the data.

Example: Schedule Performance

Consider an example of a software development project. The estimated duration of the
entire project is four months. Dan, the project manager, decides early in the project life
cycle that there will be eight reporting periods and that work package owners will sup-
ply schedule performance reports every two weeks.

Software Development Gantt

Chart (2 Slides)

Lesson 6: Developing and Controlling a Project Schedule 175

LESSON 6

Figure 6-19: Software development Gantt chart.

On the fifth reporting period, Dan receives the schedule reports and plots the results on
a Gantt chart, shown in the software development Gantt chart.
The Gantt chart shows that:
• Activities A, B, and C are finished.
• Activity B finished behind schedule.
• Activity C finished early.
• Activity D started a week late.
• Activity E is behind schedule.
• Activity F has not started yet.
The Gantt chart is an effective tool for providing up-to-date summary information and
can be extremely helpful for analyzing the project’s overall time performance. The
Gantt chart also shows when milestones are scheduled and if those critical dates are
still on track.

Schedule Control Chart

Another tool you can use to illustrate schedule performance is the schedule control
chart. This chart can be used to show trends in schedule performance. The following
graphic is an example of a typical schedule control chart.

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 LESSON 6

Figure 6-20: A schedule control chart.

This chart plots the variance in the schedule for a project. It shows that the project
started behind schedule and that corrective action was probably taken to bring the
project back in line with planned schedule estimates.

Schedule Variance (SV)

Definition: Schedule Variance (SV)
Schedule Variance (SV) is the measured difference between the actual completion of an
activity and the planned or scheduled completion of an activity. To calculate the SV,
subtract the planned value from the earned value. A negative SV indicates that the
project is behind schedule. A positive SV indicates that the project is ahead of sched-
ule. When the SV is zero, it indicates that a project is on schedule. The formula for
schedule variance is (SV = EV - PV).

Example: Calculating Schedule Variance for a Construction Project

A project manager for a construction project plans to calculate the schedule variance at
the end of every month to measure schedule performance. The project is scheduled to
last eight months and has a budget of $800,000. According to the cost baseline, by the
fourth reporting period, he planned to spend $500,000 accomplishing project work.
This is the PV through this reporting period. By collecting reporting data through the
fourth period, he determines that only $425,000 worth of the work has actually been
accomplished. This is the EV through the fourth reporting period. He subtracts
$500,000 (the PV) from $425,000 (the EV) to determine that the project currently has
an SV of -$75,000, which indicates that the project is behind schedule.

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 LESSON 6
Schedule Performance Index (SPI)
Schedule Performance Index
Another measurement of schedule performance efficiency is the Schedule Performance Index
(SPI) (SPI). The SPI is the ratio of work performed to work scheduled. To calculate the SPI, divide
the EV by the PV. An SPI of 1.0 or 100 percent means the project is right on schedule. If the
SPI is greater than 1.0 or 100 percent, the project is ahead of schedule. If the SPI is less than
1.0 or 100 percent, the project is behind schedule. The formula for schedule performance index
is (SPI = EV / PV).

SPI Trend Analysis

SPI Trend Analysis (2 Slides)
Performance indices can be plotted on a graph to show a trend. An SPI curve for a project
with normal variance would show some fluctuations on the graph but tends to remain within
the range of SPI 1.0.

Figure 6-21: A normal SPI curve.

If no corrective action is taken to make up for any schedule overrun, the trend could be unfa-
vorable and the SPI graph could potentially show a trend where it starts to fall below SPI 1.0.

Figure 6-22: A potential SPI curve for a schedule overrun.

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 LESSON 6
Working with EVM
To calculate EVM: Working with EVM
1. Determine the AC incurred for the work completed for each activity to calculate the CV.
2. Analyze the data to determine whether the actual cost to perform the work is more or less
than its Earned Value (EV).
3. Determine if the EV is more or less than the Planned Value (PV), which indicates a
Schedule Variance (SV).

EVM
The project manager analyzes the information in the table and graph and determines
that the Actual Cost (AC) to perform the work is more than its Earned Value (EV).
This indicates a negative cost variance and a budget overrun. In addition, the EV is
less than the Planned Value (PV), which indicates a negative schedule variance.

Figure 6-23: Calculating EVM.

% Com-
Activity plete PV AC EV SV CV SPI CPI
A 100% $6,000 $10,000 $6,000 $0.00 -$4,000 1.00 0.60
B 50% $50,000 $44,000 $25,000 -$25,000 -$19,000 0.50 0.57
C 50% $12,000 $5,000 $6,000 -$6,000 $1,000 0.50 1.20
D 25% $16,000 $6,000 $4,000 -$12,000 -$2,000 0.25 0.67
E 0% 0 0 0 0 0 -
F 0% 0 0 0 0 0 -
TOTAL $84,000 $65,000 $41,000 -$43,000 -$24,000 0.49 0.63

Lesson 6: Developing and Controlling a Project Schedule 179

LESSON 6
The combination of both a negative SV and negative CV indicates that the project is
performing over budget and producing less work than scheduled. The project manager
uses this information to find out the causes of the variances and determine the appro-
priate corrective action necessary to bring the cost and schedule performance back in
line with the baselines. He repeats the analysis at regular intervals to monitor the
results.

Content related to schedule and costs has been dealt with separately as topics in this course. For
detailed information on Cost Variance (CV) and Cost Performance Index (CPI), refer to the “Control
Project Costs” topic.

How to Control the Project Schedule

How to Control the Project
Continually monitoring schedule performance and controlling changes to the approved project
Schedule schedule enables you to maintain the schedule baseline.

Guidelines:
To control the project schedule, follow these guidelines.
• Develop and implement a schedule change control system. Make sure your sys-
tem:
— Is integrated with the project’s integrated change control system.
— Includes the paperwork, tracking systems, and approval levels necessary for
authorizing schedule changes.
— Complies with any relevant contractual provisions when the project is done
under contract.
— Complies with the guidelines specified in the schedule management plan.
• Evaluate change requests by asking these questions:
— What is the magnitude of the change when compared to the schedule
baseline?
— What is the impact of the change on project cost and quality objectives?
— What are the potential risks and benefits of the change?
• Use performance measurement techniques to compare actual schedule perfor-
mance to planned performance.
— Use schedule reports to monitor schedule performance.
— Calculate SV and SPI to determine whether the project is ahead of or behind
schedule.
• Analyze the results of your performance measurements by asking these questions:
— What is the cause of the variance?
— What is the magnitude of the variance? Is the activity that is causing the
variance on the schedule’s critical path? If so, this will indicate that your
project finish date will be pushed out.
— Is it likely that the variance can be made up in the near future without cor-
rective action or is corrective action necessary to bring the schedule
performance back in line with the baseline?
• Identify and document corrective action to take to bring expected future project
performance in line with planned performance. Depending on the priorities of
your project, consider one or more of the following alternatives:

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 LESSON 6
— Fast-tracking
— Crashing
— Outsourcing
— Resource leveling
— Reducing project scope
• Depending upon the nature of the change, you may need to revise the cost, sched-
ule, or quality performance baselines to reflect the changes and to form a new
baseline against which to measure future performance. Notify project stakeholders
of any changes made to project baselines.
• Use performance measurement techniques, including trend analysis, to monitor the
changes.
— Are the changes being properly implemented?
— Do the changes bring about the desired results?
— Are new risks being introduced as a result of implementing the changes?
• Document lessons learned during schedule control for use on future projects. The
documentation should include:
— Causes of variances.
— Performance baselines affected by the changes.
— Rationale behind the recommended corrective action.
— Any other lessons learned during schedule control.

Determining Schedule Performance Efficiency

The following table provides calculations to determine schedule performance effi-
ciency:

Performance Measurement Technique Calculation

Earned Value (EV) EV = % complete x total budget of
work
Schedule Variance (SV) SV = EV - PV
Cost Variance (CV) CV = EV - AC
Cost Performance Index (CPI) CPI = EV / AC
Schedule Performance Index (SPI) SPI = EV / PV

Example: Controlling the Project Schedule for an Elementary Reading Course

Project
The project team producing an elementary reading course is four months into produc-
tion. The performance reports indicate schedule performance problems. To get a better
picture, the project manager compares the actual work completed to the schedule
baseline and calculates the SPI as .80. This figure confirms the concern that the project
is behind schedule.

Lesson 6: Developing and Controlling a Project Schedule 181

LESSON 6
The project manager calls a core team meeting to determine the cause of the schedule
variance and to determine the magnitude of the variance. According to the multimedia
and technical leads, the major rework in the text-to-speech option in the glossary is
taking more time to implement than expected. It is taking valuable resources away
from other activities on the critical path.
The team agrees that corrective action is necessary to bring the project back in line
with the original schedule baseline. Realizing that they still have to implement the
change to the text-to-speech and that the project’s end date cannot be extended, the
team brainstorms other corrective action alternatives. They decide to recommend add-
ing one graphic artist and one programmer to work on the text-to-speech issues for two
months at a total cost of $15,000.
After discussing their recommendation with the project sponsor, the core team submits
a change request to the CCB. The CCB approves the change request and the project
manager informs project stakeholders of the decision. The project manager carefully
monitors the situation and recalculates the SV after the first and second months. Trend
analysis shows that the corrective action was effective in bringing the schedule back in
line with the baseline.
The project manager documents the problem, the causes of the variance, the alterna-
tives considered, the corrective action chosen, and the reason for the decision. In
addition, the project manager documents the results of the corrective action and files
the documentation in the project archives as lessons learned.

DISCOVERY ACTIVITY 6-5

Controlling the Project Schedule
Scenario:
The OGC Cincinnati office is undergoing minor renovations. The entire project is scheduled to
take 16 weeks at a total cost of $25,000. It is eight weeks into the project and your manager
asks you whether the project is on schedule.

1. Match the EVM measure with its formula.

b Schedule variance a. EV / PV
a Schedule performance b. EV - PV
index
d Cost variance c. EV / AC
c Cost performance index d. EV - AC

182 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 6
2. According to your cost baseline for the project, you planned to spend $15,000 by the
end of the eighth week. You collect reporting data for the eighth week and determine
that $12,000 worth of work has actually been completed. What actions should you
take with this information?
a) Bring it to the attention of the CCB with some possible solutions.
✓ b) Use it to identify corrective action to take.
✓ c) Use it to compare actual schedule performance to planned performance.
d) Bring it to the attention of project stakeholders.

3. The SV for the eighth week of your project is -$3,000. The SPI for this reporting period For question 3, you may want
is .80. What is your analysis of this data and the project’s schedule performance to to explain to the students that
date? the SPI is .80, which indicates
the project is behind schedule.
A negative SV indicates that the project is currently behind schedule. An SPI number less
than 1.0 also indicates that the project is behind schedule. You need to determine the
cause of the variance and whether the activity that is behind schedule is on the critical
path. You may consider talking to your resources to identify the source of the problem.
You may have to change the schedule dates as well.

4. Using performance measurement techniques, you have determined that the project is
behind schedule. What should you do with this information?
Now that you know the project is behind schedule, you need to determine what activity is
causing the problem. Once the activity has been identified, you must then determine
whether it is on the critical path. If it is on the critical path, you most likely will have to
take corrective action, such as fast-tracking, compression, or resource leveling to meet
your milestone dates and your project deliverable deadline. Remember to analyze the
impact of your corrective action on project cost and quality performance baselines. You
should continue to carefully monitor the schedule performance to check the effectiveness
of your corrective action.

Lesson 6 Follow-up
In this lesson, you developed a project schedule. Developing a project schedule that details the
work assigned to the project resources and attaching a timeline to each task will allow you to
track the progress of work at every stage of the project cycle.
1. What performance measurement techniques will you use in the future to measure
schedule performance?
Answers will vary, but may include: you can use Schedule Variance (SV), Schedule Perfor-
mance Index (SPI), and SPI trend analysis to measure schedule performance.
2. Reflect on the advantages of creating a project schedule network diagram. How do you
think this will help you organize your project more effectively?
Answers will vary, but may include: the project schedule network diagram depicts the
flow of project execution. This helps identify any flaws in the flow of project activities
and rectify them immediately.

Lesson 6: Developing and Controlling a Project Schedule 183

NOTES

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 LESSON 7

LESSON 7 Lesson Time

3 hour(s), 15 minutes

Analyzing Project Cost

In this lesson, you will analyze project cost.
You will:
• Estimate project costs.
• Establish the cost baseline.
• Reconcile funding and costs.
• Control project costs.

Lesson 7: Analyzing Project Cost 185

LESSON 7
Introduction
Good project management requires the ability to create accurate estimates regarding the costs
of project completion. It also requires you to monitor costs against the estimates and make
adjustments to the schedule or the scope as changes arise. Further, you will have to reconcile
the actual costs with the cost estimates in order to measure the project performance with
regards to costs, and also measure the variances that have occurred. In this lesson, you will
analyze project costs and budgets.
The ability to deliver projects on time and on budget is the cornerstone of good project man-
agement. You want to create accurate estimates regarding the work that must be done and the
costs that will be incurred, as well as monitor progress against expectations. By identifying
methods for creating accurate cost estimates and budgets that will guide your projects, you can
meet expectations effectively and deliver the desired results.

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 LESSON 7

Figure 7-1: The project management framework.

The Project Management

Framework (2 Slides)

Lesson 7: Analyzing Project Cost 187

LESSON 7
TOPIC A
Estimate Project Costs
Estimating project costs as accurately as possible will enable project managers and sponsors to
assess the total amount that needs to be spent on a project. In this topic, you will examine the
estimate costs process and estimate project costs.
Inappropriately high cost estimates may discourage sponsors from pursuing projects that have
the potential for success. Conversely, estimates that are too low could waste precious resources
on a project that ultimately proves unfeasible. As a project manager, it is your responsibility to
estimate project costs as accurately and realistically as possible. Mastering the tools and tech-
niques for estimating project costs will help you to effectively control project costs.

The Estimate Costs Process

The Estimate Costs Process
Estimate costs is the process of projecting the total expenditures necessary for the completion
of your project. Logical estimates provide a basis for making sound decisions about projects
and they establish baselines against which the success of the projects can later be measured.
Cost estimating also involves identifying and considering cost alternatives. A different type of
cost estimate and level of accuracy may be required for different phases of the project life
cycle.
A cost estimating method might be chosen due to:
• Software availability.
• Team member experience.
• Project life cycle phase.
• Time constraints.
• Project definition.
• Personal preference.

Figure 7-2: The estimate costs process.

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 LESSON 7
Example: Cost Estimation for a Software Application Project
Your team is trying to estimate costs of an extensive software application project.
However, some of the functionality has not yet been finalized, leaving only half of the
WBS truly defined. Your team creates definitive estimates for each of the defined work
packages. Then, you use historical information from similar projects to approximate
the costs for each undefined work package.

Estimate Costs Inputs

Accurate cost estimating requires numerous inputs.

Input Description
Scope baseline The scope baseline includes the approved detailed project scope statement
along with its associated WBS and WBS dictionary.
• Project scope statement: Contains relevant information, such as
project requirements, constraints, assumptions, and deliverables.
• WBS: Provides the relationship between individual project components
and deliverables.
• WBS dictionary: The WBS dictionary along with the statements of
work provide specific details of work activities and deliverables.
Project schedule The project schedule includes start and finish dates for each activity, and
details of resources along with the time needed for them to complete
project work that will incur project cost.
Human resource plan The human resource plan includes the components necessary for develop-
ing cost estimates such as the project staffing attributes, personnel rates,
and its related rewards and recognitions.
Risk register Risks that have an impact on cost.
Enterprise environmental External factors, such as market trends, unavoidable budget restructuring,
factors or commercial financial analysis may affect cost estimation.
Organizational process Intra-organizational cost estimating policies or templates, team experience,
assets or data from old projects.

Estimate Costs Tools and Techniques

There are many tools and techniques that can be used to estimate cost.

Tools and Techniques Description

Expert judgment Variables such as labor costs, material costs, inflation, and risk factors
can influence cost estimates. Expert judgment along with historical
information will provide an insight on the information related to prior
similar projects.
Analogous estimating Uses the cost of a previous project with similar scope or activities to
predict the cost of future activities.
Parametric estimating Relies on the statistical relationship that exists between historical infor-
mation and variables so as to arrive at an estimate for parameters such
as duration and cost.

Lesson 7: Analyzing Project Cost 189

LESSON 7
Tools and Techniques Description
Bottom-up estimating Estimates the cost of individual activities then “rolls up” to higher lev-
els.
Three-point estimate Incorporates three types of estimates into a singular cost estimate sce-
nario: most likely, optimistic, and pessimistic.
Reserve analysis Contingency funds that are built into a cost estimate for as-yet
unknown costs. Reserve analyses run the risk of inflating a cost esti-
mate.
Cost of Quality (COQ) A technique that focuses on the cost of ensured quality. Peripheral
costs include quality planning, control, and assurance.
Project management estimating Project management cost estimating software simplifies the cost esti-
software mation process, can accelerate estimation time, and is applicable to
most projects, regardless of scale or scope.
Vendor bid analysis Cost estimation is based on the responsive bids obtained from vendors.
Results must often be revisited once contract approval has been
gained.

Estimate Costs Outputs

In addition to cost estimates, there are several possible outputs from the estimate costs process.

Output Description
Activity cost estimates Provide estimates on probable costs necessary to finish project work. This
includes costs on direct labor, materials, equipment, facilities, services, infor-
mation technology, contingency reserves, or indirect costs, if any.
Basis of estimates Supporting or additional information needed to justify the cost estimates.
Details can include project scope, justification for the estimate, range of esti-
mates, the assumptions, constraints, and confidence level on the estimate,
and expected range of estimates.
Project document updates Updated project documents may include the risk register, human resource
plan, activity list, project schedule, and training plans.

Common Estimate Types

Common Estimate Types
This table describes some common estimate types and their associated degrees of accuracy.

Type or Level of Accuracy Description or Accuracy Rating

Rough Order of Magnitude (ROM) Generally made early in the project. Developed without basis
of detailed data and often based on very high level historical
data, expert judgment, or a costing model. Accuracy: -50 per-
cent to +100 percent.
Budgetary Often used for appropriation purposes. Accuracy: -10 percent
to +25 percent.

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 LESSON 7
Type or Level of Accuracy Description or Accuracy Rating
Range of estimate Often used as an alternative to ROM where the accuracy of the
estimate is not well known. So, rather than $10M ±30 percent,
the estimate could be stated as $7M to $13M. Accuracy: ± 35
percent.
Approximate estimate Based on more information than ROM estimates, but still lacks
the detail required for high accuracy. May be possible if the
project is similar to previous ones with reliable historical data
for costing or where a proven costing model is applicable.
Accuracy: ± 15 percent.
Definitive estimate (or “control” or Based on detailed information about the project work. Devel-
“detailed”) oped by estimating the cost for each work package in the
WBS. Accuracy: -5 percent to +10 percent.
Phased estimate (or “rolling wave” or Allows the use of ROM or approximate estimates for some
“moving window”) later parts of the work, while work that must be done earlier in
the project life cycle is estimated at the definitive level. Accu-
racy: ± 5 percent to ± 15 percent in the window closest to
present time; ± 35 percent farther in the future.

Analogous Estimating
Definition: Analogous Estimating
Analogous estimating, or top-down estimating, is a method of cost estimating in which
managers use their experience, historical information from similar projects, and expert
judgment to determine the total project cost or time estimate. The resulting total is then
apportioned across the major categories of project work. Estimates are generated for
the top levels of the WBS and then apportioned downward through the levels of the
WBS.
Analogous cost estimating is used when:
• You have a limited amount of detailed information about the project.
• You have a similar project to use for comparison.
• Those preparing the estimates have the requisite expertise.

Example: Analogous Estimating for a Web-Design Project

A project manager for a web-design firm might use analogous estimating to produce
cost and time estimates for new accounts. He would base their estimates on past expe-
rience and expert judgment. If several other similar sites, each of which included five
pages and basic functionality, took approximately 15 hours to develop, then he could
fairly estimate that a site with 10 pages would require 30 hours of development time.

Lesson 7: Analyzing Project Cost 191

LESSON 7
Bottom-Up Estimating
Bottom-Up Estimating Definition:
Bottom-up estimating is a method of estimating the cost for each work package in the
WBS. The estimates are then rolled up or aggregated for progressively higher levels
within the WBS. The project manager reviews the estimate figures and adds the
required overhead estimates to compile the total project cost. Bottom-up estimating is
the most accurate method but it is also the most challenging, costly, and time consum-
ing.
Use bottom-up estimating later in the project life cycle, when:
• More detail is available about the work packages.
• You need more accurate estimates.
• You have the time to invest in making the estimates.
You should also use bottom-up estimating for work packages with the highest level of
uncertainty associated with cost. Make sure you weigh the additional accuracy pro-
vided by bottom-up estimating against the additional cost of making the estimates.

Example: Bottom-Up Estimating for a Construction Project

Bottom-up estimating is used to reach a very accurate estimate on a project, such as a
contractor submitting a bid to a client for a construction of a large office building. The
contractor will be able to use the bottom-up estimating technique based on a very
detailed WBS, which would include foundation, structural work, carpentry, electrical,
plumbing, and architecture work. Each of these will be further decomposed to reach a
detailed activity level and then estimated by the cost of manpower, material, transpor-
tation, cost or hire charges of equipment required for the different activities, and so on.
The estimate for each work package would be rolled up until the contractor reached
one accurate cost estimate for the construction.

Parametric Estimating
Parametric Estimating Definition:
Parametric estimating is a technique used to predict total project costs by using the
project’s characteristics in a mathematical model. It requires the project manager to do
a statistical analysis using historical information about scope, cost, budget, and dura-
tion. The accuracy of a parametric estimate will only be as good as the accuracy of the
data used in it.

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 LESSON 7
Example: Parametric Estimating Technique

Figure 7-3: A sample of parametric estimating.

Estimating Techniques Advantages and

Disadvantages
There are benefits and drawbacks to using different estimating techniques. Estimating Techniques
Advantages and Disadvantages

Technique Advantages and Disadvantages

Analogous estimating Can ensure no work is inadvertently omitted from work estimates. But, it
can sometimes be difficult for lower-level managers to apportion cost
estimates.
Bottom-up estimating Is very accurate and gives lower-level managers more responsibility. But,
it may be very time consuming and can be used only after the WBS has
been well-defined.
Parametric estimating Is not time consuming. But, it may be inaccurate, depending on the integ-
rity of the historical information used.

How to Estimate Project Costs

Accurately estimating project costs will avoid overruns and unforeseen expenditures. Making How to Estimate Project Costs
good cost estimates will help you to create a strong cost baseline, which will ultimately be
used for measuring project cost performance.

Guidelines:
To develop accurate cost estimates, follow these guidelines:
• Involve the work package owners.
— When possible, the cost figures that go into the cost estimates for individual
work packages should be provided by those who will actually provide the
resources. As always, it is the people who will do the work, provide the ser-
vice, or supply the material that can best estimate what the associated costs
will be. It is the project manager’s responsibility to compile these cost fig-
ures into realistic estimates.
— For some projects, though, the project manager will be solely responsible for
generating the cost estimates. This may be the case for:

Lesson 7: Analyzing Project Cost 193

LESSON 7
• Small projects in which the project manager is very familiar with the
activities required.
• Projects with very well-defined resource requirements.
• Projects that are very similar to past projects for which the costs are
well documented.
— Even in such cases, the project manager may want to do a quick reality
check with the resource supplier to make sure no incorrect assumptions have
been made.
• Gather any relevant input information that may help you prepare the estimates,
such as estimating publications and resource rates.
• Determine which estimating technique to use.
— Use analogous estimating when you have a limited amount of detailed infor-
mation about the project, you have a similar project to use for comparison,
and the work package owners preparing the estimates have the requisite
expertise.
— Use parametric estimating to estimate work packages when you have reliable
parametric models and the work conforms closely to those models.
— Use bottom-up estimating later in the project life cycle, when more detail is
available about the work packages, you need more accurate estimates, and
you have the time to invest in making the estimates. Also use bottom-up esti-
mating for work packages with the highest level of uncertainty or risk
associated with cost. Make sure you weigh the additional accuracy provided
by bottom-up estimating against the additional cost of making the estimates.
— Use a combination of estimating techniques when you have a combination of
circumstances for different deliverables on the WBS.
• Look for alternative costing options. Some options you might explore could
include:
— Using stock components versus custom-made.
— Stretching the duration of an activity to eliminate overtime charges.
— Leasing versus purchasing of capital equipment.
— Outsourcing as opposed to handling the work in-house.
• Determine the units of measure that will be used.
— Estimates should all be in the same unit of measure (usually monetary).
— Units must be clearly defined and easily interpreted.
• Consider possible risks that may impact cost.
• Ensure that all cost estimates are assigned to the appropriate account, according to
the chart of accounts.
• Make sure your cost estimates include the following key elements:
— Estimated costs for all resources that will be charged to the project. Use the
WBS and resource requirements document to develop the estimates.
— The level of estimate (degree of certainty).
— A list of assumptions made when developing the estimates.

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Example: Estimate Project Costs for a Website Project
You are estimating the costs of the company website project with a budget of
$100,000. Although you have rough estimates from some of the work package owners,
it is early in the project life cycle. Therefore, you decide to use analogous estimation.
After researching outsourcing costs and consulting several financial references, you
apportion the money across the major deliverables. Once you review the individual
estimates to make sure they are assigned to the proper accounts, you submit your cost
estimate and a list of assumptions.

DISCOVERY ACTIVITY 7-1

Estimating Project Costs
Data Files:
• Public Meeting Estimate

Before You Begin:

From the C:\085061Data\Analyzing Project Cost folder, open the Public Meeting Estimate
document.

Scenario:
You are an OGC project manager assigned to manage the launching of a new OGC telestore
and related media campaign in Seattle, Washington. Earlier, you met with the senior executives
and core individuals of the Business Transformation group to discuss project cost estimates.
Based on their input, you allocated $62,000 of the $100 million total project budget to the
Media Campaign deliverable, which includes the Website, Public Meeting, and Information
Packets work packages. The $62,000 allocation was based on previous projects with a similar
major deliverable. Now that more information is known about the Media Campaign deliver-
able, you ask the work package owners to provide detailed estimates. The estimates must
include direct labor and overhead costs (burdened rate) for each in-house staff resource. The
standard hourly burdened rate for in-house staff is averaged to a flat $80.
The Website work package owner gave you an estimate that came to $15,000. The Information
Packets work package owner gave you an estimate of $18,000. The Public Meeting work pack-
age owner summarizes her preliminary information for you in the Public Meeting Estimate
document.
In the past, public meetings of this size have cost approximately $30,000.

1. Which estimating technique was used to come up with the $62,000 allocation to the
Media Campaign deliverable? Why?
Analogous estimating was used to come up with $62,000 because you used historical infor-
mation based on similar previous projects to allocate a portion of the $100 million total
project budget (top-down).

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LESSON 7
2. How would you describe the level of accuracy for the $62,000 estimate?
Since one OGC store is very much like any other OGC store, it may have originated as an
appropriation, in which case, budgetary estimation may have been used with an accuracy
of -10 percent to +25 percent. It could also have been an approximate estimate, since it
lacks the detail required for high accuracy, with an accuracy of ± 15 percent.

3. What was the impact of involving the work package owners in preparing the cost esti-
mates? Why?
The work package owners are closest to the work and have a better understanding of the
work, so their cost estimates can be expected to be more accurate.

4. Which estimating technique was used when you asked the work package owners for
their estimates?
Bottom-up estimating was used.

5. What technique would you use to estimate the Conduct Planning Meetings activity?
Why?
Use parametric modeling because you can use mathematical models to develop the esti-
mate.

6. What are the benefits of the parametric modeling technique?

The parametric model is reliable and can provide a high level of accuracy. However, the
information that forms the parameters must be accurate, quantifiable, and scalable.

7. What is the estimated cost of the Conduct Planning Meetings activity?

The four 2-hour planning meetings involving 15 in-house people at $80 an hour will cost
$9,600 (4 x 2 x 15 x $80), and the two catered lunches for the 15 people at $15 per person
will cost a total of $450 (2 x 15 x $15). So the total cost of the Conduct Planning Meetings
activity is $10,050.

8. Are there activities in the work package for which you will use more than one estimat-
ing technique? Why?
The Arrange Staffing activity uses analogous estimating for the air travel and parametric
modeling for the other costs. The Hold Event activity uses analogous estimating for the
labor and equipment that will be provided by the cable station and parametric modeling
for the other costs.

9. Using the information in Public Meeting Estimate document, estimate the cost of each
of the activities.
The breakdown is: 1.1.4.2.1: $10,050; 1.1.4.2.2: $4,950 to $5,540; 1.1.4.2.3: $6,700;
1.1.4.2.4: $7,800 to $8,300; 1.1.4.2.5: $3,000.

10. What is your total cost estimate for the Public Meeting work package?
The total cost estimate should be $32,500 to $33,590.

11. What is the level of your cost estimate now?

You now have a definitive (control or detailed) estimate that has an accuracy of -5% to
+10%.

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12. Do you need to take any action regarding your preliminary estimate of $62,000 for the
Media Campaign deliverable? If so, what action should you take?
Because the more accurate estimate for the public meeting exceeds the initial assump-
tion of $30,000 by $1,500 to $2,590, you need to take some action. You can adjust your
earlier estimate and try to reconcile the deficit with one of the other major deliverables;
you can work with the work package owners of the media campaign deliverable to try to
get the costs down to below $62,000; or you can go back for more funding.

TOPIC B
Establish the Cost Baseline
After estimating project costs, you need to consolidate the costs into a project budget and pre-
pare the project cost baseline. Having a cost baseline in place will ensure that the costs
involved in executing each work package in a project can be effectively monitored and con-
trolled. In this topic, you will establish the cost baseline.
Costs are one of the major constraints of any project, and your ability to manage the project’s
costs will directly correlate to its success or defeat. You need to be able to employ sound
methodology when estimating costs and carefully monitor expenditures throughout the project
life cycle. You need to be able to track project costs associated with each work package in the
WBS at the points in the project life cycle when those costs will be incurred. By establishing a
cost baseline, you can track those project costs, set up the cash flow for the project, and mea-
sure cost performance.

Cost Baselines
Definition: Cost Baselines
A cost baseline is a time-phased budget that will monitor and measure cost perfor-
mance throughout the project life cycle. It is developed by adding the estimated costs
of project components by period. The cost baseline typically includes a budget contin-
gency to accommodate the risk of incurring unidentifiable, but normally occurring
costs, within the defined scope. Cost baselines will vary from project to project,
depending on each project’s unique budget and schedule.

Once the baseline is established, the cost becomes a commitment from the project manager’s perspec-
tive. The project manager should try to closely match the project’s committed funds to the baseline,
from a timing perspective.

Example: Cost Performance Baseline

Many project management software packages can create an S-curve of the cost
baseline for you; a generic example of a cost baseline displayed in an S-curve is
shown here. Cost is on the Y axis and time is on the X axis. Developed by totaling the
estimated project costs by period, this cost performance baseline shows how the cumu-
lative planned project costs are distributed across the project’s duration.

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 LESSON 7

Figure 7-4: A generic cost baseline shown as an S-curve.

The Determine Budget Process

The Determine Budget Process
Determine budget is the process of allocating the overall cost estimates to individual activities
or work packages across the project life cycle. The purpose of cost budgeting is to establish a
budget as well as a cost baseline for measuring the project’s cost performance.

Figure 7-5: The determine budget process.

Example: Cost Budgeting by Aggregated Cost

Most cost estimates are derived at the activity level. One example of cost budgeting
requires project managers to add up those estimated costs for activities to derive a cost
estimate at the work package level. This is also referred to as the aggregated cost. The
costs are aggregated until the entire work package has an estimated budget, and then
the process is repeated for each work package. Then, each work package cost budget is
aggregated to the next highest level of the WBS. The process is iterated until the top
of the WBS is reached and a single cost budget figure for the whole project is
obtained.

Determine Budget Inputs

There are numerous inputs for accurate cost budgeting.

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Input Description
Activity cost estimates Cost estimates for each activity are added together to create an overall
cost estimate for the work package.
Basis of estimates Supporting information required to justify the activity cost estimates
should be specified. Assumptions made to the addition or exclusion of
indirect project costs made to the project budget are to be mentioned in
the basis of estimates.
Scope baseline The scope baseline includes the approved detailed project scope state-
ment along with its associated WBS and WBS dictionary.
• Project scope statement: May contain relevant funding constraints.
• WBS: Identifies project elements to which costs will be allocated.
• WBS dictionary: Identifies deliverables and describes the work that
will be required to produce them.
Project schedule Has the start and finish dates, which are necessary to assign costs of
project components to the time period when cost is expected to be
incurred.
Resource calendars Provide information relating to the resources. Availability of resources
may affect budgeting.
Contracts Relevant purchase costs will be detailed in contracts.
Organizational process assets Policies, procedures, and guidelines related to formal and informal cost
budgeting, cost budgeting tools, and reporting methods.

Determine Budget Tools and Techniques

There are some common tools and techniques used in the determine budget process.

Tools and Techniques Description

Cost aggregation Activity costs are combined into work package costs, which are
then aggregated up the WBS until a single project cost is pro-
duced.
Reserve analysis Contingency reserves may be necessary additions to the budget,
allowing for unforeseen costs and setbacks.
Expert judgment Expertise provided by a group or individual who possess spe-
cialized education, knowledge, experience, skill, or training in
cost budgeting, such as people from other departments within
the organization, consultants, stakeholders including customers,
professional and technical associations, and industry groups.
Historical relationships Involves relationships that result in parametric or analogous esti-
mates, which use project parameters to develop simple or
complex mathematical models to calculate project costs. The
cost and accuracy of the parametric and analogous estimates will
vary widely. They can be relied upon when the historical infor-
mation used is accurate, parameters used are quantifiable, and
when the models are scalable to be used for big or small
projects or even in phases of a project.

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Tools and Techniques Description
Funding limit reconciliation If there are existing funding limits set by the organization or
customer, the budget must be mapped accordingly.

Determine Budget Outputs

There are several useful outputs of the determine budget process.

Output Description
Cost performance baseline The primary output of the determine budget process. It will be
used to monitor and measure cost performance for the duration
of the project.
Project funding requirements Created from the cost baseline, these are built-in cost increments
that will allow for overruns and/or rapid progress on the project.
Project document updates Project documents that may need to be updated; includes risk
register, project schedule, and cost estimates.

Funding Limit Reconciliation

Funding Limit Reconciliation Definition:
Funding limit reconciliation is a method of adjusting, spending, scheduling, and
resource allocation in order to bring expenditures into alignment with budgetary con-
straints. Most budgets are created on the premise of steady incoming and outgoing
flows. Large, sporadic expenditures are usually incompatible with organizational opera-
tions. Therefore, funding limits are often in place to regulate the outgoing capital flow
and to protect against over-spending.
Budgets must be reconciled with such limits. This will affect the scheduling of project
work and possibly reshuffle WBS work packages entirely. The schedule, in turn, can
affect the distribution or acquisition of resources.

Example: Set Funding Limits for Projects

Customers or sponsors set funding limits for large projects based on internal consider-
ations such as when their fiscal years begin and end, and how healthy their cash flows
are. A customer who wants to spread the costs of a project over two quarters might
authorize $250,000 in spending during Quarter 1 and $350,000 during Quarter 2. In
response, the project manager would need to align the resources, schedules, and activi-
ties so that the project work does not exceed the funding limits.

Contingency Allowances
Contingency Allowances
Contingency allowances are additional funds that are sometimes built into cost estimates to
allow for unanticipated events. Planning for contingency allowances for a project ensures that
the project manager is able to manage unforeseen costs and expenditures.

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Guidelines:
When considering adding a contingency allowance to your budget:
• Avoid contingency on contingency. Based on the WBS input, make sure that the
work packages do not already have a contingency amount tacked onto the basic
estimate.
• Inform the project team. Let them know that the project will be managed against
a point estimate without contingency.
• As project manager, you must release contingency funds only through a closely
controlled and well-documented process, which is typically included in the cost
management plan. A contingency allowance is not to be used as a slush fund
without controls.

Example: Contingency Allowances for a Construction Project

You are the project manager of a major restoration project of an old government build-
ing. Contingency allowances for this project might include funds to cover an
unexpected problem, such as a hidden structural problem. Such a condition can dra-
matically increase the total cost of the project. Contingency allowances would not be
used for general operating support—if the workmanship does not meet expectations,
for example.

Cost Assignment Methods

Consider the way costs are assigned when establishing the baseline; this is important because Cost Assignment Methods
the cost should be earned or tracked in the same way it is assigned.

Cost Assignment Method Description

50/50 percent rule 50 percent credit is given when the activity begins and 50 percent
credit is given when the work is completed. For example, if an
activity is budgeted to cost $3,000, the activity will receive the
other $1,500 when the work is complete. The basic assumption
when using this rule is that activities are approximately the same
size. This same method can vary in the percentage values. You
could also use a 25/75 or 75/25 rule, for instance. Some of the
variants to the 50/50 percent rule include the 20/80 and the 0/100
rule.
Percentage complete rule Completion percentages are estimated and assessed at specified
reporting intervals. This is perhaps the most commonly used rule.
Weighted milestones The total work package value is divided up and assigned to mile-
stone intervals within the work package. Each milestone carries a
budgeted value. The value is earned when the milestone is
achieved. This method works well for long work packages with
multiple activities.

There are certain activities that are not measurable; for example, research-based activities. It becomes difficult to
account for earned values for such activities. So to avoid nonmeasurability in such cases, the 50/50 rule is used.
The moment activity starts, 50% work completion credit is given to the activity. However, no further credit is
given until the activity is complete.

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 LESSON 7
How to Establish the Cost Baseline
How to Establish the Cost Procedure Reference: Establish the Cost Baseline
Baseline
To establish the cost baseline:
1. Gather the inputs you will need to establish the baseline, such as the WBS,
project schedule, cost estimates, and risk management plan.
2. Use the project schedule to determine when activities will be taking place.
3. Using one of the methods for assigning costs, allocate funds for each activity or
work package for the time period in which it will be taking place.
4. Consider adding in a contingency amount to accommodate the risk of incurring
extra expenses.
5. Total the costs for each time period.
6. Plot the costs for each period on a chart to create an S-curve of the baseline.
7. Publish and distribute the cost baseline to the appropriate project stakeholders.

DISCOVERY ACTIVITY 7-2

Establishing a Cost Baseline
This activity works best when Data Files:
students work in groups of
three or four. • Media Campaign
• PM Cost Estimate
• Public Meeting Estimate
• OGC_WBS

Before You Begin:

From the C:\085061Data\Analyzing Project Cost folder, open the Media Campaign, PM Cost
Estimate, and OGC_WBS documents.

Scenario:
You are ready to move forward with the public meeting work package for the Media Cam-
paign deliverable for the Seattle telestore project. The director of finance is ready to allocate
project funds but is interested in your cash flow. Before creating the cash flow document, you
review your notes from a recent meeting:
• Staffing arrangements must be made.
• Contracts for the venue must be completed.
• Five weeks before the event, a promotional newspaper ad will be purchased. Sub-
sequent ads will be placed in the final week before the meeting.
• Planning meetings will be scheduled over the 10 weeks. The first one will happen
right away, another at week four. The remaining meetings will occur at two-week
intervals until the event.

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 LESSON 7
• A food budget that covers lunch at the first meeting and the third meeting must be
set.
• The project schedule is 10 weeks.
• The cost of the event is $3,000.

1. Do you have all the necessary inputs to establish a cost baseline?

Yes, you have the WBS with cost codes assigned, the project schedule with at least start
and finish dates for each activity, and cost estimates.

2. During what time period will the Public Meeting activities take place?
All activities will take place over a 10-week period.

3. What cost assignment method will you choose to allocate funds? Why?
Answers will vary, but might include the Percentage Complete rule, since the milestones
are clearly defined and can be easily reported on; or the 0/100 percent rule, where no
credit is given until the work is complete.

4. What are the weekly cost estimates for the activities in the Public Meeting work pack-
age? Refer to the Cost Estimates Per Week chart given below to estimate costs per
week and round up to the nearest thousand. Completed Estimated Costs
Per Week

The allocation of costs will look similar to this table.

5. Will you include a contingency amount?

No, since this is a relatively low-risk work package.

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LESSON 7
6. How would you plot the estimates to create an S-curve? Use the graph to plot your
results. Cost is on the y-axis and time is on the x-axis.
Completed S-Curve Graph

Based on how the costs were allocated, the answers will look similar to this graph, which
plots the S-curve based on the previous Estimated Cost Per Week table.

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 LESSON 7
TOPIC C
Reconcile Funding and Costs
Once costs are estimated and cost baselines have been established, you need to verify that
there is no discrepancy between the funding committed and the cost of the work to be done.
You would want to be able to reconcile the funding with the actual costs to make sure that
your project stays on track. In this topic, you will identify methods of reconciling funding with
costs.
Reconciling funding and costs ensures that the sponsor’s expectations are in alignment with the
reality of the cost of completing the work. If required, you should be able to make necessary
adjustments to the budget and schedule to solve the funding constraints. Your ability to recon-
cile funding and costs will be critical to meet real-world project challenges like this.

How to Reconcile Funding and Costs

Frequently, it is only at this point in a project—after you have established a cost baseline—that How to Reconcile Funding and
funding deficiencies become apparent. It is your responsibility as a project manager to recon- Costs (2 Slides)
cile the costs with the funding that has been approved by the sponsor.

Guidelines:
To reconcile funding and costs, follow these guidelines:
• Gather the materials you will need, including:
— The project budget and schedule.
— The project scope statement, which may contain information regarding fund-
ing constraints.
— The cost estimation and activity cost estimates, so that you can monitor
expenditures against estimates.
— The WBS, so that you can monitor deliverables.
— Contracts, so that you can monitor the commitments and requirements that
must be met.
• Map the project budget, scope statement, and schedule to the funding available.
— Make sure that the promised work and the promised funding are in align-
ment.
— Review the project scope statement, making sure that the budget accounts for
the funding constraints.
— If there is already a clear disconnect between the work that has been prom-
ised and the funding that has been allocated, you must alert the sponsor now.
— Identify alternatives. If funding deficiencies are apparent, look for sugges-
tions of alternatives that the sponsor could agree to, which are typically a
reduction in scope, an increase in the budget, an extension of the schedule,
or some combination of those.
• Involve the project sponsor.
— Reconciliation requires good communication. Now is the time to discuss
funding limitations, expectations, changes to the project scope, and options
for resource allocation and schedule revisions.

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LESSON 7
— Work with the sponsor on an ongoing basis from this point forward to adjust
the project’s scope and/or schedule and/or cost to be in line with the funding
to which the sponsor is willing to formally commit.
— Make sure that the sponsor is apprised of changes in resource allocation that
may affect deliverables.
• Partner formally with the company’s financial decision makers.
— Discuss the initial project overall cost validation and mapping of financial
transactions for cash flow reasons.
— Discuss the on-going monitoring of the project’s financial performance to
enhance the financial integrity of the project.
• Reconcile funding with costs on an iterative basis throughout the project. Many
problems can be avoided through careful monitoring and adjusting resources in
response to the changes that will arise.
• Actual costs may exceed the estimated costs during different time frames. Keep
the sponsor (and the external customer, if there is one) apprised of any additional
costs that are incurred.
• Monitor spending.
— As work begins on the project, you will need to monitor expenditures both in
terms of cash and in terms of effort, or hours of labor.
— Monitor and document unexpected expenses as they arise, such as rework
that may be required. Unexpected expenses will affect the budget and/or
schedule, and must be discussed with the sponsor.
• Monitor the schedule. As work begins on the project, it will be your responsibility
to monitor the activities as they are completed or partially completed so that you
can identify and adjust for delays before they derail the project.
• Monitor the risks that have been identified for your project. Alert the sponsor if
those risks become reality, so that appropriate changes can be made to the scope
or schedule. Make sure any risks that arise during reconciliation are reflected in
an updated risk register.

Example: Reconcile Funding and Costs for Your Company

A key decision maker at your company has an ambitious plan for a significant redesign
of the company’s website. He wants the site to incorporate new functionality including
the ability for customers to access your site and order products, view streaming videos
about your products, and access inventory. This is a dramatic change from the website
your company currently has. You collect the project budget, scope statement, and
schedule, and compare those specifications to the funding that has been allocated.
Immediately, it becomes clear that the small amount of funding allocated is out of line
with the cost estimates received. The company has committed less than half the
amount of funding that would be needed. You go directly to the project sponsor to dis-
cuss the discrepancies and find alternative ways to reach the objectives of the project.
Throughout the life cycle of the website redesign, you monitor spending closely, since
it is clear that the sponsor’s ambitions threaten to overwhelm the available funding.

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DISCOVERY ACTIVITY 7-3
Reconciling Funding and Costs
Scenario:
As the project manager coordinating the launching of the new telestore, you have responsibil-
ity for the store’s grand opening and related advertisements. You have estimated the baseline
costs for the project, which are based in part on previous expenditures for other stores’ grand
openings in similar markets, and your estimate shows that the costs will exceed $2,500. The
funding for this one project was set at $1,000 by the Finance Director. You are concerned that
the senior executives’ expectations may not be in alignment with the reality of the cost of
completing all the work for this project.

1. The project scope statement specifies a specific number of ads to be placed in the
newspaper in the weeks leading up to the grand opening. You have researched the
cost of ad space and you know that the sponsors’ requirements will exceed the funding
commitment. How would you proceed?
Answers will vary, but could include: you could approach the sponsor with a cost break-
down for the ad placement and suggest placing fewer ads. Come up with solutions such as
spend less per ad, place smaller ads, purchase black and white ads instead of full color,
and approach the advertising agency about cost savings. You might also consult with a
subject matter expert, such as someone in the marketing department, who can speak
directly to the sponsor in this matter.

2. Assume that you have no background in advertising or marketing. How could you go
about generating alternative ideas to suggest regarding less expensive advertising
options so that you can deliver the desired results within budget?
Answers will vary, but could include: you could consult with your company’s public rela-
tions department for suggestions of cost saving efforts. You might consider implementing
a partnership with a local university by offering a marketing internship program to uni-
versity students, thereby gaining extra help at little or no additional cost.

3. You need to partner formally with your company’s financial decision makers regarding
the costs of this project. Given the above scenario, what steps would you take to fur-
ther this goal?
Answers will vary, but could include: you could ask your financial decision makers for a
meeting, bring documentation regarding advertising costs and budget, and ask for their
help in identifying additional sources of revenue. It is possible that they might choose to
increase the funding commitment. However, keep in mind that the forecasted cost vari-
ance should be a guideline for how elaborate an escalation should be.

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LESSON 7
4. The advertising agency that has been contracted to produce the ads for the Seattle
store’s grand opening has unexpectedly gone over budget. You receive an invoice that
exceeds their original estimate. How would you proceed?
Answers will vary, but could include: you could meet with the agency to determine why
they went over budget and whether they did anything that was beyond the scope that had
been agreed to. You could ask the advertising agency to work with you to identify savings
elsewhere, such as a discount on future work so that you can recoup some of your losses.
You could alert the sponsor regarding the cost overrun so that changes could be made to
the scope of the project.

TOPIC D
Control Project Costs
You established a cost baseline for your project. Now that work results are being produced,
you need to monitor project costs as your project progresses. In this topic, you will focus on
the cost control component process and use the cost baseline to control project costs.
Controlling cost performance is a lot like watching for smoke from a fire tower. The earlier
you see the smoke, the easier it will be to put out the fire. Effective cost control will allow you
to spot the warning signs early, measure the cost variance, and make the necessary adjustments
before cost overruns cause the project to go up in flames.

The Control Costs Process

The Control Costs Process
Control costs is the process of monitoring cost performance and controlling changes to the cost
baseline, while influencing the causes of changes. During this process, the project manager
(along with a CCB) monitors, coordinates, and implements changes to the project’s cost
baseline and evaluates the impact of those changes on other performance baselines and the
original scope definition. Effective cost control is to analyze the relationship between the utili-
zation of project funds to the actual expenditures made to the work that has been completed.

Figure 7-6: The control costs process.

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 LESSON 7
Control Costs Inputs
There are several inputs to successfully controlling costs.

Input Description
Project management plan Contains project documents such as the cost performance
baseline and cost management plan, which provide cost control
information.
Project funding requirements All funding requirements are obtained from the cost baseline.
Any funding occurs in increments. The total amount of funds
includes the cost baseline plus the management contingency
reserve.
Work performance information Information collected dealing with the status and cost of project
activities being performed. This information includes
deliverables completed and not completed, authorized and
incurred costs, and approximate estimates to complete project
work.
Organizational process assets Includes cost control related policies, procedures, and guide-
lines, cost control tools, and monitoring and reporting methods
that are to be followed.

Control Costs Tools and Techniques

There are several tools and techniques that a manager can use relating to cost control.

Tools and Techniques Description

Earned value management A technique that integrates scope, cost, and schedule to measure perfor-
mance of the project and its progress. The three parameters that EVM
considers for monitoring are Planned Value (PV), Earned Value (EV), and
Actual Cost (AC). Variances such as schedule and cost variance and indi-
ces such as the schedule performance index and cost performance index
from the approved baseline will also be monitored.
Forecasting An estimate or prediction of the project’s future, based on past and present
knowledge. As the project progresses, forecasts get generated, updated, and
reissued based on work performance. Work performance information is
based on past performance and anything that could affect the project’s
future.
To-Complete Performance Calculates the efficiency of cost performance on the project to achieve the
Index (TCPI) Budget at Completion (BAC) or the Estimate at Completion (EAC). If it is
not possible to complete the project within the BAC, then an EAC (fore-
cast of the total cost required) is determined by the project manager.
Performance reviews A comparison of cost performance over time, schedule activities or work
packages exceeding or going under budget, and the estimated project funds
required to complete work in progress.
Variance analysis Determines the cause and degree of variance comparative to the cost
baseline and decides on the corrective action that is required. Variance
decreases as project work nears completion.

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 LESSON 7
Tools and Techniques Description
Project management soft- Used to examine the three parameters of EVM (Planned Value [PV],
ware Earned Value [EV], and Actual Cost [AC]), demonstrate graphical trends,
and forecast possible project results.

Further Reading on EVT

There is an increasing emphasis on the Earned Value Technique (EVT) within the field
of project management. For further reading, you may want to investigate Project
Management: The Common Sense Approach by Lee R. Lambert and Erin Lambert.

Control Costs Outputs

Cost control results in several outputs.

Output Description
Work performance measurements The calculated CV, SV, CPI, and SPI values for certain WBS
components including work packages and control accounts are
documented and communicated.
Budget forecasts A calculated or organization-reported EAC value or a bottom-up
EAC value are documented and communicated to stakeholders.
Organizational process assets updates Items that may need to be updated include causes of variances,
reasons as to why certain corrective actions are chosen, as well
as lessons learned from cost control.
Change requests Requested changes can occur from an analysis of project perfor-
mance. Any changes identified may result in an increase or
decrease to the budget.
Project management plan updates Elements of the project management plan that provide updates
on cost performance baseline and cost management plan.
Project document updates Include updated project documents such as the cost estimates
and basis of estimates.

Cost Variance (CV)

Cost Variance (CV) (2 Slides) Definition:
Cost Variance (CV) is any difference between the earned value and the actual cost
incurred to complete that work. To calculate the CV, subtract the Actual Cost (AC)
from the EV. Actual costs are the costs incurred to accomplish the work to date. A
negative CV indicates that the project is performing over budget. A positive CV indi-
cates that the project is performing below budget. When the CV is zero, it indicates
that the project is running as per the budget.

Example: Cost Variance for a Project

Suppose a project has an earned value of $200,000 for the fourth reporting period.
However, the project manager assesses the actual cost for the work by the fourth
period to be $240,000. The project manager calculates the CV by subtracting $240,000
(the AC) from $200,000 (the EV). The result is -$40,000.

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 LESSON 7
The negative value suggests that the project has overrun the baseline budget by
$40,000. This graph shows these figures plotted to provide a visual representation of
the cost variance.

Figure 7-7: An illustration of Cost Variance (CV).

The Cost Performance Index (CPI)

Definition: The Cost Performance Index
(CPI) (2 Slides)
Cost Performance Index (CPI) is a measurement of cost performance used to deter-
mine whether the project is over or under budget. To calculate CPI, divide the Earned
Value (EV) by the Actual Cost (AC); the formula is (CPI = EV / AC). A CPI of 1.0
means the project is right on budget. If the CPI is greater than 1.0, the project is per-
forming under budget. If the CPI is less than 1.0, the project is over budget.

It’s important to remember that the CV and CPI values do not take time performance into consider-
ation. Therefore, they do not provide a complete picture of overall project performance.

Example: CPI for a Project

Consider a project with an earned value of $200,000 and an actual cost of $240,000.
To calculate the CPI for this project, divide $200,000 (the EV) by $240,000 (the AC).
The result is 0.83 or 83 percent. A performance index curve for this project might look
like this.

Lesson 7: Analyzing Project Cost 211

LESSON 7

Figure 7-8: An illustration of the Cost Performance Index (CPI).

Performance Measurement Analysis Techniques

Performance Measurement
The cause of variance, magnitude of variance, and corrective action for a variance are all
Analysis Techniques important factors in cost control. Cost baseline, used in EVM, reviews the progress of a
project and impact of variations.
Several standard values for schedule activity, work package, and control account are involved
in the earned value technique, including:
• Planned Value (PV)
• Earned Value (EV)
• Actual Cost (AC)
• Estimate to Complete (ETC) and Estimate at Completion (EAC)
• Cost Variance (CV)
• Schedule Variance (SV)
• Cost Performance Index (CPI)
• Schedule Performance Index (SPI)
• Budget at Completion (BAC)
• To-Complete Performance Index (TCPI)
• To-Schedule Performance Index (TSPI)

Performance Reporting Techniques

Performance Reporting
Performance reviews are meetings held to review schedule activity, work package, or cost
Techniques account status and progress, usually in concurrence with one or more performance reporting
techniques.

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Performance Reporting Technique Description
Variance analysis Comparing actual project performance to projected performance.
For the most part, cost and schedule variances are analyzed.
However, variances from project scope, resource, quality, and risk
are taken into consideration.
Trend analysis Inspecting project performance over a period of time to determine
if performance is increasing or decreasing.
Earned value performance Compares baseline plan to actual performance.

Budget at Completion (BAC) Calculations

The Budget at Completion (BAC) is the total budgeted cost of the project at completion. Budget at Completion (BAC)
Projects seldom run as per the plan and they are continuously updated. It is necessary to fore- Calculations
cast the expected cost at completion. BAC is used as a base value factored with CPI to
calculate Estimate to Complete (ETC) and Estimate at Completion (EAC). The formula is:
BAC = total PV at completion.

Estimate to Complete (ETC) Calculations

The Estimate to Complete (ETC) forecasting technique, based on an updated, mid-project esti- Estimate to Complete (ETC)
mate that is more accurate and comprehensive, is independent for all outstanding work. It also Calculations
takes into consideration the performance and production of current resources.

ETC for all authorized work can also be calculated with respect to project schedule (time).

You can calculate ETC for cost using earned value with one of two formulas.

Formula Description
ETC = (BAC - EV) ETC is used when variances are determined to be
atypical and forecasts that similar variances will
not occur in the future.
ETC = (BAC - EV) / CPI ETC is used when variances are determined to be
typical or expected.

Accuracy
One downfall for using ETC and EAC is that they are not accurate in determining the
remainder of work to be done in a project. The accuracy depends on accuracy of data
of work completed.

Estimate at Completion (EAC) Calculations

Estimate at Completion (EAC) is a forecast of total costs needed to complete the project; it is Estimate at Completion (EAC)
used to predict and control cost problems. Calculations

EAC for all authorized work can be calculated with respect to project schedule (time).

Lesson 7: Analyzing Project Cost 213

 LESSON 7
EAC Method Description
EAC = AC + ETC EAC using a new estimate. This method requires
making a new ETC for all remaining project work
and adding that estimate to the ACs incurred to
date. Should be used when original estimating
assumptions are flawed and conditions have
changed.
EAC = AC + BAC - EV EAC using remaining budget. This method uses
the sum of the ACs and the BAC minus the EV.
Should be used when current cost variances are
atypical of future variances.
EAC = AC + [ (BAC - EV) / CPI ] EAC using CPI. This method involves adding the
or AC to the difference of the BAC and the EV
EAC = BAC / CPI divided by the CPI. Should be used when current
variances are typical of future variances.

To-Complete Performance Index (TCPI)

To-Complete Performance
The To-Complete Performance Index (TCPI) is an indicator of the usage of resources for the
Index (TCPI) remainder of the project. The TCPI value can be derived by dividing the budgeted cost of
remaining work by the remaining project budget to achieve either the Budget at Completion
(BAC) or the Estimate at Completion (EAC). If management decides that the BAC is not
achievable, a new EAC is created by the project manager.
TCPI based on BAC can be calculated using the equation: (BAC - EV) / (BAC - AC). The
TCPI based on EAC can be calculated using the equation: (BAC - EV) / (EAC - AC).
The TCPI value can be either greater or less than 1 when it is compared with the Cost Perfor-
mance Index (CPI). If the TCPI value is greater than 1, then the project team should be
utilized carefully for the remainder of the project. But if the TCPI value is less than 1, then the
project team can be utilized more freely.

To-Schedule Performance Index (TSPI)

The To-Schedule Performance Index (TSPI) is an indicator of efficiency at which the
remaining time that is allocated for the project should be utilized by the project team.
The equation to evaluate TSPI is: (BAC - EV) / (BAC - PV).
The TSPI value can either be greater or less than 1. If the value is less than 1, then it
indicates the required efficiency is less than 100% and therefore the project team can
work at a measured pace in utilizing the remaining project time. But if the TSPI value
is greater than 1, then it indicates the required efficiency is more than 100% and there-
fore the project team should be careful in utilizing the remaining project time and will
have to work more efficiently.

How to Control Project Costs

How to Control Project Costs
Continually monitoring cost performance and controlling changes to the project’s budget
enables you to maintain the cost baseline. Controlling project costs also helps avoid budget
problems that may jeopardize the successful completion of a project.

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Guidelines:
To control cost performance, follow these guidelines:
• Develop and implement a cost change control system. Make sure your system:
— Is integrated with the project’s integrated change control system.
— Includes the paperwork, tracking systems, and approval levels necessary for
authorizing changes to the cost baseline.
— Complies with any relevant contractual provisions when the project is done
under contract.
— Complies with the guidelines specified in the cost management plan.
• Evaluate change requests by asking these questions:
— What is the magnitude of the change when compared to the cost baseline?
— What is the impact of the change on project schedule and quality objectives?
— What are the potential risks and benefits of the change?
• Use performance measurement techniques to compare actual cost performance to
planned performance.
— Use performance reports to monitor cost performance.
— Calculate CV and CPI to determine whether the project is performing over or
under budget.
— Use earned value analysis and management to continually measure cost and
schedule performance and to assess the value of work performed to date.
• Analyze the results of your performance measurements by asking these questions:
— What is the cause of the variance?
— What is the magnitude of the variance? Is the activity causing the variance
on the critical path?
— Is it likely that the variance can be made up in the near future without cor-
rective action, or is corrective action necessary to bring the cost performance
back in line with the baseline?
• Identify and document corrective action to take to bring expected future cost per-
formance in line with planned performance. Depending on the priorities of your
project, consider one or more of the following alternatives:
— Re-check cost estimates to determine whether they are still valid. Avoid the
temptation to reduce estimates simply to make the cost performance look
better.
— Identify alternate, cheaper sources for materials. For example, consider using
a lower-grade building material to keep the project costs on target.
— Brainstorm ways to improve productivity. Consider using an efficiency expert
to identify areas where productivity could be bolstered with training or guid-
ance.
— Change the schedule baseline. When a schedule change is contemplated,
make sure it is done in communication with customers and other key stake-
holders to determine the schedule flexibility. If finishing on time is not as
important as finishing on budget, cost overruns can be corrected through
schedule changes.
— Reduce project scope. One way to reduce scope is to prioritize the remaining
work and eliminate work with the lowest priority. Another option is to plan

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LESSON 7
for a Phase 2 project to cover unfinished scope items. Reducing the project
scope must be done according to the integrated change control system and
with approval of the customer and the sponsoring organization.
• Depending upon the nature of the change, you may need to revise the cost, sched-
ule, or quality performance baselines to reflect the changes and to form a new
baseline against which to measure future performance.
— Review the cost management plan as you begin to monitor cost performance.
Follow the systematic procedures outlined in the cost management plan as
you identify the need for corrective action and baseline adjustments.
— Notify project stakeholders of any changes made to project baselines.
• Use performance measurement techniques, including trend analysis and EAC, to
monitor the changes.
— Are the changes being properly implemented?
— Do the changes bring about the desired results?
— Are new risks being introduced as a result of implementing the changes?
• Document lessons learned during cost control for use on future projects. The
documentation should include:
— Causes of variances.
— Performance baselines affected by the changes.
— Rationale behind the recommended corrective action.
— Any other lessons learned during cost control.

Determining Cost Performance

The following table provides calculations to determine cost performance efficiency.

Cost Formulas Calculation

Cost Variance (CV) CV = EV - AC
Cost Performance Index (CPI) CPI = EV / AC
Estimate to Complete (ETC) ETC = BAC - EV or (BAC - EV) / CPI
Estimate at Completion (EAC) EAC = AC + ETC
using new estimate
Estimate at Completion (EAC) EAC = AC + BAC - EV
using remaining budget
Estimate at Completion (EAC) EAC = AC + ( (BAC - EV) / CPI) or EAC = BAC / CPI
using CPI
To-Complete Performance Index TCPI = (BAC - EV) / (BAC - AC)
(TCPI) based on BAC
To-Complete Performance Index TCPI = (BAC - EV) / (EAC - AC)
(TCPI) based on EAC
To-Schedule Performance Index (BAC - EV) / (BAC - PV)
(TSPI)

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 LESSON 7
Example: Cost Control for a Project
The project team for the preschoolers’ educational website has implemented the change
to the cost baseline required to bring the schedule back in line with the schedule
baseline after adding the added functionality. Ben, the project manager, continually
monitors the revised cost baseline by calculating the CV and CPI at regular reporting
intervals. Using EVM, Ben analyzes any variances to determine their cause and magni-
tude.
As of the eighth reporting period, only minor variances in cost performance occur.
These variances might be corrected by renegotiating contracts and by verifying the
estimates of work still to be done, resulting in lower estimates.
Trend analysis conducted at the sixth, seventh, and eighth reporting periods indicates
that the corrective actions were effective in maintaining the cost baseline. The project
manager documents the cost variances, their causes, corrective action, and the results
of the corrective action as lessons learned for future projects.

DISCOVERY ACTIVITY 7-4

Controlling Project Costs
Data Files:
• PM_CostPerfRpt
• Cost_Baseline

Before You Begin:

From the C:\085061Data\Analyzing Project Cost folder, open the PM_CostPerfRpt and Cost_
Baseline documents.

Scenario:
As the media campaign for the Seattle New Telestore project progresses, you ask each of the
work package owners to give you a cost performance report for the sixth reporting period. The
first report you receive is the PM_CostPerfRpt document from the Public Meeting work pack-
age owner. You compare the information received in the report against the original cost
baseline for the work package (Cost_Baseline document) to measure its cost performance to
date. You will work with the work package owners to calculate the EV, PV, CV, SPI, and SV
for the report.

Display the data files as

necessary to facilitate class
1. Review the PM_CostPerfRpt document. What is the actual cost for the Public Meeting
discussion.
Work Package in the 6th week reporting period?
$16,000 (You can calculate this figure by adding up the amount that has been spent so far
on activities: $4,500 + $7,000 + $4,000 + $500.)

Lesson 7: Analyzing Project Cost 217

LESSON 7
2. What is the total EV for the Public Meeting Work package in the 6th week reporting
period?

The total EV is $21,600.

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 LESSON 7
3. According to the cost baseline, the PV up through the sixth reporting period is
$22,000. What is the CV for this work package?

CV = + $5,600

4. Which formula will allow you to calculate the Estimate at Completion (EAC) for the
work package?
a) EV / AC
b) EV – AC
✓ c) AC + [(BAC – EV)/CPI]
d) EV – PV

Lesson 7: Analyzing Project Cost 219

LESSON 7
5. Based on the formula EV/AC, you determine that the CPI for this work package is 1.11.
When you take the CPI and CV into consideration, how is this work package perform-
ing?
A CPI greater than 1.0 and a positive CV indicates the work package is performing better
than anticipated when compared against the budget.

6. What is the SV for this work package?

SV = - $400

7. What is the SPI for this work package?

SPI = EV/PV. The SPI is 0.98, which is less than 1.0 and indicates some work on the sched-
ule needs to be done.

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 LESSON 7
8. Based on your analysis of the product costs, what courses of action might you take?
✓ a) Find the cause of the variance.
✓ b) Determine the appropriate corrective action to take.
c) Alert project stakeholders that the project is in crisis.
d) Document lessons learned.

Lesson 7 Follow-up
In this lesson, you identified methods for creating accurate cost estimates and budgets that will
guide all the work done in your projects, so that you can meet expectations effectively and
deliver the desired results. Delivering projects on time and within budget is the cornerstone of
good project management.
1. How do you think the ability to estimate costs effectively will improve your perfor-
mance on the job?
Answers will vary, but may include: the ability to estimate costs effectively will help you
make sound financial decisions on the project, avoid cost overruns, identify cost alterna-
tives, and determine the cost baseline, which helps in planning project performance.
These factors will definitely improve your performance on the job and ensure project suc-
cess.
2. How do you think incorporating good funding reconciliation practices helps completing
a project within the allocated budget?
Answers will vary, but may include: incorporating good funding reconciliation practices
helps in judicious usage of funds allocated by the sponsor for the project.

Lesson 7: Analyzing Project Cost 221

NOTES

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 LESSON 8

LESSON 8 Lesson Time

2 hour(s), 10 minutes

Measuring Project Quality

In this lesson, you will measure project quality.
You will:
• Create a quality management plan.
• Execute a quality assurance plan.
• Perform quality control.

Lesson 8: Measuring Project Quality 223

LESSON 8
Introduction
You analyzed project costs and took measures to control them. However, controlling costs does
not guarantee the success of your project. You also need to ensure that your project meets the
stakeholders’ specifications and quality standards. In this topic, you will measure project qual-
ity.
In any project, quality is an important parameter. Project quality management involves plan-
ning for overall project quality, adhering to a quality assurance plan, and enforcing quality
control measures. By measuring and monitoring project quality continuously, you can ensure
that the project deliverables satisfy the needs of the project.

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 LESSON 8

Figure 8-1: The project management framework.

The Project Management

Framework (2 Slides)

Lesson 8: Measuring Project Quality 225

LESSON 8
TOPIC A
Create a Quality Management Plan
Project quality is an important benchmark for measuring project success. As a project manager,
it is important that you define the quality guidelines for your project right at the beginning,
and also ensure that the guidelines for monitoring and controlling the project quality are
clearly defined. In this topic, you will create a quality management plan.
What good is a project that is completed on time and within budget if the quality is inconsis-
tent or even substandard? Defining quality standards for project stakeholders ensures a
common understanding of how project quality will be measured and achieved. A good quality
management plan will ensure that the guidelines for measuring and monitoring project quality
are set and adhered to consistently across all phases of the project.

Quality
Quality
Quality is defined as the “totality of features and characteristics of a product or services that
bear on its ability to satisfy stated or implied needs.” In business, quality should be feasible,
modifiable, and measurable.

This definition is provided by the International Organization for Standardization, ISO Standard 8402: Terms and
Definitions.

Precision and Accuracy

Precision means that the values of repeated measurements are clustered and slightly
scattered. In contrast, accuracy means that the measured value is close to the true
value. Thus, the project management team needs to determine appropriate levels of
precision and accuracy.

Quality Management Plans

Quality Management Plans Definition:
A quality management plan is a subsidiary of the project management plan. It
describes to project stakeholders, the team’s approach to implementing the quality
policy; it explains how quality control and quality assurance will be performed. It may
be formal or informal, depending on the project’s requirements.

Example: Ensuring Quality in an Outsourced Task

A manufacturer of high-end clothing might seek to reduce costs by outsourcing some
of its labor. The quality management plan would articulate exactly how quality control
and assurance would be performed to ensure that the new source of labor could meet
the company’s high standards. The quality management plan would identify who
would be responsible for quality control; how, when, and to what degree they would
conduct inspections for quality; and how the team would respond to any quality issues
that arose.

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 LESSON 8
The Plan Quality Process
Plan quality is the process of putting plans into place to ensure that a project will satisfy its The Plan Quality Process
stated objectives or business needs. It must be performed regularly and concurrently with other
planning processes to adjust for cost or time factors. It involves identifying the project’s qual-
ity standard requirements, performing an analysis to determine how to satisfy those standards,
and creating a quality management plan.

Figure 8-2: The plan quality process.

Plan Quality Inputs

There are several inputs for planning project quality.

Input Description
Scope baseline Includes the scope statement, the WBS, and the WBS dictionary.
Stakeholder register Lists the stakeholders whose decisions can influence or impact vari-
ous aspects of the project. It helps the project team to identify the
influences of stakeholders on quality.
Cost performance baseline Describes the approved time phase that is used to measure and
monitor project cost performance.
Schedule baseline Describes the approved schedule performance measures with start
and finish dates.
Risk register Documents information about opportunities and threats that may
influence the quality requirements.
Enterprise environmental factors Includes regulations, rules, standards, guidelines, and operating con-
ditions that may affect the application area.
Organizational process assets Includes quality policies, procedures, guidelines, and historical infor-
mation.

Plan Quality Tools and Techniques

Various tools and techniques are used to plan project quality.

Lesson 8: Measuring Project Quality 227

LESSON 8
Tools and Techniques Description
Cost-benefit analysis Considers the tradeoffs and the benefit of meeting quality require-
ments of higher productivity and lower costs while increasing
stakeholder satisfaction. The business case of each activity is used to
compare the cost of each step with its expected benefits.
Cost of Quality (COQ) Costs incurred by preventing nonconformance to requirements,
appraising for conformance to requirements, and failing to meet
requirements (rework), internally or externally.
Control charts Analyze the variability of a process or project activities over time.
They can be used to monitor repetitive activities and help identify if
the project management processes are under control.
Benchmarking Compares the quality of your project’s processes and systems to
those of other comparable groups, both internally and externally.
Design of Experiments (DOE) A statistical method of identifying the factors that may influence
certain product or process variables. During quality planning, DOE
determines the number and type of tests to be used and their influ-
ence on the cost of quality.
Statistical sampling Measures an entire population by studying a randomly selected part
of the population.
Flowcharting Graphical representation of the relationships between process steps.
It helps the project teams to identify potential problems and to
develop strategies for mitigating them.
Proprietary quality management A set of available methodologies invented over a period of time. For
methodologies example, Six Sigma, Lean Six Sigma, and Quality Function Deploy-
ment are methodologies that may facilitate effective project quality
planning.
Additional quality planning tools Additional quality planning tools include brainstorming, affinity dia-
grams, matrix diagrams, prioritization matrices, flowcharts, and
others that help define and plan effective quality management activi-
ties.

Plan Quality Outputs

There are several quality planning outputs that a project manager uses.

Output Description
Quality management plan Describes the project management team’s approach to implementing
the quality policy.
Quality metrics Specifically describes what something is and how the quality control
process measures it.
Quality checklists Job aids that prompt employees to perform activities according to a
consistent standard.
Process improvement plan Describes the project management team’s approach to identify
unnecessary activity, including process boundaries indicating all
aspects of a process, process configuration flowcharting, process
interfaces, metrics for process control, and improvement guidelines.

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 LESSON 8
Output Description
Project document updates Documents that are updated during the process are the stakeholder
register, Responsibility Assignment Matrix (RAM), cost baseline,
and the SOW, among others.

Process Improvement Planning

Process improvement planning is the process of analyzing and identifying areas of improve- Process Improvement
ment in project processes and enumerating an action plan based on the project goals and Planning
identified issues. The process involves:
• Describing operational theories and project roles and responsibilities.
• Identifying long- and short-term goals.
• Describing process improvement objectives and activities.
• Identifying risks and resource requirements.
• Determining process improvement activities.
• Creating a process improvement plan.
• Receiving approval from stakeholders and senior managers.
• Executing the process improvement plan.

Process Improvement Plans

Definition: Process Improvement Plans
The process improvement plan is a subsidiary plan of the project management plan. It
describes the steps to analyze and determine areas of improvements in project pro-
cesses. The areas of process improvements include process boundaries, process
configuration, process metrics, and targets for improved performance.

Example: Process Improvement Plan at a Software Development Company

Sharon Parker is a project manager at a software development company. When manag-
ing one of the high-priority projects, Sharon realized that the product testing process
was taking longer than required. She decided to review the existing process followed
by her project. The process of testing software involves senior developer review at the
end of each phase, unit testing, systems testing, user acceptance testing, SME review,
and customer review.
Sharon discussed the issue with the process managers and other senior managers. They
agreed with Sharon and appointed her as the project manager to handle the process
improvement plan initiative. She created a process improvement plan to reduce the
time taken to test the product. The plan included information on the long- and short-
term goals, purpose of goal, actions to be taken, priority, time estimate, and who will
perform which activity while improving the process.

Lesson 8: Measuring Project Quality 229

LESSON 8

Figure 8-3: A record of changes included in the process improvement plan.

Total Quality Management (TQM)

Total Quality Management Definition:
(TQM)
Total Quality Management (TQM) is an approach to improve business results through
an emphasis on customer satisfaction, employee development, and processes rather
than functions. TQM should be viewed as a long-term, ongoing process rather than a
one-time event.

Example: Approaches to Total Quality Management

Total quality management has been implemented in varying ways by different quality
theorists.

Theorist Approach
W. Edwards Deming Focuses on continuous process improvement in which quality
must be continuously improved in order to meet customer
needs.
Joseph Juran Breaks quality management into quality planning, control, and
improvement. Quality improvement leads to breakthrough
improvement, meaning improvement that raises the quality
bar to an unprecedented level.
Philip Crosby His approach is based on four absolutes:
— Quality is conformance to requirements rather than a mea-
sure of how good it is.
— Quality is caused by prevention rather than inspection.
— Everyone in the company must work to a standard of zero
defects.
— Quality can be measured by determining the cost of qual-
ity.
Genichi Taguchi Emphasizes that quality should be designed into the product
so that factors that cause variation can be identified and con-
trolled.

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 LESSON 8
Theorist Approach
Bill Smith (Six Sigma) This approach to TQM for the manufacturing sector empha-
sizes responding to customer needs and improving processes
by systematically removing defects. Originally developed by a
Motorola, Inc. engineer named Bill Smith, Six Sigma is now
closely associated with General Electric, Inc. and other major
industrial companies such as Eastman Kodak.

Further Reading
As part of your quest to further your project management skills, you should consider
investigating some of the major motivational and leadership theories that are a key part
of serious project management efforts today. Many organizations are increasingly using
project-based continuous improvement approaches; the work of W. Edwards Deming
provided the foundation for this effort. Deming’s “14 Points for Management,”
included in his book, The New Economics for Industry, Government, Education,
provides a systematic and pragmatic approach to transforming a western style of man-
agement in industry, education, or government to one of optimization. For further
reading, see Out of the Crisis by W. Edwards Deming.

Standards and Regulations

Definition: Standards and Regulations
Standards are voluntary guidelines or characteristics that have been approved by a rec-
ognized body of experts such as the International Organization for Standardization
(ISO). In some cases, the standards body will provide certification that suppliers con-
form to the requirements of their standards. Often, the conformance to standards is a
customer requirement.
Regulations are compliance-mandatory characteristics for specific products, services, or
processes. Standards often start out as accepted or de facto best practices describing a
preferred approach, and may later become de jure regulations, such as using the critical
path method in scheduling major construction projects.

There are also de facto standards that aren’t approved by a standards body. For example, TCP/IP is the
de facto standard protocol for all modern computer networks. It is the approved standard for the
Internet, but everyone uses it on private networks now as well.

Example: Standards and Regulations in Toy Manufacturing

In the U.S., consumer-safety legislation governs the manufacturing of products, includ-
ing toys. In 2007, a recall of millions of toys produced with lead-based paint led
lawmakers to introduce stricter federal regulations, with criminal penalties for noncom-
pliance. But major U.S. toy retailers, in response to public demand, went further; they
forced their suppliers to meet even tougher standards for lead in surface paint than the
government had required.

Lesson 8: Measuring Project Quality 231

LESSON 8
The ISO 9000 Series
The ISO 9000 Series
The ISO 9000 Series is a quality system standard that is applicable to any product, service, or
process in the world. It was developed by ISO, which is a consortium of approximately 100 of
the world’s industrial nations. There are limits to the certification, which does not guarantee
that an organization will produce quality products or services; it simply confirms that appropri-
ate systems are in place. Subsections of the standard address particular industries or products.

For more information about the ISO 9000 Series, you may visit the http://www.iso.org/iso/home.htm website.

Cost of Quality
Cost of Quality
Cost of quality refers to the total cost of effort needed to achieve an acceptable level of quality
in the project’s product or service. Those costs include all the work necessary to ensure con-
formance and all the work performed as a result of nonconformance to requirements.
Prevention costs, appraisal costs, and failure costs combine to form the cost of quality.

Types of Cost
The four types of cost associated with quality are prevention costs, appraisal costs,
internal failure costs, and external failure costs. Prevention and appraisal costs are
called conformance costs—amount spent to avoid failures. Internal and external failure
costs are called nonconformance costs—amount spent to rectify errors.

Type of Cost Description Example

Prevention costs The up-front costs of pro- • Design plans
grams or processes needed to
• Quality plans
meet customer requirements,
or to design in quality. • Employee and customer
training
• Process evaluations and
improvements
• Vendor surveys
• Other related preventive
activities
Appraisal costs The costs associated with • Inspections
evaluating whether the pro-
• Testing
grams or processes meet
requirements. • Design reviews
• Destructive testing loss
Internal failure costs The costs associated with • Scrap or rejects
making the product or service
• Design flaws
acceptable to the customer
after it fails internal testing • Rework or repair
and before it’s delivered to • Defect evaluation
the customer.

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Type of Cost Description Example
External failure costs The costs resulting from • Product returns
rejection of the product or
• Liabilities
service by the customer.
• Evaluation of customer
complaints
• Maintenance costs
• Corrective action
• Loss of contract

Checklists
Definition: Checklists
A checklist is a job aid that prompts employees to perform activities according to a
consistent quality standard. Items on checklists are phrased as either imperatives, such
as “Make sure you save this file correctly,” or questions, such as “Does this image
match the description in the database?”
Checklists can be simple or complex and may range in detail depending on the experi-
ence and skill level of the employees and the complexity of the situation.

Example: An Image Quality Checklist

A checklist for printing images is shown. Note that the checklist prompts the graphic
artist to create images to a consistent quality standard. The items on the list are
phrased as interrogatives. Until the artist can answer all the questions in the affirma-
tive, the image should not be handed off.

Obtain a printout of the image specifications from the graphics database. Use this checklist to
ensure that the images are ready to be handed off to the programmer.
# Item Y/N
1 Does the image match the
description in the database?
2 Does the style meet the speci-
fications set for the course or
lesson?
3 Does the quality of the image
meet the standards set for the
course?
4 Is the image size correct?
5 Is the image named correctly?
6 Is the correct border on the
image?
7 Is the image in the correct
palette?
8 Is the opacity correct (trans-
parent or opaque)?

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9 Is the bit-depth correct?
10 Is the resolution correct?
11 Does it have the correct
extension?
12 Have all stray pixels been
cleaned up?

Flowcharts
Flowcharts Definition:
A flowchart is a diagram that shows the relationships of various elements in a system
or process. The two most widely used flowcharting techniques are the cause-and-effect
diagram and the process or system flowchart. Flowcharting techniques can assist the
team’s efforts in identifying potential quality problems and the possible effects of those
problems.

Example: A Flowchart

Figure 8-4: A process flowchart.

Process Flowchart

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Process Flowcharts
The process flowchart or system flowchart shows the sequence of events and flow of
inputs and outputs between elements in a process or system. There is a definite begin-
ning and end along with decision points clearly called out with the actions to take
based on the result of each decision.

Cause-and-Effect Diagrams Cause-and-Effect Diagram

A cause-and-effect diagram is a type of flowchart organized by category. The cause-
and-effect diagram provides a structured method to identify and analyze potential
causes of problems in a process or system. This method organizes potential causes of
problems into defined categories. Using these defined categories promotes the identifi-
cation of potential causes. Some common categories include, but are not limited to:
• Material
• Method
• Environment
• Personnel
• Measurement
• Energy
In the diagram below, each category shows potential snags that might lead to the rejec-
tion of images.

Figure 8-5: A cause-and-effect diagram.

The cause-and-effect diagram is also called the Ishikawa diagram (named after its creator, Kaoru
Ishikawa of Japan) or the fishbone diagram (named for its shape).

Control Charts
Definition: Control Charts (2 Slides)
Control charts are graphs used to analyze and communicate the variability of a process
or project activity over time. Control charts help to show the potential capability of the
process and also suggest the range of variability in the process. This range of variabil-
ity can assist a project manager in determining if the variance is caused by common or
assignable sources. If the process variability fluctuates around the average, or statistical
mean, the process shows very little variability and is said to be stable.

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LESSON 8
The components of a control chart include the process mean, the upper control limit
(UCL), and the lower control limit (LCL). The process mean is determined by taking
samples from the actual process and calculating the statistical mean. As additional
samples are taken and tested, they are evaluated in terms of standard deviations from
the process mean. For most organizations and projects, the UCL will be three standard
deviations above the mean, while the LCL will be three standard deviations below the
mean.

Example: Control Charts Indicating Variance Instability

These control charts have measurements that indicate instability because they each
have measurements that exceed the range between the UCL and LCL. Analysis of the
first chart shows that there are more than seven consecutive points above the mean. On
the second chart, more than seven consecutive points are below the mean. This seven-
point variance is called the seven-run rule.

Figure 8-6: Variability above the upper control limit (UCL).

Figure 8-7: Variability below the lower control limit (LCL).

Seven-Run Rules
Run rules are used to indicate situations that are out-of-statistical control. When seven
or more consecutive points lie on one side of the mean, it indicates that there should
be a shift in the mean.

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Benchmarking
Definition: Benchmarking
Benchmarking addresses the evaluation of a group’s business or project practices in
comparison to those of other groups. It is used to identify the best practices in order to
meet or exceed them. Benchmarking can be conducted between identical processes in a
variety of ways: in similar industries, in dissimilar industries, and with internal or with
external organizational areas.

Example: Benchmarking the Espresso-Based Beverages

Twenty percent of Americans drink espresso-based beverages every day, and the $12
billion premium coffee market is expected to grow significantly in the next several
years. Several leading fast-food retailers have benchmarked the performance of Seattle-
based Starbucks Corp., the world’s largest chain of coffee houses. McDonald’s,
Dunkin’ Donuts, and Tim Horton’s have expanded their menus of premium coffees to
compete in this arena and offer similar, high quality coffee products.

Benchmarking Purpose and Results

Benchmarking is commonly used to determine:
• The products or services to offer and the features that should be included.
• The processes used by other groups to achieve customer satisfaction.
• The metrics or goals used to measure the processes or products that achieve cus-
tomer satisfaction.

Design of Experiments (DOE)

Definition: Design of Experiments (DOE)
Design of Experiments (DOE) is a technique to systematically identify varying levels
of independent variables. DOE can determine:
• Which variable has the greatest effect.
• What the relationship is between each variable and the customer-focused quality
specifications.
• What the best value is for each variable, ensuring optimal quality or value.
When done properly, DOE can result in significant improvements to products and pro-
cesses, including shorter development cycles, more robust products, and cost
reductions.

Example: Design of Experiments for Producing a New Style of Jar

A cannery was about to put a new style of jar into production. As development of the
packaging moved forward, questions arose regarding the ability of the in-line capper to
deliver the precise amount of torque when rotating the lid onto the new jar. Early test-
ing demonstrated that lid torque less than three inch pounds would result in a leaky
package. Torque greater than eight inch pounds would mar the finish on the screw-on
lid.

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LESSON 8
The project team given the task of determining the optimum torque requirement for the
new packaging used a DOE software program to generate statistical information about
how torque was affected by other interconnected factors. Two of the factors tested
were spindle speed and conveyor speed. The results indicated that these speeds had the
greatest effect on lid torque.
Armed with this information, it was a simple exercise in determining adjustments to
these settings that would result in consistent optimum torque. The experiment
employed by the project team was successful because it was able to identify the vari-
able that had the greatest effect and its relationship to the quality specification of lid
torque.

How to Create a Quality Management Plan

How to Create a Quality
Creating a quality management plan will ensure that the organizational structure, responsibili-
Management Plan ties, procedures, processes, and resources are in place to implement quality management.

Guidelines:
To create an appropriate quality management plan, follow these guidelines:
• Review the organization’s quality policy and determine how your project team
will implement the policy.
— How will your team identify potential quality problems and their potential
impact on the quality of the project’s product, service, systems, or processes?
Will you use particular flowcharting methods, benchmarking, design of
experiments, or other techniques?
— Are there any standards and regulations that are applicable to your project?
— Are there any activities or components that require the development of opera-
tional definitions to provide a common understanding of the project’s quality
standards? If so, who is responsible for developing them?
— Does your organization have any standard checklists that can be modified, or
used as is, to prompt employees to perform certain activities according to a
specific quality standard? If not, should checklists be developed? Who is
responsible for developing them? What are the conditions under which they
should be developed?
• Review the product description to identify customer/stakeholder quality require-
ments.
• Determine the cost of quality trade-offs.
— How will your team “design in” quality to avoid expensive rework to bring
the quality back into conformance?
— Are the proposed processes and systems worth the cost of implementing
them?
• Review the quality management plan and make sure it:
— Describes the project management team’s approach to implementing its qual-
ity policy (quality assurance, quality control, and quality improvement
approaches).
— Describes the resources required to implement quality management.
— Includes quality management roles and responsibilities for the project.
— Is as detailed and formal as required, based on the quality needs of the
project.

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 LESSON 8
— Includes how customer satisfaction will be measured and managed.

Example: Quality Management Plan

The project team is given the task of creating a quality management plan. The team
determines that the company has an adequate quality policy. However, it does not
address potential problems. The team assigns roles and responsibilities to the individu-
als responsible for project quality and includes a project quality assurance coordinator.
The team reviews the baseline performance requirements and customer-requested qual-
ity requirements. They determine a cost-effective quality trade-off would be to repeat
the design process and peer plan reviews. Finally, the organization’s quality manual is
referenced in regard to approved approaches to each relevant quality assurance and
control item, including specifications, change control, checking criteria, and control
logs.

DISCOVERY ACTIVITY 8-1

Creating a Quality Management Plan
Scenario:
As the project manager, you are responsible for formulating a quality management plan for the
PM Training Roll-Out. You have listed the primary project objectives in order to develop a
quality management plan.
The PMO authorized this project in order to enhance the project managers’ tracking and sched-
uling capabilities during the business transformation program. The PMO identified that all
project managers should be able to:
• Develop a WBS that includes summary, milestones, and detailed activities.
• Allocate resources in their project using an OGC resource pool.
• Include activity costs and resource costs.
• Set activities as effort driven, fixed duration, or fixed units.
• List and document all project constraints.
• Identify the critical path.
• Set a baseline for their project.
• Set interim baselines when necessary.
• Track the completion of activities by resource work and/or by percent complete.
• Use existing software filters and create new filters to print reports: Project Status,
Resource Allocation, Budget, and Cash Flow.
Other project objectives include:
• Confirming that all the project managers will use the project software during the
business transformation program.
• Developing an assessment by a training provider that addresses the PMO’s list of
tracking and scheduling activities.
• All managers passing the post-assessment at 75% or above.
• The selected training vendor providing follow-up support after training.

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LESSON 8
1. Based on the scenario, which documents would you have used to identify the primary
project objectives for this project quality plan?
✓ a) OGC quality policies and procedures
✓ b) Project scope statement
c) Process improvement plan
✓ d) Project management plan

2. True or False? The process improvement plan helps remove activities that do not con-
tribute to producing products of required quality.
✓ True
False

3. Which tool can be used to monitor repetitive activities and help identify if the project
management processes are under control?
a) Benchmarking
✓ b) Control charts
c) Flowcharting
d) Cost-benefit analysis

4. The PMO has identified a list of objectives for all project managers in the use of the
software. What would you include in your quality plan that will address the level of
quality achieved by each project manager?
Answers will vary, but may include: the assessment is a form of benchmarking. A checklist
could be used as a helpful tool. Knowledge gaps can be identified and the follow-up sup-
port from the training provider can address these gaps to get each manager to the
appropriate 75% or above.

5. The quality department has provided a complete list of activities as expected improve-
ments after training. What could your team use as a way to determine the degree of
improvement after training?
Answers will vary, but may include: the post-assessment evaluations taken by each
project manager will assess their level of knowledge and the regularly scheduled PMO
conducted project reviews and audits will evaluate whether the managers have incorpo-
rated what they have learned.

6. What are some ways that you could identify the level of quality of the vendor instruc-
tor?
Answers will vary, but may include: ask that the training vendor provide evaluations from
previous classes taught by the instructor in the use of the software at all three levels of
training. Ask for a resume from the instructor. If resources were available, you could
observe the instructor in front of a classroom.

7. How will you measure the quality of support after training?

Answers will vary, but may include: using evaluations where project managers provide
feedback at a statistically valid rate.

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TOPIC B
Execute a Quality Assurance Plan
Now that you have created a quality management plan, you are ready to move forward with
this key element of ensuring that your project meets its stated goals. This is the action phase of
your work, in which you will measure, verify, and quantify the progress achieved. In this
topic, you will execute quality assurance.
You can set quality goals for your project, but how do you know proactively if they are being
met on an ongoing basis? Performing quality assurance ensures the project will meet the iden-
tified quality standards and that stakeholders are confident in the quality of the work being
produced.

Quality Assurance Plans

Definition: Quality Assurance Plans
A quality assurance plan is a document that specifies a project’s parameters and stan-
dards for quality, identifies how testing will be carried out, and describes how, when,
in what manner, and to what degree the project will be reviewed and evaluated against
quality criteria. It includes recommendations for the appropriate actions to be taken to
improve quality, and it lists the quality assurance team members who are responsible
for carrying out the quality reviews.

Example: Quality Assurance Planning for a Software Design Project

A team of software engineers designing a new product would be guided by a quality
assurance plan to monitor quality throughout the project life cycle. The quality assur-
ance plan would document the criteria for functional and technical requirements,
outline the testing and evaluation process, and ensure that all steps of the project are
monitored. It would document signoff procedures for various milestones and identify
specific procedures for testing, correction, re-testing, and review sessions. The quality
assurance plan would also document how issues should be logged and addressed, and
who would be responsible for oversight and approval.

The Perform Quality Assurance Process

The perform quality assurance process is a method of evaluating overall project performance The Perform Quality Assurance
through planned, systematic activities; it creates confidence that the project will employ the Process
appropriate processes and satisfy standards for quality. It also ensures that the appropriate qual-
ity standards are used by analyzing the project’s quality requirements and results of the quality
control measurements. It is part of a continuum of quality activities that started with the devel-
opment of the quality management plan that begins in the initiating and planning processes and
continues throughout the project. The actual quality assurance process varies with the needs of
each project. Quality assurance is iterative and it may be adapted based on the identification
and resolution of quality problems over the project’s life cycle.

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 LESSON 8

Figure 8-8: The perform quality assurance process.

Example: Performing Quality Assurance for a Website Design Project

The quality assurance team for a website project would monitor its progress throughout
the development process, checking its overall performance to make sure it meets qual-
ity standards. Criteria to be reviewed and evaluated would include functionality,
aesthetic quality, and usability.

Quality Assurance (QA) and Quality Control (QC)

The differences between quality assurance and quality control are listed in the follow-
ing table.

Quality Assurance Quality Control

Focuses on process. Focuses on product.
Are we following the right processes in the Is this product/deliverable correct?
right manner? This is the question that QA
asks. However, QA needs data from QC to
analyze the trend.
Concerned with the future. Concerned about the current/past performance
of the deliverables.

Perform Quality Assurance Inputs

There are several inputs to the perform quality assurance process.

Note that the quality assurance

process is an iterative process Input Description
and is repeated throughout the
project life cycle. Project management plan Contains the quality management and process improvement plans
to ensure project quality.
• Quality management plan: Details how project quality assur-
ance should be conducted.
• Process improvement plan: Provides detailed steps for ana-
lyzing processes and identifying ways to enhance the value of
the processes.

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 LESSON 8
Input Description
Quality metrics Describes what specific elements of the project are going to be
measured, how they will be measured, and how they are factored
into the project.
Work performance information Periodically collected information about project activities being
performed to accomplish the project work. Some of the perfor-
mance results that might support the audit process are the
technical performance measures, status of project deliverables,
progress of the project schedule, and cost incurred.
Quality control measurements Used to assess the organization’s quality standards and processes.
These measurements are the results of the control project quality
process and are developed during the quality control processes.
They are assessed and analyzed for determining the process reli-
ability.

Perform Quality Assurance Tools and Techniques

There are several perform quality assurance tools and techniques.

Tools and Techniques Description

Plan quality and perform quality con- All tools and techniques used for the plan quality and perform
trol tools and techniques quality control processes such as the cause-and-effect diagrams,
control charts, flowcharting, histogram, Pareto diagram, run
chart, scatter diagram, statistical sampling, inspection, approved
change requests review, cost-benefit analysis, cost of quality,
control charts, benchmarking, design of experiments, proprietary
quality management methodologies, and additional quality plan-
ning tools are used to perform the quality assurance process.
Quality audits A quality audit is a review to determine if the activities comply
with policies, processes, and procedures in an attempt to identify
inefficient or ineffective procedures in use, resulting in lower
cost of quality and higher percentage of output acceptance.
Quality audits may be carried out by internal or external auditors
at regular intervals or at random. It confirms that the approved
changes have been implemented.
Process analysis Used for identifying organizational and technical improvements
to processes. Includes root cause analysis to determine underly-
ing causes and develop corrective actions.

Quality Audit Objectives

There are various objectives for performing quality audits. Some of them are:
• Identify the best practices that have been implemented.
• Identify the flaws or deficiencies in the project processes.
• Use the best practices followed in similar projects performed earlier.
• Help increase team productivity by providing assistance for process implementa-
tion improvements.

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LESSON 8
• Highlight the contributions of each quality audit in the organization’s lessons
learned library.

Perform Quality Assurance Outputs

There are several outputs to the perform quality assurance process.

Output Description
Organizational process assets Include updates to components such as project quality standards.
updates
Change requests Actions suggested to improve quality, effectiveness, and efficiency
of policies, processes, and procedures in the organization. This
results in enhanced stakeholder benefits. Change requests are used to
analyze recommended improvements and take appropriate corrective
or preventive actions.
Project management plan updates Include updates in the project management plan elements such as
quality, schedule, and cost management plans.
Project document updates Include documents such as quality audits, training plans, and process
documentations.

Quality Audits
Quality Audits Definition:
A quality audit is an independent evaluation, inspection, or review of a project’s qual-
ity assurance system to improve quality performance of a project. The audits can take
place at scheduled or random intervals. The auditor may be a trained individual from
within the performing organization or a qualified representative of a third-party organi-
zation. During a quality audit, the quality management plan is analyzed to make sure
that it is still reflective of what has been learned in the project and to make sure the
operational definitions are still adequate and valid. The results of a quality audit are
important for the current project, as well as for later projects or other parts of the orga-
nization.

Example: Quality Audits at a Manufacturing Company

An auditor for a manufacturing company performs quality audits regularly. Every six
months he walks into the factory and reviews the company’s quality management plan,
cost of quality, and quality process design to make sure these processes are up-to-date,
being used correctly, and still valid.

Topics of Quality Audits

Topics of Quality Audits
Several topics can be included in a quality audit.

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 LESSON 8
Topic Description
Quality management policy May be evaluated to determine how well management uses quality data
and how well others in the organization understand how the data is
being used. The evaluation might include an analysis of management
policies for collection, analysis, and use of data in decision-making or
strategic planning.
Collection and use of informa- May be evaluated to determine how well the project team is collecting,
tion distributing, and using quality data. Items for analysis in this category
might include consistency of data collection processes, speed of infor-
mation distribution, and use of quality data in decision-making.
Analytical methods May be evaluated to determine if the best analytical methods are being
used consistently and how well their results are being used. Items for
audit might include how analysis topics and analysis methods are
selected, what technology is used, and how results are fed back to oth-
ers in the process.
Cost of quality May be evaluated to determine the most effective proportion between
prevention, inspection, and costs of repair or rework.
Quality process design May be evaluated to determine how process design, process analysis,
and statistical process control should be used to establish and improve
the capability of a process.

How to Execute a Quality Assurance Plan

Effective quality assurance provides confidence that the project’s product or service will satisfy How to Execute a Quality
relevant quality requirements and standards. Assurance Plan

Guidelines:
To execute a quality assurance plan, follow these guidelines:
• Ensure that random and/or scheduled quality audits are conducted by qualified
auditors to evaluate the quality management plan, quality testing procedures, and
measurement criteria.
— Are the quality parameters set forth in the quality assurance plan valid?
— Are the operational definitions and checklists adequate and appropriate to
achieving the desired final results?
— Are the testing methods being implemented correctly?
— Are the data being interpreted, recorded, and fed back into the system prop-
erly?
• Use one or more of the quality assurance tools and techniques to determine the
causes of quality problems of the project’s product, service, systems, or processes.
• Identify and implement the appropriate actions to take to increase the effective-
ness and efficiency of the project team’s work results to improve quality in the
product or service.

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LESSON 8
Example: Execution of Quality Assurance Plan by a Coffee Brewing Equipment
Manufacturer
A leading coffee brewing equipment manufacturer is beginning to produce a new prod-
uct line, and John Smith has been assigned as the project manager for the project. John
has been given the task of maintaining a satisfactory level of quality while maintaining
the fiscal goals for the project.
A quality audit was commissioned to determine if in-process monitoring produced the
expected improvements to cost and quality. Following an examination of the testing
procedure outlined in the quality management plan, the audit team analyzed the col-
lected data from the latest series of testing seven days per week.
The analyzed data was compared to projected quality data based on the in-process
monitoring system and showed that the projections matched the actual data. Armed
with this information, the audit team recommended modifications to the quality man-
agement plan requiring testing only twice each week. At a cost of $100 per test, the
company is now spending $200 per week instead of $700 and therefore saving $500
per week on testing. Through careful review of the quality management plan, analysis
of the use and distribution of collected data, and monitoring the cost of quality, the
company achieved marked improvements in quality while realizing an improved
bottom-line.

DISCOVERY ACTIVITY 8-2

Executing Quality Assurance
Scenario:
For the Seattle OGC store, the construction phase is getting started. Materials have been
ordered and delivered and excavation has begun. Olson and Sons Construction has a standard
quality management plan that you adapted slightly for your project. The plan contains specific
operational definitions for measuring the quality of the construction work. In addition, it states
that scheduled and random quality inspections will occur. These inspections will be done by an
internal quality assurance engineer and will be in addition to the inspections conducted by the
city. Your company is ISO certified, so relevant ISO standards and regulations must be adhered
to as well. You have selected a good team of workers for the construction and you are confi-
dent in their ability to meet the quality standards.

1. Who is responsible for the quality of the project deliverables?

a) The project sponsor
✓ b) The project team
c) Stakeholders
d) Customers

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 LESSON 8
2. The manager of quality assurance has asked you about your quality management plan.
Which feature might he find problematic?
a) Scheduled and random quality inspections will take place, which will be conducted
by an internal quality assurance engineer, as well as by the city.
✓ b) Any corrective actions that a project manager feels will improve the effectiveness or
efficiency of the project will be implemented.
c) Operational definitions were defined for measuring the quality of the construction
work.
d) Occurrence of scheduled and random quality inspections during the course of the
project.

3. As construction gets underway, random inspection results of completed construction

elements are being analyzed. What sort of quality activities should be taking place?
Perform a random or scheduled quality audit to evaluate the quality management plan,
quality testing procedures, and measurement criteria for inconsistencies in the way that
the quality plan and operational definitions are being carried out.

4. The stakeholders are questioning the amount of resources dedicated to quality assur-
ance. How can you demonstrate to them that the benefits of quality assurance
outweigh the cost?
a) Perform benchmarking to compare project practices to other projects to generate
ideas for improvement.
b) Conduct an array of experiments to identify which factors may be influencing specific
variables.
c) Use flowcharts to see how systems relate and how various factors might be linked to
problems or effects.
✓ d) Document the identified corrective actions so that their effect on project quality,
cost, and schedule can be monitored during quality control.

5. Which is an example of internal failure cost?

✓ a) Rework
b) Quality audits
c) Random quality audits
d) Project team training

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LESSON 8
TOPIC C
Perform Quality Control
Your quality management plan describes how your project team will move forward. Now that
your project is well underway, you need to monitor the work results to ensure that they meet
the quality standards you defined in your quality management plan. In this topic, you will
focus on the perform quality control process and control project quality.
Companies face fierce competition to minimize development time and bring products to market
before the competition. At the same time, organizations are faced with the challenge of staying
competitive by keeping customers’ costs low. As a result, quality is a component that perme-
ates all aspects of project work. Effective quality control can streamline project work, saving
time and money while continuing to maintain customer and stakeholder satisfaction. Control-
ling quality ensures that your project meets or exceeds your customers’ quality requirements.

The Perform Quality Control Process

The Perform Quality Control
The perform quality control process involves monitoring project performance to determine if it
Process complies with relevant quality standards and identifying ways to eliminate causes of unaccept-
able performance. Quality control involves continually measuring, adjusting, and monitoring.
Its goal is to improve the work process and produce results that meet customer and stakeholder
specifications and expectations. Quality control is normally performed by the quality control
department or a similar unit.

Figure 8-9: The perform quality control process.

Perform Quality Control Inputs

Quality control requires several inputs.

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 LESSON 8
Input Description
Project management plan Contains the quality management plan, which describes the
project management team’s approach to implementing its qual-
ity policy. The quality management plan must include Quality
Control (QC), Quality Assurance (QA), and documentation on
process improvements.
Quality metrics An actual value that describes the measurements for the quality
control process. Examples of quality metrics include defect
density, reliability, rate of failure, and test coverage.
Quality checklists Job aids that prompt employees to perform activities according
to a consistent standard.
Work performance measurements Measurements used to create the project activity metrics, which
maintain actual progress vs. planned progress. Some of the
metrics used are:
• Planned vs. actual technical performance.
• Defects found and defects originated.
• Deliverables in progress and those completed.
• Planned vs. actual schedule performance.
• Planned vs. actual cost performance.
Approved change requests In quality control, approved change requests can include modi-
fications to work methods and the schedule. All approved
changes need to be verified.
Deliverables A distinctive product, result, or capability used to perform a
service that must be produced to complete a project, phase, or
process.
Organizational process assets Represent formal and informal policies, procedures, plans,
guidelines, and knowledge from previous projects that can
influence the perform quality control process.

Perform Quality Control Tools and Techniques

There are several tools and techniques for quality control.

Tools and Techniques Description

Cause-and-effect diagrams Illustrate how various factors might be associated with possible
problems. Possible causes can be identified by asking “why” and
“how” for each problem identified. Cause-and-effect diagrams are
also known as Ishikawa or fishbone diagrams.
Control charts Graphical display of the results or status of a process over time and
against established control limits. It helps track the behavior of qual-
ity control processes over time and determine if the variances in the
process are within acceptable limits.
Flowcharting Flowcharting can assist the project team’s effort to identify potential
quality problems, their associated effects on overall project quality
targets, improvement areas, and the possible improvement measures.

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LESSON 8
Tools and Techniques Description
Histogram A bar chart of variables. Each column symbolizes an element of a
problem. The height of each column represents how frequently the
element occurs. By using the shape and width of the distribution,
causes of problems are identified.
Pareto chart A histogram that shows the causes of problems in the order of their
severity.
Run chart A line graph showing plotted data points in chronological order. It
could show trends in a process over time or improvements over
time. Trend analysis uses run charts. Trend analysis is a tool you
can use to communicate forecasting information based on the
project’s current performance. It is also used to monitor technical
and cost and schedule performance.
Scatter diagram A diagram showing a relationship between two variables. The dia-
gram plots dependent versus independent variables. The more
closely the points form a diagonal line, the more closely they are
related.
Statistical sampling Measures an entire population based on actual measurement of a
representative sample of that population.
Inspection An official examination of work results to verify that they meet
requirements. The inspection may be conducted by an internal or
external inspection team.
Approved change requests review Ensures that all change requests are reviewed and implemented as
approved during the perform integrated change control process.

Perform Quality Control Outputs

There are several outputs from quality control.

Output Description
Quality control measurements The results of quality control activities that are documented in the for-
mat determined when planning for project quality. The results are fed
back to the QA process for use in re-evaluating and analyzing quality
standards and processes.
Validated changes Reinspected, repaired items to be formally accepted or rejected.
Validated deliverables QC needs to verify the accuracy of deliverables through quality control
processes.
Organizational process assets These include completed checklists and lessons learned documentation.
updates If checklists are used, they become part of the project’s records, and
any lessons learned from QC should be documented and put in a data-
base for the current project and for the entire organization to refer to.
Change requests If any actions require a change in the process, a change request should
be submitted in compliance with the perform integrated change control
process.

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Output Description
Project management plan Any changes in the quality management plan through QC processes are
updates documented in the project management plan. Any requested changes to
the project management plan and its subplans are reviewed through the
integrated change control process. Plans that may be subject to changes
in this process include the quality management plan and process
improvement plan.
Project document updates Documents that may need to be updated include the quality standards,
quality management plan, quality baseline, and quality metrics.

Variance
Definition: Variance
Variance is the quantifiable deviance, or amount of departure, from the expected results
for any component of a product and service being developed, including quality, sched-
ule, and cost. Variance can be extreme or almost undetectable; it may result from many
causes, such as problems with resource availability or from the skills of personnel
assigned to the project. Variance may be obvious the moment a product is produced or
may become obvious over time through use and exposure to environmental conditions.
To control quality, you must recognize the difference between quality variance within a
normal range and variance that indicates a quality error.

Example: Schedule Variance in a Daily Flight

A daily flight from Chicago to New York City may typically arrive 10 to 20 minutes
late. Those minor fluctuations in arrival time are schedule variances that may result
from different issues: mechanical breakdowns, human error, or weather-related delays.
Addressing the different variances for one flight can be difficult without evaluating the
entire system.

Causes of Variance
Definition: Causes of Variance
Causes of variance in a process or item are the sources or reasons for deviations from
the expected standard. There are two main types: random causes and special causes.
Random, or common, causes are those everyday occurrences that are always present in
project work; as such, they may be unavoidable. They may be either insignificant and
have little impact on the overall quality performance or they may have a dramatic
effect on quality. The corrective actions taken in response to random causes of variance
are typically long-term and generally involve overall changes to the process.
Special, or assignable, causes are unusual, sporadic occurrences; they are the result of
some unexpected circumstance and are typically not caused by a flaw in the overall
production process. Like random causes, special causes of variance can also have a
dramatic effect on performance. By analyzing instances of the occurrences of special
variances, you may be able to isolate the cause and take corrective action to avoid the
negative effects on quality performance. The corrective actions taken in response to
special causes of variance are typically short-term and do not involve overall changes
to the process. Special causes do not occur frequently but it can sometimes be decided
not to act upon them as the cost of action may be much more than the benefit.

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Example: Causes of Variance in the Metropolitan Bus Schedules
A metropolitan bus company is trying to improve customer satisfaction in one key
area: the buses consistently run late. Random causes of the schedule variances include
the weather and traffic conditions: these are unavoidable, everyday occurrences that
will have an impact on how closely the buses can meet their schedules. A special
cause of schedule variance is a minor traffic accident. This is an isolated, unexpected
issue that may have a dramatic effect on the bus’s schedule that day, but it does not
indicate a process flaw.

Example: Random and Special Causes in an E-Learning Project

A language quality controller for an e-learning project identified a considerable number
of structural and grammatical errors in one of the lessons in the course. Generally, the
errors identified during a review are minor, which occur due to fatigue or other distur-
bances to the writer that are caused by emails and phone calls. These causes are called
random causes. But because the number of errors in this lesson were significantly high,
the company decided to analyze the cause for this problem. Two major causes were
identified during the analysis: the keyboard of the computer was not functioning prop-
erly and the auto spelling correction option in the software was turned off. These are
called special causes.

Example: A Random Cause Generating Regular Defects in a Sheet Metal Devel-

oping Company
A sheet metal development company, which creates very thin sheets of aluminum,
observed that two sheets produced every 15 minutes had wave-form patterns on the
surface. After having analyzed the reasons, it was found that the factory was directly
above a subway line, and the train passed over the line every 15 minutes.

The Analyzing Variances Task

The Analyzing Variances Task
The analyzing variances task involves taking data concerning work results and measuring that
data against the specifications and operational definitions included in the project plan. Any
variances must be analyzed to determine whether they are acceptable or if they merit correc-
tive action to keep the performance within specifications.

Tolerances
Tolerances Definition:
Tolerances are the measurement values that determine if a product or service is accept-
able or unacceptable. They are the standards against which data collected will be
analyzed. Tolerances are typically expressed in ranges. If the result of the test falls
within the range specified by the tolerance, it is acceptable. If not, it is considered
unacceptable. Tolerances are specified in the quality management plan.

Example: Tolerance Level for a Product’s Weight

The tolerance for a product’s weight may be 5.8 grams ± 0.2 grams. If a product
weighs more than 6.0 grams, or less than 5.6 grams, it is considered unacceptable
because it exceeds the tolerance and does not meet specification.

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The 6-Sigma Limit
Project managers use control charts to measure for instability because processes always have The 6-Sigma Limit
some fluctuation and variability. In measuring deviations, if one has six standard deviations
between the process mean and the nearest specification limit defined in the control chart, prac-
tically no items will fail to meet the specifications. This is termed the 6-sigma limit. In terms
of controlling processes, the 6-Sigma limit is significant because it provides a generally
accepted guideline for monitoring for quality and adjusting when necessary.

The 6-Sigma Process

6-Sigma has also evolved into a business management strategy that seeks to improve
the quality of process outputs by identifying and removing the causes of defects and
variability in processes. To achieve 6-Sigma, a process must not produce more than 3.4
defects per million opportunities.

The 3-Sigma Rule

The 3-sigma rule, an empirical rule, states that for normal distribution, almost all val-
ues lie within 3 standard deviations of the mean.
The values in the normal distribution will exhibit deviation as follows:
• About 68.27% of the values lie within 1 standard deviation of the mean.
• About 95.45% of the values lie within 2 standard deviations of the mean.
• About 99.73% of the values lie within 3 standard deviations of the mean.

Variability Indications
Measurements that exceed the range between the upper and lower control limits are considered Variability Indications
to be an indication of instability. The variability expressed is atypical for the process and may
be an indication of a special source of variance.
It is important to remember that, while control charts can effectively show variability, they
cannot indicate the source of the variability or show performance in relation to an expected
performance. The control chart shows only the capability of the process to produce similar
products. It does not show the conformity of that process to a customer’s specifications.

Pareto Diagrams
Definition: Pareto Diagrams
A Pareto diagram is a histogram that is used to rank causes of problems in a hierar-
chical format. The goal is to narrow down the primary causes of variance on a project,
and focus the energy and efforts into tackling the most significant sources of variance.
The variables in the diagram are ordered by frequency of occurrence.

Example: An Example of a Pareto Diagram

A typical Pareto diagram is used to represent the data, which is first organized in the
descending order of occurrence and then plotting the cumulative curve. The bars repre-
sent the number of failures for each of the causes (A through E). In this example,
approximately 72 percent of the total number of failures are due to causes A and B
(320 out of 440). The project team can easily see that they should focus most of their
corrective action efforts on those two causes.

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Figure 8-10: A Pareto diagram.

Pareto Analysis
The analysis used to develop Pareto diagrams is referred to as a Pareto analysis, after
Vilfredo Pareto, an Italian economist of the late 19th and early 20th century. In his
analysis, Pareto found that 80 percent of the country’s wealth was concentrated in the
hands of 20% of the population.
During a Pareto analysis, data is collected in various forms, such as reports, inspec-
tions, and surveys. This data is then analyzed to isolate the major causes of project
variance and is assigned a frequency or percentage value. The resulting diagram is a
histogram that identifies specific sources of variance and ranks them according to their
effect on the quality performance. Pareto diagrams can be very useful tools throughout
the entire project for prioritizing and focusing corrective actions. Comparative analysis
of Pareto diagrams at different points in the project can be an effective tool for deter-
mining and communicating the effect corrective actions have had on curtailing or
eliminating variability.

The 80/20 Rule

The 80/20 Rule
Pareto diagrams are based on Pareto’s law, also known as the 80/20 rule. The 80/20 rule is a
general guideline with many applications; in terms of controlling processes, it contends that a
relatively large number of problems or defects, typically 80 percent, are commonly due to a
relatively small number of causes, typically 20 percent.

Statistical Sampling
Statistical Sampling Definition:
Statistical sampling is a technique used to determine characteristics of an entire popu-
lation based on actual measurement of a representative sample of that population.
Sampling is a way to determine if large batches of a product should be accepted or
rejected without having to test every single item produced. Its goal is to produce a pro-
cess that does not require inspection of every item. The size of samples and the
frequency and cost of sampling must be determined when planning for project quality.

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Example: Statistical Sampling Through Polling
A common example of statistical sampling is polling. Polling organizations ask ques-
tions of a small, random sample of participants. The answers given by the sample
group are used to suggest how an entire group may feel regarding an issue.

Determining Sample Size

Sample size can affect the accuracy of results. Generally speaking, the larger the
sample size, the higher the likelihood the sample will truly represent the variability of
the population. In quality terms, the larger the sample size, the more confidence you
can have that your measurements reflect the quality level of the entire product popula-
tion.

It is important that members of a team whose focus is quality control have a strong understanding of
statistics. Other members need only have a basic understanding of statistical concepts.

The Statistical Sampling Process

The statistical sampling process involves dividing sampling data into two categories—attribute The Statistical Sampling
and variable—each of which is gathered according to sampling plans. As corrective actions are Process
taken in response to analysis of statistical sampling and other quality control activities, and as
trend analysis is performed, defects and process variability should be reduced. The use of sta-
tistical sampling during quality control can reduce overall quality costs by helping to forecast
and prevent errors before they occur.

Figure 8-11: The process of statistically sampling the given data.

Attribute Sampling Data

Definition: Attribute Sampling Data
Attribute sampling data is data from the sample that is counted, such as the:
• Number of employees participating in profit sharing.
• Number of customer complaint calls.
• Number of returned items.
Attribute sampling uses no scale. It simply tells you whether or not a standard has
been met. Implementing an attribute sampling plan is fairly simple. Team members
may be required to count the number of items that do not conform to a quality specifi-
cation or that show evidence of a quality defect. If the number exceeds a certain limit,
the sample fails to meet quality specifications.

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LESSON 8
Example: Attribute Sampling for a Random Sample of Widgets
A project team is given a sampling plan that involves taking a random sample of 500
widgets and counting the number of widgets that do not meet the relevant operational
definition. The plan states that there must be fewer than 10 defective widgets in order
for the sample to pass the inspection. The team inspects each of the widgets, compares
them to the standard specified by the operational definition, and determines that 30 of
the widgets do not meet the standard. The sample did not pass the inspection because
the number of defective widgets exceeded the minimum acceptance level of 10.
This is an example of attribute sampling because no scale is used. The test was a pass-
or-fail inspection to determine whether the sample exceeded a certain acceptance level.

Variable Sampling Data

Variable Sampling Data Definition:
Variable sampling data is data from the sample that is measured on a continuous scale,
such as:
• Time
• Temperature
• Weight
For variable data, the compliance to specifications is rated on a continuous scale. Mea-
surements can fall between an upper and lower range. To implement a variable
sampling plan, you would collect a sample of product and take some specific measure-
ment to determine if the sample meets quality specifications. Variable samples typically
provide the same level of accuracy as attribute samples with much smaller sample
sizes.

Example: Variable Sampling by an Ice Cream Manufacturing Company

A company manufacturing premium ice cream would use variable sampling data to
ensure quality control. Not every batch of ice cream produced would be tested for
quality measurements, but testers would take measurements of random batches and
measure for flavor, consistency, color, texture, visual appeal, and other internal markers
for quality.

How to Perform Quality Control

How to Perform Quality
Monitoring and controlling project quality ensures that the quality complies with relevant qual-
Control ity standards. Meeting quality standards enhances the team’s ability to deliver an overall
project performance that meets the project objectives.

Guidelines:
To effectively control project quality, follow these guidelines:
• Conduct inspections to detect quality errors as project work is ongoing.
— Consult the quality management plan for the procedures and guidelines to
use during quality control.
— Check work results against relevant operational definitions and checklists.
Document the results.
— Use statistical sampling to determine whether large batches of a product
should be accepted or rejected based on the quality of the sample(s). Ensure

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that samples are chosen randomly and that the sample size is large enough to
demonstrate the variability of the entire group.
• Use Pareto diagrams to focus corrective actions on the problems having the great-
est effect on overall quality performance and to measure and monitor the effect of
corrective actions over time.
• Use control charts to analyze and communicate the variability of a process or
project activity over time. As you analyze performance with control charts, you
must not only look for variability outside the control limits, but you should also
analyze patterns of data within control limits.
• Identify ways to eliminate causes of unsatisfactory results in order to minimize
rework and bring nonconforming items into compliance. Use flowcharts to iden-
tify redundancies, missed steps, or the source of quality performance problems.
• Initiate process adjustments by implementing corrective or preventive actions nec-
essary to bring the quality of work results to an acceptable level. Major
adjustments must be made according to the project’s change control system.
• Continue to monitor, measure, and adjust quality throughout the project life cycle.

Example: Performing Quality Control for the Arithmetic on a Stick Project

As the project team for the Arithmetic on a Stick project continues through production,
the team continually monitors work results by conducting online reviews of the com-
pleted lessons and documenting any problems in the project’s database. During one of
the core team’s meetings, the project manager does a quick trend analysis and notices
that there is an unusually high number of problems in the database for the fifth lesson
when compared to the previous four lessons.
The project manager asks the quality control engineer to evaluate the problems to
determine which are generating the most problems. The quality control engineer does a
Pareto analysis and plots the results on a Pareto diagram. Since curriculum changes
and technical problems are generating most of the problems, the team decides to focus
on those two issues. Further analysis of the problems reveals that one technical prob-
lem was the cause of all the trouble. The technical lead was able to isolate the problem
and resolve the issues.
The curriculum changes were not so easily resolved. A new curriculum developer had
been hired recently. The new curriculum developer was having difficulty understanding
the project team’s development process and consistently changed lessons after they had
already been produced and programmed. This resulted in change requests for the art
director, as well as for the programmers. Intensive training sessions were suggested
and implemented.
Trend analyses conducted on the sixth, seventh, and eighth lessons indicated that the
corrective actions were effective in reducing the number of problems due to curriculum
changes and technical problems. Now the highest number of problems was due to cur-
riculum and programming errors, so the team focused their attention on those issues.
As they moved through the remaining lessons, the overall number of problems in the
database significantly declined, indicating an overall increase in project quality.

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LESSON 8
DISCOVERY ACTIVITY 8-3
Performing Quality Control
Scenario:
You are managing the construction of the Seattle OGC New Store project. The HVAC contrac-
tors are completing the work for the installation of the heating and cooling system. Your team
had developed operational definitions and checklists for this work, and you have provided
these to the lead quality control engineer. Historically, on similar projects, there has been no
more than an average variance of one degree between floors. The quality inspections reveal
that the second floor is three degrees cooler than the first floor.

1. Given that there is a significant variation in temperature between the first and second
floor, what should be done?
a) Report this information to the appropriate people, according to the project’s change
control system.
✓ b) Because of the potentially high re-work cost, finding a solution should be a top prior-
ity.
c) Initiate process adjustments.
d) Continue to monitor quality as the HVAC installation continues.

2. The quality management plan documented acceptability of the installation with a tol-
erance of a one degree variance between floors. What would you do to determine the
reasons for the variance in quality tests?
You will need to determine the source of the variability so that appropriate corrective
action can be taken. Take a closer look at how the HVAC installation is being distributed
among the contractors. Also consider how the quality testing is being done. Is the same
quality control engineer inspecting all of the floors?

3. After researching the cause of the variance, you discover that the testing was done by
one quality control engineer. You then meet with the contract supervisor to investi-
gate the process. You discover that the duct work on the second floor was installed
over a weekend by a different, less experienced crew. What should your next step be?
Recommend corrective action to the supervisor to bring in the first floor crew to trouble-
shoot the variance between floors. It is important that you consider the impact any
corrective action may have on the project budget and schedule. Major adjustments must
be made according to the project’s change control system.

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Lesson 8 Follow-up
In this lesson, you planned for project quality, executed a quality assurance plan, and enforced
quality control measures. This enables you to ensure that the deliverables satisfy the needs of
the project.
1. What specific benefits would enlisting stakeholder support bring to your quality plan-
ning efforts?
Answers will vary, but may include: projects are highly impacted by stakeholder support.
By enlisting stakeholder support and identifying the amount of support each stakeholder
will provide, their requirements and priorities enable project managers to address poten-
tial risks during project planning itself. It will also enable the project manager to clearly
determine the quality requirements for the project and increase the chances of project
success.
2. What quality control methods have you used in the past? Were they effective? Why or
why not?
Answers will vary, but may include: tools such as Pareto diagrams and statistical sampling
have been used. They were effective in most cases. Because a Pareto diagram shows the
relative ranking of causes of problems, it has helped assign the issues, in the order of
importance, to the corresponding team members for correction. Statistical sampling has
helped in learning the market trends for the goods and services produced in the company.

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 LESSON 9

LESSON 9 Lesson Time

1 hour(s), 10 minutes

Organizing Human
Resources for a Project
In this lesson, you will organize human resources for a project.
You will:
• Document the project roles, responsibilities, and reporting relationships.
• Acquire the project team.
• Develop the project team.
• Manage the project team.

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LESSON 9
Introduction
You measured project quality to ensure that your project meets the expectations of the stake-
holders. Meeting stakeholder expectations also requires you to have a right mix of resources in
your team to execute the project. In this lesson, you will organize human resources for your
project.
Managing a project successfully involves competent handling of resources, as human resources
have a huge impact on the success or failure of the project. You can organize human resources
in a project effectively by identifying and documenting the roles and responsibilities of each
resource, acquiring the right team members, and coordinating and managing the team to
execute the project work according to the project plan.

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 LESSON 9

Figure 9-1: The project management framework.

The Project Management

Framework (2 Slides)

Lesson 9: Organizing Human Resources for a Project 263

 LESSON 9
TOPIC A
Document the Project Roles,
Responsibilities, and Reporting
Relationships
Now that you have created a quality management plan for your project and put plans into
place to ensure that standards for quality will be met and measured, you are ready to move
forward with the next element of good planning, which is documenting how people on your
project will interact. In this topic, you will document the roles, responsibilities, and reporting
relationships for the people working on your project.
You will have to ensure that everyone working on your project has knowledge of their roles
and duties, and that those responsibilities are clearly defined and documented. By orchestrating
the roles and responsibilities of resources and making sure that relationships are documented,
you will ensure that everyone has a clear understanding of their duties. This will eliminate
confusion and misunderstanding throughout the life cycle of a project.

The Develop Human Resource Plan Process

The Develop Human Resource
Develop human resource plan is the process of identifying, documenting, and assigning project
Plan Process roles, responsibilities, and reporting relationships. It is commonly performed during early
project phases.
The process involves:
• Creating a human resource plan that documents the human resource skills required to
complete the project successfully.
• Identifying training requirements, team-building strategies, and planning recognition and
rewards systems.
• Planning for the availability of resources with a rare blend of skills and of those working
on multiple projects.
The develop human resource plan process tries to make the most effective use of people
involved in the project by first determining project interfaces, staffing requirements, and con-
straints. Factors such as project costs, schedules, risks, and quality may also be affected when
developing the human resource plan, which should include these issues and a plan for provid-
ing appropriate solutions.

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 LESSON 9

Figure 9-2: The develop human resource plan process.

Develop Human Resource Plan Inputs

Several inputs are required for planning human resources.

Input Description
Activity resource requirements List the required people and competencies necessary for each
activity, which will be progressively elaborated when developing
the human resource plan.
Enterprise environmental factors Include organizational structure and culture, marketplace scenario,
and existing human resources.
Organizational process assets Items from previous projects such as organizational processes,
policies, and structures; lessons learned; templates; and checklists
help shorten planning time and ensure nothing is overlooked.

Develop Human Resource Plan Tools and

Techniques
Develop human resource plan tools and techniques include organization charts and position
descriptions, networking, and organizational theory.

Tools and Techniques Description

Organization charts and position Document team members’ roles and responsibilities so each work
descriptions package has a clear owner and each team member understands his or
her role using hierarchical formats such as the WBS, the Organiza-
tional Breakdown Structure (OBS), and the resource breakdown
structure. You can also document using matrix formats such as a
RAM and text-oriented formats such as position descriptions and
role-responsibility-authority forms. Subsidiary project plans may list
resource roles as well.

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LESSON 9
Tools and Techniques Description
Networking Formal and informal interactions such as correspondence, meetings,
and conversations are networking tools to understand how interper-
sonal factors impact staffing options. Networking also enhances the
professional project management practices of a project manager at
different phases of a project.
Organizational theory Provides information on the organization of work processes through,
among other things, organizational structure, power, culture, and
behavior of people. The project manager must understand how dif-
ferent organizational structures influence or impact human resources
differently.

Develop Human Resource Plan Outputs

The human resource plan is the only output for the develop human resource plan process.

Output Description
Human resource plan Describes how human resources working on the project must be identi-
fied, managed, controlled, and released after the end of the project. The
human resource plan should be reviewed throughout the project life
cycle to ensure applicability and validity. It includes:
• Roles and responsibilities: Determined for each element of the
project’s scope of work. Typically done with a Responsibility
Assignment Matrix (RAM). Some of the factors that need to be ful-
filled when determining roles and responsibilities include role,
authority, responsibility, and competency.
• Project organization charts: Illustrate the project’s organizational
structure.
• Staffing management plan: Describes the project management
team’s approach to managing the increase and decrease of project
staff across the project life cycle.

Project Interfaces
Project Interfaces
Project interfaces are the various reporting relationships that occur within the project as well
as the boundaries of the project.

Interface Description
Organizational Reporting relationships among different organizational units. They may be
internal or external to the parent organization and include interfaces
between the project team, upper management, other functional managers
that may need to support the team, and even the organization’s customers.

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 LESSON 9
Interface Description
Technical Reporting relationships among technical disciplines on the project that can
occur during a phase or during the transition between phases. They reflect
informal and formal relationships with people on the project team as well
as outside of the team.
Interpersonal Formal and informal reporting relationships among individuals working on
the project, whether internally or externally.
Logistical Relationships between project team members who are distributed across
different buildings, countries, and time zones.
Political Goals and expectations of internal and external project stakeholders and
their relationships with the projects.

The Responsibility Assignment Matrix (RAM)

Definition: The Responsibility Assignment
Matrix (RAM)
A Responsibility Assignment Matrix (RAM) is a chart that links key project stakehold-
ers to specific project deliverables or activities by assigning responsibility to an
individual stakeholder for each element of work. Some of the questions the RAM
attempts to answer include:
• Who is accountable for the completion of a specific deliverable or activity?
• Who has sign-off authority on the deliverable or activity?
• Who must be notified of the completion?
• Who makes the acceptance or rejection decision?

In a large or complex project, a matrix might be used to show the responsibilities for major
deliverables only. A lower-level matrix may be developed to show work package roles and responsibili-
ties within each deliverable. Work package owners may develop a RAM that assigns responsibility to
each activity in the work package.

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LESSON 9
Example: A Responsibility Assignment Matrix

Figure 9-3: A responsibility assignment matrix links key project stakeholders

to project deliverables.

Listing RAM Elements

On a RAM, the deliverables or activities are typically listed vertically, with the key
project stakeholder positions, titles, or names listed horizontally. Responsibility for
each deliverable or activity is assigned to one of the stakeholders.

RACI Chart
A RACI chart is a type of RAM that helps detect the level of responsibility for each
project team member. RACI stands for Responsible, Accountable, Consultive, and
Informed. The RACI matrix helps identify who is responsible for making decisions and
how the people responsible are supported. RACI is generally used to provide clarity on
the roles and responsibilities assigned to each project team member. A RACI chart is
also called a RASI chart, where “S” stands for “Supportive.”

Figure 9-4: A RACI chart.

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Staffing Management Plans
Definition: Staffing Management Plans
A staffıng management plan forecasts what types of staff will work on the project,
when they will be needed, how they will be recruited onto the project, and when they
will be released from the project. Depending upon the project requirements, the staffing
management plan may be formal or informal, exhaustive or brief. The plan is a subsid-
iary plan to the human resources plan and is an important input to the develop human
resource plan process.

Example: Staffing Management Plans for Writing a Book

To coincide with the company’s 100th anniversary, the CEO might decide to have a
book written to document the company’s growth and evolution. The staffing manage-
ment plan for this project would stipulate external resources with expertise in writing,
designing, printing, and publishing, but it would also include internal resources with
specialized knowledge about the company history. The staffing management plan
would identify who would be needed to help with the book, when they would be
needed, what they would be expected to contribute, and how long they would be
expected to participate.

Staffing Management Plan Components

There are several components of the staffing management plan that will continue to evolve as Staffing Management Plan
you develop the project plan. Components

Component Description
Staff acquisition When planning resources, consider whether you will use team members
from within the organization or from external sources, the costs associ-
ated with the level of expertise required for the project, physical
location of resources, and the amount of assistance that can be provided
by other departments for the project management team.
Resource calendars The staffing management plan details the time frame required for a
project and for each project team member. Optimizing the use of people
on a project will help finish the project on time and within budget. Use
of human resource charting tools such as resource histograms or bar
charts can help illustrate the number of hours that a person, department,
or entire project team will be needed for each week or month over the
course of the project. Bar charts can also include a horizontal line rep-
resenting the maximum number of hours available from a particular
resource.
Staff release plan Developing a plan for releasing resources helps control project costs by
using team members’ expertise or skills as and when they are needed.
Planning for release also allows for a smooth transition to other projects
and mitigation of human resource risks that may occur during the final
phases of the project.
Training needs A training plan can be developed for team members who need to
improve their competency levels or who may need to obtain certifica-
tions that will benefit the project.

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 LESSON 9
Component Description
Recognition and rewards Creating incentives for meeting milestones or other project deliverables
can have a positive effect on morale. An effective recognition plan
rewards team members for meeting goals that are under their control.
Compliance If the contract requires compliance with government regulation, con-
tracts, or other standards, this should be stipulated in the staffing
management plan.
Safety Projects performed where specific safety precautions must be taken—
i.e., construction sites or nuclear power plants—can have documented
policies and procedures for the protection of team members. These pro-
cedures should also be documented in the risk register.

How to Document the Project Roles,

Responsibilities, and Reporting Relationships
How to Document the Project
Documenting roles, responsibilities, and reporting relationships will give project personnel a
Roles, Responsibilities, and clear understanding of their duties.
Reporting Relationships
Guidelines:
To document roles, responsibilities, and reporting relationships, follow these guide-
lines:
• Review the staffing requirements for your project, which were identified during
resource planning, as well as external relationship requirements with clients, con-
sultants, and/or vendors.
• Make sure you have a good understanding of any constraints that may limit your
organizational planning options.
• Address the organizational structure of the performing organization and how this
affects the structure of the project team.
• If necessary, incorporate required roles and reporting relationships from any con-
tractual agreements with unions or other employee groups.
• Consider the competencies of expected staff members and how they affect the
project’s reporting relationships or roles and responsibility assignments.
• Create an organization chart to document the reporting relationships among your
project team.
• Ensure all key project stakeholders with reporting relationships are indicated in a
hierarchical format on the chart.
• Analyze the formal and informal project interfaces that exist among the organiza-
tional units, technical disciplines, and individuals working on the project for their
possible impact on your organizational planning.
• Create a RAM to document the roles and responsibilities for key project stake-
holders.
• Ensure the RAM is created as early as possible in the project and is updated as
necessary to reflect changes in personnel or project focus.
• Assign roles and responsibilities to stakeholders who are directly involved with
the project work rather than to senior managers or customers who have limited
and/or indirect involvement.

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• Make sure each element of the project’s scope is accounted for in the RAM and
provide a key to describe responsibility codes.
• Distribute the organization chart and RAM appropriately to all project team mem-
bers and other key project stakeholders.

Example: Project Roles, Responsibilities, and Reporting Relationships in a Con-

struction Firm
Charles is working on a project team at a construction firm. He decided to document
the roles and reporting relationships of the project team members. Charles began by
reviewing the staffing requirements of the project, which state that a senior foreman
must oversee the primary labor force and should report directly to the assistant project
manager.
He reviewed the project constraints and identified that the plumbing sub-contractor
requires employment of at least five full-time laborers for the duration of the project.
The sub-contractor also must report to the union branch chief.
Charles identified all the key stakeholders on the project and created an organization
chart. Using this information, he then built a Responsibility Assignment Matrix
(RAM).
After reviewing this document for omissions, he distributed it among the team mem-
bers and stakeholders.

DISCOVERY ACTIVITY 9-1

Documenting Reporting Relationships
Scenario:
OGC is in the process of opening its new telestore in Salt Lake City, UT. You want to ensure
that everyone on the project has a clear understanding of their duties. Therefore, you document
the roles, responsibilities, and reporting relationships for the new store opening project.

1. During which process are the roles and responsibility assignments completed?
a) Resource planning
b) Schedule development
c) Staff acquisition
✓ d) Human resource planning

2. The management at OGC has reviewed the Staffing Management Plan, and to their sur-
prise, it appears that there are now staffing gaps due to resource reassignments. What
could you do to address this problem?
Answers will vary, but may include: one of the first things would be to develop some
draft alternatives in terms of acquiring new resources and lead times to fill these staffing
gaps. Typically, this is where the budget and schedule change.

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LESSON 9
3. Which step would be the logical first step in documenting the roles, responsibilities,
and reporting relationships of project team members?
a) Create a RAM to document the roles and responsibilities for key project stakeholders.
b) Create an organization chart to organize the team members into a hierarchy.
c) Consider the competencies of expected staff members and how they affect the
project’s reporting relationships or roles and responsibility assignments.
✓ d) Examine the staffing requirements of the project.

4. You have examined the staffing requirements of this project. Which options would you
include as constraints that would affect the organizational planning for this project?
a) The project includes resources from several different OGC stores.
✓ b) The project includes resources from outside the organization.
✓ c) The project requires resources that are assigned to another project that may not be
released.
✓ d) The project includes some resources that are new hires.

5. At the conclusion of documenting project roles and reporting relationships, what key
documents would you create and distribute to project team members?
a) The project charter and a RAM.
✓ b) An organization chart and a RAM.
c) The company quality policy and a RAM.
d) A cost-benefit analysis and a RAM.

TOPIC B
Acquire the Project Team
You paved the way for effective communication and staffing plans by documenting the roles,
responsibilities, and reporting relationships of your project. The next step is to bring together
the resources, with the requisite skills and knowledge, you need to fulfill these positions. In
this topic, you will acquire your project team.
Competent resources guarantee the success of a project to a large extent. Naturally, you want
the best resources in the organization to work on your project, but all of them may not be
available at all times. Mandated team members, projects with higher priorities, and functional
managers with their own agendas can impede your chances of putting together your “dream
team.” Your chances of success will be greater if you can negotiate for the best resources.

The Acquire Project Team Process

The Acquire Project Team
The acquire project team process involves making the identified resources available to the
Process project.

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Resource selection may be driven by different factors such as collective bargaining agreements,
or other internal or external reporting relationships. In such cases, the project management
team may not be directly involved in the team member selection processes.
Resources may be dictated by senior management, in which case a project manager has no
room to negotiate. In this case, the project manager needs to build a cohesive team, ensure
effective communication, and clearly define people’s roles and responsibilities.

Figure 9-5: The acquire project team process.

Planning for Acquiring a Project Team

Factors to be considered when planning for acquiring the project team include:
• Project managers must effectively negotiate with the appropriate people for the
needed project resources.
• Failure to acquire the appropriate resources may impact project performance and
may ultimately result in the termination of the project.
• If human resources with the required skills and capabilities are not available at the
appropriate time, alternate resources with lower competencies may be assigned
without violating legal, regulatory, or other criteria.

Documenting Resource Constraints

The project team or the project management team must ensure that all project docu-
ments such as the project schedule, budget, risks, quality, training plans, and the
project and project management plan components reflect the possible resource con-
straints and other problems in acquiring the required resources.

Acquire Project Team Inputs

There are several inputs to the acquire project team process.

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LESSON 9
Input Description
Project management plan Contains the human resources plan that provides information
about how to identify, acquire, assign, manage, control, and
later release the human resources. It also specifies:
• The roles and responsibilities, positions, skills, and compe-
tencies required for each project.
• The project organization chart indicating the number of
human resources required to work on the project.
• The staffing management plan that provides information
about acquiring the project team and the duration for which
each team member will work on the project.
Enterprise environmental factors Factors the project management team needs to take into consid-
eration when acquiring their team include:
• Information about human resources such as which resources
are free during the required time frame, their experience, and
their cost rate.
• Personnel administration policies.
• Organizational structure.
• Location(s) of the resources.
Organizational process assets Any kind of policies, guidelines, or procedures that organiza-
tions follow when delegating staff assignments and selecting
resources for the project.

Acquire Project Team Tools and Techniques

Several tools and techniques are used in acquiring a project team.

Tools and Techniques Description

Pre-assignment When project team members know in advance what their assignment
is before the project has its official kick-off.
Negotiation Staff assignments can be negotiated with functional managers, vendors,
or external organizations. This helps ensure that the appropriate staff is
assigned within the time frame, when there is a need for scarce or spe-
cialized resources.
Acquisition When there isn’t enough staff to complete the project, outside sources
such as consultants or contractors can be hired.

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Tools and Techniques Description
Virtual teams Groups of people, hired for the same project, who never or rarely
speak face-to-face. Using currently available communications technol-
ogy, such as collaborative software, aids in communication. Virtual
teams make it possible for people to:
• Form teams where people live in widespread geographic areas, but
work for the same company.
• Add expertise to projects from people who are not in the same geo-
graphical area.
• Include employees who work from home.
• Include employees who work different shifts.
• Include employees with disabilities.
• Avoid travel expenses.
Planning for effective communication among the virtual team members
is an important consideration that needs to be considered when setting
up a virtual team.

Acquire Project Team Outputs

Outputs from acquiring a project team include project staff assignments, resource calendars,
and project management plan updates.

Output Description
Project staff assignments The assignment of the people who will work on the project,
whether full-time, part-time, or as needed. This includes mem-
bers of the project office as well as all other members of the
project team and usually includes a team directory, memos
to/from team members, and project organization charts and
schedules.
Resource calendar Provides information on the schedule and availability of the
project resources. It also prevents resource scheduling conflicts
and factors in details such as vacation time and other project
commitments.
Project management plan updates As people are assigned to project roles and responsibilities,
changes may need to be made to the human resources manage-
ment plan due to promotions, retirements, illnesses, performance
issues, workloads, and expertise.

Virtual Teams
Definition: Virtual Teams
A virtual team is a team that is distributed across multiple locations. Some virtual
teams have occasional physical meetings, while others may never meet face-to-face.
Virtual team building is more difficult, for a number of reasons.

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LESSON 9
• Bonding and team identity can be hard to create when team members are geo-
graphically dispersed, because finding ways to provide a sense of team spirit and
cooperation may be difficult.
• Communication and information sharing need to rely on various forms of technol-
ogy because teams cannot meet face-to-face. However, managing electronic
collaboration so that everyone on the team can reliably transmit and access infor-
mation from one another can be challenging.
• Because roles, reporting, and performance can be harder to track on a dispersed
team, individual contributions may be overlooked.

Example: Virtual Team for the Apollo 13 Mission

The Apollo 13 spacecraft was launched from the Kennedy Space Center in April, 1970,
but an accidental explosion in an oxygen tank aborted its mission to the moon. The
virtual team responsible for Apollo 13’s launch and its subsequent safe return included
the three crew members on board as well as the staff of mission control in Houston,
Texas. Telecommunications included voice and television communications between
astronauts and Earth.

How to Acquire the Project Team

How to Acquire the Project
Acquiring well-formed project teams will result in meeting the resource needs of the project to
Team fulfill project requirements.

Guidelines:
To acquire a project team, follow these guidelines:
• Form good relationships with functional managers.
• Know when you need specific resources.
• Negotiate with the appropriate organizations or parties for critical resources timed
with project need.
• Look for synergy and diversity among team members.
• Look outside to competent suppliers where in-house resources are not available.
• Make sure that roles and responsibilities are clearly understood by the team and
other stakeholders.
• Publish an organization chart to all stakeholders.

Example: Acquiring the Project Team for a Fundraising Event

Greg has been assigned to organize a fundraiser for a children’s hospital. First, Greg
meets with his functional managers, Kim and Rob, to determine what kinds of people
should be running each activity, if they need to hire any extra help, and how much
resources will cost. They employ about 40 people, and 20 have been pre-assigned by
Kim and Rob to work on activities based on previous experience with the fundraiser.
Some activities have already been decided including a hoop-shooting contest, balloon
volleyball, and a karaoke contest.

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Greg receives a list of everyone who has been assigned to work with him, and calls a
meeting to develop his team and assign responsibilities. Some team members need to
have good organizational skills, some need to have creative skills; however, all need to
be good with kids. Based on skills and abilities Greg selects his team, including a high
school basketball coach to be in charge of the hoop-shooting contest, and an art major
to run arts and crafts. Greg finds a local college that agrees to rent its gymnasium to
the event for only $100.
The next day, Greg goes over roles and responsibilities one final time with his team to
make sure all is understood. An organization chart is made and given to the college,
Kim, and Rob so they know exactly how the gym will be used and who will be
involved in each activity. Now, organization and setup can begin for the event.

DISCOVERY ACTIVITY 9-2

Acquiring a Project Team
Scenario:
You have documented the roles, responsibilities, and reporting relationships for the new
telestore opening project. Now, you are ready to determine the individuals you will need to
fulfill these positions.

1. Three members of the project team have to be allocated to you on a part-time (50
percent) basis from the IT department. What would be your first step in acquiring
these resources for the project team?
Answers will vary, but may include: form good relationships with the functional manager
in order to identify and acquire resources, resolve problems, and manage team members.
Discuss and get commitment for the specific time frames when you will need these
resources on the project.

2. The functional manager of the IT department at OGC informs you that, based on the
time frame for his project, two of the resources that are available are new hires who
have not worked earlier in a project on their own at this point. What should you do?
Ask the functional manager if a senior member of his team can serve as a mentor to the
new hires, at least throughout the beginning phases of the project. Verify that the
assigned resources will be able to perform the work required. Discuss who will be respon-
sible for training the new hires. Learning to negotiate effectively with functional
managers is a crucial part of the team acquisition process. Also, consider identifying the
training needs for these two new resources.

3. During the first meeting of the new project team, some confusion arises between two
team members about their roles and responsibilities. Since this conversation is not
appropriate in this forum, how might you respond?
Answers will vary, but may include: as the project manager, you should identify the
issue, table it, and use the human resource plan, which was developed for the project,
which clearly documents the roles and responsibilities and organizational structure. The
two resources will be informed and once again be made aware of it. This sets the expec-
tation that “working the problem” should be the focus, and not “arguing the problem.”

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LESSON 9
TOPIC C
Develop the Project Team
Now that you have acquired your project team, you need to motivate them to achieve peak
performance. Developing the team also ensures that the team members are equipped with the
skills and knowledge to take on higher responsibilities in the future. In this topic, you will
develop your project team.
Project teams comprise individuals, drawn from different disciplines, who must learn to work
together to achieve a common goal in a short period of time. The individuals working on your
team, all of whom have their own communication styles, work habits, motivation, and career
agendas, need to trust one another and work together towards achieving a common objective,
rather than compete for resources and time. Team building ensures that you build an atmo-
sphere of trust, collaboration, and open communication.

The Develop Project Team Process

The Develop Project Team
The develop project team process is an on-going effort to build a cohesive team that benefits
Process from good communication and a foundation of trust. Its goal is to enhance the team’s collec-
tive performance and improve their skills so that you increase the likelihood of meeting project
objectives. It includes good general management practices including providing training and
coaching to the team, building trust, encouraging good communication and the sharing of
resources, and recognizing and rewarding desirable behavior. Project managers use the develop
project team process to enhance the performance of the project and the project team in an
effort to increase the likelihood of meeting project objectives.

Figure 9-6: The develop project team process.

Foster Team Building

To foster team building within a project team, a project manager might ask each of the
veteran employees on the team to partner with a less experienced team member, offer-
ing coaching as needed and sharing knowledge, information, and expertise. Working
collaboratively towards a shared goal is a great way for team members to help each
other reach a higher level of performance.

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Effective Project Teams
The team members should work in a collaborative way to ensure project success. It is
the responsibility of the project manager to build an effective project team and foster
teamwork. Managers should give opportunities that challenge the team members’ abili-
ties, provide support and timely feedback, and recognize and reward good
performance. To achieve highest team performance, managers should use effective
communication methods, develop trust among team members, manage conflicts, and
promote collaborative decision making and problem solving.
Project managers should seek support from the management or the appropriate stake-
holders to effectively build project teams. This will help improve people skills,
advance technical competencies, build good team environment, and increase project
performance.

Develop Project Team Inputs

There are several inputs for developing the project team.

Input Description
Project staff assignments The assignment of the people who will work on the project,
whether full-time, part-time, or as needed. This includes members
of the project office as well as all other members of the project
team.
Project management plan Contains the human resource plan that identifies training strategies
and plans for developing the project team through rewards, feed-
back, and disciplinary actions.
Resource calendars Helps identify the schedules of team members and the time when
they can participate in team development tasks.

Develop Project Team Tools and Techniques

You can use several tools and techniques to develop the project team.

Tools and Techniques Description

Interpersonal skills Interpersonal skills, often referred to as “soft skills,” can help a
project manager prevent or resolve team issues that hinder successful
completion of the project. Leadership, influencing, communicating,
delegating, and empowerment skills are particularly relevant to team
development.
Training Project team members can acquire new or enhanced management or
technical skills, knowledge, or attitudes through training. Training
may be provided to teams, small groups, or individuals through a
variety of methods such as classroom, online, computer-based, and
on-the-job training, mentoring, and coaching.

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LESSON 9
Tools and Techniques Description
Team-building activities Exercises that help the team develop into a mature, productive team.
Effective project teams can be realized through factors such as:
• Gaining support from top management.
• Obtaining commitment from team members.
• Encouraging team members through awards and recognition.
• Creating a team identity.
• Managing conflicts effectively.
• Building trust among team members.
• Promoting effective communication methods.
• Providing good team leadership.
Ground rules Rules setting clear expectations as to the expected code of conduct
from team members so as to increase productivity and decrease mis-
understandings.
Co-location The establishment of a common physical location for a project team
to enhance overall team performance. Co-location can be done on a
temporary or permanent basis for a given project.
Recognition and rewards A formal method used to reinforce behaviors or performance, which
will make individuals feel that they are valued in the organization.

Develop Project Team Outputs

There are two outputs to project team development.

Output Description
Team performance assessment Formal or informal evaluations of the team’s performance
are done periodically in order to help improve interaction
between team members, solve issues, and deal with con-
flicts. A team’s technical success is measured on the basis
of meeting the project objectives, and finishing the project
on time and within the decided budget. An effective team
will show improvements in skills, competencies, and team
cohesiveness.
Enterprise environmental factors updates Includes updates on employee training records and skills
assessments.

Team Development Stages

Team Development Stages
The development of the project team generally proceeds in five stages.

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Stage Description
Forming Team members are wondering whether the decision to join the team was a
wise one. They are making initial judgments about the skills and personal
qualities of their teammates, as well as worrying about how they personally
will be viewed by the rest of the team. During this stage, conversations tend
to be polite and noncommittal, as people hesitate to reveal too much about
their personal views. In addition, team meetings tend to be confusing, as the
team tries to figure out who is in charge.
Storming Team members begin to assert themselves and control issues as they emerge.
Personality differences begin to arise. Conflicts result as team members differ
on the way they want to do the project work, or the way they want to make
decisions.
Norming The team begins to work productively, without worrying about personal
acceptance or control issues. There are still conflicts; however, they tend to
be focused on process issues rather than personality differences. The team
begins to operate off mutual dependence and trust.
Performing The team is working at optimum productivity. It is collaborating easily, com-
municating freely, and solving its own conflict problems. Team members feel
safe in reporting problems, trusting their fellow team members to help them
create the best solution for the team as a whole.
Adjourning The team members complete their assigned work and shift to the next
project or assigned task. This phase is sometimes known as “mourning.”

Lock Step
The process of forming, storming, norming, and performing is not done in a “lock
step” fashion by the team. Team members keep coming in and going out of the team.
Whenever a new member joins, forming takes place; even if the rest of the team has
already crossed the forming stage. So, these stages are not followed one after the other
but are rather situational.

Training
Definition: Training
Training is an activity in which team members acquire new or enhanced skills, knowl-
edge, or attitudes. Training may be provided to teams, small groups, or individuals and
can cover management, technical, or administrative topics. It can range from a multi-
day, formal workshop in a classroom to a five-minute, informal on-the-job training
demonstration at the employee’s desk. It may be formulated to provide generic skills
or customized to provide a specific skill set that is unique to the project. Training
should be made available to team members as soon as the need becomes apparent.

Example: Training on a Software Program

Mark is the programmer assigned to the company website project. Recently, Mark was
informed that he would have to create the entire site using an inhouse website develop-
ment software program with which he was unfamiliar because the entire organization
was using the program and maintenance would be easier if the tool was standardized.

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LESSON 9
Since Mark was the only programmer available to work on the project, Carrie, the
project manager, arranged for Mark to take a training course to learn the technical pro-
gram. Not only would Mark’s training help the project achieve its objectives and abide
by organizational policy, but it would also enhance Mark’s skills and help position him
to advance within the organization.

Team-Building Activities
Team-Building Activities Definition:
Team-building activities are the specific functions or actions taken to help the team to
develop into a mature, productive team. They can be formal or informal, brief or
extended, and facilitated by the project manager or a group facilitator.

Example: Team-Building Activity for a Sportswear Project

Robin, a new project manager for a line of youth-oriented sportswear, decided that a
good way to get to know her team was to plan an outdoor team-building activity. Two
of the designers were located on the east coast and would be working very closely
with the manufacturing team at the company’s San Diego facility. Robin arranged to
fly the two designers to San Diego to participate in the all day, off-site ropes course.
Robin participated in the rope climbing exercise as well, and an experienced team-
building coach facilitated the activity.

Co-Location
Co-Location Definition:
Co-location refers to positioning most or all key team members in the same physical
location to make communication easier and enhance team performance and team spirit.
Although most commonly used on large projects, smaller project teams may also ben-
efit from co-location. There are different degrees of co-location. On some projects,
some of the team may be co-located, while others are not.

Example: Co-Location for a Satellite City Project

A satellite city project for the State of New York is underway. The project scope
involves development of all infrastructure such as road and rail networks, electricity
network, water supply systems, residential blocks, drainage and sewage treatment
plants, and so on. The State would establish a head office near the project site, at
which the key members of the project team would be co-located. The head office
would serve as a base for all project related work and centralize the efforts of the dif-
ferent construction departments. The co-location of the project team will last only for
the duration of the project.

Reward and Recognition Systems

Reward and Recognition Definition:
Systems
A reward and recognition system is a formal system used to reinforce performance or
behavior. The purpose is to motivate the team to perform well. Rewards could include
monetary gifts, additional vacation time or other perks, company plaques or trophies,
or small gifts. Reward and recognition systems are generally standardized throughout
an organization and approved through corporate channels.

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Rewarding or recognizing a team member for working overtime due to poor planning or in an effort to
receive extra pay is not an effective reward and recognition system because it does nothing to motivate
the team to perform well or to improve team morale.

Example: Rewards and Recognition

Tim is an art director assigned to the company website. Often, Tim helps new team
members and provides coaching and mentoring. Carrie, the project manager, recog-
nized Tim’s extra efforts at the weekly project team meeting. She presented Tim with a
gift certificate to a new restaurant as a reward and incentive for his outstanding perfor-
mance.

Rewarding Individual Performance

Definition: Rewarding Individual
Performance
In traditional U.S. organizations, rewarding individual performance refers to giving pay
increases or promotions to individuals based on merit. In a team environment, it is dif-
ficult to tie merit increases to individual performance because of the mutual
interdependence of the team members.

Recognizing individual team member performance is considered culturally unacceptable in many coun-
tries, particularly China and Japan.

Example: Recognition
In an effort to reward individual performance, the managers of a real estate company
decided to offer a 10% salary increase to the sales representatives who exceeded their
sales quota by more than 25% for the year.

How to Develop the Project Team

Effective team development results in improved individual and team performance, which How to Develop the Project
increases the team’s ability to achieve project objectives. Team

Guidelines:
To effectively develop your project team, follow these guidelines:
• Recognize the project team’s current stage of development and be proactive in
helping the team be as productive as possible.
— During the forming stage, conduct activities that will help the team get to
know one another and develop a sense of mutual respect. The following is a
list of activities for the forming stage:
• A kick-off meeting that includes time for introductions.
• Creation of a team handbook documenting the team’s goal, the major
tasks required to achieve the goal, and any constraints under which the
team must operate.
• Publication of a team directory.
• Development of a team charter that sets forth guidelines on how team
members will behave toward one another, how they will communicate,
when they will meet, how they will make decisions, and how they will
escalate problems.

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• Selection of a team name or emblem.
• Initial social events to allow the team members to get to know one
another on a personal level.
— During the storming stage, use conflict management approaches to help the
team work through problems.
— In the norming stage, concentrate on issues of project performance.
• Focus on the team’s productivity towards meeting the project goals.
• If the team is bogged down on certain problems, help to create cross-
functional sub-teams to work on the problems.
• Eliminate barriers that may be hampering team performance.
• Provide opportunities for recognition for the team’s performance from
management, customers, or peers.
— In the performing stage, provide recognition for team performance, but stay
out of the way as the team manages its own problems. However, if project
progress is sluggish, this is a good stage in which to challenge the team with
more stringent performance goals.
— In the adjourning stage, team members complete project work and shift to
the next project or assigned task.
• This phase indicates the transformational phase of achievement through
synergy.
• In this phase, ensure formal closure and completion of the tasks happen.
Also, facilitate the smooth transition of the project team members to the
next project.
• Develop and implement a formal reward and recognition system.
• Consider co-location to enhance the team’s ability to perform as a team and
improve communication. When co-location is not feasible, it becomes especially
important to encourage and enhance interaction among team members.
• Provide appropriate training and coaching to help team members acquire new or
enhanced skills, knowledge, or behaviors.

Example: Developing the Beautification Project Team

A city council passed a proposal for a beautification project, including a new public
park. The new park design fell to a board comprising citizens and government officials.
The Director of Parks and Recreation, Elizabeth Fry, served as the project manager.
Elizabeth scheduled a kick-off meeting that included introductions and an exchange of
information for creating a team directory.
As the project moved through execution, the team performed well for the most part.
One team member owned an Internet hosting service and made arrangements for the
team to use web-collaboration software, making team communication much easier. To
reward team members’ efforts, Elizabeth offered small gifts of appreciation, which
were donated by local merchants. She also made sure she recognized the extra efforts
of her team during city council meetings.
Elizabeth arranged for local landscape architects and gardeners to offer special training
seminars to interested team members, which proved to be extremely motivating. When
conflicts arose, like a disagreement over what to use as surfacing materials in the play-
ground, Elizabeth monitored the situations but usually let the team work them out for
themselves.

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DISCOVERY ACTIVITY 9-3
Developing a Project Team
Scenario:
Your team has started working on the new telestore opening project. As your team continues
executing the project plan, you are learning more about the team members and their interper-
sonal skills and relationships.

1. Match each team development stage to its appropriate description.

c Forming a. Team members complete their
assigned project work and shift to the
next project or task.
b Storming b. Team members begin to assert them-
selves and conflict management
approaches are used to help the team
work through problems.
d Norming c. Team members make initial judg-
ments about the skills and personal
qualities of their teammates, as well
as worry about how they personally
will be viewed by the rest of the
team.
e Performing d. Team members begin to work produc-
tively, without worrying about
personal acceptance or control issues.
a Adjourning e. Team members collaborate easily,
communicate freely, work at optimum
productivity, and solve their own con-
flict problems.

2. You notice that Rachel, a team member, has consistently met her deliverable dead-
lines and is always on time with her status reports. She actively participates in
brainstorming sessions and makes valuable contributions to the discussions. When
required, she has gone beyond her responsibilities and has helped her project manager
facilitate brainstorming meetings and discussion sessions. How should you respond?
You should consider publicly rewarding her in a team meeting to reinforce the desirable
behaviors. The team may congratulate her and it may give everyone motivation to go the
extra mile when needed to meet aggressive deadlines.
It is also advisable to provide positive input to her functional manager for her perfor-
mance appraisal. This will also boost her motivation to go the extra mile, and might lead
to a raise.

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LESSON 9
3. One of your junior team members, who is assigned to gather information from manag-
ers through an interview process, has confided in you that he is not comfortable during
the interviews. He feels that the managers seem impatient with the questions he is
asking. The other junior team members assigned to interviews have not had any prob-
lems. What are some things you would do to address this issue?
Answers will vary, but may include: as a project manager, you can talk to the team mem-
ber about certain aspects of his voice, such as intonation, and his communication style,
such as nonverbal cues. You need to identify if the team member has a problem in any of
these aspects, which might create a negative impression while interviewing the manag-
ers. Having identified the area of concern, you should try to help the team member to
overcome his shortcomings and motivate him to do his best. You can facilitate discussions
with other team members to understand the way he or she conducts the interview.

TOPIC D
Manage the Project Team
Now that you have acquired your project team and your team has started working on the
project, it is time to monitor individual and team performance, and provide relevant feedback
and appraisals. In this topic, you will manage your project team.
Managing the project team involves monitoring the performance of each team member indi-
vidually, and also collectively as a team. It is important to give feedback and appraise the team
members’ performance. Giving positive feedback ensures that the team members can work on
the areas where they lack competence, thus improving their individual performance and of the
team collectively.

The Manage Project Team Process

The Manage Project Team
The manage project team process monitors individual performance, gives feedback, solves
Process issues, and organizes changes to improve project performance. This results in updates to the
human resource plan, submission of change requests, resolved issues, input given for perfor-
mance appraisals, and documentation of lessons learned. Efficiently managing a project team
requires a combination of project management and interpersonal skills to foster teamwork and
enhance the team performance.

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Figure 9-7: The manage project team process.

Dual Reporting
Managing the project team can become more complicated when team members are
required to report to both a functional manager and a project manager. Coordination of
this dual reporting relationship can be very important for the success of the project; it
is the project manager’s responsibility to make sure that team members are reporting
appropriately.

Manage Project Team Inputs

There are several inputs to successfully managing a project team.

Input Description
Project staff assignments Documentation on the list of project team members, project organiza-
tion charts, and schedules.
Project management plan Contains the human resource plan that includes the roles and responsi-
bilities of project team members and the staffing management plan.
Team performance assessments During the project, the project management team makes formal and
informal judgments on team performance. Continual assessment can
result in resolving issues, improving communication, recognizing con-
flict, and improving team interaction.
Performance reports Give documented performance information on the status of the project
with regards to the forecasts made. Performance areas that are docu-
mented include schedule control, cost control, quality control, and
scope verification. This information can be helpful when determining
corrections or updates required in future human resource requirements,
awards and recognition, and modifications to the staffing management
plan.
Organizational process assets Inputs that can influence the manage project team process include cer-
tificates of appreciation, websites, newsletters, bonus structures,
corporate apparel, and organizational prerequisites.

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360-Degree Feedback
360-degree feedback is the collection of performance data from several key sources,
including peers, managers, and subordinates. Confidentiality is crucial to employing
360-degree feedback as it is implemented in most organizations. Many project prac-
tices do not have the sophistication and/or resources to manage employee relations in a
manner that makes implementation of 360-degree feedback practical. Thus, there is
consensus within the human resources field that 360-degree feedback is best used only
for developmental purposes, and not for performance management.

Manage Project Team Tools and Techniques

A project manager has several tools and techniques available to manage the team.

Tools and Techniques Description

Observation and conversation Used to stay in constant communication with the work and atti-
tudes of the team. Measurements include progress toward
deliverables, interpersonal issues, and accomplishments resulting
in pride for team members.
Project performance appraisals The need for formal or informal appraisals often relies on project
length, project complexity, organizational policy, labor contract
requirements, and amount and quality of communication. Evalua-
tion can come from supervisors and people who interact with the
team. Some of the main objectives to conduct performance
appraisals are to clarify the roles and responsibilities of project
team members, provide constructive feedback, identify unknown
or unresolved issues, develop individual training plans, and estab-
lish futuristic goals.
Conflict management Proper conflict management will result in improved productivity
and good relationships. To reduce the amount of conflict, estab-
lish team rules, group norms, and stable project management
practices. If the team is managed properly, disagreements will be
healthy and can lead to increased productivity and good decision
making. Care should be taken that conflicts are handled early and
in private using a direct, collaborative approach.
Issue log An issue log is used to document individuals responsible for
resolving certain issues by a specific date, whereas issue resolu-
tion addresses obstacles that hinder the team from achieving its
goals.
Interpersonal skills Skills that capitalize on the strengths of team members include
leadership, influencing, and effective decision making.

Manage Project Team Outputs

Several outputs result from managing a project team.

Output Description
Enterprise environmental factors Updates include inputs to organizational performance appraisals
updates and on personnel skills.

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Output Description
Organizational process assets updates Updates include historical information, lessons learned docu-
ments, templates, and organizational standard processes.
Change requests Staffing changes can affect the project plan. This results in a
request to be processed through the perform integrated change
control process. These changes include moving people to dif-
ferent tasks, outsourcing work, and replacing team members
during absence or when they leave the company. Preventive
methods can be adopted to avoid such situations.
Project management plan updates Any approved change requests and corrective actions should
result in updates to the staffing management plan, a subset of
the project management plan.

Causes of Conflict
Conflict arises in most groups and working situations. Causes of conflict include: Causes of Conflict
• Competition.
• Differences in objectives, values, and perceptions.
• Disagreements about role requirements, work activities, and individual approaches.
• Communication breakdowns.

Characteristics of Conflicts
Project managers should be aware of certain characteristics of conflict that will help
them effectively handle conflicts when they arise. Conflict is natural and forces the
need for exploring alternatives. It is a team aspect and openness about the situation or
opinions can resolve conflicts. While resolving conflicts, focus should be on the issues
and not on individuals; on the present situation and not the past.

Conflict Management
Definition: Conflict Management
Conflict management is the application of one or more strategies for dealing with dis-
agreements that may be detrimental to team performance. Effective conflict
management can lead to improved understanding, performance, and productivity. Con-
versely, ineffective or nonexistent conflict management can lead to destructive
behavior, animosity, poor performance, and reduced productivity—all of which threaten
successful completion of the project’s deliverables. There are certain conflict resolution
methods and the need to follow a particular method includes the intensity and impor-
tance of conflict, the time given to resolve the conflict, the positions of the conflicting
parties, and the motivation to resolve conflicts on a short-term or long-term basis.

Example: Conflict Management Between Two Salespeople

Two salespeople accustomed to working independently, on commission, might be
asked to partner together on a project to bring in a major new account. If the two
become embroiled in conflicts regarding their commission splits and their differing
sales styles, and they cannot agree to work together amicably for the sake of the
project, the business will suffer. Conflict management strategies would be used to help
the team members work through their differences.

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Conflict Management Approaches
Conflict Management
There are six basic approaches for handling conflicts; each is effective in different circum-
Approaches stances.

Approach Description
Confronting/Problem solving Focuses on identifying the underlying problem and work-
ing out alternatives or solutions for it in a way that allows
the involved parties to work through their disagreements.
Compromising Involves working out a middle ground that satisfies all
parties to some degree.
Smoothing/Accommodating Focuses on de-emphasizing the differences between points
of view and focuses on commonalities.
Forcing Requires others to yield to the point of view of one side
or another. It may increase conflict and end in a win-lose
situation.
Collaborating Incorporates insights and viewpoints from different per-
spectives, which can lead to commitment between the
conflicting parties.
Withdrawing/Avoiding Involves avoiding or retreating from the conflict or poten-
tial conflict and allowing the involved parties to work out
the conflict on their own.

Different problem-solving business philosophies interpret and categorize ″compromise″ and ″confrontation″ dif-
ferently, in terms of their effectiveness and desirability; additionally, different companies may have their own way
of interpreting and implementing these approaches. Also, there cannot be “one effective” way to resolve conflicts
as they are mostly situational.

Tasks of Performance Appraisals

Tasks of Performance
You can use the performance appraisal to accomplish a number of tasks, including:
Appraisals • Comparing performance to goals.
• Clarifying roles and responsibilities again.
• Delivering positive as well as negative feedback.
• Discovering unknown or unresolved issues.
• Creating and monitoring individual training plans.
• Establishing future goals.

How to Manage the Project Team

How to Manage the Project
Using good management skills to manage your project team results in a solid staffing manage-
Team ment plan, updated and submitted change requests, resolution of issues, and good lessons
learned documentation, as well as productive team members.

Guidelines:
To effectively manage a project team, follow these guidelines:
• Establish good communication among team members, internally and externally.

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— On virtual teams, communication can become a major issue and challenge—
especially when team members are in different time zones and in different
countries.
— In the era of electronic mail, use proper etiquette. For example, typing with
all capital letters is synonymous to shouting. Avoid conducting arguments
with people through email. Know when to use the phone or a personal visit
to discuss issues.
— Cultural-sensitivity training is essential to ensure that communications are
well-maintained with global project teams. Remember that on some project
teams, English may be a second language. Keep communications simple and
to the point. Eliminate slang, sports terms, or jokes. Many jokes do not trans-
late well in other cultures or may even result in people being offended or
insulted.
• Monitor performance of team members on an ongoing basis.
— Monitor progress of team members by speaking with them on a one-to-one
basis. Don’t wait for the emails or monthly reports. Get out there and see for
yourself what progress is being made by the team, and what intangibles
(such as morale, engagement, or cynicism) are at play.
— Develop a set of metrics for each project to measure team performance.
Establish tolerances for each so that corrective actions can be taken when
needed. Use a management by exception approach to avoid micromanaging
the team.
— Provide constructive feedback to team members on a frequent basis. Team
members need to know they are either on track or need to take steps to get
back on track. Performance reviews can be formal or informal. If disciplinary
actions are taken, these must be in writing to avoid any misunderstanding.
— Consider additional training for those team members who need to improve
their performance.
• Consider having a quality audit to get another perspective on whether the team is
headed in the right direction to meet the project’s quality requirements. The qual-
ity audit team needs to be independent from the project team to be effective.
• Manage conflict using the appropriate approach based on the circumstances and
the individuals involved. Regardless of the approach, apply the following prin-
ciples.
— Allow people to have their say. Make sure you give both sides a chance to
state their case. Demonstrating respect and acknowledging people’s different
positions are necessary to address conflicts effectively.
— Listen hard to what people are telling you. Paraphrase or ask questions to be
sure everyone understands what is being said.
— Find those areas at issue where both sides are in agreement.
— Encourage both sides to find a win-win resolution to the problem. Restate the
resolution and get agreement from both parties.
— Focus on the reasons that the group has come together: to find a resolution to
the problem.
— To help avoid unnecessary conflict, set expected ground rules in the begin-
ning for the team to operate with based on the communications management
plan.

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— During the project life cycle, follow established project management prac-
tices. Refer to your communications management plan for guidance.
— When conflict occurs among team members or between the team and other
organizational entities, it may be effective to implement the conflict manage-
ment approach of confrontation—focusing on the problem. It may be
advantageous to try to defuse conflicts early to avoid escalation.
• As results are being obtained during the implementation phase, establish an issues
log to track and assign project issues. This log is useful for regular follow-up with
the project team. Hold specific team members accountable for resolution of issues.

Example: Managing the Project Team in an Advertising Company

An advertising company has plans to develop a campaign for a customer over the next
four months, and David is acting as the project manager.
David wanted to make sure that everything got off to a good start, so he called a kick-
off meeting. Before the meeting, he developed a set of metrics to measure team
performance, and planned to monitor the progress of his team by meeting with them
individually once a week.
During the kick-off meeting, David asked the team to make weekly status reports using
email and to use instant messaging software to keep in close contact with one another.
He also let the team know how their performances would be monitored, and he set up
a meeting schedule. However, as might be expected, there was some conflict on the
team. Two team members disagreed on the direction for their campaign. One wanted to
use a very contemporary, almost edgy approach, while the other wanted to appeal to
traditional, more conservative values. After a series of meetings with the customer’s
product analyst, the team was able to find a middle ground that satisfied both team
members and pleased the customer.
From the earliest days of the project, David instituted the practice of using an issues
log to track all changes in the project. This became extremely valuable as the project
got to the final stages and prepared for hand off to the customer. Everyone was clear
on exactly what they had committed to, and the customer received the expected
deliverables.

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DISCOVERY ACTIVITY 9-4
Managing a Project Team
Scenario:
Work on the new OGC telestore continues to move along. All deadlines are being met. How-
ever, one of the masonry supervisors, Joe, sends you an email detailing a recent argument
between the plumbing contractor and the tile contractor assigned to the project. He is con-
cerned that their possible inability to get along may jeopardize the project.

1. Given the masonry supervisor’s email about the conflict between the plumbing and tile
contractor, what should you do?
✓ a) Confirm the inability of the plumbing and tile contractor to get along and its prob-
able impact on the team. Responding to alleged interpersonal conflict from second
hand sources is almost always a mistake.
b) Wait for results of the weekly masonry work progress report.
c) Provide constructive feedback to the contractors.
d) Consider offering an online conflict resolution course for the contractors.

2. By speaking to the contractors, you discover that the tile contractor feels that the
plumber is spending too much time at lunch and on breaks, which causes him to work
past 6:00 P.M. each day. The plumber responds that he takes a normal lunch break.
What can you do to resolve this situation?
To help resolve this conflict, you can review the expected ground rules that were set at
the beginning of the project. Confirm the amount of time that should be used for lunch
and breaks and verify the facts of the breaks being taken. You should then remind the
plumber of the team’s ground rules and schedule expectations, as well as his responsibili-
ties on the project. Lastly, you should document the incident and monitor the situation as
the contractors continue to work together to complete the project. If the plumber is tak-
ing normal lunch breaks and still needs to work after 6:00 P.M., review the assignment
efforts by validating the efforts and duration estimate. Take actions that can improve the
plumber’s productivity and explain to him the dependencies that others have on his work.

3. The roofing team has been working effectively, meeting all deadlines and experiencing
no personnel problems. What approach should you take when monitoring this team?
You should give positive feedback. Providing constructive feedback to team members on a
frequent basis enables the team members to know that they are on track. Speaking to
team members one-on-one is an excellent way to maintain communication and monitor
progress.

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LESSON 9
Lesson 9 Follow-up
In this lesson, you organized human resources for your project. This enables you to manage
the resources effectively by carefully identifying and documenting their roles and responsibili-
ties, acquiring the right team members, and coordinating and managing the team to execute the
project work according to the project plan.
1. Which conflict management approach will you use to manage your project team?
Answers will vary, but may include one or more approaches such as: confronting/problem
solving, compromising, smoothing/accommodating, forcing, collaborating, withdrawing/
avoiding.
2. What could be the components of a staffing management plan?
Answers will vary, but may include components such as: staff acquisition, staff release
plan, training needs, compliance, safety, and so on.

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 LESSON 10

LESSON 10 Lesson Time

1 hour(s), 10 minutes

Devising Effective
Communication Methods
In this lesson, you will devise effective communication methods for resources involved in the
project.
You will:
• Identify project stakeholders.
• Create a communications management plan.
• Distribute project information.
• Manage stakeholders’ relationships and expectations.
• Report project performance.

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LESSON 10
Introduction
You built your project team by acquiring the right members and developing them as a strong
unit. Efficient communication between the project team members and the concerned stakehold-
ers is necessary for the smooth execution of the project. In this lesson, you will devise
effective communication methods for your team.
In order to meet project objectives successfully, it is important to ensure that project informa-
tion is communicated efficiently to the team members and stakeholders. Therefore, it is
necessary to meticulously plan for communication and establish effective communication meth-
ods.

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 LESSON 10

Figure 10-1: The project management framework.

The Project Management

Framework (2 Slides)

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LESSON 10
TOPIC A
Identify Project Stakeholders
Now that you have acquired the necessary human resources for your project, it is vital to iden-
tify the groups or individuals who will have a role to play either directly or indirectly in the
project. In this topic, you will identify the stakeholders of your project.
Stakeholders are an integral part of any project and extensively support the success of the
project. It is imperative that you document the relevant information regarding the stakeholders’
interests and expectations as they strongly influence a project’s product or service.

The Identify Stakeholders Process

The Identify Stakeholders
During the identify stakeholders process, the project manager identifies all stakeholders that are
Process impacted by the project and documents information that is relevant regarding their interests,
involvement, and impact on project success. Stakeholders exert influence on the project and its
deliverables, and their interests may be positively or negatively affected by the execution or
completion of the project.
Stakeholders need to be classified based on factors such as their level of interest and influence
in a given project. This would enable the project manager to prioritize the level of importance
to be assigned for a specific stakeholder.

Figure 10-2: The identify stakeholder process.

Identify Stakeholders Inputs

The project manager uses four inputs to identify stakeholders that are impacted by the project.

Input Description
Project charter Provides information about internal and external parties who are impacted
by the project, namely project sponsor(s), customers, key team members,
groups and departments participating in the project, and other people and
organizations affected by the project.

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Input Description
Procurement documents Provide information to indicate if the project involves procurement or is
based on an established contract. The parties, such as the suppliers,
involved in the contract are key project stakeholders and are added to the
project stakeholders list.
Enterprise environmental The enterprise environmental factors that can influence the identify stake-
factors holders process include:
• The culture and structure of the organization or company.
• Government or industry standards, namely product standards or regula-
tions.
• Availability or unavailability of web-based project management sys-
tems in the organization.
• Extent of complexity and presence of confidentiality needs on the
project.
Organizational process The organizational process assets that can influence the identify stake-
assets holders process include:
• Stakeholder register templates.
• Lessons learned from previous projects.
• Stakeholder registers from previous projects.

Identify Stakeholders Tools and Techniques

Two tools and techniques are employed to identify stakeholders for the project.

Tools and Techniques Description

Stakeholder analysis The process of systematically gathering and analyzing quantitative and
qualitative information to determine the stakeholders whose interests need
to be considered throughout the project. It helps identify stakeholder rela-
tionships to build coalitions and partnerships that can enhance the project’s
chance of success.
Expert judgment Identification and listing of stakeholder groups and individuals with special-
ized training or knowledge on the subject area can be sought from senior
management, other units within the organization, key stakeholders, project
managers who worked on similar projects, Subject Matter Experts (SMEs)
in business or project area, industry groups and consultants, and profes-
sional and technical associations. Expert judgment is obtained through
individual consultations, such as one-on-one meetings and interviews.
Expert judgment could also be obtained through a panel format, such as
focus groups and surveys.

Identify Stakeholders Outputs

There are two outputs of the identify stakeholders process.

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LESSON 10
Output Description
Stakeholder register Contains the list of the identified project stakeholders with information
on their identification, assessment, and stakeholder classification details.
Stakeholder management Defines an approach to increase the support and minimize negative
strategy impacts of stakeholders throughout the entire project life cycle.

Stakeholder Analysis
Stakeholder Analysis
Stakeholder analysis is the formal process of identifying all of the stakeholders of a project by
gathering and analyzing quantitative and qualitative information, and building coalitions at the
onset of a project by identifying their needs, objectives, goals, issues, and impact.
Stakeholder analysis is performed through a series of steps:
1. Identify all potential stakeholders of the project.
2. Classify stakeholders based on their potential impact or support on the project.
3. Plan for likely stakeholder reaction or response and plan how to enhance their support and
mitigate potential negative impact on the project.
Ideally, project managers will question the stakeholders about their interest in the project, their
desired outcome, their goals, and any lessons learned from prior projects. This increases the
effectiveness of the stakeholder analysis process. As the project progresses, the analysis will be
validated against the current state of project work and stakeholders’ changing needs.

Figure 10-3: The stakeholder analysis process.

Stakeholder Registers
Stakeholder Registers Definition:
A stakeholder register is a document that identifies stakeholders of a project with
information that includes their identification, assessment, and stakeholder classification.
Typical stakeholder register entries may include the stakeholder name, organizational
position, location, role in the project, contact information, requirements, expectations,
influence on the project, specific interest in the project or a phase, whether internal or
external, and whether for, against, or neutral to the project.

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Example: A Stakeholder Register

Figure 10-4: Stakeholder register for the OGC PM Training Roll-Out project.

The Stakeholder Analysis Matrix

Definition: The Stakeholder Analysis
Matrix
A stakeholder analysis matrix is a document that describes the strategies used to man-
age the stakeholders of a project. The project manager prepares the stakeholder
analysis matrix during the identify stakeholders process. The stakeholder analysis
matrix is a shared document, and therefore it is imperative that the project manager
exercise proper judgment and due caution with regards to the kind of information and
detail that need to be included in it.

Example: A Stakeholder Analysis Matrix

Figure 10-5: A stakeholder analysis matrix template used to manage the

project stakeholders.

Stakeholder Management Strategy

Definition: Stakeholder Management
Strategy
A stakeholder management strategy is a management strategy that is created to ensure
maximum support and to minimize the negative impacts of stakeholders throughout the
entire project life cycle. The stakeholder management strategy is created by the project
manager during the identify stakeholders process. The strategy information is ideally
represented in a stakeholder analysis matrix.

Example: Components of a Stakeholder Management Strategy Document

A typical stakeholder management strategy document could include:

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LESSON 10
• Stakeholder Identification—a list of the identified stakeholders along with their
identification related information.
• Stakeholder Map—a chart showing the interest of different stakeholders and levels
of participation required from each identified stakeholder.
• Stakeholder Analysis Influence and Importance Matrix—a matrix that describes
the stakeholders based on their influence and importance to the project.
• Stakeholder List—a list of various stakeholder groups involved in the project and
their management.
• Stakeholder Communication—a description of how the project will engage various
stakeholders that includes communication routes and frequency for each stake-
holder or group of stakeholders.
• Communication Efficiency—specifies how the efficiency of the communication
process will be measured.

How to Identify Project Stakeholders

How to Identify Project
It is important to identify the stakeholders early in the project; analyze relevant information
Stakeholders regarding their interests, expectations, importance, and influence; and devise a strategy to
ensure their involvement to maximize positive influences and mitigate potential negative
impacts.

Guidelines:
To identify project stakeholders, follow these guidelines:
• Perform a review of project and related information to ascertain the list of internal
and external parties who may be impacted by the project. The documents or infor-
mation are a valuable source for stakeholder identification. These may include:
— Project charter
— Procurement documents
— Organization or company structure
— Organization or company culture
— Government or industry standards
— Stakeholder register templates
— Lessons learned from previous projects
— Stakeholder registers from previous projects
• Identify groups or individuals with specialized training or knowledge who can
help in the comprehensive identification and listing of the stakeholders.
• Perform interviews of the identified stakeholders to gain knowledge of their roles,
departments, interests, knowledge levels, expectations, and influence levels within
the organization.
• Analyze your lists to identify the key stakeholders of the project. These include
anyone in a decision-making or management role who is impacted by the project
outcome, such as the sponsor, the project manager, and the primary customer.
• Determine and classify the potential impact or support that each stakeholder could
generate during the project life cycle and define an approach strategy. You need to
prioritize the key stakeholders to plan for efficient communication and manage-
ment of their expectations.

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• Assess how stakeholders would react or respond in various situations during the
project life cycle. You need to plan how to influence the stakeholders to enhance
their support to the project and also mitigate any potential negative impacts aris-
ing from them.
• Document stakeholder information to include identification, assessment, and stake-
holder classification in the stakeholder register.
• Devise a stakeholder management strategy to increase support and minimize nega-
tive impacts of stakeholders to the project.

Example: Identifying the Computer Networks Upgrade Project Stakeholders

Andrew is the project manager for the computer networks upgrade project within your
company. He collects project information that includes the project charter, the organi-
zation structure, the organization’s policy documents, lessons learned and stakeholder
register of previous projects, and other documents related to the current networking
and computer resources deployed within the company. He studies the information gath-
ered to identify the stakeholders from senior management.
Andrew interviews the key stakeholders, namely the department heads for marketing,
finance, human resources, content development, media development, and quality con-
trol, and expands the list of identified stakeholders based on these interviews. The
additional stakeholders would be the department heads for IT services, customer sup-
port, purchasing, administration, and accounting. Further, Andrew classifies the
stakeholders based on their potential impact or support to the project. Andrew docu-
ments the details of the stakeholders in the stakeholder register and based on his
assessment of each stakeholder, he defines the stakeholder management strategy in a
stakeholder analysis matrix.

DISCOVERY ACTIVITY 10-1

Identifying Project Stakeholders
Data Files:
• Blank OGC PM Training Roll-Out Stakeholder Register
• OGC Project Charter
• OGC Quality Plans Training Stakeholder Register

Before You Begin:

From the C:\085061Data\Devising Effective Communication Methods folder, open the OGC
Quality Plans Training Stakeholder Register and OGC Project Charter documents.

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LESSON 10
Scenario:
OGC’s new project sponsor has authorized the OGC PM Training Roll-Out project. As part of
the project charter, a preliminary list of project stakeholders was identified. Your intent as a
project manager is to be able to identify all the stakeholders for the project. You can refer to
the stakeholder register for a similar project, the “OGC Quality Plans Training” project, to
determine the likely stakeholders of your project. You are in the process of creating the stake-
holder register for your OGC PM Training Roll-Out project.

You can either have the

students do this activity
1. How would you approach ascertaining the total list of project stakeholders for the OGC
individually or divide the class
PM Training Roll-Out project?
into groups of three or four.
Allow up to 15 minutes to Answers will vary, but may include: study the input documents, such as the project char-
complete the activity, then ter for the OGC Quality Plans Training project, to identify the potential stakeholders of
discuss the answers with the the project. The objectives, business need, assumptions, and project description men-
whole class for approximately tioned in the project charter are understood from the perspective of contributors in the
10 minutes. organization. A dialog with the project sponsor will be of great help. Document this infor-
mation along with details of impact and support that these stakeholders would have on
the project.

2. True or False? Members of the OGC PM Training Roll-Out project team are considered
to be stakeholders.
✓ True
False

3. How would you identify the positive and negative stakeholders of the project?
Answers will vary, but may include: you would perform a stakeholder analysis to identify
all potential stakeholders, analyze their potential impact to the project, and assess how
each stakeholder is likely to positively or negatively react or respond to various situations
during the project life cycle. This would help to identify positive and negative stakehold-
ers.

4. Which statements are true of the stakeholder management strategy?

✓ a) Identifies key stakeholders who can impact the project.
b) Describes the government and industry standards to be applied to stakeholder man-
agement.
✓ c) Describes the level of participation for each identified stakeholder in the project.
✓ d) Identifies the stakeholder groups and their management.

5. How would you establish levels of stakeholders based upon their interest in the project
and the impact they can have on the project?
Answers will vary, but may include: you would perform a stakeholder analysis to identify
the various levels of stakeholders, use interviews to gain insight into their interest in the
project, identify their ability to influence the project, and assess their positive or nega-
tive impact on the project. These would help in categorizing stakeholders into various
levels.

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6. What is the documentation needed for each level of stakeholder?
Answers will vary, but may include: you will document information relating to the stake-
holder’s identification, their assessment, and their classification in the stakeholder
register. This information could include the stakeholder name, primary role or designa-
tion, their interest or objective, their influence, the communication strategy and mode,
and the artifacts or documents required for these stakeholders.

7. Which documents can you use as a basis for identifying stakeholder information?
You can use the OGC Project Charter as a basis for identifying stakeholder information.

8. Open the Blank OGC PM Training Roll-Out Stakeholder Register document from the C:\ You may want to display the
085061Data\Devising Effective Communication Methods folder, and based on the scenario, C:\085061Data\Devising
complete the stakeholder register. Effective Communication
Methods\Solutions\Completed
OGC PM Training Roll-Out
9. Compare your Blank OGC PM Training Roll-Out Stakeholder Register document with the Stakeholder Register document
Completed OGC PM Training Roll-Out Stakeholder Register document in the C:\085061Data\ rather than having the stu-
Devising Effective Communication Methods\Solutions folder. dents take the time to
complete the SOW on their
own. The goal is to allow
students to see a completed
project stakeholder register.

TOPIC B
Create a Communications
Management Plan
You have identified the stakeholders who would influence the outcome of your project. Now,
you need to define how your project team will communicate with the stakeholders. In this
topic, you will identify strategies to ensure effective communication by creating a communica-
tions management plan.
An effective communications management plan ensures that the resources receive the right
information at the right time. You do not want the resources expending unnecessary energy on
every detail nor do you want to spend hours generating long reports. Mastering the tools and
techniques to develop an effective communications management plan will ensure that you
deliver appropriate information to your stakeholders when needed and in the appropriate for-
mat.

Communications Management Plans

Definition: Communications Management
Plans
A communications management plan describes the project team’s approach to commu-
nicating information about the project. It documents what information must be
communicated to whom, by whom, when, and in what manner. It also documents how
information is collected, archived, and accessed.

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Example: Communications Management Plan to Arrange for a Company’s
Annual Meeting
A project manager in charge of presenting the company’s annual meeting with share-
holders would have many stakeholders from different departments and at different
levels of company management. The communications management plan might include
regularly scheduled status meetings with the employees assigned to the project, with
meeting minutes to be distributed to upper management. It might also stipulate an
email distribution list with all stakeholders and resources included on all relevant
project communications.

The Plan Communications Process

The Plan Communications
Plan communications is the process of ensuring timely and appropriate generation, collection,
Process dissemination, storage, and ultimate disposition of project information. It involves identifying
communications requirements while accounting for the project scope, performing stakeholder
analysis, reviewing available technology, and finally, creating a communications management
plan. Creating the communications plan when developing the project management plan helps
allocate resources such as time and budget to communication activities. This plan must be
reviewed and updated regularly to ensure that it continues to meet stakeholder needs.

Figure 10-6: The plan communications process.

Plan Communications Inputs

The plan communications process inputs include the stakeholder register, stakeholder manage-
ment strategy, enterprise environmental factors, and organizational process assets.

Input Description
Stakeholder register Provides information regarding the identified project stakeholders. It
includes identification information, assessment information, and stake-
holder classification.
Stakeholder management Defines a strategy to maximize the stakeholder support and mitigate the
strategy negative impact of stakeholders on the project.
Enterprise environmental These factors help in understanding the communication needs of the exist-
factors ing organizations and stakeholders.
Organizational process Assets such as lessons learned from previous projects help to identify
assets communication needs and to plan project communication activities.

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Plan Communications Tools and Techniques
Various communications planning tools and techniques are available to project managers.

Tools and Techniques Description

Communication requirements analysis Yields the communication needs of each stakeholder, allowing
the project manager to make informed decisions about commu-
nications systems.
The information used to identify communications requirements
of a project are:
• Organization charts.
• Project organizations.
• Disciplines and departments working on a project.
• Internal and external information requirements.
Communication technology The particular communications systems available, such as
Internet access, email, and video/web conferencing, will impact
the technological choices a project manager can make.
Communication models Determine how information must flow from the sender to the
receiver. The major components of the communication model
include encoding, message and feedback-message, medium,
noise, and decoding. The communication model must be consid-
ered when planning for project communications. The project can
be negatively impacted if the communication between the
sender and receiver fails.
Communication methods Used to share information among stakeholders in a project.
Some of the communication methods include:
• Interactive communication: Involves communication
between multiple people performing multidirectional informa-
tion exchange.
• Push communication: Involves sending information to a
receiver. It ensures that the information has been distributed
but does not guarantee that it has reached the receiver.
• Pull communication: Involves receivers to access informa-
tion whenever required.

Plan Communications Outputs

The two communications planning outputs are the communications management plan and the
project document updates.

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LESSON 10
Output Description
Communications management plan Documents the project team’s approach to communicating project
information. It can include:
• Stakeholder communication requirements.
• Information to be communicated including language and level
of detail.
• Reason for distributing the information.
• Resources allotted for communication activities such as time
and budget.
• A glossary of common terminologies.
Project document updates Documents that are updated when planning for communications
include project schedule, stakeholder register, stakeholder manage-
ment strategy, and cost performance baseline.

Communications Requirements
Communications Requirements Definition:
Communications requirements are the project stakeholders’ documented communica-
tions needs. They include relevant information that contributes to the success of a
project, as well as an analysis of cost, time, and logistics. Not all stakeholders will
require the same amount, level, or timeliness of communication. The variances must be
factored into the communications requirements.

Example: Communications Requirements for Meeting Stakeholder Needs

Communications requirements might include weekly meetings with a stakeholder to
summarize the progress of a project and the installation of a software program, such as
Microsoft® Outlook®, that facilitates the exchange of necessary information.

Communications Requirements Analysis

Communications Requirements Definition:
Analysis
A communications requirements analysis is an investigation that leads to a clear articu-
lation of the stakeholders’ communications needs and helps the project manager make
effective choices regarding the technologies to be recommended in the communications
management plan.
This analysis should take the form of a grid, questionnaire, or survey that documents
the communications and technology requirements for each stakeholder. It will also
enable the project manager to obtain buy-in from stakeholders and to shape their per-
ceptions by providing the right information at the right time.

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Example: Conducting a Communications Requirements Analysis
A project manager conducting a communications requirements analysis might survey
stakeholders regarding their communications needs by asking: How often would you
like to receive status reports? How would you prefer to receive information: by phone,
by email, or in face-to-face meetings? What level of detail are you expecting to see?
Issues of appropriateness, level of detail, timeliness, and cost should be considered in
addition to the preferences and technology capabilities of stakeholders.

Identifying Communication Channels

Project managers need to identify the number of communication channels or paths,
which will indicate the complexity of the project’s communications. The maximum
number of channels that can be used is identified with the formula: (n(n – 1)) / 2,
where “n” is the number of stakeholders. For example, when there are 12 key stake-
holders for a project, the probable number of communication channels will be (12 x
11) / 2 = 66. The project manager must plan and use the optimum number of commu-
nication channels. This can be identified using tools such as organizational structures.

Communications Technologies
Definition: Communications Technologies
Communications technology is any type of technology that is used for communications
planning, including websites, email, instant messaging, phones, and video
conferencing.
Some technologies are instantaneous, while others take time; some are interactive,
while others are one-way only. Some provide a historical record of what was commu-
nicated, while others are transient.

Example: Different Communications Technologies

Figure 10-7: Communications technologies used for planning communications.

Selecting a Communications Technology

Questions to ask when determining a communications technology for each type of
communications are:
• How quickly must the information reach the audience?
• Is there likely to be feedback from the communication? How will it be collected
and integrated?
• Must there be a record of the communication? What type of record is required?
• What technologies are available for transmitting the given communication? Are
they appropriate to the type and value of the communication?

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LESSON 10
• What technology will the audience need to receive the communications? Is it
likely that the receiving technology is in place? If not, how expensive is it to
acquire?
• Are there technical difficulties or learning curve issues with communicating via
the technology?
• Are there access issues, such as security-protected sites, which could limit the
number of audience members who could receive the communications?
• What types of archival technology will be used to store the communications?
Where will they be stored? Are there compatibility or access issues that must be
addressed?
• Is the particular mode of technology (transmittal, storage, or reception) likely to
become outdated before the project is completed?
• What is the relative cost of each technology, taking into account the number of
communications and number of audience members who must receive them?
• Consider any relevant global communications issues that may affect your project;
how might they influence your choice of the most appropriate technology?

How to Create a Communications Management

Plan
How to Create a
Effective communications management plans ensure that all project team members are aware
Communications Management of the type and format of information shared with project stakeholders for the success of the
Plan project.

Guidelines:
To create an effective communications management plan, follow these guidelines:
• Gather and distribute contact information for all involved parties.
• Determine the communication needs of project stakeholders.
— Work from an organization chart to avoid omitting a key stakeholder.
— Ask for your project sponsor’s input.
— Ask open-ended questions.
• As a rule of thumb, project team members require more detail on a more frequent
basis. Senior management typically requires summary information on a less fre-
quent basis.
• Analyze the value to the project of providing the information.
• Evaluate any constraints and assumptions to determine their possible impact on
communication planning.
• Determine the appropriate communications technologies to use for communicating
project information.
— Determine the immediacy of the need for information.
— Analyze the availability of technology systems.
— Evaluate the expected project staff to identify their knowledge of and access
to proposed technology.
— Conduct research to determine the likelihood that there will be changes to the
proposed technology before the project is over.
• Make sure your communications management plan includes all key elements:

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— A description of the types of information required for each project stake-
holder.
— A collection and filing structure that describes the methods the project team
will use to collect and file project information.
— A distribution structure describing to whom and by whom project informa-
tion, such as status reports, data schedules, and meeting minutes should be
provided.
— The methods that will be used to distribute the various types of information.
— Schedules for the production of each type of communication.
— Methods for accessing information between scheduled communications.
— A method for updating and refining the communications management plan
throughout the project life cycle.
• Integrate the communications management plan into the overall project plan.
• Distribute the plan to project stakeholders.

Example: Creating a Communications Management Plan for a New Project

You are working on a project for a multinational company. Communications for this
project have been particularly difficult, with members missing the vast amount of infor-
mation being generated or acting on misinformation. These errors have cost thousands
of dollars in lost work hours. You’ve discovered that the problem is due to the geo-
graphic dispersal of team members and the irregular schedules of several stakeholders.
Based on these considerations, you have determined that the communications manage-
ment plan will use a web-based template that allows deployed staff to submit their
information into a uniform database. To facilitate information collection and dissemina-
tion, you determine that an online form will categorize the data while the online
program organizes the data and automatically prepares reports in email format that are
delivered on a schedule based on the needs of all stakeholders.
You integrate all information into the communications management plan and provide
copies to all project stakeholders.

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LESSON 10
DISCOVERY ACTIVITY 10-2
Creating a Communications Management Plan
Scenario:
You have assigned roles and responsibilities to your project team members and now you need
to define in your communications management plan how you and your project team will com-
municate with each other. While most of your team is local, several key members are
geographically dispersed across several states.

1. Which item should you use to determine the communications needs of your project
stakeholders?
a) Research material
✓ b) Stakeholder analysis data
c) Project report deadlines
d) Executive board schedule

2. Given the scenario, what would be a good technology for enhancing team member
interactions and building relationships through the life of the project?
a) Team building event at project kick-off.
b) Project team threaded discussion board.
c) Use email and databases to collect and store information.
✓ d) High quality virtual teleconferencing on a semi weekly or weekly basis.

3. Given the scenario, what would be a good primary communication technology for
exchanging project information?
✓ a) Phone exchange with email confirmation
b) Weekly face-to-face meetings
c) Voice mail
d) Video conferencing

4. After integrating the communications management plan into the overall project plan,
what would be the next logical step?
a) Determining whether there will be changes to the proposed technology before the
project is over.
b) Creating a schedule for the production of each type of communication.
✓ c) Distributing the plan to all the stakeholders.
d) Creating a description of stakeholder communication requirements.

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TOPIC C
Distribute Project Information
Developing a communications management plan is just a step towards describing the team’s
approach to project communications. Now that the communications management plan is being
created, you need to let project stakeholders know what is happening on the project. In this
topic, you will distribute project information.
Information dissemination is the key for successfully meeting the project’s objectives. Distrib-
uting project information efficiently and effectively ensures meaningful and appropriate
information is available to project stakeholders. This in turn assists stakeholders in making
appropriate decisions by giving a clear view of the project progress.

The Distribute Information Process

The distribute information process involves getting the right information to the right people, The Distribute Information
both internally and externally, at the right time. During information distribution, the project Process
team implements the communications management plan. This plan documents what informa-
tion will be communicated, to whom, by whom, when, and in what manner, as well as how
information is collected, archived, and accessed.

Figure 10-8: The distribute information process.

Effective Information Distribution Techniques

Different techniques can be used to distribute information effectively.

Techniques Includes
Sender-receiver models Setting up appropriate feedback loop and avoiding com-
munication barriers.
Choice of media Specifying when to communicate in writing or in oral
form and which communication media should be used
such as verbal, written, email, and phone.
Writing style Choosing the right tone and word choice.
Meeting management techniques Identifying the meeting agenda and managing conflicts.
Presentation techniques Using appropriate design of visual aids and body lan-
guage.

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LESSON 10
Techniques Includes
Facilitation techniques Building harmony within the team.

Distribute Information Inputs

There are a few inputs to the distribute information process.

Input Description
Project management plan Contains the communications management plan, which
describes the details for distributing information to various con-
cerned parties in the form of how to distribute the info, such as
whom to, when to, and what to.
Performance reports Describes the current performance status of a project. These
reports are distributed to the relevant stakeholders prior to
project meetings. Based on the performance reports, the man-
agement and the stakeholders assess the project progress and
can forecast future course of action, if any.
Organizational process assets Factors that can have an impact on the distribute information
process could include:
• Past lessons learned and historical project information.
• Guidelines, policies, and procedures regarding information
distribution.
• Templates.

Distribute Information Tools and Techniques

Two tools and techniques are used to distribute information.

Tools and Techniques Description

Communications methods The communication methods could include video and audio confer-
ences, computer chats, individual group meetings, and other remote
communication methods.
Information distribution tools The tools that can be used to provide project information to stake-
holders. The tools could include electronic mail, hard-copy
documents, presentations, video conferencing, meetings, and phone
calls.

Distribute Information Outputs

There is one output from the distribute information process.

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 LESSON 10
Output Description
Organizational process assets Organizational process assets that may need to be updated include:
updates • Lessons learned documentation
• Project records
• Project reports
• Project presentations
• Feedback from stakeholders
• Stakeholder notifications

How to Distribute Project Information

Effective information distribution ensures that project information is appropriately dispensed to How to Distribute Project
project stakeholders. Getting the necessary information in a timely manner enables the stake- Information
holders to make decisions regarding the project in time to make a difference.

Guidelines:
To distribute project information effectively, follow these guidelines:
• Create and distribute requests for project information, such as project records,
reports, and presentations, in accordance with the communications management
plan.
• Use effective communication skills to exchange information.
• Use an information retrieval system to provide stakeholders access to project
information. Everyone should have access to the information needed. Whether
manual, computerized, or a combination of both, make sure your system complies
with the following standards:
— The system has sufficient storage capacity to hold the necessary project infor-
mation.
— The system follows any security protection protocols established in the com-
munications management plan so that sensitive information can be accessed
only by appropriate stakeholders.
— The system provides a method of version control to protect data and to
ensure that everyone is working off the same, most recent document.
— The system is organized to meet the needs of the project and the stakehold-
ers.
• Select the appropriate information distribution method for distributing project
information.
— Sending an email announcing that a report is posted on the intranet site.
— Making a telephone call to schedule a one-on-one meeting.
— Taking notes of phone calls to provide a written record of the communica-
tion.
— Making a presentation to highlight the important points in a report.

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LESSON 10
• Monitor the communications system for feedback to make sure that messages are
getting through as planned. If individuals, locations, or organizations are not able
to send or receive messages adequately, identify the problem and adjust the com-
munications management plan, information distribution method, or retrieval
system accordingly.
• When unexpected requests for information surface, determine their effect on other
aspects of managing the execution and control of the project, such as risk moni-
toring and schedule control. Take appropriate action to make changes to the plan
as necessary.

Example: Information Distribution to Stakeholders

As the company website project continues through the executing process, a huge
amount of project information is generated and collected. Carrie, the project manager,
is diligent in providing the stakeholders with the information they need to make sound
decisions. First, she and her team review the communications management plan to
make sure they implement an information retrieval system.
The executive stakeholders present a challenge regarding project communications. On
the one hand, they need to make decisions about the project and require enough infor-
mation to support their decision-making, but they are impatient with lengthy
presentations. So Carrie prepares a clear, concise summary of key information as well
as a more detailed report with charts and status updates for those who are interested.
Carrie invites the stakeholders to ask questions or provide other feedback. She moni-
tors the communications system to make sure that messages are getting through as
planned and that the recipients fully understand the content.

DISCOVERY ACTIVITY 10-3

Distributing Project Information
Scenario:
A primary PMO goal for all projects during the Business Transformation program is consistent
and timely reporting of project information. This was in large part the justification for the PM
Training Roll-Out project and the implementation of the PMIS at OGC. However, the project
managers at OGC are now concerned that they will be spending more time creating reports for
senior management than actually managing their projects. You are meeting with Sharon Will-
iams, the new PMO Director, to discuss these concerns.

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1. An automated information retrieval system will provide stakeholders with access to
project information via the intranet. What possible concerns do you have with relying
on this type of distribution of project information to stakeholders?
Answers will vary, but may include: while this may be a good method for making informa-
tion available to stakeholders in an efficient manner, the information is left up to the
stakeholders to interpret. One-on-one meetings would still be necessary to provide an
overview of how the information reflects the reality of the project status. Also, the
information must be carefully screened for accuracy. Consider the importance of version
control; stakeholders should be able to share information without losing earlier versions
of the material. Consider whether only selected people should have the ability to modify
the content.

2. As people strive to meet their deadlines, reporting the status of activities can become
a low priority. This is a problem when you are trying to distribute up-to-date informa-
tion on the status of the project. What are some things that you could do to make sure
that people report accurate and timely information to you?
Answers may vary, but may include: schedule weekly project status meetings or meet
with resource groups on an individual basis. Ensure that the meetings are crisp and focus
on the key issues. If they are using the same document to report their status, you may
consider implementing a date and time stamp for version control.

3. You need to provide the senior executives your project’s progress to date. Which
information distribution methods would be most appropriate in this situation?
a) Send an email announcing that a report is posted on the intranet site.
b) Make a telephone call to schedule one-on-one meetings with each executive.
c) Send an email based on status notes that you took over the phone while communicat-
ing with team members.
✓ d) Make a presentation to the senior executives and highlight the important points in
the report.

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LESSON 10
TOPIC D
Manage Stakeholder Relationships
and Expectations
Informing the stakeholders about the project progress is necessary to achieve project objec-
tives. In this process, inevitably, issues will arise that need to be addressed and resolved with
the appropriate project stakeholders. In this topic, you will manage stakeholder relationships
and expectations.
Managing communications to satisfy the requirements of and resolve issues with project stake-
holders holds the key to a project’s success. Actively managing relationships with your
project’s stakeholders and working with their expectations increases the chances that your
project will remain on track and that issues are resolved right away to avoid disruptions at a
later stage in the project life cycle.

The Manage Stakeholder Expectations Process

The Manage Stakeholder
The manage stakeholder expectations process aims at managing communications to meet the
Expectations Process needs and expectations of the stakeholders. The project manager is responsible for managing
stakeholders’ expectations, which:
• Increases the chances of project acceptance.
• Addresses emerging issues and concerns before they manifest into a serious impediment.
This includes clarifying and resolving issues that have already been identified.

Figure 10-9: The manage stakeholder expectations process.

Manage Stakeholder Expectations Inputs

There are a few inputs associated with the manage stakeholder expectations process.

Input Description
Stakeholder register A list that contains all relevant stakeholders in a project and
ensures that they are included in the project communications.

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 LESSON 10
Input Description
Stakeholder management strategy Contains the procedure for understanding the stakeholders’ goals
and objectives, in order to manage their expectations.
Project management plan Includes the communications management plan, which describes
the objectives and expectations of each stakeholder in a project. It
also documents the level of communication required by a stake-
holder.
Issue log Used to track and assign project issues. It is useful for regular
follow-up with the project team. These issues are usually very
minor, but nevertheless are addressed to maintain a good working
relationship with stakeholders. Any unresolved issues can result in
conflict among team members and stakeholders and delays in the
project.
Change log A record of the changes that occur during project execution. Appro-
priate stakeholders are told of these changes in order to gain their
consent.
Organizational process assets Organizational process assets include:
• Change control procedures
• Past project information
• Issue management procedures
• Organizational communication

Manage Stakeholder Expectations Tools and

Techniques
Project managers have a few tools and techniques at their disposal when managing stakeholder
expectations.

Tools and Techniques Description

Communications methods Each stakeholder’s method of communication is documented in
the communications management plan and applied during stake-
holder management. Face-to-face meetings are the best way to
communicate with stakeholders. When face-to-face meetings
are not possible, phone calls, email, and other electronic tools
are acceptable for exchanging information.
Interpersonal skills A project manager should apply appropriate interpersonal skills
to manage stakeholder expectations. These could include skills
such as conflict resolution, building trust, active listening, and
overcoming resistance to change.
Management skills A project manager should apply his management skills of
directing and controlling the team members, thus channeling
their efforts towards achieving the project objectives. These
skills could include presentation, writing, negotiation, and pub-
lic speaking.

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LESSON 10
Manage Stakeholder Expectations Outputs
Several outputs result from managing stakeholder expectations.

Output Description
Organizational process assets Updates to the organizational process assets could include rea-
updates sons for issues, and the motives behind why certain corrective
actions are chosen. The updates could also include lessons
learned from managing stakeholder expectations. Lessons learned
are documented to be part of the historical database for the cur-
rent project and future projects in the organization.
Change requests There may be changes that might take place to the product or
project during the process of managing stakeholder expectations.
These could also include preventive and corrective actions.
Project management plan updates The project management plan is updated due to a change in the
stakeholder communication management. This may occur as a
result of the identification of a new communication requirement
or method. The project management plan can also be updated in
case a communication method is deemed redundant.
Project document updates Documents that may be updated include stakeholder management
strategy, stakeholder register, and issue log.

How to Manage Stakeholder Relationships and

Expectations
How to Manage Stakeholder
Actively managing stakeholders ensures that your stakeholders understand the progress your
Relationships and Expectations project is making. Managing stakeholder expectations will support your team’s project sched-
ule, enhance team performance, and decrease project interruption.

Guidelines:
To effectively manage stakeholders, follow these guidelines:
• During the planning phase of the project, the communication plan for each stake-
holder is developed. In managing stakeholders, the project manager needs to
follow that plan and periodically obtain stakeholder feedback to make any
required adjustments to the plan.
• Face-to-face meetings with stakeholders are most effective. Assessing body lan-
guage provides the project manager with an opportunity to determine if the
stakeholder is pleased or not with the project’s progress. For example, if during a
project update the stakeholder is frowning, has arms folded, and is looking at his
shoes, it is essential that the project manager determine the stakeholder’s con-
cerns. By managing stakeholder expectations, the project will continue to have
their buy-in.
• When face-to-face meetings are not practical, as in global projects, video/web
conferencing, webinars, desktop sharing, net meeting, and video chat can be use-
ful substitutes if available to the project team.
• Be flexible in communications for the project sponsor or other members of senior
management. Be prepared to provide a summary of project status in five minutes
or less if the need arises.

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Flexible communication is the ability to meet the specific communication require-
ments of each stakeholder. For example, one might prefer extensive numerical
data while some others might just prefer a synopsis.
• Use an issue log to assign, track, and resolve open issues that are of interest to
stakeholders. Issues that remain unresolved can lead to project delays.
• Change requests need to be processed to update the communication plan reflecting
changes in project staffing.
• Take corrective action as needed to bring project performance in line with cus-
tomer expectations.
• Document lessons learned to reflect the causes of issues and changes made to rec-
tify them.

Example: Managing Stakeholders at an Insurance Company

Alex is a project manager at an insurance company. His team has been developing a
new type of insurance plan for car owners. When the project kicked off, Alex created a
communications plan and handed it off to the project stakeholders for their review. He
met with them and got their feedback, so now a communication plan is in place that
seems to be working well.
A regular status meeting is planned as part of the communication plan. Before each
meeting, Alex prepares a summary of the project status. The stakeholders appreciate
this brief summary. Alex always gives the stakeholders an opportunity to bring up con-
cerns. At the most recent meeting, the stakeholders had an issue with the discount the
new insurance plan offers to people with clean driving records. While the stakeholders
think this is a good offer, they would like to extend this offer to single car owners with
no co-ownership.
Alex agreed that this change was manageable, and immediately logged this change in
requirements into the database for it to be analyzed and processed through the inte-
grated change control system.

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LESSON 10
DISCOVERY ACTIVITY 10-4
Managing Stakeholders
Scenario:
The OGC’s Seattle telestore project has faced several challenges, including staffing changes
and construction problems. Although you have consistently informed stakeholders of all
changes using the protocols outlined in the communications plan, several stakeholders have
been expressing concern that the project has gotten off track.

1. Stakeholders are worried about the current state of the project. How should you
handle their concerns?
a) Follow processes outlined in the communications plan.
b) Take corrective action.
✓ c) Conduct a face-to-face meeting with a clear agenda targeting their specific concerns.
d) Document lessons learned.

2. Two stakeholders are out of town on a business trip and are available sporadically.
Another has an extremely busy schedule and can’t squeeze another lengthy meeting
into his day. You know it is important to have face-to-face interaction with each stake-
holder. How can you accommodate their needs?
✓ a) Use video conferencing.
b) Send a memo via email.
c) Use an instant messaging service.
✓ d) Hold a brief summarization meeting.

3. During the face-to-face meeting with project stakeholders, you offer a recap of some
contractor changes that occurred. It became necessary to add another electrical con-
tractor to the team, which resulted in changes to the project cost baseline. While you
are talking about this issue, you notice that one of the project stakeholders continually
looks down at the floor and rapidly taps her pen against the table. What does her
behavior indicate?
Assessing body language provides the project manager with an opportunity to determine
if the stakeholder is pleased or not with the project’s progress. Based on her body lan-
guage, you can determine that the project stakeholder is uncomfortable with the
information you are providing to the group. Draw her into a conversation to determine
what aspect of the information is unsettling to her. Her answer will tell you if there are
outstanding issues to address in regards to project cost baselines, or any other issue that
may be of concern to her.

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TOPIC E
Report on Project Performance
Your communications management plan describes the kinds of project reporting information
each stakeholder needs and the level of detail required. As the work results are being generated
and deliverables are being produced for your project, you need to communicate with your
stakeholders about how the project is performing. In this topic, you will report project perfor-
mance.
Implementing the report performance process in your project work can make a tremendous
difference in your ability to communicate project performance to senior management, stake-
holders, and customers, and to reassure those with a vested interest in project success that the
work is on time and within budget. Performance reports are really the heart of the entire moni-
toring and controlling process. Effective performance reporting enables you—and your team
members, sponsors, stakeholders, and customers—to make reasoned, informed, and timely
decisions regarding project status.

The Report Performance Process

Report performance is the process of gathering and communicating information regarding the The Report Performance
current status of a project as well as projections for progress over time. During performance Process
reporting, information regarding the work being accomplished versus the baseline, and
resources being used, is collected, analyzed, and displayed in various report formats. This
helps the project management team to forecast project progress and performance.

Figure 10-10: The report performance process.

Report Performance Inputs

Project managers use several performance reporting inputs.

Input Description
Project management plan Project execution is compared to an approved project work
plan, and variations are measured for management control. This
includes scope, schedule, and cost restrictions, but may include
technical and quality constraints.

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LESSON 10
Input Description
Work performance information Any information on performance results such as schedule
progress and costs incurred is collected and put into the perfor-
mance reporting process.
Work performance measurements The comparison of actual performance against planned perfor-
mance. It is used to create the project activity metrics. The
metrics thus generated include planned versus actual schedule
performance, planned versus actual cost performance, and
planned versus actual technical performance.
Budget forecasts Help estimate the budget required to complete the remaining
project work. Stakeholders will be given either a calculated
EAC and ETC value or a performing organization-reported
EAC and ETC value.
Organizational process assets Assets such as report templates, policies, and organizationally
defined variance limits can impact the report performance pro-
cess.

Report Performance Tools and Techniques

Several tools and techniques are used in performance reporting.

Tools and Techniques Description

Variance analysis The retrospective analysis of causes of variance between the baseline
and actual performance.
Forecasting methods Used to predict the future performance of the project based on its
current performance.
Communication methods Used to communicate project performance and progress.
Reporting systems Tools used to collect, store, and distribute project information to
stakeholders. Information can be distributed through various formats
such as presentation and a spreadsheet analysis.

The Variance Analysis Process

Though the process of variance analysis may vary based on factors such as application
areas and standards used, the common steps involved are:
• Verifying if the collected quality information is complete, consistent, and valid
when compared with other project information.
• Identifying variances between the project baseline and the project outcome.
• Evaluating the impact of the identified variances on project cost, schedule, perfor-
mance, and scope.

Report Performance Outputs

Several outputs result from performance reporting.

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 LESSON 10
Output Description
Performance reports An arrangement and review of collected information in which
analysis results are compared to the performance baseline.
Techniques such as variance analysis and forecast data are
used to create performance reports.
Organizational process assets updates Include lessons learned and report formats. Lessons learned
are documented to become part of the database for the cur-
rent project and performing organization, and should include
causes of issues and reasoning behind corrective action cho-
sen.
Change requests Requested changes are generated as analysis of project per-
formance takes place. Changes such as recommended
corrective and preventive actions are processed through the
perform integrated change control process.

Components of a Performance Report

Performance reports mainly serve the purpose of making the actual vs. baseline infor-
mation with forecasted results available in a consolidated manner. It may be simple or
more detailed. A simple report may contain information on the project scope, time,
cost, and quality, whereas the detailed report may also contain components such as:
• Inferences of the past analysis
• Current risk status
• Work completed
• Work to be completed
• Summary of approved changes
• Variance analysis results
• Forecasted results
Examples include: SV, CV, SPI, CPI, EAC, and ETC.

Forecasting Methods
Forecasting methods are classified into various categories. Forecasting Methods

Category Description
Time series methods Estimation of future outcomes is based on historical data.
Some of the methods under this category include earned value
and moving average.
Causal or econometric methods Forecasting the factors that may influence the identified vari-
ables, by combining economic theories and statistical
information. Some of the methods under this category include
regression analysis and econometrics.
Judgmental methods Forecasting by intuitive methods and probability estimates.
Some of the methods under this category include composite
forecasts, Delphi method, and surveys.

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LESSON 10
Category Description
Other methods May include simulation, probabilistic forecasting, and
ensemble forecasting.

Benefits of Creating Performance Reports

Benefits of Creating
Some of the overall benefits of creating performance reports include:
Performance Reports • Analysis of the current status of the schedule and budget.
• Feedback to team members and work package owners.
• Communication with upper management and customers.
• Early identification of variance.
• Early implementation of corrective actions.

How to Report on Project Performance

How to Report on Project
Identifying variance to performance as early as possible helps the team pinpoint programmatic
Performance (2 Slides) and administrative problems that may need to be resolved and enhances the team’s ability to
implement corrective actions early enough to make a difference. Final performance reports pro-
vide historical information that may improve the likelihood of success for future projects.

Guidelines:
To effectively report project performance, follow these guidelines:
• Analyze work results against planned performance based on performance elements
defined during the planning processes.
— Involve the team members who are closest to the work in the data analysis.
They are the people who understand the work and can probably identify
appropriate corrective actions for resolving variances.
— Use EVM techniques to assess cost and schedule progress against planned
performance.
— Evaluate the results of corrective actions to determine whether they have pro-
duced the desired results.
• Hold performance reviews to communicate and assess project status and/or
progress.
— Keep meetings productive and concise by creating meeting rules that every-
one clearly understands and agrees to follow.
— Define the start and stop times.
— Prepare and distribute a written agenda.
— Make sure the people presenting are ready and understand their role in the
meeting.
• Consult your project management plan’s subsidiary plans for guidelines and pro-
cedures for reporting on the various aspects of project performance.
— Consult the procurement management plan for guidelines and procedures for
analyzing and reporting contractor cost, schedule, and technical performance.

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 LESSON 10
— Consult the cost management plan for guidelines and procedures for analyz-
ing and reporting project cost performance.
— Consult the schedule management plan for guidelines and procedures for ana-
lyzing and reporting project schedule performance.
— Consult the quality management plan for guidelines and procedures for ana-
lyzing and reporting project quality performance.
• Determine the type of report needed for the information being reported. Make
sure that the format of the report adequately provides the type of information and
level of detail required by various stakeholders. Refer to the communications
management plan for information regarding stakeholder needs.
• Prepare performance reports that provide the required information in a format that
enhances understanding of the material. Formal reports should contain:
— A cover page with the project name, project manager’s name, type of report,
and date of report.
— A narrative description of the project’s actual accomplishments for the report-
ing period as compared to the goals established for the period. The
description should include qualitative and quantitative terms if possible. In
addition, any changes implemented or anticipated should be described.
— Interim performance reports should include a forecast of how the project is
expected to perform in the future.
— End of project reports should include a brief description of major accom-
plishments, an evaluation of the project’s performance (including in-house
staff and contractor performance), an explanation of any variances in the per-
formance and project objectives, and any future plans for the project.
— Appendices, which may include any supporting material that contributes to
an understanding of the project and its progress to date, such as charts,
tables, and samples.
— If available, use standard formats for status, progress, and forecasting reports.
These standard formats should be specified in the communications manage-
ment plan or as part of the PMIS.
• Balance the cost, time, and logistics of preparing performance reports against the
benefits gained by the reporting.
• Measure and monitor performance the same way throughout the project life cycle
so that meaningful comparisons can be made.

Example: Reporting the Performance of a Construction Project

The project team for a construction project has completed the first phase. Before mov-
ing on to phase two, the executive board asks the project manager to prepare a mid-
project report. The project manager assembles the team and discusses the requirements
of the report and explains its value in terms of future development for the remaining
work on the current project and for future projects.
The team takes a few days to evaluate the project’s accomplishments against expected
performance and to discuss and document lessons learned. Because they have regularly
monitored and documented project progress and held performance review meetings,
they have solid data to evaluate.

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LESSON 10
Their mid-project report uses the standard format specified in the communications
management plan and consists of the following information as required by the plan: a
cover page, a narrative description of accomplishments as compared to established
goals, interim performance reports and end of project reports, and any appendices or
supporting materials. The comparison section also includes a table showing the earned
value information for phase one development.

DISCOVERY ACTIVITY 10-5

Reporting Project Performance
Scenario:
There were some unexpected delays in the OGC’s Seattle telestore project due to the problems
with the installation and other contractor problems. You and your project team have minimized
the impact of these issues; however, senior management is concerned as to how the actual
schedule and costs performance compare with their original baselines.

1. You need to provide a progress report to senior management. What should your first
step be in gathering data for your report?
a) Hold performance reviews.
b) Consult subsidiary plans for guidelines on reporting project performance.
c) Prepare a professional performance report.
✓ d) Include in the report EV measurements for SV and CV with appropriate action plans
to remedy any variances.

2. After you completed your analysis of work results, you held project deliverables per-
formance reviews with project team members to assess project status. You have
gathered all relevant data necessary for completing your progress report. Given the
cost and schedule concerns of senior management, what type of report format should
you prepare?
The format of the report you prepare should provide the type of information and the
level of detail required by senior management. As a guide, consult your communication
management plan for guidelines and procedures for reporting on cost and scheduling per-
formance, as these represent management’s primary concerns.

3. Since project baselines have shifted, one of the team leads for the project suggests
that you should alter the format of the progress report before handing it off to senior
management. She says that extensive enhancements to the graphic elements are nec-
essary to truly express the major points of the report. Should you implement her
suggested changes?
When you create a progress report, it is important to weigh the time, expense, and effort
it would take to produce the report against the benefits of the report. The suggestions of
the team lead will take additional time, money, and manpower to implement. However,
if you believe the format suggested by her would really help the project, then you could
consider changing the format. In short, the integrated approach should be considered
while making a decision.

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 LESSON 10
Lesson 10 Follow-up
In this lesson, you devised effective communication methods for your project team. Devising
effective communication methods will ensure that project information is communicated effi-
ciently to all the team members and stakeholders.
1. In the project you are managing, which forecasting method do you implement when
predicting your project’s future performance to stakeholders?
Answers will vary, but may include: you can implement forecasting methods such as time
series methods, causal or econometric methods, judgmental methods, and other forecast-
ing methods. These methods are used to predict the future performance of the project
based on its current performance.
2. Which information distribution tools will you use to share progress information with
stakeholders?
Answers will vary, but may include: when sharing progress information with stakeholders,
you can use tools such as electronic mail, hard-copy documents, presentations, video
conferencing, meetings, and phone calls.

Lesson 10: Devising Effective Communication Methods 329

NOTES

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 LESSON 11

LESSON 11 Lesson Time

2 hour(s), 50 minutes

Analyzing Project Risks

In this lesson, you will analyze risks and plan risk responses.
You will:
• Examine a risk management plan.
• Identify project risks and triggers.
• Perform qualitative risk analysis.
• Perform quantitative risk analysis.
• Develop a risk response plan.
• Monitor and control project risk.

Lesson 11: Analyzing Project Risks 331

LESSON 11
Introduction
You have established systems to ensure effective communication within the project team and
with the appropriate stakeholders. You will now need to identify the project risks and be pre-
pared to manage them at any point in the project cycle. In this lesson, you will identify and
manage the risks in a project.
Delivering projects on time and within the prescribed quality standard is always your primary
goal. However, there are always risks that need to be considered while planning a project.
Identifying the risks during the project planning process will enable you and your team to
respond to risks and manage them effectively without affecting the project execution.

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 LESSON 11

Figure 11-1: The project management framework.

The Project Management

Framework (2 Slides)

Lesson 11: Analyzing Project Risks 333

LESSON 11
TOPIC A
Examine a Risk Management Plan
All projects carry risk, and as a project manager, it is your responsibility to conduct effective
risk management planning to mitigate or prevent any potential issues. In this topic, you will
create a risk management plan.
An inherent characteristic of project management is that things can go differently than what
you planned. Deciding how to approach and plan for such uncertainties early in the planning
phase can help you maximize the opportunities in positive risks and minimize the conse-
quences of adverse risks that may occur during the life of your project.

Risks
Risks Definition:
A risk is an uncertain event that may have either a positive or negative effect on the
project. Its primary components are a measure of probability that a risk will occur and
the impact of the risk on a project. Some common ways to classify risk are effect-
based classification, source-based classification, and level of uncertainty. The level of
uncertainty describes how much is known about the risks, which are often described as
knowns, known-unknowns, and unknown-unknowns.

Example: Weather Risks

Due to its relative unpredictability, the weather is a risk common to business. An orga-
nization planning an outdoor festival will likely choose a location and day with the
highest probability for agreeable weather. In this scenario, the threat of rain is a risk
that could seriously affect attendance and revenue. Because the weather is known to be
a possible risk, but its impact is yet unknown, this risk would be classified as known-
unknown.

Project Risk Management

Project Risk Management
The project risk management process is a high-level process that includes five main sub-
phases: risk management planning, risk identification, qualitative risk analysis, quantitative risk
analysis, and risk response planning.

Figure 11-2: The project risk management process with the five main sub-phases.

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 LESSON 11
Business Risk vs. Insurable Risk
Definition: Business Risk vs. Insurable
Risk
Risk can further be classified in two ways: as business risk or insurable risk. A busi-
ness risk is one that is inherent in a business endeavor, such as when a company
assumes that it will spend money as well as make money, and that any project under-
taken carries with it the potential for either success or failure, profit or loss. Insurable
risk is a risk that has only the potential for loss and no potential for profit or gain. An
insurable risk is one for which insurance may be purchased to reduce or offset the pos-
sible loss.

Example: Risks in a Retail Store

For a retail store owner, the outlay of money to purchase inventory without a guaran-
tee that it will sell is a business risk. A loss of inventory due to a fire is an insurable
risk.

Types of Business Risks

Project managers should be aware of some of the common types of business risks. Types of Business Risks

Business Risk Description

Competitive Risks such as the risk of increased competition in the marketplace and a
rival company developing a superior product.
Legislative Risks such as the risk of new laws or changes in regulations governing your
products, goods, or services requiring your company to spend more to main-
tain compliance.
Monetary Risks such as the risk of increased prices for raw materials, increased taxes,
increased operating costs, and losses due to nonpayment by customers.
Operational Risks such as the risk of fraud, theft, employee injury, workplace accidents,
and damage to equipment.

Types of Insurable Risks

There are several types of insurable risks of which you should be aware. Types of Insurable Risks

Insurable Risk Description

Direct property risk Risk of property damage due to weather, fire, and so on.
Indirect property risk Risk of additional expenditures needed to recover from property loss.
Liability risk Risk of needing to make good after causing damage to another.
Personnel-related risk Liability risk for injury to employees.

Lesson 11: Analyzing Project Risks 335

LESSON 11
Risk Management Plan
Risk Management Plan Definition:
A risk management plan is a document that describes the team’s approach to identify-
ing risks. It identifies the methodology, approaches, and tools that will be used,
documents the roles and responsibilities of those involved, identifies the budgeting and
the scheduling for risk management activities, and identifies risk categories.

The risk management plan does not address responses to risks. These are addressed in the risk
response plan.

Example: Risk Management Plan for a New Project

Entrepreneurs seeking funding from venture capitalists for a new business would
present a risk management plan to their potential investors. For a proposed amusement
park, the risk management plan would describe business risks, such as operational risks
of potential losses due to employee theft, and insurable risks, including liabilities for
injuries sustained on the park rides.

The Plan Risk Management Process

The Plan Risk Management
Plan risk management is the process of deciding how to plan and execute the risk management
Process activities for a project. It involves identifying the project charter, current policies, roles, risk
tolerance, the project management plan, any templates for risk management, and performing an
analysis on the inputs. The final output of this process is the risk management plan. It is
imperative that the plan risk management process is initiated at the early stages of project
planning.

Figure 11-3: The plan risk management process.

Plan Risk Management Inputs

Accurate inputs are essential to forging an effective risk management plan.

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 LESSON 11
Input Description
Project scope statement Describes the deliverables and a common understanding among
the stakeholders. Project assumptions are found here. Uncer-
tainty in project assumptions should be evaluated as potential
causes of project risk.
Cost management plan Describes how risk budgets, contingencies, and management
reserves will be communicated and accessed.
Schedule management plan Describes how schedule contingencies will be communicated
and assessed.
Communications management plan Describes the interactions that happen on the project and deter-
mine the right resource to share the available information on
risks and responses at a suitable time and location.
Enterprise environmental factors Factors that influence the risk management plan include attitudes
towards risk and risk tolerance, and the individuals involved in
the project. These attitudes and tolerances may be expressed in
policy statements or by personal action.
Organizational process assets Pre-defined approaches to risk management include risk catego-
ries, common definition of concepts and terms, risk statement
formats, standard templates, roles and responsibilities, authority
levels for decision-making, lessons learned, and stakeholder reg-
isters.

Plan Risk Management Tools and Techniques

Only one tool and technique is used in risk management planning.

Tools and Techniques Description

Planning meetings and analysis Planning meetings are the only tools for risk management plan-
ning. Project teams conduct planning meetings to develop the risk
management plan. Generally, the project manager, project team
leaders, and anyone in the organization with responsibility to
manage risk planning and execute activities will attend risk man-
agement planning meetings. The outcome of these meetings is
documented in the risk management plan.

Plan Risk Management Output

There is one output from the plan risk management process.

Output Description
Risk management plan Made up of methodology, descriptions of roles and responsibilities,
budgeting, timing, risk categories, definitions of risk probability and
impact, probability and impact matrix, revised stakeholders’ toler-
ances, reporting formats, and tracking.

Lesson 11: Analyzing Project Risks 337

LESSON 11

Risk Management Plan Components

Risk Management Plan
A good risk management plan will include several components.
Components (2 Slides)

Component Description
Methodology Defines the tools, approaches, and data sources
that may be used to perform risk management on
the project.
Roles and responsibilities Defines the lead, support, and risk management
team membership for each type of action in the
risk management plan.
Definitions of risk probability and impact Scales of risk probabilities and impact are defined
for use in qualitative risk analysis using terms like
“very unlikely” to “almost certain” with respected
values in numbers for these terms. For instance,
“very unlikely” might have 0.05 probability value.
Probability and impact matrix Predefined matrix with risk priority areas ear-
marked, which has product of impact value on x
axis and probability value on y axis.
Revised stakeholder tolerances Revised stakeholder tolerances may need to be
updated as a result of the plan risk management
process.
Budgeting A budget for project risk management should be
established and included in the risk management
plan. Also specifies how the contingency reserve
should be applied.
Timing Defines how often the risk management activities
will be performed throughout the project life cycle.
Risk categories Documentation such as Risk Breakdown Structure
(RBS) or categories from previous projects will
help identify and organize risks.
Reporting formats Defines how outputs of this process will be docu-
mented, analyzed, and communicated.
Tracking Documents how risk activities will be recorded
and audited.

Risk Breakdown Structure (RBS)

Risk Breakdown Structure Definition:
(RBS)
A Risk Breakdown Structure (RBS) is a hierarchical arrangement of identified risks that
helps project managers to organize potential sources of risk to the project. Functioning
much like a work breakdown structure, an RBS arranges categories into a hierarchy.
This approach allows the project team to define risk at very detailed levels.

338 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON 11
Example: RBS

Figure 11-4: A risk breakdown structure.

Effect-Based Risk Classification

Definition: Effect-Based Risk
Classification
Effect-based risk classification is a way of analyzing the major risks that are inherent
to a project that could have an impact on its success. These major risks include time,
cost, quality, and scope. All these risks are interrelated such that changes to one will
affect all of the others.

Example: Effect-Based Risk Classification for a Project

A project manager might choose to use effect-based risk classification for a complex
project in which many of the risk factors are interrelated, such as a large-scale corpo-
rate production in which many departments, teams, and external resources are
participating. Any one department’s failure to produce its work on time or on budget
will affect the schedule, cost, quality, and scope of the project. Therefore, the project
manager would need to classify all of the risks as well as their potential impact on the
rest of the project.

Source-Based Risk Classification

Definition: Source-Based Risk
Classification
Source-based risk classification is a method of analyzing risk in terms of its origins.
Sources may be internal or external to the project, as well as technical, nontechnical,
industry-specific, or generic.

Lesson 11: Analyzing Project Risks 339

LESSON 11
Example: Source-Based Risk Classification for a Project
For a project requiring internal and external resources, such as an advertising cam-
paign, a project manager might classify the risks in terms of where they originate. One
source of risk could be the potential rise in the price of advertising time on network
television, which could affect cost and scope. Another source of risk could be the fail-
ure of an external advertising agency to meet its deadlines, which would affect
schedule and scope.

Probability Scales
Probability Scales Definition:
A probability scale is a graph showing the assignment of value to the likelihood of a
risk occurring. Probability scales are designed using a variety of values, such as linear,
nonlinear, or an ordinal scale using relative probability values ranging from very
unlikely to almost certain. A risk’s probability score can range in value from 0.0 (no
probability) to 1.0 (certainty).

Example: A Probability Scale

Figure 11-5: A probability scale with values showing the likelihood of a risk
occurring.

Impact Scales
Impact Scales Definition:
An impact scale is a rating system showing the assignment of a value that reflects the
magnitude of the impact of a risk event on project objectives. They can be ordinal
scales using values of very low, low, moderate, high, and very high. They can also be
ordinal scales using linear or nonlinear numeric values. Often, impact scales use both
methods. To improve the integrity and quality of the data and make the processes con-
sistent and repeatable, organizations typically develop definitions for each value to help
the risk management team assign each risk’s impact score consistently.

Example: Impact Rating Scale

The following table shows an organization’s impact scale.

Impact Rat-
ing Impact Level Definition
1 Very low If this risk occurs, the impact on the project’s objectives would
be minor and not noticeable outside the project.
3 Low If this risk occurs, the impact on the project’s objectives would
be minor but noticeable to the customer or sponsor.

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Impact Rat-
ing Impact Level Definition
5 Moderate If this risk occurs, the impact to the project’s objectives would
be significant and would create customer or sponsor dissatis-
faction with the project.
7 High If this risk occurs, the impact on the project would be signifi-
cant and would create major customer or sponsor
dissatisfaction. The project would be in jeopardy.
9 Very high If this risk occurs, the impact would be catastrophic. The
project would be canceled.

Levels of Uncertainty
Levels of uncertainty describe the risks of a project based on how much is known about the Levels of Uncertainty
source and effect of the risk.

Level of Uncertainty Description and Example

Known Items that you know could affect you, and for which you can
roughly predict the nature and extent of the effect.
Example: Staff turnover.
Known-unknown Items that you know could affect you, although you are not able to
predict how or how much they will affect you.
Example: Competition in the marketplace.
Unknown-unknown Items that are beyond your ability to foresee, predict, or prepare
for.
Example: Unexpected budget cuts.

Risk Analysis
Definition: Risk Analysis
Risk analysis is the evaluation of the probability and impact of the occurrence of a
risk. Risk analysis is typically conducted through either qualitative or quantitative tech-
niques. The level of risk to the project is the product of the probability of the risk
occurring and the predicted impact that the risk will have on the project’s success.

Example: Risk Analysis for a New Venture

A manufacturing company would conduct various kinds of risk analyses before launch-
ing a new line of products. They would evaluate the probability and impact of the risks
that would be associated with this new venture, which might include the costs of
research and design, the potential for future sales and revenue from a new product line,
fluctuating consumer demand, competition from rivals, and pending consumer-safety
legislation, which might govern the manufacturing of the new products.

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LESSON 11
Risk Tolerance
Risk Tolerance Definition:
Risk tolerance refers to the level of risk acceptable to a project manager or key stake-
holder when the investment is compared to the potential payoff.

Example: Risk Tolerance Between Stakeholders

Two stakeholders might perceive risk differently. One stakeholder might be interested
in only conservative, low-risk projects that are similar in nature and scope to many
past successes. Another stakeholder might seek out high-risk ventures in uncharted ter-
ritory and might be willing to risk a great amount of capital on a speculative project
with the potential for large returns.

Levels of Risk Tolerance

Levels of Risk Tolerance
Risk tolerance can be classified by three levels.

Risk Tolerance Classifica-

tion Description
Risk-averse Not likely to take a risk that is considered a high risk.
Risk-seeking Accepts an uncertain outcome and may be willing to take a high risk
regardless of the consequences.
Risk-neutral Tolerance to risk is proportional to the amount of money at stake.

How to Create a Risk Management Plan

How to Create a Risk
Creating an effective risk management plan provides the project team with a secure approach
Management Plan (2 Slides) to identifying, analyzing, responding to, monitoring, and controlling project risk.

Guidelines:
To create an effective risk management plan, follow these guidelines:
• Determine how you will organize your project’s risk management team.
— Consider assigning a risk officer to coordinate all risk management activities.
While not all organizations typically have risk officers, it may be a helpful
option to consider.
— Define the roles and responsibilities for each person on the risk management
team.
— The sponsor may be able to assist in some risk management activities, such
as developing response strategies for all risks classified as high risks.
• Conduct risk planning meetings to develop the risk management plan.
• Establish a budget for risk management.
• Consult your organization’s risk management policy and make sure your risk
planning complies with the policy. If your organization has a risk management
plan template, use it and make modifications to meet the specific needs of your
project.

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• Describe the approaches, tools, and data sources that may be used to perform risk
management activities for this project.
— How will the risks be identified? Will you conduct brainstorming sessions?
Will you use the Delphi technique? Will you use subject matter experts?
— How will the identified risks be scored and analyzed so that effective
response strategies can be developed? Is there organizational policy mandat-
ing a specific scoring and prioritization method?
• Determine and describe the schedule for performing risk management activities.
• Determine and describe how your team will document risk response efforts.
— What tools will your team use to store risk information and track responses?
— How will the risk response efforts be communicated to the project stakehold-
ers?
• Determine and describe how the lessons learned from your risk management
activities will be documented for the benefit of future projects.
• If an organization, sponsor, or customer has specific guidelines or requirements
regarding risk thresholds, this information should be included in your risk man-
agement plan.

Example: Drafting a Risk Management Plan

You have been asked to draft a risk management plan for the Arithmetic on a Stick
project. You are provided with the organization’s risk management policy, which con-
tains information concerning the organization’s risk threshold and scoring and
interpretation methods. While organizing the risk management team, you assign a risk
officer to set up a risk database for the plan.
You arrange for the team to have planning meetings. The team determines a budget
and decides that weekly brainstorming meetings will be used to identify risks. The
organization has a policy outlining scoring. It turns out that all scoring must be done
twice by independent parties and the results averaged together. To accommodate this
stipulation, you add a scoring controller to the team. Finally, you decide that all infor-
mation will be entered into the risk database for documentation and future project
purposes.

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LESSON 11
DISCOVERY ACTIVITY 11-1
Examining a Risk Management Plan
Data Files:
• OGC Risk Management Plan

Before You Begin:

From the C:\085061Data\Analyzing Project Risks folder, open the OGC Risk Management Plan
document.

Scenario:
You have constructed your project management plan for the OGC PM Training Roll-Out,
which includes plans for managing costs, quality, and communications. The risk management
plan for the project has been developed and you would like to review its content before you
share it with the project team. You know that your risk management plan needs to address all
risks associated with the internal training as well as the external training provider.

1. During your project review, you determine that a risk officer is needed to handle risk
management activities. Which activities would you assign to this person?
a) Develop response strategies.
✓ b) Confirm and articulate the risks’ probability and impact to the business strategy.
✓ c) Coordinate risk identification and analysis activities.
d) Assign roles and responsibilities to each team member.

2. With your planning meetings started and budget decided, your team begins the task of
determining how to identify risks. Which is the first place to look for risk planning?
a) Other project risk management policies
✓ b) The organization’s risk management policy
c) The project scope statement
d) The organization’s quality policy

3. The risk management plan for your OGC PM Training Roll-Out project uses a probability
scale to define the probability of occurrence of a risk listed in the risk register. Which
is the probability scale defined for the project?
a) 1, 3, 5, 7, 9, 11
✓ b) 0.1, 0.3, 0.5, 0.7, 0.9
c) 2, 4, 6, 8, 10, 12
d) 1.1, 1.3, 1.5, 1.7, 1.9

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4. Which additional factor should you consider when developing your risk management
plan?
a) Job descriptions
b) Geography of the project team
✓ c) Thresholds
d) Communication technology

5. You have integrated specific risk related activities and deliverables into the project’s
schedule and documented how to track risk response efforts in your risk management
plan. Which task should you perform to complete the risk management plan?
✓ a) Determine how to document lessons learned for future projects.
b) Determine the necessary budget.
c) Make sure that roles and responsibilities are clearly understood by the team and
other stakeholders.
d) Create a payoff matrix.

6. Which section of the risk management plan highlights the risk priority areas for the
project?
a) Methodology
✓ b) Probability and Impact Matrix
c) Roles and Responsibilities
d) Frequency of Updating Risk Registers

7. True or False? As per the OGC risk management plan, the OGC PM Training Roll-Out
project requires a quantitative risk analysis to be performed to assess the risk expo-
sure events of your project.
True
✓ False

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LESSON 11
TOPIC B
Identify Project Risks and Triggers
You created a risk management plan. Using the approach outlined in the plan, you can begin
the process of identifying the potential risks that may affect your project. In this topic, you will
identify project risks and triggers.
Identifying risks and triggers helps you determine the most effective action to be taken for
each risk. Mastering the tools and techniques to identify project risks and triggers ensures that
you are prepared to take the appropriate action.

Triggers
Triggers Definition:
Triggers are the early warning signs or indications that a risk to your project is about
to occur. Triggers could be external factors that influence your project, such as changes
in relevant legislation. They could also be internal factors that influence your project,
such as changes in staffing, governance, or funding within your organization. Triggers
must be examined during regularly scheduled risk review sessions held during the life
of the project.

Example: Trigger Indicators

For a project involving the production of an independent documentary for television,
news of an impending television writers’ strike would be a trigger. If the writing on
the documentary had not yet been completed, the trigger could indicate the negative
risk that critical external resources would not be available during the strike. If the writ-
ing on the documentary had been completed, the trigger could indicate the positive risk
that the networks’ demand for the product could increase in the absence of other new
programs.

The Identify Risks Process

The Identify Risks Process
Identify risks is an iterative process of identifying the risks and triggers facing a project. It
requires an understanding of the project’s schedule, its costs, and its quality management plan.
Project managers can design data-related triggers for their projects; when the data falls outside
a defined acceptable variance range, the project manager is alerted to imminent risk.

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Figure 11-6: The identify risks process.

Identify Risks Inputs

There are several inputs to the identify risks process.

Input Description
Risk management plan Describes the team’s approach to identifying risks.
Activity cost estimates Provide a quantitative assessment of the costs involved in complet-
ing each scheduled activity, with range of estimates indicating risk
range. They also provide an indication whether the cost estimates
are sufficient or insufficient to complete the activities.
Activity duration estimates Indicate the time allotted for each activity or for the whole project.
They are reviewed periodically for identifying the risk involved in
the estimated durations.
Scope baseline Contains the project scope statement that includes project assump-
tions and their uncertainties, and the detailed WBS of potential
risks.
Stakeholder register Contains information on stakeholders that is useful in seeking opin-
ions to identify risks.
Cost management plan A subsidiary of the project management plan, it contains a cost
management approach specific to the project that helps to generate
or mitigate risks.
Schedule management plan Includes guidelines for handling changes to the schedule, updated
risks, and associated response plans.
Quality management plan Describes the project management team’s approach to implement-
ing the quality policy. It is reviewed to identify risks related to
quality and those might be generated by the quality management
plan.

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LESSON 11
Input Description
Project documents Includes an assumptions log, work performance reports, earned
value reports, network diagrams, baselines, and other project infor-
mation that helps to identify risks.
Enterprise environmental factors External sources of risk information may include commercial data-
bases, academic studies, published checklists, industry studies, risk
attitudes, or benchmarking.
Organizational process assets Historical information includes files from previous projects, lessons
learned, risk statement templates, and commercially available pub-
lished information such as benchmarking or best practices data.
Historical information can provide important data about potential
future risks that could affect a current project.

Identify Risks Tools and Techniques

There are a number of tools and techniques available to the project manager to aid in risk
identification.

Tools and Techniques Description

Documentation reviews Structured reviews of project plans and related documents at
both the total project and detailed scope levels.
Information-gathering techniques Data collection methods such as brainstorming, the Delphi tech-
nique, interviewing, and root cause analysis that the project
team can use to assist in identifying risks.
Checklist analysis Developed based on historical information as a standardized
way to identify risks. Be careful to look for items that do not
appear on the existing checklist, as each project is unique.
Assumptions analysis Technique used to explore the validity of project assumptions.
Diagramming techniques Cause-and-effect diagrams, process flowcharts, and influence
diagrams are used to identify risk causes.
SWOT analysis Analysis that examines the project from the perspective of
strengths, weaknesses, opportunities, and threats.
Expert judgment Input from subject matter experts or team members with rel-
evant experience and expertise on similar projects or business
areas who can suggest possible risks based on previous experi-
ence.

Identify Risks Output

The risk register is the only output from the identify risks process.

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Output Description
Risk register The risk register contains the list of identified risks and the potential responses.
When complete, the risk register will ultimately contain the outcomes of the
other risk management processes, including the results of the qualitative risk
analysis, quantitative risk analysis, and risk response planning.

Information-Gathering Techniques
Information-gathering techniques are methods used to collect data that will assist the project Information-Gathering
team in identifying risks to the project. Techniques

Technique Description
Brainstorming Used to identify overall project risks or may focus in on the risks within
a particular project segment or work package.
Delphi technique Generates a consensus among project risk experts who anonymously
submit their risk list to a facilitator. Because it relies on achieving con-
sensus, the Delphi technique may be difficult to implement in many
organizations.
Interviewing Used to get information from people with a wide experience across
many projects, such as stakeholders, team members, project managers
from previous projects, and functional management peers to quantify the
probability and consequences of risk on project objectives. The output is
a statistical interpretation of the data from which a range of probability
can be expressed against a level of confidence that the risk will or will
not occur, such as optimistic/low and pessimistic/high.
Root cause analysis Used to identify problems, discover the root cause, and develop correc-
tive actions.

Types of Interviewing Methods

There are two interviewing methods used for generating risk probabilities.

Interviewing Methods Description

Direct Asks an expert to assign subjective probabilities to a given range of
values, providing a lowest possible value, most likely value, and high-
est possible value.
Diagrammatic Uses diagrams for an expert to assign subjective probabilities to a
given range of values, providing a lowest possible value, most likely
value, and highest possible value.

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LESSON 11
Risk Registers
Risk Registers Definition:
The risk register is a document that identifies and categorizes risks, potential risk
responses, and their triggers, or warning signs. If risk categories are changed, the risk
register must be updated. Any possible risk responses included in the risk register are
forwarded for use in the risk response planning process. The risk register will be
updated with the results of other risk management processes and provided to any team
members involved in project risk management.

The risk register will ultimately contain the outcomes of the other risk management processes, includ-
ing the results of the qualitative risk analysis, quantitative risk analysis, and risk response planning. In
its initial stage, the risk register does not necessarily contain information regarding planned responses
to mitigate the effects of risk.

Example: A Risk Register

Figure 11-7: A risk register that identifies and categorizes risks.

Risk Categories
Risk Categories
Risk categories divide project risks into areas reflecting common sources of the risk.

Risk Category Examples

Technical, quality, or performance • Technical changes.
risks
• Changes to industry standards during the project.
• Reliance on unproven or complex technology.
• Unrealistic performance goals.
Project management risks • Inadequate time and resource allocation.
• Ineffective project plan development.
• Poor cost estimates.
Organizational risks • Resource conflicts with other projects.
• Inadequate project funding.
• Inconsistent management support.
External risks • Union issues.
• Change of management in customer’s organization.
• Regional security issues.

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How to Identify Project Risks and Triggers

It is important to identify and document the characteristics of risks that might affect the project How to Identify Project Risks
so that the project team can determine the most effective action to take for each risk. and Triggers

Guidelines:
The project risks and triggers identified will determine the type of risk analysis to be The procurement plan is
performed. To identify project risks and triggers, follow these guidelines: mentioned briefly here; it will
be discussed in greater detail
• Perform a structured review of appropriate documentation from other planning later.
processes with key project stakeholders to ensure an understanding of each. These
documents are a valuable source for risk identification and they may include:
— Project charter
— WBS
— Product description
— Schedule and cost estimates
— Resource plan
— Procurement plan
— List of constraints and assumptions
• Use one or more risk identification techniques to identify risks and their possible
triggers. Techniques may include:
— Information-gathering techniques, such as brainstorming, interviewing, the
Delphi technique, and SWOT analysis, among others.
— Risk identification checklists (make every effort to itemize all types of pos-
sible risks to the project on the checklist).
— Assumptions analysis.
— Diagramming techniques such as cause-and-effect diagrams and system flow
charts. You can also use influence diagrams, which provide a graphical repre-
sentation of a problem showing causal influences, time ordering of events,
and other relationships among variables and outcomes.
• Be consistent. Whatever method you adopt, apply it systematically across your
project. Before the project begins, identify risks in every project segment and
work package. At the start of each project segment, re-examine the risks for that
segment. Update your list of risks at the close of each project segment.
• Think outside the box. Apply your method consistently, but be on the lookout for
special circumstances that might arise in any project segment. Those checklists
and templates are in place to help get the risk identification process going, but
they are far from complete. As the project progresses, circumstances change. Be
on the lookout for changed assumptions, new risks, or additional impacts from
previously identified risks.
• Consult relevant historical information, such as risk response plans and final
reports from previous, similar projects that may include lessons learned describing
problems and their resolutions. Another source of historical information for risk
identification is published information, such as commercial databases, academic
studies, and benchmarking results.

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LESSON 11
• Once risks have been identified, group them into categories that reflect common
sources of risk for your industry or application area. Examine each identified risk
to determine what triggers will indicate that a risk has occurred or is about to
occur.
• Use the results of your analysis to initiate the risk register.
— Consider implementing any risk-register software that may be in common
usage at your company. You can also create a risk register without special-
ized software by using a spreadsheet or table.
— Include the project’s name, sponsor, key stakeholders, and objectives.
— Identify the risks inherent in your project with a description of each.

Example: Identify Project Risks and Triggers

A car manufacturer conducted an internal study and concluded that passengers had dif-
ficulty buckling the company’s standard seat belt. A team was commissioned to
redesign the belt buckle. The project manager directed the risk management team to
review the project documentation and results of the study. The risk management team
brainstormed a list of potential risks and their triggers for the new buckles. Two risks
identified were that the buckles would fail to provide proper slack during regular use
and that the buckles might accidentally release during a collision.
The project team examined old test results for similar buckle designs and commercial
safety studies concerning seat belts. After reviewing the information, these risks were
categorized as technical. The project manager called for tests that would specifically
check the probability of these risks occurring. Because public safety was at risk, the
team agreed that even one failed test would trigger an immediate risk response plan.
The team noted all of their results in the initial project risk register for later analysis.

DISCOVERY ACTIVITY 11-2

Identifying Project Risks and Triggers
Scenario:
With a completed risk management plan, your project team moves into the risk identification
phase. You are meeting with your team and you provided each team member with a copy of
the project charter and technical documentation for the identify risk process.

1. To identify risks for this project, you and your project team will meet as a group to
identify and examine as many of the strengths and weaknesses within OGC that can
potentially impact the project as you can, as well as any opportunities or threats that
may be imposed by the external training provider. Which information-gathering tech-
niques will you use?
✓ a) Brainstorming
b) Interviewing
c) Delphi technique
✓ d) SWOT analysis

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 LESSON 11
2. There is a new upgrade to the project management software with enhancements to
the project tracking and communications features. This upgrade is mandatory in a
networked environment and therefore, when available, will be required by OGC. In
what risk category should your team place this risk?
✓ a) Technical, quality, or performance risks
b) Project management
c) Organizational
d) External

3. What is the trigger for the software upgrade risk that has been identified?
a) The enhancements to the project tracking and communications software.
✓ b) The IT department scheduling the software upgrade.
c) The impact the upgrade will have on the PM Training Roll-Out project by narrowing
the RFPs sent to external training providers.
d) The potential increase to the total costs of training that the upgrade will cause.

TOPIC C
Perform Qualitative Risk Analysis
You identified the risks that might affect your project and documented their characteristics.
Now you must assess the impact and possibilities of occurrences of the identified risks. In this
topic, you will explore the qualitative risk analysis process where you will rank and prioritize
project risks according to their potential effect on project objectives.
Identifying risks is only one part of an effective strategy to minimize work activity disruptions
that could cause your project to exceed budget or exceed its promised deadline. It’s important
to rank their importance so that precious time is not wasted trying to mitigate risks with a low
priority. Qualitative risk analysis lays the foundation for effectively quantifying high priority
risks to your project.

Qualitative Risk Analysis

Definition: Qualitative Risk Analysis
Qualitative risk analysis is a technique used to determine the probability of occurrence
and the impact of identified risk. This is then used to determine the risk exposure of
the project by multiplying the probability and impact. The qualitative risk analysis pro-
cess ultimately provides the list of prioritized risks for further actions.

Example: Performing Qualitative Risk Analysis for a Music Concert

An event management company is planning to organize a jazz concert in a coastal city.
An initial marketing survey undertaken by the company indicates that the response for
the concert would be good, since the general population of that city likes jazz music.
Also the historical data show that the response towards similar musical concerts held
in this city has been very encouraging.

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LESSON 11
However, a recent weather bureau announcement has indicated that there is a slight
possibility that the low-pressure area that has developed beside the coastal city can
cause heavy rains on the day of the concert. The organizing committee officials decide
to have a discussion about the weather risk with all the stakeholders involved to evalu-
ate the impact of risk on the project objectives, on the basis of a scale of low, medium,
and high.
The members discuss the issue, list different areas of concern, and rate them. The
members find that in the worst case scenario, the low-pressure area over the coast may
develop into a tropical storm, accompanied by very heavy rains and wind. But the
chances of that are remote, since the weather bulletin does not project a tropical storm
and indicates that there is only a slight possibility of heavy rains.
Secondly, some of the members were concerned that heavy rains might force people to
stay indoors and reduce the incremental revenue from ticket sales at the box office on
the day of the event, as well as from sales of souvenirs and concessions at the event.
But on the contrary, others felt that since the concert is to be held inside an audito-
rium, the chance of rain having a big impact on the audience turnout is remote. Also,
even a seat occupancy rate of 50% would ensure that the expenditure involved with
this event can be reclaimed.
Based on the deliberations, the organizing committee finally concludes that the risk
exposure is low or at the worst, is moderate in nature. The event managing company
documents the information in the risk register.

The Perform Qualitative Risk Analysis Process

The Perform Qualitative Risk
Perform qualitative risk analysis is the process of assessing, ranking, and prioritizing risks for
Analysis Process subsequent analysis. It takes into account the probability of different risks occurring and their
likely impact. Qualitative analysis provides the foundation for assessing risk. To be effective,
qualitative analysis should be conducted early in the project life cycle so that potential prob-
lems can surface early enough to develop an effective response plan. When qualitative analysis
is repeated, trends can be evaluated and corrective action may be taken early enough to avoid
or lessen a negative consequence.

Figure 11-8: The perform qualitative risk analysis process.

Perform Qualitative Risk Analysis Inputs

Several elements go into the perform qualitative risk analysis process.

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 LESSON 11
Input Description
Risk register Contains the list of identified risks.
Risk management plan Contains important information about roles and assignments in risk
management, schedule activities for risk management, risk catego-
ries, the probability and impact matrix, and revised stakeholders’
risk tolerances.
Project scope statement A project scope that is very complex or unfamiliar to the organiza-
tion will carry much more risk than project scopes that are more
common. The risks inherent in familiar project scopes are already
documented and more easily anticipated.
Organizational process assets Includes information on completed projects of similar scope, studies
of risk specialists, and risk databases.

Perform Qualitative Risk Analysis Tools and

Techniques
There are several qualitative risk analysis tools and techniques that you can employ.

Tools and Techniques Description

Risk probability and impact Probability is the likelihood that a risk event will occur or prove
assessment true. In risk analysis, each risk is assigned a value to represent its
probability or degree of uncertainty. Impact is the likely effect on
project objectives if the risk event occurs. In risk analysis, each
risk is assigned a value representing the likely consequences of the
risk event occurring. These factors are often described in terms of
being very high, high, moderate, low, and very low.
Probability and impact matrix Illustrates a risk rating assignment for identified risks. The matrix
specifies the probability and impact of the risks identified and rates
them as high, medium, or low priority.
Risk data quality assessment Techniques to evaluate if the obtained data is unbiased, accurate,
and of high quality.
Risk categorization Categorizes risks to identify the areas of the project most exposed
to the effects of uncertainty.
Risk urgency assessment Indicates priority and can include specific information on timing
for response.
Expert judgment Information provided by a group or individual with expertise based
on relevant experience on similar projects, and through risk facilita-
tion interviews or workshops. Helps assess the impact and
probability of each risk.

Perform Qualitative Risk Analysis Output

Risk register updates constitute the only output of qualitative risk analysis.

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LESSON 11
Output Description
Risk register updates The risk register contains the list of identified risks; it should be updated
with the results of the qualitative analysis.

Risk Data Quality Assessment

Risk Data Quality Assessment Definition:
Risk data quality assessment is the evaluation of the usefulness of the available data
concerning the risk. It includes examining the data obtained about a particular risk for
the amount of data available, the quality of data available, the extent to which the
source of the information understands the risk, and the legitimacy and dependability of
the data.

Example: Risk Assessment for a Restaurant Chain

As project manager for a restaurant chain, Barry is responsible for new site develop-
ment. The company is interested in expanding to a location in the northern section of
the city, and Barry has conducted a risk assessment to determine whether or not it
would be financially sound to purchase property in a large shopping plaza there. The
risk assessment includes the average cost per square foot of real estate within that
neighborhood; this figure indicates that real estate is selling at a very reasonable price.
Upon detailed examination of the risk data, however, Barry discovers that the informa-
tion used to calculate the average cost per square foot is five years old. Barry’s quality
assessment indicates that the data is too out-of-date to be useful in the risk analysis,
and purchasing property based on this information would be a poor idea.

Probability and Impact Risk Rating Matrix

Probability and Impact Risk Definition:
Rating Matrix
A probability and impact risk rating matrix is a graph showing the assignment of a
risk rating to risks or conditions. The matrix combines the probability and impact
scales to prioritize risks and identify risks that are likely to require further analysis.
The risk rating is calculated by multiplying the risk’s impact score by its probability
score. It may indicate risk thresholds by applying shading, color, or line variations. The
probability and impact risk rating matrix will guide the response plans.

Example: A Probability and Impact Risk Rating Matrix

The sample probability and impact risk rating matrix shown here is a simplified
example; the shadings of color indicate the levels of probability and impact. A real
probability and impact risk rating matrix would be used to assess very complicated
risks with many factors and data points.

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 LESSON 11

Figure 11-9: A simplified probability and impact risk rating matrix.

Components of Risk Registers

There are several components of risk registers that project managers identify at the qualitative Components of Risk Registers
risk analysis stage.

Component Description
Relative ranking or priority list of project risks The overall risk ranking for a project can be deter-
mined by adding the individual risk factor scores
and dividing by the number of risks.
Risks grouped by categories Placing risks in categories may reveal areas of risk
concentration. It may also highlight common
causes of risk, allowing you to improve risk antici-
pation and response.
Causes of risk or project areas requiring particular Identifying specific frequently occurring causes in
attention risk occurrence enables better risk response plan-
ning.
Lists of risks requiring response in the near term Some risks may require action in the near term.
These can be grouped separately from the risks
that will be addressed at a later date.
List of risks for additional analysis and response Risks that may require additional analysis and
management typically include risks classified as
high or moderate. For example, a schedule risk
that threatens to delay the project end date beyond
acceptable limits will require quantitative analysis.
Watchlist of low-priority risks Risks that are not urgent and do not require near-
term action can be documented on a watchlist for
monitoring.

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LESSON 11
Component Description
Trends in qualitative risk analysis results As qualitative risk analysis is repeated, a trend
may result that can make risk response or further
analysis more or less urgent.

The Ongoing Risk Assessment Process

The Ongoing Risk Assessment
The ongoing risk assessment process is an iterative process of identifying, analyzing, and
Process documenting the risks facing your project; it is conducted throughout the project life cycle.
This is primarily an organizational issue that requires the project manager (or the PMO) to
have project managers, outside the project, shadow the project manager and provide oversight
and fresh perspective during risk management reviews.

Figure 11-10: The ongoing risk assessment process.

How to Perform Qualitative Risk Analysis

How to Perform Qualitative
Performing qualitative risk analysis provides a method by which you can rank and prioritize
Risk Analysis (2 Slides) risks. Effective qualitative risk analysis can assist an organization with the decision-making
process when selecting which project to do and what resources are assigned.

Guidelines:
To perform qualitative risk analysis, follow these guidelines:
• Examine the list of identified risks.
— Are all the risks identified?
— Are all the risks completely documented?
• Analyze the data available for each risk to assign a data precision ranking score.
— Does the source of the data fully understand the risk?
— Is the source reliable and trustworthy?
— Is the amount of data sufficient to adequately analyze the risk?
— What is the accuracy and quality of the data?
— Are there risks that require further monitoring? Should they be placed in the
risk register for watching?

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• Determine the organization’s risk threshold for this project.
• Analyze the assumptions identified during risk identification as potential risks
against the validity of the assumption and the impact on the project if false.
• Analyze the probability and impact of each identified risk using well-defined
probability and impact scales.
• Determine the risk factor scores using a probability and impact risk matrix.
• Prioritize the risks according to the risk management plan.
• Identify risks that require further analysis.
• Determine the overall risk for the project and compare with the organization risk
threshold.
• Document all changes to the risk register.

Example: Qualitative Risk Analysis for a Fast Food Company

A fast food company wanted to reduce its long lines and increase its hourly sales. The
company discovered that by reducing the cooking time of hamburgers by 30 seconds,
they could average 10 more customers served per hour. The shift managers decided to
perform qualitative risk analysis to identify potential problems with this plan. Most of
the risks they identified centered on food safety and were based on existing health and
safety standards for the cooking of meat products. These regulations forced the restau-
rant chain’s risk threshold to be very low.
A probability and impact matrix was created and each identified risk was scored on the
matrix. Highest in the ranking was the cook’s inability to guarantee consistency of
internal food temperature based on a formula of cooking times.

DISCOVERY ACTIVITY 11-3

Performing Qualitative Risk Analysis
Data Files:
• Risk Register

Before You Begin:

From the C:\085061Data\Analyzing Project Risks folder, open the Risk Register document.

Scenario:
After brainstorming the potential risks for the OGC PM Training Roll-Out, it is now time to
analyze the risks qualitatively and document them in the Risk Register document. You and
your team have created a risk summary outlining all identified risks and have assigned a risk
probability factor to each risk. There are a total of 25 activities in the project; however, at this
time you are reviewing the risks associated with the Obtain External Training Provider.

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LESSON 11
1. Based on the OGC Risk Event Impact Scale, which of the risks should receive the high-
est priority for this project?

a) IT might not approve project management software upgrade.

b) Temporary loss of a team member.
✓ c) Change in organizational requirements to use external training.
d) RFPs do not meet OGC specifications for training; i.e., dates and costs.

2. Based on OGC’s risk event impact scale, the risk event impact is calculated as 2.5. How
is the risk impact for this project best described?
✓ a) Between Very Low to Low
b) Between Low to Moderate
c) Between Moderate to High
d) Between High to Very High

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3. You need to enter the risk factors into the risk register for the work activity, Obtain
External Training Provider. In the Risk Register document, list the risk probability rat-
ing for each task.

The risk probability rating for each task:

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LESSON 11
4. For each risk that is identified, provide an impact rating for the work activity, Obtain
External Training Provider. In the Risk Register document, list the risk impact rating
for each task.

The risk impact rating for each task:

TOPIC D
Perform Quantitative Risk Analysis
You performed a qualitative risk analysis for your project. Now you can determine the extent
of the risk exposure to your entire project. In this topic, you will examine the quantitative risk
analysis process and perform a quantitative risk analysis.
Taking advantage of opportunities can often mean turning a negative outcome into a positive
one. By performing a quantitative risk analysis, you can take steps to maximize the positive
consequences of the opportunities that your project faces.

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Quantitative Risk Analysis
Definition: Quantitative Risk Analysis
Quantitative risk analysis is a technique used to assess the risk exposure events to
overall project objectives and determine the confidence levels of achieving the project
objectives. Quantifying risk can help you to identify time and cost contingencies of a
project. It further refines and enhances the prioritization and scoring of risks produced
during qualitative analysis.

Example: Quantitative Risk Analysis for the Supply-Chain Management Software

Project
The project team on the Supply-Chain Management Software project identifies process
data for a statistical analysis using a Monte Carlo simulation to determine the confi-
dence level that the project will be completed on time and within the budget. The team
identifies critical project parameters, which affect project schedule. The team further
determines project success rate, and makes decisions about viable project alternatives
taking into account the risks within the project.

Everyday Practicalities
In most everyday project management scenarios, conducting a qualitative risk analysis
is adequate to meet the project manager’s purposes; only in very sophisticated, mature
project management environments is there much additional value added by conducting
further quantitative risk analysis.

The Perform Quantitative Risk Analysis Process

Perform quantitative risk analysis is the process of numerically assessing the probability and The Perform Quantitative Risk
impact of each risk and determining the extent of the overall project risk. It involves gathering Analysis Process
documents indicating risk planning and project scope, as well as the risk register; analyzing
each risk using such tools as interviewing, expert judgment, probability distributions, sensitiv-
ity analysis, expected monetary value analysis, decision tree analysis, and simulation; and
finally entering any alterations into the risk register.

Figure 11-11: The perform quantitative risk analysis process.

Perform Quantitative Risk Analysis Inputs

There are several inputs to the perform quantitative risk analysis process.

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LESSON 11
Input Description
Risk register List of identified risks and relative ranking and categories.
Risk management plan Contains roles and responsibilities, budgets and schedule for risk
management activities, RBS, risk categories, the probability and
impact matrix, and risk tolerances.
Cost management plan Sets the criteria for planning, estimating, budgeting, and controlling
project costs.
Schedule management plan Sets the criteria for developing and controlling the project schedule.
Organizational process assets Contains information on completed projects, studies from risk spe-
cialists, and risk databases.

Perform Quantitative Risk Analysis Tools and

Techniques
There are some tools and techniques used in the perform quantitative risk analysis process.

Tools and Techniques Description

Data gathering and representation There are two techniques used in data gathering and representa-
techniques tion:
• Interviewing: Taking subjective probability and representing
that data objectively.
• Probability distributions: Visually represent risk probability.
Quantitative risk analysis and model- There are three techniques used in risk analysis and modeling:
ing techniques • Sensitivity analysis: Examines how the uncertainty of a
project element affects the objective in question if the other
uncertain elements remain unchanged.
• Expected monetary value analysis: Calculates the average
outcome under uncertainty.
• Modeling and simulation: Includes cost risk analysis, which
is most commonly performed using the Monte Carlo method.
Expert judgment Utilizes subject matter expertise to analyze potential cost, iden-
tify schedule impacts, and validate risks. Also, utilized for
interpretation of data and to identify the strength and weakness
of the tools used.

Perform Quantitative Risk Analysis Output

Risk register updates constitute the only output of the perform quantitative risk analysis pro-
cess.

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Output Description
Risk register updates Include probabilistic analysis of the project, the probability of achieving
the cost and time objectives, a newly prioritized list of quantified risks,
and trends in quantitative risk analysis results.

Quantitative Risk Analysis Update Components

There are several quantitative risk analysis update components. Quantitative Risk Analysis
Update Components

Component Description
Probabilistic analysis of the project Once risks are qualitatively and quantitatively analyzed, the
project team should be able to forecast the possible completion
dates and costs and provide a level of confidence for each.
Probability of achieving the cost and Using quantitative risk analysis, the project team can estimate
time objectives the likelihood of achieving the project objectives under the
current plan and with the current knowledge of the project
risks.
Prioritized list of quantified risks Identified risks are prioritized according to the threat they pose
or the opportunity they present to the project. This prioritized
list includes a measure of the impact of each identified risk.
Trends in quantitative risk analysis Repeating the quantitative risk analysis allows the project’s
results risk management team to analyze the trends and make adjust-
ments as necessary. Information on project schedule, cost,
quality, and performance gained through the perform quantita-
tive risk analysis process will help the team to prepare a
quantitative risk analysis report.

Project Risk Ranking

Definition: Project Risk Ranking
Project risk ranking is the overall risk ranking for producing the final deliverable of
the product or service of the project. It allows for comparisons among other projects,
assisting in project initiation, budget and resource allocation, and other decisions.

Example: Risk Ranking for a Project

The risk management team for a project created a probability and impact matrix that
illustrates the relative position of threats as identified in the qualitative risk analysis.
The team now calculates the percent exposure of the top four risks.

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LESSON 11

The qualitative risk analysis has already suggested the descending order of risks. The
following table displays the total exposure of all the risks for the project as 3.22% and
the exposure of the top four risks as 2.37%. Considering the top four risks, the team
determines the exposure to these risks as 73.6%.

Basics of Probability
Basics of Probability
When you perform probabilistic analysis, you will need to apply some of the basic principles
of probability.

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Principle of Probability Description
Sum of probabilities The sum of the probabilities of all possible events must equal 1
(100%).
Probability of single event The probability of any single event must be greater than or
equal to 0 and less than or equal to 1.
Dependent joint events The probability of joint events is the product of the probability
that one event occurs and the probability that another event
occurs, given that the first event has occurred. Under these cir-
cumstances, the events are considered to be dependent
(connected in some way with each other).
Independent joint events When the probability of joint events occurring is the product of
the probabilities of each, the events are considered to be inde-
pendent (the two events have nothing in common and may occur
simultaneously.)
Mean The sum of the events divided by the number of occurrences.
Median The number that separates the higher half of a probability distri-
bution from the lower half. It is not the same as the average,
although the two terms are often confused.
Average The number that typifies the data in a set. It is calculated by
adding the values of a group of numbers and dividing that total
by the number of objects included.
Standard deviation This is the measure of the spread of the data, or the statistical
dispersion of the values in your data set.

Probability Distribution
Definition: Probability Distribution
Probability distribution is the scattering of values assigned to likelihood in a sample
population. It can be visually depicted in the form of a Probability Density Function
(PDF). In a PDF, the vertical axis refers to the probability of the risk event and the
horizontal axis refers to the impact that the risk event will have on the project objec-
tives.

Example: A Probability Distribution Graph

Figure 11-12: A probability distribution graph displaying the probability and

impact of a risk event.

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LESSON 11
Subjective vs. Objective Probability
Probability can be assigned subjectively or objectively. Subjective probability is based
on people’s opinions, which may be shaped by information, experience, and attitude.
Even if they are given the same set of facts, they may make very different determina-
tions of the probability of an event. Objective probability is deduced mathematically.

Uniform Distribution PDF

Uniform Distribution PDF Definition:
A uniform distribution PDF results when all outcomes are equally likely to occur, so
the data is shown in a straight line.

Example: A Uniform Distribution PDF Graph

Figure 11-13: A visual depiction of a uniform distribution PDF.

Normal Distribution PDF

Normal Distribution PDF Definition:
A normal distribution PDF results when there is a symmetrical range or variation in
the probabilities of each outcome. Visually, the data is distributed symmetrically in the
shape of a bell with a single peak, resulting in the common term “bell curve.” The
peak represents the mean; the symmetry indicates that there is an equal number of
occurrences above and below the mean.

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 LESSON 11
Example: A Bell Curve

Figure 11-14: A normal distribution PDF graph.

Triangular Distribution PDF

Definition: Triangular Distribution PDF
A triangular distribution PDF results when there is an asymmetrical distribution of
probabilities. Visually, the data is skewed to one side, indicating that an activity or ele-
ment presents relatively little risk to project objectives. Note that if either the
probability of occurrence is low or the impact is low, then this necessarily indicates
there is little risk.

Example: A Triangular Distribution PDF Graph

Figure 11-15: A triangular distribution PDF graph displaying asymmetrical dis-

tribution of probabilities.

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LESSON 11
Decision Making Under Risk
Decision Making Under Risk Definition:
Decision making under risk refers to assigning probabilities to the possibility of each
state of nature occurring. The best choice of strategy is the strategy with the largest
expected value where the expected value is the sum of the payoffs multiplied by the
probability of occurrence for each state of nature.

When assigning probabilities, it is important that they are based on valid information and are not
assigned erroneously.

Example: Decision Making Under Risk by a Ski Resort

A ski resort sought to weigh the probabilities of different weather patterns against the
cost of two different snow-making machines. The project managers knew from past
history that without any new machine, the resort could make up to $100,000, but had
the potential to make more with the addition of a snow-making machine. The Snow-
maker Lite costs $10,000, and the Deluxe model costs $25,000. The following table
indicates how much profit could be made in three different weather conditions after
paying for power and materials to make the snow.

Strategy Lots of Snow Little Snow Dry and Cold

Strategy 1: Snow-maker $90,000 $55,000 $35,000
Lite
Strategy 2: Snow-maker $75,000 $70,000 $65,000
Deluxe

To analyze each strategy under risk, probabilities must be assigned to the possibility of
each state of nature occurring. Based on weather history in their area, the probability
of lots of snow is considered to be 45%, of little snow 35%, and of a dry but cold sea-
son as 20%.

We should consider the cost of machines in this calculation. $10,000 should be subtracted from the
profit value of Snow-maker Lite and $25,000 should be subtracted from the profit value of Snow-maker
Deluxe.

Strategy Calculation
Snow-maker Lite (80)(.45) + (45)(.35) + (25)(.20) = 56.75
Snow-maker Deluxe (50)(.45) + (45)(.35) + (40)(.20) = 46.25

The best choice of strategy is the strategy with the largest expected value (Snow-maker
Lite strategy) where the expected value is the sum of the payoffs multiplied by the
probability of occurrence for each state of nature.

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Quantitative Analysis Methods
Quantitative analysis methods allow project managers to consistently determine the probability Quantitative Analysis Methods
and impact of each risk.

Method Description
Sensitivity analysis Places a value on the effect of changing a single variable within a
project by analyzing that effect on the project plan.
Expected Monetary Value (EMV) Assesses the average outcome of both known and unknown sce-
analysis narios.
Decision tree analysis Factors both probability and impact for each variable, indicating
the decision providing the greatest expected value when all uncer-
tain implications and subsequent decisions are quantified.
Modeling and simulation Uses models that calculate potential impact of events on the
project, based on random input values.

EMV and decision tree analysis are commonly used together to come to a final decision.

Sensitivity Analysis
Sensitivity analysis is a method of assessing the relative impact of changing a variable
in the project to gain insight into possible outcomes of one or more potential courses
of action. Sensitivity analysis places a value on the effect of changing a single variable
within a project by analyzing that effect on the project plan. The results are typically
displayed as a tornado diagram.
Sensitivity analysis is probably the simplest method of analyzing the impact of a
potential risk and its results are easy for project stakeholders to understand. However,
it does not lend itself well to assessing combinations of risks and how they might
affect a project. Furthermore, the tornado diagram does not provide an indication of
anticipated probability of occurrence of the risk event.
Often, sensitivity analysis is performed independently on a number of variables. When
displayed on a single graph or diagram, the results allow you to compare which vari-
ables have the highest likely impact on project performance. Typically, it is only
performed for variables that are likely to have a major impact on project performance
in terms of cost, time, or economic return.

A typical display of sensitivity analysis is the tornado diagram.

Decision Tree Analysis

Decision tree analysis is an assessment of the data obtained using the decision tree
method to evaluate various possible outcomes. Decision trees allow decision-makers to
factor in both probability and impact for each branch of every decision under consider-
ation, making it a useful tool for risk analysis. Solving the decision tree indicates the
decision that will provide the greatest expected value when all the uncertain implica-
tions, costs, rewards, and subsequent decisions are quantified.

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LESSON 11
Expected Monetary Value (EMV) Analysis
Expected Monetary Value (EMV) analysis is a method of calculating the average out-
come when the future is uncertain. Opportunities will have positive values and risks
will have negative values.
EMV is found by multiplying the monetary value of a possible outcome by the prob-
ability it will occur. This is done for all possible outcomes and their figures are added
together. The sum is the EMV for that scenario.
This technique is used in decision tree analysis; EMV must be calculated in order for
the analysis to find the best outcome. The best outcome is the lowest combination of
cost and EMV.

Modeling and Simulations

Simulations involve calculating multiple project durations with different sets of activity
assumptions. A project simulation uses a model that translates project uncertainties into
their potential impact on project objectives. The project model is created many times
with different variables to calculate a probability distribution.

Simulations
Simulations Definition:
Simulation is a technique that uses computer models and estimates of risk to translate
uncertainties at a detailed level into their potential impact on project objectives. For
schedule development, simulation involves calculating multiple project durations with
varying sets of assumptions regarding project activities.

Example: Simulations
You are planning a multimedia campaign for a client. Your team is divided as to which
printing contractor to use. Printer A has handled similar projects for you in the past.
However, they are poorly staffed and turnaround time can be slow. Printer B is a large
company with modern equipment and fast turnaround time. However, their remote
location will add at least a day for each shipment of the product.
Your team simulates two project activity durations using each of the printers. Your
simulations take into account factors such as previous turnaround times for similar
projects, realistic shipping times, and maximum production capabilities. Based on your
simulation results, you decide to stick with Printer A.

Monte Carlo Analysis

Monte Carlo Analysis Definition:
Monte Carlo analysis is a technique used by project managers to make predictions
about the optimistic, most likely, and pessimistic estimates for variables in the model
and simulates various outcomes of the project schedule to provide a statistical distribu-
tion of the calculated results. In addition to the what-if scenario analysis method, this
is the other most common simulation type. A Monte Carlo analysis does not produce a
single result, but calculates a range of possible results.

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In more general business terms, “Monte Carlo” refers to not one single analysis
method but to a wide class of techniques, mostly making use of sophisticated comput-
ers and inputs of random numbers, probabilities, and algorithms. It has a wide range of
applications in many fields, including finance and engineering; since it works effec-
tively with large inputs of numbers, it is well suited to complex project management
problems in which more than a few inputs such as costs, activity, and durations are
unknown.

Example: Monte Carlo Analysis for a Project Note that this is a simplified
Stakeholders have asked a project manager to estimate how long it will likely take to example for illustration
purposes; in practical use, a
produce a project involving three tasks and an inexperienced team. The first task is Monte Carlo analysis is used
scheduled to take 30 days, the second task is scheduled to take 60 days, and the third when there are many,
task is scheduled to take 90 days, but with inexperienced resources these activity dura- potentially thousands, of
tions are optimistic and could take more time. Using a software application, the project numbers to be input.
manager runs a Monte Carlo simulation analysis using these inputs as well as the prob-
ability that each task will be completed early, on time, and late. After running the
Monte Carlo analysis repeatedly to generate a range of results, he estimates that this
project has a 40% probability of being completed within 170 days, a 60% probability
of being completed within 180 days, and an 80% probability of being completed
within 200 days.

How to Perform Quantitative Risk Analysis

Performing quantitative risk analysis enables the project team to prioritize risks according to How to Perform Quantitative
the threat they pose or the opportunity they present to the project. The prioritized list can be Risk Analysis (2 Slides)
used to develop an effective response plan for each risk.

Guidelines:
To effectively perform quantitative risk analysis, follow these guidelines:
• Begin with your original estimate of time or cost. Break out the various compo-
nents of the estimate into manageable chunks. Determine the variable that you
wish to investigate and identify its likely range of variation.
• Calculate and assess the impact of changing the range of results on the overall
project estimate for each value in the range.
• Consult historical information, such as similar completed projects, studies of simi-
lar projects by risk specialists, and risk databases for information that may be
useful for quantitative risk analysis on your project.
• Use the appropriate interviewing technique and obtain probability distributions
from stakeholders and subject matter experts.
— If expertise resides with more than one or two people and the problem does
not lend itself to precise analytical techniques but can benefit from subjective
judgments on a collective basis, consider using the Delphi technique.
— Consider using the direct method when time or resource constraints do not
allow for more complex, resource-intensive methods and questions can be
phrased clearly and concisely.
— If your expert has a solid understanding of probability concepts and is famil-
iar with PDFs, consider using the diagrammatic method.
• Depict the distributions in a PDF.

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LESSON 11
• Perform a sensitivity analysis to determine which risks have the most potential
impact on the project by examining the extent to which the uncertainty of each
element affects the objective being examined if all other uncertain elements are
held at their baseline values. Use the decision tree analysis technique to examine
the implications of choosing one or two or more alternatives by incorporating the
probabilities of risks and the costs or rewards of each logical path of events and
future decisions.
• Conduct a project simulation using a model to translate uncertainties at a detailed
level into their potential impact on project objectives at the total project level.
Prioritize the quantified risks according to the threat they pose or the opportunity
they present to the project objectives. Include a measure of each risk’s impact.
Document all changes to the risk register.

Example: Performing Quantitative Risk Analysis for a Presidential Campaign

The campaign staff of a candidate for president was given the project of deciding if
money spent on campaign ads in a western state was likely to garner the votes needed
to win in a general election. One method was to analyze the state’s voter history in
each of the past 11 elections.
Based on this information, the project team set out to determine the likelihood that a
candidate from Party A could win the state. Using 100 percent of the vote as Best
Case and 0 percent of the vote as Worst Case, the Most Likely Case was derived from
an average of the historical voting record. The data was plotted in a probability distri-
bution resulting in the expected normal distribution of data about the mean. Also
expected was the reasonably small standard deviation, indicating that the plotted data
was tightly distributed about the mean.
The deviation indicated a range of possibility about the mean from about 40 percent to
slightly more than 54 percent. Although initial reaction to this news was positive,
everyone agreed that more analysis was required. So the team set out to analyze just
the data from the last three elections, knowing that voter sentiment goes with the
times. The difference was disconcerting. It seems that the Party A electorate repre-
sented on average 37 percent of the vote over the last three elections. The data was
just as stable and in fact the standard deviation shrank to just 4.59 percent, resulting in
a probability range between 32.5 and 41.5 percent.

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 LESSON 11
DISCOVERY ACTIVITY 11-4
Performing Quantitative Risk Analysis
Data Files:
• Analyzing Project Risk

Before You Begin:

From the C:\085061Data\Analyzing Project Risks folder, open the Analyzing Project Risk
image.

Scenario:
Your project requires an external training provider. Your team has assessed each training pro-
vider’s rate of success in delivering the project management software training within the
required time-frame and within budget and you have graphed the results.

1. Which analysis technique was used in the Analyzing Project Risk image to determine
the most cost-effective choice of a training provider?
a) Delphi
b) Diagrammatic
c) Simulation
✓ d) Decision tree

2. What is the probability that Vendor 1 will complete the project on time?
a) 70 percent
b) 60 percent
c) 50 percent
✓ d) 40 percent

3. What is the probability that Vendor 2 will run over the allotted time for the project?
a) 40 percent
✓ b) 50 percent
c) 60 percent
d) 70 percent

4. What is Vendor 3’s expected monetary value?

a) $0
✓ b) $200
c) $1,700
d) $10,300

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LESSON 11
5. Your team combines the EMV at the end of each vendor’s network end-points to arrive
at a net proceed for each vendor. You want to choose the vendor bid with the most
economic advantage for OGC. Based on this number, which vendor should your team
choose?
a) Vendor 1
✓ b) Vendor 2
c) Vendor 3
d) Vendor 1 and Vendor 3

TOPIC E
Develop a Risk Response Plan
You performed a quantitative risk analysis for your project. Now you need to decide how you
are going to address these project risks. In this topic, you will examine the risk response plan-
ning process by developing a risk response plan.
Every planned risk response stems from an identified risk. Developing a risk response plan
provides insurance for your project, because you are taking steps to ensure that each possible
scenario has an action plan.

The Plan Risk Responses Process

The Plan Risk Responses
Plan risk responses is the process of examining each risk and corresponding response alterna-
Process tive, determining which response will improve the likelihood of a positive outcome. First, you
review the risk management plan and risk register, which were updated with previous risk
management planning outputs. Then, you employ an appropriate technique for each risk, such
as avoidance, mitigation, or exploitation. Finally, you enter any alterations into the risk regis-
ter, risk response plan, or other necessary project documentation.

Figure 11-16: The plan risk responses process.

Initial risk response planning on a project-wide basis should happen early in the project in order to be proactive
in addressing risk issues. Additional risk response planning initiatives should be undertaken at the start of each
project segment and work package.

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 LESSON 11
Plan Risk Responses Inputs
There are several important risk response planning elements contained in the risk management
plan and the risk register.

Input Description
Risk register Contains prioritized lists of project risks, root causes of risk, list
of potential responses, risk ranking, lists of near- and long-term
risks, trends in qualitative risk analysis, categorized risks, and a
watchlist of low priority risks.
Risk management plan Contains the guidelines, methodology, templates, and formats
necessary to perform all risk management processes, including
plan risk responses.

Plan Risk Responses Tools and Techniques

Each risk may require that you employ one of several different strategies, depending on the
potential effectiveness of the different techniques.

Tools and Techniques Description

Strategies for negative risks or threats The common strategies for threats are:
• Avoid
• Transfer
• Mitigate
• Accept
Strategies for positive risks or oppor- The common strategies for opportunities are:
tunities • Exploit
• Share
• Enhance
• Accept
Contingency response strategy A contingency plan is created in advance so that if a risk is
about to happen, the contingency plan can be invoked.
Expert judgment Expertise provided by a group or individual with relevant expe-
rience and skill to take action on identified risks and establish
risk responses.

Plan Risk Responses Outputs

There are four outputs to the plan risk responses process.

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LESSON 11
Output Description
Risk register updates Updated information in the risk register may include identified
risks, team members responsible for specific risks, response strat-
egies, warning signs of particular risks, contingency plans and
their trigger condition, and contingency reserves.
Risk-related contract decisions Decisions to transfer risk that include insurance agreements, ser-
vice agreements, or any risk sharing agreements.
Project management plan updates Subsidiary management plans and their various requirements
needed for the plan risk responses process. Elements that need to
be updated include:
• Schedule management plan
• Cost management plan
• Quality management plan
• Procurement management plan
• Human resource management plan
• Work breakdown structure
• Schedule baseline
• Cost performance baseline
Project document updates Contain assumptions log updates and technical documentation
updates.

Negative Risk Strategies (Threats)

Negative Risk Strategies
Negative risk strategies address how to deal with risk scenarios that have a possible negative
(Threats) impact on the project.

Strategy Description
Risk avoidance Involves changing the project plan to prevent a potentially detrimental
risk condition or event from happening. One way to eliminate a risk is to
reduce or change the scope of the project in an attempt to avoid high-risk
activities. The scope change could involve the requirements or specifica-
tions, or it could mean changing the approach to meeting the
requirements or specifications.
Risk transference Involves shifting the impact of a risk event and ownership of the risk
response to a third party. This strategy typically is used in connection
with financial risk exposure and most often involves payment of a risk
premium to the party assuming the risk.
Risk mitigation Attempts to reduce the probability or impact of a potential risk event to
an acceptable level. Mitigation may involve implementing a new course
of action in an effort to reduce the problem or changing the current con-
ditions so that the probability of the risk occurring is reduced.
Sometimes, when reducing the probability is not possible, the focus must
be on reducing the consequences of the risk event.

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Strategy Description
Risk acceptance Involves accepting that a risk exists. The acceptance may be passive or
active. Active acceptance indicates that the plan is ready for execution if
the risk occurs. Passive acceptance indicates that no action is planned if
the risk occurs and whatever action is suitable will be executed on an
extempore basis.

Positive Risk Strategies (Opportunities)

Positive risk strategies address how to deal with risk scenarios that have a possible positive Positive Risk Strategies
impact on the project. (Opportunities)

Strategy Description
Risk exploitation Often used when a project team wants to make sure that a positive risk is
fully realized. This is often done by hiring the best experts in a field or
ensuring the most technologically advanced resources are available to the
project team.
Risk sharing Entails partnering up with another party in an effort to give your team the
best chance of seizing the opportunity. Joint ventures are a common
example of risk sharing.
Risk enhancement Attempts to increase the probability that an opportunity will occur. This is
done by focusing on the trigger conditions of the opportunity and trying to
optimize their chances for occurrence.
Risk acceptance Involves accepting the risk and actively responding to it as it comes, but
not through pursuit.

Contingency Plans
Definition: Contingency Plans
A contingency plan is a risk response strategy developed in advance, before things go
wrong; it is meant to be used if and when identified risks become reality. An effective
contingency plan allows a project manager to react quickly and appropriately to the
risk event, mitigating its negative impact or increasing its potential benefits. A contin-
gency plan may include a fallback plan for risks with high impact. The fallback plan is
implemented if the initial contingency plan is ineffective in responding to the risk
event.

Example: Contingency Plan for an Outdoor Event

A rain date is a classic example of a contingency plan. For an outdoor event that could
be spoiled by inclement weather, such as a company picnic, the project manager could
announce in advance the contingency plan: in case of rain, the picnic will be post-
poned by one week.

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Contingency Reserves
Contingency Reserves Definition:
A contingency reserve is a predetermined amount of additional time, money, or
resources set aside in advance to be used to further the project’s objectives in the event
that unknown risks or accepted known risks become reality. Contingency reserves
cover risk events that are not accounted for in the project’s baseline duration and cost
estimates. The amount of the reserve is determined by the potential impact of the risk,
but should include enough to implement any contingency plans as well as a buffer for
dealing with unidentified risks.

Example: Contingency Reserve for a Trade Show

A project manager in charge of company participation at a trade show might solicit
help in the form of employees willing to participate. His contingency reserve would
take the form of human resources; he could solicit more volunteers than he expects he
will need. In the event that some employees are not able to participate at the last
minute, he will have a reserve of other employees to call upon.

How to Develop a Risk Response Plan

How to Develop a Risk
An effective risk response plan describes the response strategies for each identified risk. The
Response Plan selected response strategies should take advantage of opportunities and reduce the probability
and/or impact of threats to project objectives.

Guidelines:
To develop an effective risk response plan, follow these guidelines:
• Examine each identified risk to determine its causes and how it may affect project
objectives. Brainstorm possible strategies for each risk.
— Identify which project stakeholders can be assigned responsibility of a risk.
Involve those people in your risk response planning.
— Write down every idea mentioned regardless of feasibility or cost.
• Choose the response strategy that is most likely to be effective for each identified
risk. Ensure that the chosen risk response strategies are:
— Enough to bring the risk threshold below the organization’s limit.
— Appropriate to the severity of the risk.
— Cost effective.
— Timely enough to be successful.
— Realistic within the context of the project.
— Agreed to by all parties involved.
— Owned by a responsible person.
• If you are unable to bring a risk’s rating below the organization’s risk threshold,
ask your sponsor for help. Develop specific actions for implementing the chosen
strategy.
• Identify backup strategies for risks with high risk factor scores.
• Determine the amount of contingency reserves necessary to deal with accepted
risks.
— How much will your contingency plans cost?

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— How much time will your contingency plans add to the schedule?
• Determine how much of a contingency reserve you should set aside for unknown
risks (ones that have not been identified).
• Consult the risk management plan for the description of the content and format of
the risk response plan. Include the following elements in your risk response plan:
— A description of the identified risks along with the area of the project
affected (that is, the WBS element).
— Risk owners and assigned responsibilities.
— Qualitative and/or quantitative risk analysis results.
— Response strategies selected and the specific actions for implementing the
strategies.
— Level of residual risk expected to remain after the response strategies are
implemented.
— Budget and schedule for responses.
— Contingency plans and fallback plans for all accepted risks with high impact.
• Incorporate the risk response plan into the overall project plan so the strategies
can be implemented and monitored. As the project progresses through the life
cycle, examine trends in qualitative and quantitative analysis results that may
guide your response strategies.

Example: Risk Response Plan for a New Product

You and your team have been asked to create a new line of exercise equipment. Your
project team reviews all documentation for risks. From these documents, they identify
three risks that need risk response planning. As the first risk deals with the negative
loss time due to possible worker injuries, the team decides to employ risk transference,
paying a premium for insurance.
The second risk involves a scenario in which the new products could be first to mar-
ket. To address this opportunity, the team settles on risk exploitation by hiring more
staff to ensure the positive outcome. After a lengthy review, the team is unable to
determine a course of action for the final risk, which is the possibility that a key patent
may not be approved in time for production.
In response, the team develops a contingency plan and documents all changes to the
risk register, risk management plan, and project plan.

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LESSON 11
DISCOVERY ACTIVITY 11-5
Developing a Risk Response Plan
Scenario:
You and your team have identified risks in the PM Training Roll-Out project.
• A potential project software upgrade. IT approval may occur during the project
life cycle.
• Change in organizational requirements. Vicky Morris, the PMO Director, has
resigned.
• Instructor illness.
Now it is time to consider your risk response planning.

1. The first risk has possible positive outcomes. Which risk response strategy should you
employ?
a) Risk avoidance
✓ b) Risk enhancement
c) Risk mitigation
d) Risk transference

2. What response do you have regarding the risk of a potential project software upgrade
during the project life cycle?
If the software meets the approval of the IT department, you may want to include a pro-
vision to obtain a beta version of the software. You may choose to add more people who
can be trained on the upgrade and they can train others. You may choose to have a pilot
group work with the software.

3. The change in organizational requirements due to the resignation of Vicky Morris has
possible negative outcomes to the project, but you have determined there is no way to
avoid the scenario completely. Which risk response strategy should you employ?
a) Risk avoidance
b) Risk enhancement
✓ c) Risk mitigation
d) Risk exploitation

4. You determine that instructor illness cannot be avoided. Which risk response strategy
should you employ?
a) Risk enhancement
b) Risk exploitation
✓ c) Active acceptance
d) Passive acceptance

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5. What are some ways you would respond to the potential risk of instructor illness dur-
ing the training?
Answers will vary, but may include: include in the vendor contract the availability of a
backup instructor.

TOPIC F
Monitor and Control Project Risks
You developed a risk management plan and a risk register with a risk response plan to manage
project risk. During project execution, you will need to implement those plans in order to
monitor and control project risks. In this topic, you will identify the monitor and control
project risks process.
You’ve identified the project risks, quantified and ranked them, and planned an appropriate
response to each prioritized risk. That’s just the beginning. When risk events occur, it’s up to
you, as project manager, to implement your risk plans in the face of predicted and unforeseen
risks. Effective project risk monitoring and control ensures that you respond in a reasoned
manner.

The Monitor and Control Risks Process

The monitor and control risks process is the process of responding to identified and unforeseen The Monitor and Control Risks
risks. It involves tracking identified risks, identifying new risks, implementing risk response Process
plans, and monitoring their effectiveness. During the monitor and control risks process, you
will constantly monitor your project for the introduction of new risks in addition to monitoring
triggers for the risks already identified.
When new risks surface, they must be documented and analyzed, and a response plan must be
selected using the risk analysis and response planning processes. As the project progresses,
risks change. Constant monitoring is essential. Risk monitoring and control is iterative and
ongoing, and takes place throughout the project life cycle.

Figure 11-17: The monitor and control risks process.

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LESSON 11
Monitor and Control Risks Inputs
Monitoring and controlling project risks includes several inputs.

Input Description
Risk register Identifies risks, risk owners, actions to respond to risks, char-
acteristics of risks, and a watch list of risks of low priority.
Project management plan Contains the risk management plan, which includes risk toler-
ances, risk owners, protocols, human resources, time, and
other resources allocated for project risk management.
Work performance information Items relating to risk monitoring and control such as deliver-
able status, corrective action, and performance reports.
Performance reports Information on project work performance that may affect the
processes of risk management or the actual occurrence of risk.

Monitor and Control Risks Tools and Techniques

A project manager uses several tools and techniques to monitor and control project risk.

Tools and Techniques Description

Risk reassessment The risk register should be reassessed at project team status meet-
ings. Tasks in risk assessment require the identification of new risks,
reassessment of current risks for their probability and impact, and
the closure of outdated risks. The extent of risk assessment at the
status meetings depends on how the project is flowing compared to
its objectives. For example, if an unanticipated risk develops, it may
be necessary to have additional response planning.
Risk audit Examines effectiveness of the team’s risk response efforts. Risk
audits are performed as per the risk management plan schedules and
are conducted during project review meetings or in separate risk
audit meetings.
Variance and trend analysis Project trends should be reviewed using data collected on perfor-
mance. Results from trend analysis may forecast a difference of cost
and schedule from their initial targets. Any variation from the plan
may result in threats or lost opportunities on the project.
Technical performance measure- A comparison of the project’s technical accomplishments to the
ment planned accomplishments as outlined in the project plan. Any differ-
ences can help predict if the project scope will be achieved.
Reserve analysis Makes a comparison of the amount of contingency reserves to the
remaining amount of risk to decide if the reserve is sufficient.
Status meetings Project risk management should be on the to-do list at project status
meetings. The time it takes to address the issue depends on what
risks have been identified, their priority, and complexity of response.

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Monitor and Control Risks Outputs
Monitoring and controlling project risk results in several outputs.

Output Description
Risk register updates Include results from risk assessments, risk audits, and periodic
risk reviews that may include updates to probability, impact,
priority, response plans, ownership, and risks that are no longer
active; also include results of project risks that can help in
future risk planning. This will complete the records of risk
management, and is part of the close project or phase process
and project closure documents.
Organizational process assets updates Project risk management processes should be documented in
the organizational process assets to be references in future
projects. The probability and impact matrix, risk register, and
risk breakdown structure can be updated at project closeout.
Lessons learned from project risk management activities can be
added to the lessons learned database. Cost and project activity
length can be added to the organization’s database.
Change requests Anything that deviates from the project baseline results in
changes to the project management plan. These changes are
submitted through the perform integrated change control pro-
cess as an output of the monitor and control risks process.
Approved changes become inputs to the direct and manage
project execution process and monitor and control risks pro-
cess. Change requests can include recommended corrective
actions, namely contingency plans and workaround plans.
Change requests can also include recommended preventive
actions that are used to make sure the project is following the
guidelines of the project management plan.
Project management plan updates The project management plan needs to be revised and reissued
if any approved changes have an effect on risk management
processes.
Project document updates Various project documents that require updates include the
assumptions log, technical documentation, contract terms, and
the schedule and cost baselines.

The Project Risk Response Audit

A project risk response audit is the process of examining the team’s ability to identify risks, The Project Risk Response
the effectiveness of risk response plans, and of the performance of risk owners. The audit may Audit
be conducted by a third party, by the project’s risk officer, or by other qualified personnel.
The auditor reviews the risk response plan and data concerning project work results to deter-
mine whether the planned responses to identified risks are producing the desired results in
terms of avoiding, transferring, or mitigating risk. In addition, the auditor evaluates the perfor-
mance of the risk owner in implementing the response plan. The auditor documents the results
of the audit and makes recommendations for improvement in the project’s risk management
efforts.

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LESSON 11

Figure 11-18: Risk response audit for a project.

How to Monitor and Control Project Risks

How to Monitor and Control
Monitoring and controlling project risks ensures that appropriate responses to risk events are
Project Risks implemented.

Guidelines:
To effectively monitor and control project risks, follow these guidelines:
• When an event affects the project objectives, consult the risk response plan to
execute actions as mentioned in the risk response plan.
• Monitor the environment for any new risks that may arise due to:
— Changes in the project objectives. Any change to the overall cost, schedule,
or quality/performance level of your project will change your overall risk
picture.
— Changes to scope. Whether the scope of the project increases or decreases,
the risk picture changes. For example, increasing the scope of the project
without assessing the impact on time or cost can spell disaster. Changes in
scope require iterating the risk management process.
— Changes within the organization, such as restructuring within functional
departments that may mean some of the resources you were counting on will
no longer be available for assignment to the project.
— Changes outside of the organization, such as technological changes, changes
in industry standards, economic or market changes, or legal/regulatory
changes.
• Monitor the effectiveness of the risk response plan, as well as the contingency and
fallback plans laid out in the risk response plan. Make sure your monitoring is
done in accordance with the policies and procedures defined in the risk manage-
ment plan.
— Conduct project risk response audits to examine and document the effective-
ness of the risk response plan and the performance of the risk owner.
— Perform earned value analysis to monitor overall project performance against
the baselines. If the project is deviating significantly from the baseline, reiter-
ate the risk identification and analysis processes.
— Conduct periodic project risk reviews that are part of the project schedule to
communicate risk response effectiveness and to identify new risks or triggers
that may require additional response planning.
— Measure technical performance to determine whether variances are significant
enough to warrant additional risk response planning.
— If the response plans are not effective in reducing or eliminating risk, con-
sider implementing the fallback plan.
• Deal with unforeseen risks by systematically planning a reasoned response.

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 LESSON 11
— Develop workarounds for risks with low impact.
— Perform additional response planning for risks with significant impact on
project objectives.
• Update project documentation as changes are indicated.
— Keep the risk response plan up-to-date as risks occur and response plans are
changed or added.
— Issue change requests in accordance with the integrated change control sys-
tem.
— Update performance baselines if the changes are significant.
— Update risk identification checklists to help manage risk in future projects.
• Manage the contingency reserve so that the additional time, money, and resources
are utilized as planned.

Example: Monitoring and Controlling Project Risk for a Driver’s Safety Video
As the project work for a driver’s safety video nears completion, the parent organiza-
tion announces a restructuring of the department. As part of the restructuring effort,
two of the project’s resources, one graphic designer and one video producer, are trans-
ferred. The transfer of those resources will significantly impact the project and may
cause some turbulence in the team.
In addition to their regular risk review meetings, the project manager calls an emer-
gency core team meeting to develop a strategy for dealing with this new risk. The risk
officer and the project sponsor attend the emergency meeting, at which the group
brainstorms alternative strategies in response to the risk.
Since two other projects have been canceled as part of the organization’s restructuring
plan, other graphic designers are now available. Those resources will be distributed
among the various other projects that had lost resources. The new team members will
need to be trained.
With the deadline looming, the project manager allocates a portion of the contingency
reserves to cover the additional expenses that will be incurred to complete the video
production, which had to be outsourced. This is a serious setback because four videos
still need to be written and produced.
The multimedia lead takes ownership of this new risk. He hires a seller to edit the vid-
eos using the in-house editing equipment. He collaborates on rewriting the scripts to
make use of stock footage rather than having to shoot new footage to produce the four
remaining videos. A risk response audit shows that the team’s response plan for deal-
ing with this unforeseen risk was effective in reducing its impact on project objectives.
The team updates the project’s risk database to reflect the actions taken and the results
of those actions.

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LESSON 11
DISCOVERY ACTIVITY 11-6
Monitoring and Controlling Project Risks
Scenario:
During the course of OGC’s New Seattle store project, you receive an email from the electri-
cal contractor outlining a 3-week delay in the Install and Terminate Electrical Devices activity,
due to defective materials. The electrical contractor’s SOW states that if there is a potential
delay, all subcontractors must inform you in writing within 48 hours of the onset of the delay,
and the email meets this requirement. The project has already been significantly delayed due to
severe weather conditions. Although your risk analysis included a schedule contingency for
weather conditions and the receipt of defective materials, this is a serious problem that threat-
ens to further delay the project.

1. What action should you take in regard to the material delay?

a) Monitor the environment for new risks.
b) Conduct a project risk response audit.
c) Update performance baselines.
✓ d) Consult the risk response plan.

2. You have developed a very robust risk response plan in the risk register. Based on the
vendor performance report, you notice that chances of delay have now become very
high (from an earlier rating of high). You now need to decide what would be your next
step.
✓ a) Consult the risk response plan.
b) Follow the risk management process.
c) Implement the fallback plan.
d) Develop a workaround.

3. The contractor suggests that it might ultimately be more cost-effective to buy materi-
als from another contractor, although the initial cost of materials will be higher. Do
you think this is an effective solution?
Answers will vary, but may include: although the cost of materials will be higher when
purchased in this manner, the cost of the schedule delay might even be more expensive.
By buying materials right away, you will forestall any additional work delays.

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 LESSON 11
Lesson 11 Follow-up
In this lesson, you analyzed risks and planned for risk responses. You created a risk manage-
ment plan that describes how project risk management activities are structured and performed
throughout the project. By taking a proactive approach during risk planning, you arm yourself
with the necessary information to manage potential risks to your projects and ensure the best
possible environment for success.
1. How could your organization benefit from comprehensive risk planning?
Answers will vary, but may include: a disciplined approach on risk planning is absolutely
necessary for any organization. Early identification of project risks through various tools
and techniques and implementing immediate corrective actions will increase probability
of success and reduce possibilities of failure. It is the responsibility of the project team
to proactively identify potential risks before they occur and implement appropriate risk
response measures.
2. What tools and techniques will you use to effectively perform qualitative risk analysis
for future projects you manage?
Answers will vary, but may include: risk probability and impact assessment, probability
and impact matrix, risk data quality assessment, risk categorization, risk urgency assess-
ment, and expert judgment.

Lesson 11: Analyzing Project Risks 389

NOTES

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 LESSON 12

LESSON 12 Lesson Time

2 hour(s), 10 minutes

Processing Project
Procurements
In this lesson, you will process project procurements.
You will:
• Create a procurement management plan.
• Prepare a procurement statement of work.
• Prepare a procurement document.
• Identify the components of the conduct procurements process.
• Obtain responses from sellers.
• Determine project sellers.
• Administer project procurements.
• Close project procurements.

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LESSON 12
Introduction
You have defined the scope and have understood the detailed work required to be done to
complete the project. There are some work deliverables or services that you would probably
need to arrange from the external resources. Before you can do that, you need to identify ways
of securing external resources when necessary. You also want to manage project procurement
by soliciting bids from prospective sellers, making effective choices among the bids received,
and preparing project contracts. In this lesson, you will process project procurements.
As a project manager, it is your responsibility to ensure that your project’s work is accom-
plished on time, at a reasonable cost, and as per the prescribed quality. Obtaining proposals or
bids from sellers provides you with the confidence that work products will meet your project
objectives at a reasonable cost. By clearly defining your expectations and requirements, you
can enhance the possibilities of finding qualified, responsive suppliers who can help you
achieve a successful outcome for your project.

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 LESSON 12

Figure 12-1: The project management framework.

The Project Management

Framework (2 Slides)

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LESSON 12
TOPIC A
Plan Project Procurements
Before you transition your project to the executing process group, you need to plan for the
project procurements based on the resource requirements that you have identified. In this topic,
you will plan project procurements.
Most projects will require resources from an external vendor or agency. Before you begin
executing a project, the project purchasing requirements and decisions are to be identified and
documented. This requires the identification of resources that need to be procured from outside
your organization and an approach to identify potential sellers who would satisfy the require-
ments of your project. A good procurement plan ensures that the risks involved in garnering
external resources is minimized and does not impede the smooth functioning of your project.

The Plan Procurements Process

The Plan Procurements
The plan procurements process allows project managers to document project purchasing deci-
Process sions, specify the approach to be followed for project procurements, and identify potential
sellers to meet the purchase requirements of the project. It also determines whether the project
needs will be met internally by the project team, or whether the required products, services, or
results need to be acquired from outside the project organization.
When the project needs are to be procured from outside the project organization, the project
management team needs to determine what to acquire, how to acquire, how much to acquire,
and when to acquire the project resources. The buyer’s involvement in the procurement process
should also be considered when planning procurements. The process includes consideration of
the risks inherent in making decisions in the planning phase of the project. In mitigating the
risks, the project managers would consider the type of contract to be used for the procurement
and may involve transference of the risks to the seller.

Figure 12-2: The plan procurements process.

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 LESSON 12
Plan Procurements Inputs
Project managers would require several inputs during the plan procurements process.

Input Description
Scope baseline Includes the detailed project scope statement, the WBS, and the
WBS dictionary.
Requirements documentation Includes information about project requirements along with details
of any contractual or legal implications that may apply to the
requirements.
Teaming agreements The legal contractual agreements between the organization and one
or more external entities to form a partnership, joint venture, or
other arrangement between the parties. Teaming agreements
predefine the buyer-seller roles of parties involved in the project.
Risk register Includes identified project risks, risk owners, and risk responses
that may influence project procurements.
Risk-related contract decisions Includes details of the agreements that are prepared to specify
each party’s responsibility for specific risks in the project.
Activity resource requirements Includes information on the specific activity resource needs of the
project, namely people, equipment, or location.
Project schedule Contains information on the required timelines or the mandated
deliverable dates.
Activity cost estimates Includes cost estimates developed for the procuring activity within
the project that are used to evaluate bids or proposals received
from the sellers.
Cost performance baseline Provides details on the planned budget over the timelines of the
project.
Enterprise environmental factors The enterprise environmental factors that can influence the plan
procurements process include:
• Conditions of the marketplace.
• Availability/unavailability of products, services, or results in the
marketplace.
• Suppliers past performance and reputation.
• Terms and conditions applicable for products, services, or
results.
• Terms and conditions for the project-specific industry.
• Local requirements that may be unique.
Organizational process assets The organizational process assets that influence the plan procure-
ments process include:
• Policies, procedures, and guidelines for formal procurements.
• Management systems used by the organization in developing
the procurement management plan and in selecting the contract
types to be used to facilitate procurement.
• The established multi-tier supplier system of pre-qualified sup-
pliers based on prior project experience.

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LESSON 12
Plan Procurements Tools and Techniques
Project managers use several tools and techniques in conducting the plan procurements pro-
cess.

Tools and Techniques Description

Make-or-buy analysis Assesses the cost-effectiveness of using in-house resources as
opposed to outside sellers.
Expert judgment Expert judgment is available from sources such as the organization’s
finance department, legal consultants, risk professionals or technical
associations, and so on.
Contract types Contracts have different benefits and risks, depending on the type of
agreement.

Plan Procurements Outputs

Several outputs are created by the plan procurements process.

Output Description
Procurement management plan Describes how the procurement processes will be handled. It includes
the information on contract types to be used, standard procurement
documents, procurement metrics, constraints and assumptions, and
procurement related risk management issues.
Procurement statements of work Detailed, written description of a product or service being procured
under contract.
Make-or-buy decisions Decisions about which resources, services, or products will be created
or purchased by the organization.
Procurement documents The documents that are submitted to prospective sellers and service
providers to solicit their proposals for the work needed. These can
include Request for Information (RFI), Invitation for Bid (IFB),
Request for Proposal (RFP), and Request for Quotation (RFQ).
Source selection criteria The metrics that are used to evaluate each seller’s proposal and make
comparisons among different proposals. The criteria can be objective
or subjective and are used to rate or score seller proposals.
Change requests May apply to the subsidiary management plans in the project man-
agement plan, especially in light of new products or services being
acquired.

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 LESSON 12
Procurement Management Plans
Definition: Procurement Management
Plans
The procurement management plan is a document that outlines the specifications for
procuring work from outside sources; it specifies the types of contracts that will be
used, describes the process for obtaining and evaluating bids, mandates the standard-
ized procurement documents that must be used, and describes how multiple providers
will be managed. The plan also states how procurement activities will be coordinated
with other project management activities, such as scheduling and performance report-
ing. Depending on the needs of the project, the procurement management plan may be
formal or informal; brief or highly detailed.

Example: Planning Procurement Management for an Advertising Agency

A small advertising agency would procure contracts from external sources for some of
the work considered necessary but beyond its core capabilities, such as specialized
printing and professional photography services. The procurement management plan
would outline the company’s processes for soliciting and evaluating bids from compet-
ing service providers and would specify how management would schedule the contract
work, schedule payments to providers for the work done, and evaluate the quality.

Teaming Agreements
Definition: Teaming Agreements
A teaming agreement is a legal contractual agreement between two or more parties to
form a joint venture or other arrangement as defined by the parties to meet the require-
ments of a business opportunity. The parties can be internal or external to the
organization executing the project. When a teaming agreement is created for a project,
it significantly impacts the planning processes for the project, and predefines issues
such as scope of work and competition requirements.

Example: OGC Corporation’s Agreement with Janrex Inc.

OGC Corporation and Janrex Inc. have been associated partners for the last four years.
The agreement insists that OGC Corporation will have to procure the hardware from
Janrex Inc. for any implementation-related and/or turn-key projects executed by OGC
in the North American region. However, this arrangement is not obligatory when the
implementation is done in any other area but North America.

Risk-Related Contract Decisions

Risk-related contract decisions are made when: Risk-Related Contract
• Planning risk responses for the project. Decisions
• Sharing or transferring part or all of the risk (opportunity or threat, respectively).
• Enhancing or mitigating part or all of the opportunity or threat, respectively, faced by an
organization.
Some of the risk-related contract decisions include agreements for insurance, bonding, services,
Letter of Credit (LoC), bank guarantee, and other items as appropriate for the project.

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LESSON 12
How to Create a Procurement Management Plan
How to Create a Procurement
Effective planning of project procurements documents the project purchasing decisions, speci-
Management Plan (2 Slides) fies the approach to be used in project procurements, and identifies potential sellers for the
project and documents these in the procurement management plan.

Guidelines:
To generate an effective procurement management plan, follow these guidelines:
• Identify the project needs that can be fulfilled by acquiring products, services, or
results. Determine:
— What is to be acquired.
— How to acquire.
— How much to acquire.
— When to acquire.
• Study the various plan procurement input documents to determine information
related to the procurement requirements. The input documents could include:
— Project scope baseline.
— Requirements documentation.
— Existing teaming agreements.
— Project risk registers.
— Risk-related contract decisions.
— Activity resource requirements.
— The project schedule.
— Activity cost estimates.
— The cost performance baseline.
— Appropriate enterprise environmental factors.
— Existing organizational process assets.
• Consult technical experts to define specifications for the project needs clearly,
concisely, and completely.
• Perform a make-or-buy analysis to determine whether particular work can be
accomplished by the project team or must be procured from outside the organiza-
tion.
• Determine the contract types to be used for the specific procurement needs of the
project.
• Document the plan procurement information you have identified so far in the pro-
curement management plan.
• After the procurement management plan is created, you will also generate other
In this topic, you will examine relevant plan procurement outputs, including:
the creation of a procurement
management plan. In — Procurement statements of work.
subsequent topics, you will
— Make-or-buy decisions.
examine the creation of the
other plan procurements — Procurement documents.
process outputs, namely the
procurement statement of work
— Source selection criteria.
and the procurement — Change requests.
document.

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Some of the information developed in generating these outputs will be used to
finalize the procurement management plan.

Example: Creating a Procurement Management Plan for a Warehouse Manage-

ment Software Project
Mark Anderson, the project manager of OGC’s Warehouse Management Software
project, is creating the procurement management plan for the project. Mark discusses
with stakeholders the various project requirements that include the warehouse manage-
ment software, related computer hardware, networking, database, and project staffing.
He studies the project scope baseline to determine the scope of the warehouse manage-
ment software implementation within OGC. He goes through the requirements
documentation for each of the project requirements.
Mark involves Brian Wells, the IT Consultant of OGC, to draw up the technical speci-
fications of the project requirements. Further, discussions with Brian indicate that the
warehouse management software and other requirements of this project have to be pro-
cured from outside the organization as the current infrastructure at OGC does not
support the requirements of this project.
Based on the procurement information collected, Mark prepares the procurement man-
agement plan for OGC’s Warehouse Management Software project.

DISCOVERY ACTIVITY 12-1

Examining a Procurement Management Plan
Data Files:
• OGC Procurement Management Plan

Before You Begin:

From the C:\085061Data\Processing Project Procurements folder, open the OGC Procurement
Management Plan document.

Scenario:
During the development of the OGC PM Training Roll-Out project charter and project scope
statements, it had been determined that an outside seller would deliver the project management
software training due to time and logistical constraints within the organization. You have
updated the OGC procurement management plan that describes how the procurement processes
will be managed from developing procurement documents through contract closure. Before you
meet David Anderson, OGC’s procurement manager, to discuss the procurement requirements,
you want to ensure that the procurement management plan includes suitable guidance for suc-
cessful project procurement.

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LESSON 12
1. In the OGC Procurement Management Plan, who is authorized by OGC to enter a pre-
scribed contract with the external training provider?
a) Project sponsor
b) Project manager
✓ c) Procurement manager
d) Operations manager

2. In the OGC Procurement Management Plan, which of these job tasks are defined for
the solicitation process of the project?
✓ a) Characteristics of project requirements are to be documented in a procurement
statement of work.
✓ b) A Request for Proposal (RFP) will be sent to prospective sellers.
c) Select the vendor listed in the OGC Procurement Management Plan.
✓ d) Evaluation criteria are to be determined to evaluate proposals from sellers.

3. Which of OGC’s plan procurements inputs contains information about the time frame
for each project deliverable?
a) Requirements documentation
b) Scope baseline
✓ c) Project schedule
d) Activity resource requirements

4. Match the plan procurement inputs with their descriptions.

d Risk-related contract deci- a. Factors that can influence the plan
sions procurements process such as market
conditions and supplier information.
c Teaming agreements b. Factors that can influence the plan
procurements process such as poli-
cies, procedures, guidelines, and
management systems.
e Activity resource require- c. Contracts between the organization
ments and one or more external entities to
work together.
a Enterprise environmental d. Include details of the agreements that
factors are prepared to specify each party’s
responsibility for specific risks in the
project.
b Organizational process e. Include information on the specific
assets activity resource needs of the project.

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5. Which section in the OGC Procurement Management Plan refers to the parameters to
choose sellers?
a) Contract Type
b) Procurement Description
c) Procurement Responsibility
✓ d) Source Selection

TOPIC B
Prepare a Procurement Statement of
Work
As a project manager, you have a responsibility to acquire project resources from outside your
organization at a fair and reasonable cost and in an efficient and dependable manner. In this
topic, you will prepare a procurement statement of work.
You’re the project manager for a new brand of organic pasta sauce. In order to meet the prod-
uct launch deadline, you purchase tomatoes from a wholesale distributor in South America.
Unfortunately, the tomatoes that arrive are small, green, and hard. In a panic, you call your
seller to let him know that you wanted large, red, juicy tomatoes to meet the recipe require-
ments. Your seller says, “You ordered tomatoes and we sent you tomatoes.” Clearly describing
the exact type and specifications of the product you want to buy from the supplier in a pro-
curement statement of work ensures you will avoid costly outsourcing errors.

Procurement Statements of Work

Definition: Procurement Statements of
Work (2 Slides)
A procurement SOW is a detailed narrative description of the resources, goods, or ser-
vices that are being sought from external sources to fulfill a project’s requirements. It
is distributed to potential sellers, who will use it to evaluate their capability to perform
the work or provide the services. In addition, the SOW will serve as a basis for devel-
oping the procurement documents during the solicitation process. Information in the
project scope baseline is used to create the procurement SOW. The procurement SOW
goes through multiple rounds of reviews and fixes until the contract award is signed.

Though a procurement SOW is created for each procurement item, multiple products or services can
be grouped and specified in one procurement SOW.

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Example: A Procurement Statement of Work

Figure 12-3: A procurement statement of work for the OGC PM Training Roll-
Out project.

Specifications
Specifications Definition:
Specifications are descriptions of the work to be done or the service or product to be
provided; they define the requirements that must be met in exacting detail. These
descriptions can be in the form of words, pictures, or diagrams. Specifications may
relate to a product’s design, performance, or functionality.

Example: Performance Specifications for a Children’s Toy

Performance specifications identify measurable capabilities that the end product must
achieve in terms of operational characteristics. The performance specifications for a
children’s toy, for example, might specify that the lighted elements of the product must
have a mean time between failures rating of 1,000 hours.

Outsourcing
Outsourcing Definition:
Outsourcing refers to moving beyond the organization to secure services and expertise
from an outside source on a contract or short-term basis; it is done for core work that
has traditionally been done within the organization. It is becoming more common as it
allows businesses to focus more on their core competencies. On the other hand, many
businesses are emphasizing that work should be kept in-house whenever possible, in an
effort to maintain stricter quality controls. As a project manager, you’ll need to work
within the expectations and constraints that result from either situation.

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Example: Outsourcing by a Clothing Manufacturer
A New York clothing manufacturer that has been producing its own buttons for
decades might find that it is more cost-effective to move this part of its operations to
an outside source. By outsourcing the button production to a company in Mexico, the
company might realize significant cost savings while focusing on its core operations.

Make-or-Buy Analysis
Definition: Make-or-Buy Analysis
A make-or-buy analysis is a technique used to determine whether it would be more
cost-effective to produce a product or service in-house or to procure it from an outside
seller. Make-or-buy decisions can significantly impact project time, cost, and quality. In
the case of a buy decision, you must also consider if the product needs to be pur-
chased, leased, or rented.

Example: Make-or-Buy Analysis for Developing Training Materials

A multimedia company was required to deliver several days of training to a client on
the operation of its flagship product. The company’s project team had to decide
whether to increase staff in order to develop the training materials in-house or to
outsource the work to a seller. The company’s budget constraints and relative inexperi-
ence made it cost-effective to contract with an experienced outside firm.

Factors in Make-or-Buy Decisions

When considering a make-or-buy decision, it is important to consider several factors. Factors in Make-or-Buy
Decisions

Factor Consideration
Impact Consider the impact on cost, time, or quality. For instance, if current per-
sonnel must be retrained for services requiring a new skill set, it may be
less expensive to outsource those services.
Ongoing need If the organization will continue to need a specific skill set—even for
future, unrelated projects—it may be a worthwhile investment to train cur-
rent personnel to perform that service.
Learning curve While it may make financial sense to develop an in-house solution, there
may not be enough time to train personnel and/or implement the necessary
policies and equipment to produce that solution.
Cost-effectiveness If the required resources are readily available internally, organizations will
usually use them. However, if the project involves technology, skills, mate-
rials, or resources that are beyond the organization’s capabilities, it may be
cost-effective to hire outside help.

Lease, Rent, or Buy Decisions

Definition: Lease, Rent, or Buy Decisions
A lease, rent, or buy decision refers to a business analysis that determines the most
cost-effective way to procure the necessary equipment for a project. Such a decision is
primarily based on financial analysis.

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LESSON 12
Example: Lease, Rent, or Buy Decisions for Acquiring a High-Speed Copier
A project requires a high-speed copier with collating capabilities. If it is a small, one-
time project and the equipment is very expensive and prone to breaking, it might be
most cost-effective to lease the equipment and take advantage of a service agreement.
But if the project will be ongoing over a period of months and service needs are not
anticipated, it might be more cost-effective to rent a copier for the duration of the
project. For a long-term project requiring extensive copying resources, it might be
most cost-effective to purchase the equipment.

How to Prepare a Procurement Statement of Work

How to Prepare a Procurement
An effective procurement statement of work describes the work being procured in sufficient
Statement of Work (2 Slides) detail so that potential sellers can evaluate their capability to perform this work. In addition,
the procurement SOW will serve as a basis for developing the procurement documents during
the solicitation process.

Guidelines:
To prepare an effective procurement statement of work, follow these guidelines:
• Review the product description to ensure that you fully understand the scope of
the work being procured.
• Consult technical experts to define specifications clearly, concisely, and com-
pletely.
• If your organization has a preferred or mandated procurement SOW format, be
sure to use it and comply with any standards and policies regarding content. If
there is no standard procurement SOW format for your organization, you may be
able to modify a procurement SOW from a previous, similar project.
• Present the information in a logical sequence.
• Use consistent terminology and level of detail throughout the procurement SOW.
• Determine whether any collateral services will be required of the seller as a part
of the contract:
— What are the seller’s performance reporting requirements?
— Will the seller be required to provide any post project operational support?
• Determine the acceptable criteria for the product or service.
• Make sure your procurement SOW includes the following key elements:
— Clear identification of the project name and deliverable name or identification
number.
— A clear description of the deliverable.
— When, where, and how delivery is required.
— Specifications to which the deliverable must be produced and methods for
ensuring that the specifications have been met.
— Acceptance standards for the deliverable.
— Documentation requirements the seller must complete as part of the bidding
process (that is, references, compliance documents, confidentiality agree-
ments, proof of insurance, contractor’s license number, and so on).
— Description of any required collateral services that would support the main
work activities provided for in the contract.

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— Any additional instructions the prospective seller will need to bid on the
item.
• Have the procurement SOW reviewed by a knowledgeable third party to ensure
that it is complete, correct, and understandable.
• Document your make-or-buy decisions.

Example: Preparing a Procurement Statement of Work to Hold a Public Carnival

The City of Butterfield Visitors’ Association has decided to hold a public carnival to
increase tourism to Butterfield. To create a procurement SOW for this project, Rachel,
the project manager, enlisted the help of her organization’s chief negotiator and a law-
yer. She also hired a consultant to define the specifications of the various carnival rides
and attractions that would be utilized.
The organization had no existing preferred SOW format, so the project team
researched SOWs used by other companies for similar events. The SOW is laid out in
a logical sequence and uses consistent terminology throughout.
The statement also defines acceptable service criteria and includes key elements such
as a schedule and acceptance standards. Before sending this SOW to prospective bid-
ders, the project team had the document reviewed and validated by an independent
legal firm.

Skills Necessary to Prepare a Procurement SOW

To prepare a procurement SOW, you will need to identify procurement resources with
the necessary expertise. If there is not a formal contracting group or department within
your organization to support you in your procurement efforts, you’ll need to obtain
those resources and expertise from within your project team. Some of the skills and
expertise required for a full-blown procurement effort include:
• Supplier base and supplier qualification.
• Contracting expertise.
• Negotiating.
• Legal services.
• Knowledge of company policies and forms.

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LESSON 12
DISCOVERY ACTIVITY 12-2
Preparing a Procurement Statement of Work
Data Files:
• OGC Procurement SOW

Before You Begin:

From the C:\085061Data\Processing Project Procurements folder, open the OGC Procurement
SOW document.

Scenario:
During the development of the OGC PM Training Roll-Out project charter and project scope
statements, it had been determined that an outside training seller would deliver the project
management software training due to time constraints and logistical constraints within the
organization. You have updated the procurement statement of work that will serve as a basis
for the procurement team to develop the OGC procurement documents during the solicitation
process. You are meeting with key members of your team to make sure that it includes all of
the work for this portion of the project.

1. In the OGC Procurement SOW document, which components define the specifics of the
work being procured?
The description of the work, the Seller/Trainer Responsibilities list, and exhibits A and B
define the work being procured.

2. Were there any inconsistencies used in the document that might be confusing?
Answers will vary, but may include: “Seller” and “Training Provider” are being used inter-
changeably, and using two terms in this way is confusing.

3. Does the OGC Procurement SOW include any collateral services to be provided by the
client?
The follow-up support would be considered a collateral service in this contract.

4. Does the OGC Procurement SOW describe when, where, and how delivery is required?
The work schedule describes when the work will be delivered. The Seller/Training respon-
sibilities list that the seller must provide a classroom and instructor to accommodate nine
managers. Exhibits A and B describe in detail how delivery is required for both the assess-
ment and training.

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5. Does the OGC Procurement SOW provide specifications on how the assessment must be
produced and methods for ensuring that the specifications have been met?
Under OGC Responsibilities, it states: OGC will provide all necessary electronic and paper
documentation, source files, and imagery required or requested by Seller, which is perti-
nent to the work requested. The Lead Contact will review and validate the pre- and post-
assessment content prior to supplying it to Seller. Seller will need to receive this prior to
the project kick-off. Also, Exhibit B describes the assessment review process.

TOPIC C
Prepare a Procurement Document
You created a procurement SOW for your project. Now, you need to incorporate the SOW into
a procurement document to facilitate acquiring responses from prospective sellers. In this topic,
you will identify the steps involved in preparing a procurement document.
Congratulations! You’re the project manager for an urban redevelopment project that’s receiv-
ing a lot of positive press coverage. There are numerous sellers eager to provide you with the
outsourcing services the project requires. But these sellers will send you different documents if
you don’t specify what information you need and the format for receiving bids. Mastering the
tools and techniques to prepare effective procurement documents ensures that sellers and ser-
vice providers can respond completely and accurately to your project’s contract needs.

Procurement Documents
Definition: Procurement Documents
Procurement documents are the documents that are submitted to prospective sellers and
service providers to solicit their proposals for the work needed. There are different
types of procurement documents. The type of document used will depend on the type
of project and the product or service being procured.

Example: An RFP
A Request for Proposal is a specific type of procurement document. A company seek-
ing a new advertising agency for a marketing campaign would send out RFPs to
several agencies. The RFP would describe the company’s marketing needs and ask for
proposals that describe the agencies’ qualifications and past campaigns, the key
employees’ work history, and their approach to creating a campaign. The RFP would
request a quote for services provided and an outline of a marketing strategy.

Types of Procurement Documents

Many organizations use procurement document terms interchangeably. It is important to be Types of Procurement
sure that you understand the terms and definitions used by your organization. Documents

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Term Description
Request for Bid (RFB) Commonly used when deliverables are commodities for which
there are clear specifications, and when price will be the pri-
mary determining factor. Submitted to selected sellers for a
formal bidding process. Some negotiation may be anticipated.
Request for Quotation (RFQ) Like an RFB, commonly used when deliverables are commodi-
ties for which there are clear specifications, and when price will
be the primary determining factor. Unlike an RFB, this solicited
price quote is used for comparison purposes and is not a formal
bid for work. This may allow for some negotiation of price.
Request for Proposal (RFP) Commonly used when deliverables are not well-defined or when
other selection criteria will be used in addition to price. Sellers
are often encouraged to offer suggestions and alternative
approaches to meet the project goals. Preparing the RFP is time
consuming and costly for the seller. Negotiation is expected.
Since it is time-consuming and expensive to create a proposal in
response to an RFP, it is typical that not all the sellers solicited
will respond.
Invitation for Bid (IFB) Sometimes used interchangeably with RFP, an IFB is most com-
monly used when deliverables are commodities for which there
are clear specifications and when the quantities are very large.
The invitation is usually advertised and any seller may submit a
bid. Negotiation is typically not anticipated.
Request for Information (RFI) Commonly used to develop lists of qualified sellers and to gain
more input for resource availability.

Contracts
Contracts Definition:
Contracts are mutually binding agreements that detail the obligations of both parties;
in terms of procuring work, they relate to both the buyer and the seller. While con-
tracts are customized for each agreement, they tend to fall into a number of standard
patterns, such as fixed price, cost-reimbursable, or Time and Material (T&M) contracts.

Example: A Fixed-Price Contract

A project team is procuring the manufacturing unit for its new line of footwear. After
seeking the advice of subject matter experts and reviewing historical records of similar
projects, the team estimates the manufacturing cost at $25,000. Including the manufac-
turer’s fee of $10,000, the entire contract will be worth $35,000. Additionally, the
contract states that the manufacturer will receive $5,000 if they complete at least three
of the four project milestones on time.
This is an example of a fixed-price contract because it establishes a definitive deter-
mined total price for a product or service. In addition, this contract has an incentive for
the seller to meet or exceed schedule objectives.

Components of Contracts
Components of Contracts
In general, any contract must include these elements, at a minimum:

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 LESSON 12
• Description of the project, its deliverables, and scope.
• Delivery date or other schedule information.
• Identification of authority, where appropriate.
• Responsibilities of both parties.
• Management of technical and business aspects.
• Price and payment terms.
• Provisions for termination.
• Applicable guarantees and warranties.
• Limits of liabilities or damages.
• Indemnity or compensation paid for losses incurred.
• Insurance requirements.
• Nondisclosure, patent indemnification, noncompete, or other applicable legal statements.
• Other applicable terms and legal requirements.

Types of Contracts
Three common types of contracts are used in the procurement of goods and services. Types of Contracts

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LESSON 12
Contract Type Description
Fixed price Also called a lump sum contract, it establishes a total price for a
product or service. The seller agrees to perform the work at the
negotiated contract value. This value is based on anticipated costs
and profit, as well as a premium to cover unforeseen problems.
The contract may include incentives for meeting requirements
such as schedule milestones. Fixed-price contracts provide maxi-
mum protection to the buyer but require a long time for
preparation and bid evaluation. Since this type of contract is tied
to a fixed cost, it is most suited to projects with a high degree of
certainty about their parameters.
Types of fixed-price contracts include:
• Firm Fixed Price contracts (FFP): This is a commonly used
contract type favored by most buying organizations because
the price for products or services is set at the outset and not
subject to change unless the scope of work changes.
• Fixed Price Incentive Fee contracts (FPIF): This fixed-price
contract is flexible in that it allows for deviation from perfor-
mance. Financial incentives are tied to achieving metrics that
are agreed to earlier.
• Fixed Price with Economic Price Adjustment contracts
(FP-EPA): This is a fixed-price contract type with special pro-
vision to allow pre-defined final adjustments to the contract
price due to changed conditions, such as inflation changes, or
cost increases or decreases for specific commodities such as
fuel, and for currency fluctuations. An FP-EPA contract pro-
tects both buyer and seller from external conditions beyond
their control. It is used whenever the seller’s performance
period spans a considerable period. The Economic Price
Adjustment (EPA) clause must relate to a reliable financial
index, which is used to precisely adjust the final price.

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Contract Type Description
Cost-reimbursable This contract provides sellers a refund of the expenses incurred
while providing a service, plus a fee representing seller profit.
Incurred costs are generally classified as direct costs (those
incurred for the project), or indirect costs (costs allocated to the
project by the organization as a cost of doing business). These
contracts sometimes include incentives for meeting certain objec-
tives, such as costs, schedule, or technical performance targets.
This approach is tied to the actual cost to perform the contract,
and therefore is most suitable if project parameters are uncertain.
The cost-reimbursable contracts include:
• Cost Plus Fixed Fee contracts (CPFF): This contract ensures
that the seller is reimbursed for all allowable costs for per-
forming the contract work. The seller receives a fixed fee
payment calculated based on the initial estimated project costs.
This fixed fee does not change due to seller performance.
• Cost Plus Incentive Fee contracts (CPIF): This contract
ensures that the seller is reimbursed for all allowable costs for
performing the contract work. The seller also receives a prede-
termined target fee. In addition to this, there is a provision of
an incentive fee payable to the seller, which is based on
achieving certain performance objectives as set forth in the
contract. In case the final costs are lesser or greater than the
original estimated costs, then both the buyer and seller share
the costs from the difference based on the pre-negotiated cost
sharing formula; for example, an 80/20 split over or under
target costs based on actual performance of the seller.
• Cost Plus Award Fee contracts (CPAF): This contract
ensures that the seller is reimbursed for all legitimate costs.
The majority of the fee is earned based on the satisfaction of
certain broad subjective performance criteria defined and
incorporated into the contract. The determination of the fee is
based on the buyer’s subjective determination of seller perfor-
mance and is generally not subject to appeals.
Time and Material (T&M) This type of contract includes aspects of both fixed-price and
cost-reimbursable contracts. The buyer pays the seller a negoti-
ated hourly rate and full reimbursement for materials used to
complete the project.
This contract is used for staff augmentation, acquisition of
experts, and any outside support when a precise statement of
work cannot be quickly prescribed.
Many organizations include not-to-exceed values and time limits
in T&M contracts to prevent unlimited cost growth.

Point of Total Assumption (PTA)

The Point of Total Assumption (PTA) is a price determined by a Fixed Price Incentive
Fee contract (FPIF) above which the seller bears all the loss of a cost overrun. It is
also known as the ″most pessimistic cost″ because it represents the highest point
beyond which costs are not expected to rise, given reasonable issues. If costs go
beyond the PTA, they are assumed to be due to mismanagement rather than a worst-
case set of difficulties. The seller bears all of the cost risk at PTA and beyond.

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LESSON 12
Any FPIF contract specifies a target cost, a target profit, a target price, a ceiling price,
and one or more share ratios. The PTA is the difference between the ceiling and target
prices, divided by the buyer’s portion of the share ratio for that price range, plus the
target cost. PTA = ((Ceiling Price - Target Price)/Buyer’s Share Ratio) + Target Cost.
For example:
Target Cost: $60,000
Target Profit: $6,000
Target Price: $63,000
Ceiling Price: $65,000
Share Ratio: 70% buyer and 30% seller
PTA = (($65,000 - $63,000) / 0.7) + $60,000 = $62,857

Source Selection Criteria

Source Selection Criteria Definition:
Source selection criteria are the standards used to rate or score proposals, quotes, or
bids and form a part of the procurement solicitation documents. Some criteria are
objective and can be readily demonstrated and measured. Other criteria are subjective
and open to different interpretations. Objective criteria tend to be much more specific
than subjective criteria.

Example: Criteria
This table shows examples of objective and subjective criteria.

Objective Criteria Subjective Criteria

Ph.D. chemist with at least five Experienced laboratory chemist with strong analytical
years experience in chromato- skills.
graphic research.
80,000–90,000 square-foot storage Ample square foot storage area near Dallas-Fort Worth
area within three miles of the Airport.
Dallas-Fort Worth Airport.

The subjective criteria statements leave room for interpretation as to what is meant by
“experienced” and “strong.” Conversely, the requirement of a Ph.D. with five years
experience is very specific and not open to interpretation, making it an objective crite-
rion.

Sample Source Selection Criteria

Sample source selection criteria include:

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 LESSON 12
Source Selection Criteria Description
Understanding of need Does the seller’s proposal effectively address the procure-
ment statement of work while demonstrating the clear
understanding of the needs?
Overall or life-cycle cost Does the selected seller produce the lowest total cost of
ownership, which includes the purchase cost plus operating
cost?
Technical capability Does the seller have or is the seller expected to acquire the
technical skills and knowledge needed for the project?
Management approach Does the seller have or can the seller reasonably develop
the management processes and procedures to ensure a suc-
cessful project?
Technical approach Do the seller’s proposed technical methodologies, tech-
niques, solutions, and services meet the project
requirements?
Warranty Does the seller provide warranty for the final product and
for what duration?
Financial capacity Does the seller have or is the seller expected to obtain the
necessary financial production capacity and interest
resources?
Production capacity and interest Does the seller have the capacity and interest to meet the
project requirements?
Business size and type Does the seller’s company meet a specific category of busi-
ness defined by the buyer, or established by a governmental
agency, and included as a condition in the contract? Catego-
ries could include small, women-owned, or disadvantaged
small businesses.
Past performance of sellers Does the company have past experience with selected sell-
ers?
References Does the seller provide references from previous customers
verifying the seller’s work experience and compliance with
contractual requirements?
Intellectual property rights Are intellectual property rights established by the seller in
work processes or services to be used for the project?
Proprietary rights Are proprietary rights ensured by the seller in the work pro-
cesses or services to be used for the project?

How to Prepare a Procurement Document

An effective procurement document provides all the necessary information so that prospective How to Prepare a Procurement
sellers can respond completely and accurately to your solicitation. A well-crafted procurement Document (2 Slides)
document will elicit consistent and comparable responses and allow sellers to suggest other
ways to satisfy the requirements of the product or service.

Guidelines:
To create a thorough procurement document, follow these guidelines:

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LESSON 12
• Examine the procurement need and determine which procurement document to
use.
• Use standard procurement forms or templates if available.
• Develop a strong set of source selection criteria based on the real needs of your
project.
— Objective criteria will probably be required when requesting bids for most
goods and facilities.
— However, you may find that using objective criteria alone will be too restric-
tive when it comes to selecting resources such as a video producer, graphic
artist, or central office site.
• Leave yourself some room to select from a range of capabilities and experience to
get the best fit possible.
• Determine how you want the prospective sellers to respond:
— Must the response be provided on a specific form?
— Is there a specific format that must be followed?
— What is the deadline for proposal submissions?
— Is there any additional documentation that must be provided?
— Where and to whom should the proposals be sent?
• Examine the relevant SOW and make any necessary modifications that may have
been identified during plan contracting.
• Ensure that the procurement document is structured to facilitate consistent, com-
parable responses from sellers. It should include, at the minimum, the following
key elements:
— Reference to (or inclusion of) the relevant SOW. You may also include other
relevant project documents, such as the WBS or network diagram, as appro-
priate.
— Clear instructions for how the prospective seller should respond.
— Any required contractual provisions, such as confidentiality agreements and
certifications.
— Criteria by which proposals will be evaluated.
• In addition, your procurement document may include:
— Listing of qualified sellers expected to bid (to drive down costs).
— Bidders’ conferences.
— Supplier payment plan.
— How change requests will be managed.
• Take into account any regulations that may define the required structure of pro-
curement documents for government contracts.

Example: Prepare a Procurement Document

The Arithmetic on a Stick project team is preparing a procurement document for the
manufacturing of their product. After reviewing the project schedule and the scope
statement, the team examines the manufacturing needs to determine which type of pro-
curement document to use.

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Since the product has well-defined specifications and a tight production schedule, and
prospective sellers will primarily be evaluated on price, the team agrees that they
should use a Request for Quotation (RFQ). They use their organization’s standard RFQ
form to prepare the RFQ for this procurement project.
Before including the SOW in the procurement document, the team reviews it to ensure
that it accurately reflects the procurement needs and makes minor modifications that
they identified as necessary during solicitation planning. The team also develops a set
of objective and subjective evaluation criteria that will be used to score and rank the
quotations they receive. High on the list of criteria is a competitive price.
The RFQ includes all of the key elements listed in the guidelines, as well as a descrip-
tion of how change requests will be managed. In an effort to drive down costs, the
RFQ also includes a list of sellers expected to bid on the solicitation.

DISCOVERY ACTIVITY 12-3

Preparing a Procurement Document
Scenario:
It is OGC’s policy that all project managers must get approval from the procurement depart-
ment for all external procurements. You are meeting with the OGC procurement manager to
discuss the procurement documents that will be created based on the SOW that you had previ-
ously prepared. The manager has asked you to come to the meeting prepared with an outline
of the SOW that is to be included in the procurement documents. You are now ready to begin
the preparation of the procurement documents with the procurement manager.

1. Based on the scenario, what would be a logical first step in creating the procurement
document?
a) Determine how you want training sellers to respond.
b) Define the training specifications.
✓ c) Determine the most appropriate procurement document format to use.
d) Examine the project SOW and make any necessary changes.

2. The assessment development, the project software training needs, delivery of the
training, and costs will be the determining factors in your choice of training providers.
What type of procurement document would be most appropriate to use in this situa-
tion?
a) Request for Quotation
✓ b) Request for Proposal
c) Request for Bid
d) Invitation for Bid

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3. Which criterion for evaluating training sellers is subjective?
a) Seller must provide an instructor with a minimum 3 years of project management
software training.
✓ b) Seller must be creative and flexible about changes made to the design of the assess-
ment documents, even in late production phases.
c) Seller must have a minimum 20 years of collective training experience on staff.
d) Seller must have produced at least three projects of similar scope in the last 10
years.

TOPIC D
Examine the Conduct Procurements
Process
You are familiar with preparing a procurement document. Your project is now in the executing
process group and you need to procure the external resources that are required by your project.
In this topic, you will examine the conduct procurements process.
Procuring products and services from external suppliers requires identifying suppliers, obtain-
ing bids or proposals from them, and awarding contracts based on their evaluation. All
procurements for the project must be done within the specified parameters of time, cost, and
quality so as to ensure that the project meets the stakeholder’s requirements. Having a thor-
ough knowledge of the procurements process will ensure that you are able to identify the
suitable seller within the time frame laid down for executing the project.

The Conduct Procurements Process

The Conduct Procurements
In the conduct procurements process, project managers will obtain seller responses, select a
Process seller, and award contracts to the identified seller for the procurement of the required product,
service, or result from the seller. In this process, the project management team will receive
bids or proposals from sellers, apply predefined selection criteria to select sellers who are
qualified to perform the work, rank all proposals using weighted evaluation scores, conduct
negotiations with the selected sellers, and finally select a single seller who is required to sign a
standard contract that will meet the procurement requirements of the project.

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Figure 12-4: The conduct procurements process.

Conduct Procurements Inputs

There are several inputs for the conduct procurements process.

Input Description
Project management plan Describes every management step of the procurement process
starting with development and ending with closing the contract.
Procurement documents Contain information that you provide to prospective sellers so that
they can completely and accurately respond to your request.
Source selection criteria Can include examples of existing products from the supplier, ser-
vices, the supplier’s history with the organization and other
organizations, or results from the evaluation of the supplier’s
capabilities and quality of their products.
Qualified seller list Contains the names of prospective sellers who are pre-approved
by the organization based on past experience.
Seller proposals A response submitted by a potential seller that is prepared in
accordance with the requirements stated in the procurement docu-
ments. The proposal should demonstrate an understanding of the
procurement need, describe the sellers’ ability to provide the ser-
vice or product, and detail the price for delivering the desired
goods and/or services.
Project documents Project documents used in conducting the project procurement
include the risk register and the risk-related contract decisions
document.
Make-or-buy decisions Decisions about which resources, services, or products will be
procured in-house or purchased by the organization.
Teaming agreements The legal contractual agreements between the organization and
one or more external entities to form a partnership, joint venture,
or other arrangement between the parties. Teaming agreements
define the buyer-seller roles of parties involved in the project.

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Input Description
Organizational process assets A list of sellers (or sometimes called bidders) who can be asked to
bid, quote, or propose work. These lists give information about
sellers’ past experience. These may be previously qualified sellers
or a preferred sellers list.

Conduct Procurements Tools and Techniques

Project managers can use several tools and techniques to conduct project procurements.

Tools and Techniques Description

Bidder conferences These conferences are conducted by the buyer prior to submissions
of a bid or proposal by the sellers. The buyer explains the require-
ments, proposed terms, and conditions. Sellers clarify their queries
during this meeting. The buyer facilitates the conference to ensure
that all prospective sellers have a clear and common understanding
of the technical and contractual requirements of the procurement.
Bidder conferences are also called vendor conferences, pre-bid con-
ferences, or contractor conferences.
Proposal evaluation techniques A set of methods to evaluate, shortlist, and then select the seller.
The fundamental part of any evaluation technique is the setoff
evaluation criterion. The evaluation techniques may suggest subjec-
tive or objective criteria or a combination of both. Though a
weighting system is the most commonly used evaluation technique,
short-listing (screening) or independent estimating are also used in
combination.
Independent estimates Usually, you’ll have at least a general idea of what you expect the
price to be. If a proposal comes in at an unexpectedly high or low
price, you may want to obtain an independent estimate to verify
that the proposed price is reasonable and responsible. The Purchas-
ing Department is a good source for independent estimates. For
large projects, they will usually prepare an independent estimate
before the procurement documents go out, so they will have sound
current data against which to evaluate the proposals received.
Expert judgment Used by a multi-discipline review team to evaluate seller proposals.
The review team has expertise in the topics covered in the procure-
ment documents and the proposed contract.
Advertising Companies regularly post advertisements in newspapers, magazines,
business journals, television, and other media, requesting sellers for
bids and proposals. Advertising is a mass method for seeking
responses from prospective sellers.
Internet search The Internet is used to quickly search for information on the avail-
ability and prices of commodities, components, and off-the-shelf
items that meet the project procurement requirements.
Procurement negotiations Procurement negotiation is the process of bargaining to come to a
mutual agreement regarding the terms and conditions of a contract.

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Conduct Procurements Outputs
Several outputs are created by the conduct procurements process.

Output Description
Selected sellers Sellers who have been judged based on the outcome of the pro-
posal or bid evaluation. These sellers include those who have
negotiated an outline of a contract, which will turn into the
actual contract when the deal is made.
Procurement contract award A mutually binding agreement that details the obligations of the
buyer and seller. One is given to each selected seller.
Resource calendars The quantity and availability of resources and documented dates
on when each resource can be active or idle.
Change requests Certain changes to the project management plan, its sub-plans,
and other components may result from the conduct procure-
ments process. Any requested changes are sent for review and
disposition in the integrated change control process.
Project management plan updates Elements of the plan updates include the cost baseline, scope
baseline, schedule baseline, and the procurement management
plan.
Project document updates Various documents that require updates include the requirements
documentation, the requirements traceability documentation, and
the risk register.

Components of the Procurement Contract Award

Major components of the contract document include:
• Statement of work or deliverables
• Schedule baselines
• Period of performance
• Performance reporting
• Roles and responsibilities
• Seller’s place of performance
• Place of delivery
• Pricing
• Payment terms
• Inspection and acceptance criteria
• Warranty
• Product support
• Limitation of liability
• Fees and retainage
• Penalties
• Incentives
• Insurance and performance bonds
• Subordinate subcontractor approvals

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• Change request handling
• Termination and Alternative Dispute Resolution (ADR) mechanisms

Qualified Sellers
Qualified Sellers Definition:
Qualified sellers are sellers who are approved to deliver the products, services, or
results based on the procurement requirements identified for a project. The list of
qualified sellers can be obtained from historical information about different sellers who
delivered the resources required for prior projects executed in your organization.
If the resources you require are new to the organization, you may need to do some
research in collaboration with your Purchasing Department to identify qualified sellers
for each resource. This research will generate a list of possible sellers, and you would
need to interview the prospective sellers, visit their work sites, review work samples,
interview their references, check with certification boards, or use other approaches to
validate whether they qualify as sellers for the procurement requirements.

In case further information is required about the prospective sellers, you can send a Request for Infor-
mation (RFI) to each of them to gather information about their capabilities.

Example: Qualified Sellers Selection by OGC Corporation

OGC Corporation invites bids from sellers for setting up a Wi-Fi network for their new
corporate office in New York. The Wi-Fi network needs to meet all specifications of
the newly announced governmental regulations. On reviewing the list of their old sup-
pliers, OGC found that none of the suppliers could provide them with a Wi-Fi network
that could enable them to meet the governmental regulations.
An advertisement requesting the submission of information about prospective sellers
was announced in all the national dailies and business journals. There was an over-
whelming response from a large group of sellers. Based on the sellers’ information,
OGC Corporation was able to generate a list of 10 prospective qualified sellers. The
qualified sellers were then called in for a conference, where each seller was asked to
demonstrate their capability in delivering the required product. At the end of the pre-
sentation, Rudison Technologies Ltd. and Janrex Inc. were selected as the qualified
sellers for the Wi-Fi network installation, as they met most of the requirements and
standards prescribed by OGC corporation. OGC later on sent the RFP to these two
organizations and continued the process of seller selection.

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Figure 12-5: A qualified sellers list for the Computer Network Upgrade
project.

Request for Information (RFI)

A Request for Information (RFI) is a buyer generated document to solicit information
about prospective sellers. The RFI helps gather information from the seller on various
parameters such as the seller organization’s history, balance sheets, type of business
(family owned, private, or publicly listed, and so on), family background, directors’ or
owner’s background, succession plans, past 3 years’ bank statements, plant capacity,
and other factors that may assist in determining the seller’s qualifications.

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ACTIVITY 12-4
Examining the Conduct Procurements Process
Scenario:
As the project manager for OGC, you are in the process of outsourcing a major software
effort, the OGC Warehouse Management Software project, and the associated testing by the
subcontractors, which will take place prior to the corporate internal testing to verify content
and operational aspects. Included in this contract should be the “usability” of the resulting
product. The schedule maintenance is as important to you as is the quality of the deliverables.
The details of the product to be delivered are as firm as they can be at the present time, but
are subject to change requests under contract change control. Before you conduct your project
procurements, you would like to check your understanding of the conduct procurements pro-
cess.

1. You have a list of 10 potential sellers and have to narrow the list down to a more man-
ageable number of candidates. What will be the process to create a “short list” of
sellers that you will consider?
Based on the qualified sellers list, which lists sellers from previous projects who have
been pre-screened for their qualifications and their track record of performance, you can
narrow down the potential sellers to a more manageable number of candidates and cre-
ate a “short list” of the sellers.

2. You now have a short list of sellers. Name some of the selection criteria you might use
in finalizing the selection of the seller.
Some of the possible selection criteria might be, but are not limited to:
• Price—remembering to re-examine the very high or very low responses as the seller may
not have fully understood what was being requested.
• Working relationships—if your company has done business with a seller, are there posi-
tive or negative comments recorded regarding the work relationship?
• Prohibited bidder—does your company have a list of sellers that are no longer accept-
able for use as a subcontractor? Are there relatives or close friends of executives who
have some association with the bidder? This needs to be examined closely for a potential
conflict of interest and a seller may have to be deemed unsuitable.
• Product scalability—check with technical experts in your company on the scalability of
the solution suggested by the seller.
• Product maintainability—check on the maintainability of the solution suggested by the
seller.
• Product support commitment—evaluate whether the seller provides for adequate opera-
tional support for the product.

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3. Included in the contract should be performance criteria, on both schedule and costs,
expected of the subcontractor. What is some of the information that you would want
to see in the way of performance reporting by the subcontractor?
Answers will vary, but may include: milestone or deliverable tracking to show compliance
to requested schedule and cost constraints. You could also include test reports, test data
documentation, and certification requirements to ensure product quality requirements
are met.

4. Why might you hold a bidder conference in this situation?

To ensure that all the sellers have common understanding about the technical aspects of
the RFP and the related process, including the required forms and the submission process.

TOPIC E
Obtain Responses from Sellers
During project planning, you prepared a procurement document. Now, you are ready to obtain
bids from prospective sellers to meet project purchasing requirements. In this topic, you will
obtain responses from sellers.
Obtaining proposals or bids from sellers provides project stakeholders with the confidence that
work products will meet project objectives for a fair and reasonable cost. Having a thorough
knowledge of the steps required for requesting seller responses ensures that you obtain rel-
evant, accurate, and appropriate responses from prospective sellers.

How to Obtain Responses from Sellers

A well crafted seller response request, sent to carefully selected sellers, ensures that you obtain How to Obtain Responses
relevant, accurate, and appropriate responses from prospective sellers. from Sellers

Guidelines:
To obtain responses from sellers, follow these guidelines:
• Gather and review all of your procurement documents for accuracy and complete-
ness.
• If necessary, obtain or develop a qualified sellers list.
— If your organization has a centralized Purchasing Department, there will often
be lists of qualified or approved sellers available, or at least some historical
information about different sellers. If the resources are similar to ones pro-
cured by your organization in the past, you may be able to tap into some
expert judgment and historical information about different sellers and their
track records. Try talking with sales and marketing people in your company;
they may have contacts or know other sources to try.
— You may also consider talking to the people in your company who will be
using the resource being sought to find out more information about their
needs.

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— If the resource you require is new to your organization, you may need to do
some research in collaboration with your Purchasing Department to identify
qualified sellers for that resource. You could try to search in locations that
include Internet searches, telephone and business directories, library services,
and trade and professional organizations.
This research may only generate lists of possible sellers. You will then need
to go into more depth to learn if these sellers are actually qualified to deliver
what you need. The additional qualification step could involve interviewing
the prospective sellers, visiting their work sites, reviewing work samples,
interviewing their references, checking with any available certification
boards, or other approaches to ensure that they are indeed qualified candi-
dates.
• Determine how and from whom you will request seller responses.
— If your list of qualified sellers is sufficient for the work being procured, you
may decide to send your procurement documents to just those prospective
sellers.
— If your list is insufficient, you may want to advertise to expand the list of
potential sellers. If your project is a sub-contract to a large government
project, you may be obliged to advertise the request. Check with your legal
consultants or Purchasing Department experts on wording for the advertise-
ment. Most government projects over a specified dollar value require that
bids be publicly advertised to ensure that no supplier has unfair advantage
over others. Such notification may be in formats that include local newspa-
pers, government publications, professional journals, and other appropriate
venues.
• If necessary, hold a bidder conference to allow prospective sellers to ask questions
and get clarification about the deliverables and the requirements for preparing
their responses.
— The questions raised at a bidder conference should be of great interest to the
team who prepared the original procurement documents. If there are common
misinterpretations of wording, or if important information is found to be
missing, try to capture this so you will do a better job in the future. You may
need to go back to the standard documents to include a cue to cover that
information.
— If the bidder conference points out serious problems that could cause the
resulting proposals to be in error, you may need to amend the original pro-
curement documents and send the amended versions to all the sellers
originally provided with the documents. If this is done, the sections amended
must be clearly identified, and the areas of difference annotated clearly.
• Send the request for seller responses to the identified prospective sellers. The type
of request sent to prospective sellers is dependent on the procurement criteria set
for the project. The types of request sent to obtain responses include:
— Request for Bid (RFB)
— Request for Proposal (RFP)

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Example: Obtaining Sellers Responses for the Wi-Fi Network Project
Mark Anderson, the project manager for the OGC Corporate Office Wi-Fi Network
project, reviews procurement documents for the project to ensure that the requirement
specifications are specified in suitable and sufficient detail. Based on the qualified sell-
ers lists obtained from the Purchasing Department, Mark is able to identify prospective
sellers from the existing list. Knowing that there might be other sellers in the market
who fulfill the project procurement requirements, Mark seeks to expand his seller list
by advertising in local newspapers and professional journals.
A number of sellers of the Wi-Fi technology respond to these advertisements and add
to Mark’s list of sellers. From the list, Mark now proceeds to shortlist and identify 15
prospective sellers who meet the project’s procurement criteria.
Mark holds a bidder conference, which is attended by all the prospective sellers. Dur-
ing the bidder conference, a number of clarifications are sought by the sellers
regarding the procurement specifications, and these are addressed by the project team.
The updated procurement documents are now sent along with an RFP to each prospec-
tive seller. Sellers submit their bids in response to the RFP sent to them.

DISCOVERY ACTIVITY 12-5

Obtaining Responses from Sellers
Scenario:
Working with David Anderson, OGC’s Procurement Manager, you have planned the OGC PM
Training Roll-Out project’s external training provider procurement and you are ready to man-
age this phase of work by soliciting proposals from prospective sellers. An RFP has been
created and the procurement manager has approved it for release to potential training provid-
ers. The next step is to send the RFP to prospective training providers.

1. What do you think would be the most appropriate method of finding qualified training
providers for the OGC PM Training Roll-Out project?
Answers will vary, but may include: OGC may have a list of training providers that the
company has used in the past.

2. There are only two local training providers in a 20 mile radius of OGC. You decide to
expand your seller list outside of your local area. What methods would you use to do
this?
Answers will vary, but may include: perform an Internet search, review professional jour-
nals, and contact the project software sales representative. Once you compile your short
list, you might consider asking them for references.

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LESSON 12
3. Based on the scenario, would you conduct a bidder conference? Why or why not?
Answers will vary, but may include: based on the initial feedback and queries that you
get from various sellers in response to your RFP, you may decide to conduct a bidder con-
ference to allow prospective sellers to ask questions and to get clarification about the
deliverables and the procurement requirements for preparing their responses. However,
if the proposals from various sellers indicate a proper understanding of the requirements,
you would not require a bidder conference, as this incurs additional costs, time, and
effort that need not be expended.

TOPIC F
Determine Project Sellers
As a result of requesting seller responses, you now have proposals, quotes, or bids from pro-
spective sellers. Now, you can determine which seller best meets your project’s time, cost, and
quality commitments. In this topic, you will identify the steps involved in determining project
sellers.
You received bids from three web designers who would like to work with you on your
website. You have worked with two of them in the past. The third person was recommended to
you by a senior level executive in your company. All three bids are within your price range.
Because rolling out your new website is a high profile project for the business as a whole, you
can’t afford to make a mistake by selecting the wrong seller. Using best practices to select the
best seller helps you avoid making critical errors in judgment before signing a contract to pur-
chase products or services.

Weighting Systems
Weighting Systems (2 Slides) Definition:
A weighting system is a method for quantifying qualitative data to minimize the influ-
ence of personal bias on source selection. By assigning numerical weights to
evaluation criteria, you can objectively prioritize the criteria that best meet the needs
of your project.

Example: Weighted Scorecard

A weighted scorecard is one type of weighting system. In a weighted scorecard, evalu-
ation criteria are grouped in general categories and each category is given a numerical
weight. The seller is rated on a scale of zero to five for each of the technical criteria.
These numbers are totaled and then multiplied by the weighting factor to determine the
weighted score for that category.
In this example, the company received scores of four, three, and five in the three tech-
nical criteria for a total score for the technical category of 12 out of a possible 15.
When multiplied by the weighting factor, the weighted technical score is 240 out of a
possible 300. The weighted score for each of the other categories is calculated in a
similar manner. Then all the weighted scores are totaled to obtain a grand total score.

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 LESSON 12

Figure 12-6: A sample weighted scorecard.

Procurement Negotiations
Procurement negotiation is the process of bargaining to come to a mutual agreement regarding Procurement Negotiations
the terms and conditions of a contract. Before a contract is signed by both parties, a number of
stages of procurement negotiation are conducted between the concerned parties to arrive at a
consensus on the terms and conditions of the contract.
There are five different stages for contract negotiation.

Stage Description
Introduction All parties become acquainted and the overall attitude of the negotiation is
established; this tone is largely set by the buyer’s team leader—normally, the
person with authority to sign the contract will lead the contract negotiation
team.
Probing Each side attempts to learn more about the other’s real position.
Bargaining Give-and-take discussions take place to arrive at the best possible agreement
for all.
Closure The tentative agreement is revised and everyone has an opportunity to tweak
the results.
Agreement The team tries to ensure that all parties clearly understand and agree to all
terms and conditions of the contract.

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Term vs. Completion Contracts
Term vs. Completion Contracts Definition:
A term contract engages the seller to deliver a set amount of service—measured in
staff-hours or a similar unit—over a set period of time. A completion contract stipu-
lates that the work will not be considered complete until the seller delivers the product
to the buyer and the buyer accepts the product.

Example: Types of Contracts

Salt Lake City, Utah, hosted the 2002 Winter Olympics and needed many contracts for
sellers and service providers. Term contracts would have been appropriate for the inde-
pendent security firms that were contracted to provide professional security services for
the duration of the Olympic events. Completion contracts would have been appropriate
for the construction companies hired to improve interstate roads and build a new light
rail system to handle the increased area traffic.

How to Determine Project Sellers

How to Determine Project Procedure Reference: Determine Project Sellers
Sellers
To determine a project seller:
1. Assign a numerical weighting factor to each evaluation criterion or category of
criteria based on its relative importance to the success of the project.
2. Develop or obtain a rating scale for scoring the criteria.
3. Score each prospective seller on each criterion using the rating scale.
4. Multiply the seller’s score by the weighting factor for each criterion or sum of the
criteria in a category.
5. Add the final scores.
6. Select the seller with the highest score.
7. If necessary, negotiate with the seller on the terms and conditions of the contract.
8. It is a good idea to identify the seller who would be your second choice in case
negotiations fall through with your first choice.

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DISCOVERY ACTIVITY 12-6
Determining a Project Seller
Data Files:
• Blank OGC Seller Scoring Sheet
• OGC Seller Proposal Notes

Scenario:
You are the project manager for the OGC PM Training Roll-Out project. You have received
the proposals from prospective training providers and now it is time to determine which pro-
vider has met the criteria outlined in the RFP:
• Seller must provide an instructor with a minimum 3 years of project management
software training.
• Seller must be creative and flexible about assessment design changes, even in late
production phases.
• Seller must have a minimum 20 years of collective training experience on staff.
• Seller must have produced at least three projects of similar scope in the last 10
years.
Based on discussions that you have had with the procurement manager, you don’t expect the
costs to exceed $35,000.

1. You decide to use a weighted system to find a qualified seller. What would be your
first step?
✓ a) Assign a numerical weighting factor to each evaluation criterion.
b) Score each prospective seller based on the rating scale for criteria.
c) Select the seller with the highest score.
d) Develop a rating scale for scoring the criteria.

2. For each evaluation criterion, you have specified a rating scale. What should you do
next?
a) Add the scores of the scale.
b) Select the highest rated score.
✓ c) Score each prospective seller on each criterion using the rating scale.
d) Multiply the seller’s score by the weighting factor for each criterion or sum of the cri-
teria in a category.

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3. You have selected a seller. You and the procurement manager are meeting with the
seller to negotiate the contract. The procurement manager asks the seller if they will
use an in-house instructor or outside contractor for the project software training.
Which part of the negotiating phase are they engaged in?
a) The introduction stage
✓ b) The probing stage
c) The bargaining stage
d) The agreement stage

4. From the C:\085061Data\Processing Project Procurements folder, open the OGC Seller
Proposal Notes and Blank OGC Seller Scoring Sheet documents. Based on the scenario
and the seller notes provided, complete the seller scoring sheet.
You can either have the
students do this activity Enter your rating for each seller’s selection criteria. Using the Weighting Factor provided,
individually or divide the class calculate the Score for each criterion (multiply the Rating by the Weighting Factor). Once
into groups of three or four. you are done with the calculation of the scores for all sellers, calculate the Total Score
Allow up to 15 minutes to for each seller.
complete the activity, then
discuss the answers with the
whole class for approximately 5. Compare your Blank OGC Seller Scoring Sheet document with the Completed OGC
10 minutes. Seller Scoring Sheet document in the C:\085061Data\Processing Project Procurements\
Solutions folder.
Ratings for each seller are determined by predetermined selection criteria and the evalu-
ation of the seller proposals that were received from different sellers. Scores were
calculated based on the weighting factors and totals for scores were calculated for each
seller. You have performed a quantitative evaluation of the seller proposals.

6. Based on your quantitative evaluation of the seller proposals, which seller would you
choose for your project?
Answers will vary, but may include: based on the total scores that you calculated using
the weighting system, you now possess a quantitative evaluation of each seller. The final
total scores will serve as an objective parameter in the comparison and selection of the
seller for your project. In this case, based on the total scores, you may select Rudison
Technologies Ltd (RTL) as they posted a score of 390, which is the highest score among
the three sellers.

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TOPIC G
Administer Project Procurements
You selected a vendor to fulfill your project’s procurement requirements. Now, you need to
ensure that the vendor’s performance meets the contract requirements. In this topic, you will
identify the steps involved in the administer project procurements process.
It is very important that you must understand your and your sellers’ rights and responsibilities
under the contract, whether or not you are involved in procurement negotiations, so that prob-
lems can be worked out with a minimum impact on project goals. Knowledge of project
procurement administration will ensure that you do not take actions that could undermine your
organization’s legal position, should litigation be necessary in the later stage.

The Administer Procurements Process

The administer procurements process is the process of managing the relationship with the The Administer Procurements
seller. During administer procurements, the project manager applies other project management Process
processes to the contractual relationship and integrates the coordination of the outputs from
these processes into the overall management of the project.
The other project management processes include:
• Project plan execution to formally sanction the seller’s work to begin at the appropriate
time.
• Performance reporting to monitor seller cost, schedule, and technical performance.
• Quality control to ensure that the quality of the seller’s service or product meets contract
objectives.
• Change control to ensure that changes to the contract are carefully managed and properly
approved.
• Monitor and control the project risks to ensure that the risks are mitigated.

Figure 12-7: The administer procurements process.

Administer Procurements Inputs

Project managers use several inputs for the administer procurements process.

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Input Description
Procurement documents The instructions that you provide to prospective sellers so that
they can completely and accurately respond to your request.
These include the procurement SOW with description of the
goods or services to be purchased.
Project management plan Describes every management step of the procurement process
starting with development and ending with closing the contract.
Contract A mutually binding agreement that details the obligations of the
buyer and seller. One is given to each selected seller.
Performance reports Performance evaluation documentation for providers includes
technical documentation and other deliverables that are provided
and meet the needs of the contract. Past performance records
when dealing with this vendor figure heavily in the decision
making for current and future vendor solicitation.
Approved change requests Any changes to the current contract may include the procure-
ment statement of work, price, and the description of products,
services, or results. All changes need to be in writing and
approved before implementation. However, any verbal, undocu-
mented changes are not required to be processed or
implemented.
Work performance information These include amount of costs incurred, how quality standards
are being met and followed, and invoices. Performance reports
show what deliverables have been completed and which still
need to be accomplished. Invoices must be submitted to request
payment. All documentation on invoices are established within
the contract.

Administer Procurements Tools and Techniques

A project manager uses several tools and techniques to administer procurements.

Tools and Techniques Description

Contract change control system A contract change control system is an offshoot of the overall
change control system, but dedicated specifically to controlling
contract changes.
Procurement performance reviews A review of the seller’s performance on project scope, quality,
and the project’s associated schedule and costs as compared to
the contract. It can include a review of documentation submitted
by the seller, inspections, or quality audits. The purpose of this
review is to identify strengths and weaknesses with project per-
formance, and to monitor the progress of schedules and tasks.
Inspections and audits Can be conducted during the project to identify weaknesses in
how the seller conducts work. This is outlined in the contract.
Some contracts allow buyer procurement personnel as part of
their inspection and audit teams.

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Tools and Techniques Description
Performance reporting Performance reporting for administer procurements provides the
project management team with information about how the seller
is doing in regard to meeting the contractual obligations. The
contract performance reporting system is an offshoot of the over-
all project performance reporting system, but dedicated
specifically to reporting contract performance.
Payment systems Payments to the seller are made contingent on the acceptance of
the delivered goods or services, and on the receipt of a valid
invoice for the goods or services. Typically, invoices are sent to
the organization’s Accounts Payable Department. They, in turn,
check with the project organization to verify that goods or ser-
vices were delivered and accepted, and then authorize payment.
Claims administration When buyers and sellers cannot agree on changes, these disputes
are referred to as claims or appeals. Claims are handled in accor-
dance with contract terms, and are managed throughout the term
of the contract. If the buyer and seller do not resolve the claim, it
will be handled according to the dispute resolution procedures in
the contract. Contract clauses may include arbitration or litigation
and may be brought up after contract closure.
Records management system Contains processes, and controls functions and automation tools.
It is used by the project manager to control procurement and con-
tract documentation and records. This system is used to keep
track of and retrieve documents and correspondence.

Administer Procurements Outputs

Administer procurements results in several outputs.

Output Description
Procurement documentation Includes the contract, schedules, and approved and unapproved
change requests. It can also include technical documentation,
deliverables, seller performance reports, warranties, financial docu-
ments, and results of contract inspections.

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Output Description
Organizational process assets There are several assets to update.
updates • Correspondence: Contract terms and conditions often need
documentation of communications between the buyer and
seller. Some documentation may include warnings of bad per-
formance and contract change requests or verifications. A
complete written record of all communication between the
buyer and seller is given to both parties.
• Payment schedules and requests: This is required if the
project has an external payment system. If an internal system is
used, the output would just be payments.
• Seller performance evaluation documentation: Prepared by
the buyer to document the seller’s ability to comply with the
contract, to indicate if the seller will be hired for future
projects, or to rate the quality of the seller’s work on the
project. These documents can indicate early contract termina-
tion, or determine how contract penalties, fees, or incentives
are administered. Any results can be used in the qualified sell-
ers list.
Change requests Can include changes in project direction by the buyer or through a
change in seller actions. These changes can affect the project man-
agement plan and subsidiary plans, the project schedule, and the
procurement management plan. Any changes need to be identified
and documented in project correspondence.
Project management plan updates The procurement management plan is modified to include
approved change requests affecting procurement management.
Each contract management plan is modified to include approved
change requests affecting contract administration. The baseline
schedule is modified to reflect slippages that affect the overall
project performance and also the current expectations.
Further, updates to the project management plan include any
changes to the contracts, human resource requirements, and the
project scope or cost baselines.

The Duties of the Procurements Administrator

The Duties of the
On a small project, the project manager may play the role of procurements administrator. On a
Procurements Administrator larger project, the project manager may delegate this task to one or more team members and
monitor them.
In either case, the procurements administrator has several duties:
• Acting as contract compliance officer.
• Interpreting contract specifications and ensuring that its terms are met.
• Monitoring seller performance.
• Integrating sub-contracted elements.
• Managing change requests.
• Resolving disputes and managing payments.
• Dealing with contract breach, early termination, and so forth.

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Changes to Contract Terms
Either party can propose contract change requests for any of the contract terms, including Changes to Contract Terms
scope, cost, delivery date, or quality of goods or services.

Contract Change Description

Administrative changes These are nonsubstantive changes to the way the contract is adminis-
tered. This is the most common type of contract change.
Administrative changes should be documented and written notifica-
tion sent to the seller with a clear expectation that the seller will
approve and return the change document. Administrative changes
require no adjustment in payment.
Contract modification This is a substantive change to the contract requirements such as a
new deadline or a change to the product requirements. Contract
modifications should be documented and a formal change order
should be sent to the seller. Contract modifications may result in
claims for payment adjustment.
Supplemental agreement This is an additional agreement related to the contract but negotiated
separately. A supplemental agreement requires the signatures of both
buyer and seller. A separate payment schedule is attached for the
work in a supplemental agreement.
Constructive changes These are changes that the seller may have caused through action or
inaction. As a result of constructive changes, a seller is required to
change the way the contract is fulfilled. The seller may claim a pay-
ment adjustment as a result of constructive changes.
Termination of contract A contract may be terminated due to seller default or for customer
convenience. Defaults are typically due to nonperformance such as
late deliveries, poor quality, or nonperformance of some or all
project requirements. Termination due to customer convenience may
result due to major changes in the contract plans, through no fault of
the seller.

Legal Issues
Project managers should be familiar with some of the common legal issues related to procure- Legal Issues
ment administration.

Legal Issue Description

Warranty A promise, explicit or implied, that goods or services will meet a pre-
determined standard. The standard may cover features such as reliability,
fitness for use, and safety.
Waiver The giving up of a contract right, even inadvertently.
Breach of contract Failure to meet some or all of the obligations of a contract. It may result
in damages paid to the injured party, litigation, or other ramifications.

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LESSON 12
Types of Warranties
Types of Warranties
As a project manager, you may encounter several types of warranties.

Type of Warranty Description

Express warranty If the pre-determined standard for quality or performance is
specified, either in a formal warranty or in the manufacturer’s
description of the product, it is considered an express warranty.
Implied warranty If the pre-determined standard for quality or performance exists
but is not specified, it is considered an implied warranty. This
type of warranty takes effect if the buyer depends on the sell-
er’s expertise when making a purchasing decision. If you
purchase items that are widely available in the market, it is
assumed that you are relying on the seller’s expertise in deter-
mining that the goods are merchantable and fit for a particular
purpose.
On the other hand, if you are a technical expert, and you
require an unusual modification to the product or you intend to
use the standard product in an unusual way, you won’t be able
to claim implied warranties.
Similarly, if you provide detailed product specifications and the
seller meets them, you won’t be able to claim that the seller
breached an express warranty if the goods do not meet your
needs.
Warranties of merchantability Implied warranties that require goods to be fit for ordinary
usage. Any sale of an item is subject to warranties of merchant-
ability. The sale of an item for use in a particular project would
mean that the item was also subject to warranty of fitness if it
can be proven that the seller knew how it would be used.
Warranties of fitness for purpose Implied warranties that require goods to be fit for the usage that
was intended by the buyer.

Types of Waivers
Types of Waivers
It is possible for a party to a contract to explicitly waive a contract right. However, project
managers should be particularly aware of the ways in which they can inadvertently waive their
contract rights. These include:
• Accepting a product that fails to meet standards for quality or performance.
• Accepting late deliveries.
• Overlooking some other aspect of nonconformance to contractual obligations.
To protect against losses incurred by an inadvertent waiver of contract rights, some contracts
are written to specifically exclude the possibility of waiving a specified right.

Breaches of Contract
Breaches of Contract
Project managers may encounter different types of breaches of contracts.

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Type of Breach Description
Anticipatory breach An unavoidable indication that the other party will not be able to produce
the performance necessary to fulfill the contract.
Fundamental breach A breach so serious that it negates the very foundation of the contract.
Material breach A serious breach that prevents the injured party from benefiting from the
contract. In a material breach, the injured party can claim damages, but is
no longer obligated to fulfill any contract commitments.
Immaterial breach The contract has breached in such a way that there is no resulting damage
to the injured party; since there are no damages, the injured party is not
entitled to receive compensation. This is also called a minor breach.

Legal Expertise
Project managers should have a general understanding of contracts and breaches of
contracts, but they are not expected to be legal experts. The best way to protect your-
self, your project, and your organization is to make sure that your legal department has
reviewed and approved any contracts before you sign them. As a general guideline,
you should never sign a contract unless you are sure that you understand all of its
terms.

The Force Majeure Clause

Force majeure, or superior force, is a common clause added to contracts that addresses
the actions from both the parties when an extraordinary circumstance beyond the con-
trol of either party occurs. The extraordinary circumstances include war, strike, riot,
crime, or a natural disaster (a so-called “Act of God” that includes floods, earthquakes,
and storms) that prevent one or both parties from fulfilling their obligations under the
contract.
However, the force majeure clause is not intended to excuse negligence or other mis-
conduct by the parties and the nonperformance is caused by the usual and natural
consequences.

How to Administer Project Procurements

Regardless of project size, the project manager is responsible for administering procurements How to Administer Project
for the project. Experienced project managers always rely heavily on the contract administra- Procurements (2 Slides)
tion expertise of their organizations’ procurement, purchasing, and legal departments. Effective
procurement administration ensures that the seller’s performance meets contractual require-
ments and objectives.

Guidelines:
To administer procurements, follow these guidelines:
• Index and store all contract correspondence for ease of retrieval.
• Develop and implement an effective contract change control system. The system
should be integrated with the project’s overall change control system and should
include these elements:
— Forms and paperwork required to request a contract change.
— Contract performance-tracking mechanisms.

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LESSON 12
— Procedures for submitting and approving change requests, including approval
levels based on cost or impact of change.
— Procedures for reviewing and resolving contract disputes.
• Evaluate the risk of each contract change request.
• Document all contract changes and incorporate any effects of the changes into the
project plan.
• Develop and implement an effective performance reporting system for the seller.
The performance reporting system should include these elements:
— Baseline time, cost, and quality specifications.
— Actual time, cost, and quality specifications.
— Procedures for determining contract performance, including status reporting,
on-site visits, and product inspection.
— Procedures for determining acceptance or nonacceptance of delivered goods
or services. These might include the options to accept the entire delivery,
reject the entire delivery, or accept part of a delivery.
• Spell out in the contract any performance reporting specifications to be imposed
on the seller.
• Set performance milestones to monitor project progress.
— Depending on your project, you might use partial deliveries, completion of
selected portions of the product, or preliminary versions of the finished prod-
uct as milestones.
— Make sure the milestones are arranged and agreed upon with the seller ahead
of time.
— Negotiate a deadline for each milestone, as well as quality and completeness
specifications for the milestone.
• If work is performed at another site, conduct site visits to determine how the sell-
er’s work is progressing.
— Be sensitive to the cost of site visits in terms of time and impact on vendor
relationships.
— Schedule the visits up-front, set an agenda for each visit, and use only the
time required.
• Submit approved invoices for payment in accordance with the contract and the
project’s payment system.

Example: Administering a Contract for a Website Project

With his change request approved, Peter, a project manager, becomes responsible for
monitoring the graphic artist’s contract for his company website project. Peter fills out
a conversation log for each conversation he has with the artist about the project and
files the conversation logs in the seller’s file.
Peter schedules meetings with the artist to monitor progress and to clarify expectations
if necessary. As partial deliverables are made according to pre-determined milestones,
he reviews them for quality before signing and submitting the artist’s invoices to the
Accounts Payable Department for payment. Peter places a copy of each invoice in the
seller’s file.

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As the project team gets closer to completing the project, they decide to add another
section to the website. This change to the project goes through the appropriate change
control system set up for the project. After being analyzed for its impact on project
cost, schedule, and quality, the change request is approved.
The additional section requires a modification to the contract for the design and pro-
duction of the graphics for the new section. Peter negotiates the terms of the change
with the artist and submits a change request for the contract modification using the
change request form specified in the contract change control system.
This change request is also evaluated for its impact on project cost, schedule, and qual-
ity before being approved and signed. Peter submits the request for the contract
modification to the Legal Department, who incorporates the change and sends the
modified contract to the artist to sign and return. Peter then files the signed modifica-
tion with the seller’s file.
The seller’s work goes smoothly with no legal issues. Eventually, the final deliverable
is made and accepted and the seller submits her final invoice for payment. Peter signs
and submits the invoice for payment and thanks the artist for a job well done.

DISCOVERY ACTIVITY 12-7

Administering a Contract
Scenario:
The OGC Training Roll-Out project is continuing through the execution processes. You have
selected Rudison Technologies Ltd. (RTL) to develop the assessment and to deliver the project
software training. You have been asked to administer the contract. RTL has done training for
OGC in the past, with good results. However, since the Business Transformation Project kick-
off is dependent on the training being completed on time, you want to carefully monitor the
work to stay ahead of problems and take actions early to mitigate the risk of delays.

1. The work done by RTL is scheduled to be completed in three phases. What action can
you take to ensure that these deadlines are met?
✓ a) Set performance milestones.
b) Document contract changes.
c) Implement a contract change control system.
d) Index all contract correspondence.

2. Your contact at RTL informs you that their primary project software instructor has
given her resignation. They have asked to push the training date out a week to get
another instructor up to speed. What action should you take?
a) Document contract changes.
b) Conduct an on-site visit.
✓ c) Consult the contract change control system.
d) Negotiate a milestone deadline.

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LESSON 12
3. RTL has informed you that they have completed the beta verification of the Assess-
ment documents as specified in the contract. It is your responsibility as project
manager to verify that all feedback was incorporated correctly. Upon your review, you
notice that some of the alpha review feedback was not incorporated. What action
should you take?
You might review your contract with RTL for guidance on the timelines and deadlines for
completing the various work phases. Consult the performance reporting system to deter-
mine how to handle this problem. The procedure for determining acceptance or
nonacceptance of the assessment documents is documented in the performance reporting
system.

TOPIC H
Close Project Procurements
You administered a contract successfully. Having completed the project, you need to close any
contracts with service providers and sellers who contracted for part of the project. In this topic,
you’ll examine the close procurements process and close the necessary contracts.
You may want to improve your procurement processes for future projects by referring to the
current project’s procurement documents. Other project managers in your organization may
want to use them as historical information for their projects. Properly closing a contract
ensures that contract records will serve as valuable information for future contracts and that
work completed under contract was accomplished completely and correctly.

The Close Procurements Process

The Close Procurements
The close procurements process is the process of completing each project procurement by
Process ensuring that contractual obligations have been met on both sides and resolving any outstand-
ing issues. It involves verifying that work was done and delivered as specified, updating
contract records accordingly, and arranging for final settlement of contract obligations. The
close procurements process supports the close project or phase process, as it involves verifying
if all the project deliverables have been accepted. Procurements are closed whenever contrac-
tual obligations are satisfied. The same process is used for contracts that end successfully and
those that are terminated early for some reason.

Figure 12-8: The close procurements process.

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 LESSON 12
Close Procurements Inputs
Two inputs are necessary to begin the close procurements process.

Input Description
Project management plan Includes criteria for fulfillment of procurement contracts (such as
outsourcing or equipment rental), and documentation as to
whether these contracts have been satisfied.
Procurement documentation Contains information about vendor performances on cost, scope,
quality, contract change notes, approved and rejected changes,
payment notifications, and claims. These indexed documents are
acknowledged and validated for contract closure. The documenta-
tion is created when administering project procurements.

Close Procurements Tools and Techniques

Several tools and techniques are available to project managers for closing procurements.

Tools and Techniques Description

Procurement audits Evaluations of the effectiveness of the seller as well as the pro-
curement process itself.
Negotiated settlements The primary goal is to arrive at a final equitable settlement of all
outstanding issues, claims, and disputes by negotiation. The par-
ties may resort to Alternative Dispute Resolution (ADR), which
includes mediation and arbitration, if settlement cannot be
achieved through direct negotiations held between the parties.
Records management system Part of the project management information system; indexes con-
tract documents and correspondence, as well as assists in project
documentation archiving.

Close Procurements Outputs

There are two primary outputs of the close procurements process.

Output Description
Closed procurements Usually, the contract spells out the terms for contract accep-
tance and closure. At minimum, the seller should receive a
written notice of contract completion.

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LESSON 12
Output Description
Organizational process assets updates Updates to the organization’s process assets might include:
• Procurement file: An organized, indexed, up-to-date set
of records reflecting what occurred during the contract.
• Deliverable acceptance: Includes all formal documenta-
tion from the buyer that accepts or rejects deliverables.
• Lessons learned documentation: Includes documenta-
tion of lessons learned, project experiences, and process
improvement recommendations.
The updated project files serve as a historical archive of the
project and act as an input to future contracting decisions or
as evidence in future litigation.

Procurement Audits
Procurement Audits (2 Slides) Definition:
A procurement audit is a formal evaluation of both the seller’s performance of the con-
tract, and the effectiveness of the procurement process itself. The goal of the audit is to
establish a record that may be used to shape procurement practices in other contracts
for this project, or for other projects.

Example: Second Grade Phonics Textbook Sellers Evaluation

A project manager asked each of his core team members to evaluate the sellers they
had used during the course of the project for a new second grade phonics textbook. He
gave the team leads a checklist and asked them to answer each of the questions that
were relevant to the type of contract used. Randy, the multimedia lead, used over 50
freelance illustrators, video producers, audio producers, photographers, and animators
throughout the project. Randy developed a template to use for each seller.
This is an example of an effective procurement audit because it provides valuable
information regarding the seller’s performance that will be helpful on future projects. It
also provides lessons learned information that will increase the freelance illustrator
database.

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 LESSON 12

Figure 12-9: A sample procurement audit document.

Elements of Procurement Audits

Procurement audits seek to answer several questions about the procurement process. Elements of Procurement
• Were the seller’s responses in bids or proposals useful in conducting pre-contract assess- Audits
ments for consistency and compliance with rules and standards?
• Were the contract specifications completed as specified, and were all terms and conditions
met?
• Were the quality, timeliness, and cost acceptable?
• Were the seller’s project management, contract management, financial management, and
communications management practices acceptable?
• Was the seller able to accommodate requested changes?
• Was the seller ensuring conformance during process audits?
• Were the members of the seller’s staff acceptable? Did any individuals merit special rec-
ognition?
• Was there anyone you would not recommend for future assignments?
• Were there areas for improvements?
• What were the lessons learned from this contract?

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LESSON 12
Procurement Audit Lessons Learned
Procurement Audit Lessons
The lessons learned from a procurement audit can be invaluable information for future con-
Learned tracts. For example, the contract structure or payment terms that seemed appropriate at the start
of the contract may have acted as disincentives to performance during the contract itself. By
including as much anecdotal detail in the lessons learned as possible, you help others in the
organization apply the learning to their situations.

How to Close Project Procurements

How to Close Project Procedure Reference: Close Procurements
Procurements
To properly close project procurements:
1. Ensure that all required products or services were provided by the seller.
2. Make sure that any buyer-furnished property or information was returned to the
buyer.
3. Settle any outstanding contracting issues. Are there any claims or investigations
pending on this contract?
4. Conduct a procurement audit to identify successes and failures of the procurement
process and to evaluate the performance of the seller.
5. Address any outstanding invoices and payments.
6. Archive the complete contract file with the project archives.
7. Provide the seller with formal written notice that the contract has been completed.

Special Issues in Contract Closeout

There are a number of special issues that may impact contract closeout.

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Issue Description
Incomplete contract closeout • Contracts may be terminated early due to seller nonper-
formance, or through no fault of the seller whatsoever.
• If a project is shut down prematurely due to issues
within the customer or project organization, how does
that impact contract closeout? In this situation, the con-
tract itself will probably provide guidance as to how to
deal with early termination.
• For example, the contract may have a clause that
specifies that either side may withdraw from the con-
tract with 30-days written notice to the other side.
During the 30-day notice period, the seller may con-
tinue working on the project, tying up loose ends,
taking receipt of material ordered for the project, and
so forth. Once the project has been terminated, the
project manager should take whatever steps are nec-
essary to provide the appropriate written notice as
soon as possible, in order to start the termination
clock.
• In addition, an explanatory call to the seller in
advance of the written notice is an expected cour-
tesy. If the contract ties payment to specific
deliverables, the procurement audit should verify that
deliverables were received as specified, and that
invoices reflect only those deliverables that were
received. Issues of time, cost, and quality are still
relevant.
• Be sure to evaluate these issues based on the version
of the deliverable you are paying for, rather than for
the final deliverable. For example, say the seller was
contracted to supply a beta version of the product in
January, and a final version in March. The project is
cancelled in February.
• The product quality audit should be based on
whether it met the specifications for a beta product,
not for a final product.
Seller staff evaluations • In some cases, sellers will request that you participate
in evaluating their staff members who are participating
on your project.
• In other cases, you may wish to send letters of com-
mendation to a seller, in order to recognize the
performance of some of their staff members. Most orga-
nizations allow letters of commendation that recognize
the contribution of particular seller staff members. This
practice is highly motivating to the seller staff.
• Your organization may have a policy that limits your
participation in evaluating the ongoing performance of
seller staff. You should consult this policy before pro-
viding any sort of written performance evaluation.
• Usually, a copy is sent both to the staff member indi-
vidually as well as to the seller organization.

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LESSON 12

DISCOVERY ACTIVITY 12-8

Closing a Contract
Display data files as necessary Data Files:
to facilitate class discussion.
• Tri-Mark_SOW
• NWP_Quote

Before You Begin:

From the C:\085061Data\Processing Project Procurements folder, open the Tri-Mark SOW and
NWP_Quote documents.

Scenario:
You are the project manager at Tri-Mark Properties, a landscaping company. Your current
project is the construction of the sidewalk for the new OGC telestore in Seattle. You have sub-
contracted the concrete work to New World Properties (NWP).
According to the Tri-Mark_SOW document, the sidewalk is complete and the landscape archi-
tect’s plans have been returned. You receive the final invoice from New World Properties
(NWP) based on their quote for the job (as detailed in the NWP_Quote document). You also
receive a telephone call from the store manager, Justine, who tells you there is excess concrete
and other debris behind the store and a small crack in the new sidewalk.

1. Based on the information you have, can you close out the contract with the subcon-
tractor?
a) Yes, the contract has been fulfilled.
✓ b) No, the contract has not been fulfilled.
c) You cannot determine this until a procurement audit has been completed.
d) You cannot determine this until the seller completes a staff evaluation.

2. What would you do to resolve incorrect or unsatisfactory contract work in the situation
described in the scenario?
Answers will vary, but may include: make arrangements to meet the subcontractor at the
work site to evaluate what outstanding work is required to finish the job correctly and
satisfactorily; call the subcontractor and direct him to return to the work site, clean up
the debris, and repair the crack in the sidewalk; or conduct a procurement audit to
ensure that the contract work was properly completed.

3. NWP returned to the work site and resolved the outstanding contract issues and com-
pleted the cement work correctly and satisfactorily. Can you close out the contract?
Why or why not?
Yes. This contract can be closed out because the seller resolved the outstanding contract
issues and completed the cement work correctly and satisfactorily.

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4. Would you include a seller evaluation in your procurement audit? Why or why not?
Yes, because it is important to document the seller’s performance for use in future simi-
lar procurements.

Lesson 12 Follow-up
In this lesson, you processed project procurements. With this knowledge, you can efficiently
identify qualified and responsive suppliers who can help you achieve a successful outcome for
your project.
1. How could your organization benefit from more effective procurement planning?
Answers will vary, but may include: effective procurement planning ensures better sourc-
ing and selection of sellers for your project using the detailed product and service
specifications, seller analysis and identification, and the guidelines for carrying out
project procurement.
2. How will you make sure that you are specifying adequate detail when requesting seller
responses?
Answers will vary, but may include: verify your procurement documents to ensure that
you included measurable technical specifications as mentioned in the SOW, proposed
terms and conditions of the contract, the regulatory and statutory requirements, the nec-
essary documentation required, and details for the proposal submission process when
sending to potential sellers requesting their responses.

Lesson 12: Processing Project Procurements 447

NOTES

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 LESSON 13

LESSON 13 Lesson Time

1 hour(s)

Integrating Project
Workflow
In this lesson, you will integrate project workflow.
You will:
• Describe the direct and manage project execution process.
• Identify best practices for the monitor and control project work process.
• Develop an integrated change control system.
• Utilize the integrated change control system.
• Close the project or phase.

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LESSON 13
Introduction
As a project manager, you would want to ensure that all the elements of execution, and moni-
toring and control, are properly coordinated and ready for closeout. In this lesson, you will
integrate the project workflow.
As a project manager, it is your responsibility to deliver your project on time, within budget,
and with the required specifications. Therefore, the processes involved in project execution,
monitoring, and controlling are critical. By monitoring and controlling the project, you can
ensure that your project meets stakeholders’ expectations of time, cost, and quality standards.
It is necessary that you ensure that the project reaches its completion, without any open ends
pending. Mastering the tools and techniques of effective project closure ensures good work
from your team and success for your project.

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 LESSON 13

Figure 13-1: The project management framework.

The Project Management

Framework (2 Slides)

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LESSON 13
TOPIC A
Identify the Direct and Manage
Project Execution Process
You have successfully planned for all the aspects that need to be completed to meet your
project objectives. Now is the time to leverage the plan. In this topic, you will identify the
components and purpose of the direct and manage project execution process in the project.
Coordinating people and other resources to carry out the project plan is like conducting musi-
cians in an orchestra. Effectively directing and managing project execution ensures that the
project team starts and finishes the project work according to the project management plan.

The Direct and Manage Project Execution Process

The Direct and Manage Project
The direct and manage project execution process involves carrying out the project management
Execution Process plan to produce a product or provide a service so as to meet the project objectives. It requires
the project team to build on the foundation laid during project plan development as they coor-
dinate and direct the technical and organizational project interfaces. This is not just one
coherent task, but is a lengthy and complex iterative process.

Figure 13-2: The direct and manage project execution process.

Direct and Manage Project Execution Inputs

There are several inputs to direct and manage project execution.

Input Description
Project management plan Describes each step of the project including the way it is executed,
monitored, controlled, and closed.
Approved change requests Include approved changes, which are ready for implementation by the
project team. These change requests are recorded and can either
increase or decrease the project scope. They may also be used for
revising policies, project management plans, procedures, costs and
budgets, and adjusting schedules.

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Input Description
Enterprise environmental fac- Include factors such as organizational culture and structure, infrastruc-
tors ture, personnel administration, stakeholder tolerances, and PMIS that
can influence the direct and manage project execution process.
Organizational process assets Include existing documents and databases such as standard guidelines,
communication requirements, defect management processes, and pro-
cess measurement databases that can influence the direct and manage
project execution process.

Direct and Manage Project Execution Tools and

Techniques
There are two tools and techniques used in the direct and manage project execution process.

Tools and Techniques Description

Expert judgment Used to provide direction to effectively execute the project manage-
ment plan. The expertise provided by the project manager, project
management team, consultants, other departments in the organiza-
tion, or other stakeholders will be applied to both technical and
management details.
Project Management Information An automated or manual system, which is a part of the enterprise
System (PMIS) environmental factors, helps with directing and managing project
execution. PMIS includes systems such as scheduling software and
configuration management system.

Direct and Manage Project Execution Outputs

There are several outputs from the direct and manage project execution process.

Output Description
Deliverables A product, result, or capability produced as a result of project
execution.
Work performance information Periodically collected information about project activities being
performed to accomplish the project work, including deliverable
status and costs incurred.
Change requests Changes requested by the stakeholders that may impact the
project scope, policies, procedures, cost, and budgets, or lead to
reworking of project schedules. Changes may be categorized as
preventive and corrective actions, defect repairs, and updates.

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LESSON 13
Output Description
Project management plan updates Project management plan components that may be updated
when directing and managing project execution include:
• Requirements management plan
• Schedule management plan
• Cost management plan
• Quality management plan
• Human resource management plan
• Communications management plan
• Risk management plan
• Procurement management plan
• Project baselines
Project document updates Project documents that may be updated include the requirements
document, project logs, risk register, and stakeholder register.

Project Management Information Systems (PMIS)

Project Management Definition:
Information Systems (PMIS)
A Project Management Information System (PMIS) is an automated or manual system
used by a project team to gather, analyze, communicate, and store project information.
The PMIS collects information on the work that has and has not been accomplished in
each work package, and how that work result compares to the planned schedule, cost,
quality, and scope. A PMIS can utilize sophisticated software tools, either those pur-
chased off-the-shelf or custom built by an internal IT group, to manage some of its
components. There is some overlap between a communication plan and a PMIS; the
PMIS has a calendar associated with it and includes a lot of communication between
the project manager and the team.

A common pitfall associated with using a PMIS is creating a system in which the various pieces of
data are incompatible with one another. For example, the financial data may be created in one applica-
tion and the reporting in a different application and there is no way to get these two systems to talk to
each other.

Example: PMIS
One example of a project management information system available for purchase is
Microsoft® Project®.

Common PMIS Problems

Common PMIS Problems
Several common PMIS problems arise when directing and managing project execution.

Problem Description
Reacting to lagging indicators PMIS reports show problems after-the-fact. Good project manage-
ment requires proactive problem prevention.

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Problem Description
Managing symptoms rather than While the PMIS reports exceptions and overruns, it can’t explain
problems the reason for the problem. It is important to focus on finding the
cause and solving the problem, rather than making the exception
or overrun go away.
Over-reliance on PMIS communica- Project managers need to communicate frequently with team
tion members and other stakeholders. Sending PMIS reports is impor-
tant, but shouldn’t take the place of other types of
communication.
Invalid data in the PMIS PMIS reports can be wrong, either making problems look greater
or smaller than they are. Some very real problems may not show
up in the PMIS at all. The project manager must look beyond the
PMIS to verify information about the problems, and then concen-
trate on getting the problems solved.
Too much information Too much information is counterproductive, forcing people to
cope by ignoring some of the messages. It is important to make
sure that the right people get the information they need at the
right time, but it is equally important not to swamp people with
irrelevant or untimely information. Someone has to control the
scope of the information in the PMIS, or it will overload the
team and the project manager.

Work Authorization Systems

Definition: Work Authorization Systems
A work authorization system is a tool used to communicate official permission to begin
working on an activity or work package. It is a function, or component, of the PMIS.
Its purpose is to ensure that work is done at the appropriate time, by the appropriate
individual or group, by a specific time, and in the proper sequence. Work authorization
systems include the necessary processes, documents, tracking systems, and approval
levels required to provide work authorizations. Depending on the project, your work
authorization mechanism may be a simple email or a formal, written notice to begin
work. Smaller projects may only require verbal authorization. The work authorization
system is integrated with the communications plan.

Example: A Work Authorization System

Figure 13-3: A contract work authorization system.

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LESSON 13
Work Performance Information
Work Performance Information
Work performance information consists of periodically collected information about project
activities that are performed to accomplish the project work. This data would reside in your
PMIS, if you have one.
This information includes:
• Schedule progress with status information.
• Deliverables that have been completed and not completed.
• All schedule activities and their start and finish dates.
• The degree to which quality standards are being accomplished.
• Expenses authorized and incurred.
• Estimates to complete the schedule activities already in progress.
• Percent of completed schedule activities that have been started.
• Lessons learned that are posted to the lessons learned knowledge base.
• Details on resource utilization.
• Status for implementation of change requests.
• Details on corrective and preventive actions and defect repairs.

Project Execution Direction and Management

Techniques
Project Execution Direction
Throughout the entire execution of a project, the project manager can employ various tech-
and Management Techniques niques to coordinate and direct the various technical and organizational aspects of a project.
(2 Slides) Tools, such as the PMIS and the work authorization system, are powerful work aids that an
organization can use to ensure project success.

Selecting and implementing a PMIS is outside the scope of this class, but the guidelines presented here are
some considerations that you may want to be aware of as you move forward in your pursuit of advanced project
management skills.

Guidelines:
To effectively execute the project plan, follow these guidelines:
• Comply with any organizational policies and procedures that the organization has
in place regarding project execution to ensure predictable and consistent results.
Make sure that all contractors are familiar with and comply with the procedures.
• Evaluate and select the work authorization system you will use to formally sanc-
tion work to begin on an activity or deliverable. The value of the control your
system provides should be balanced with the cost (money and time) of designing,
implementing, and using the system.
• In line with good project management practice, use the artifacts necessary to get
the job done. Use the organization’s project management infrastructure. If it is not
there already, then invent it.
• If necessary, work with a systems analyst to create a PMIS that is workable for
your project. Make sure the systems analyst understands the following:
— Who needs to use the information?
— What types of information will be needed by each user?

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 LESSON 13
— When and in what sequence will the information be used?
— Who will generate the initial information to be incorporated into the system?
• Once the system is in place, determine who will be responsible for its day-to-day
operation, whether it will be you or someone else. Specifically, you need to deter-
mine who will be responsible for:
— Data entry of initial information. This includes assigning people to do the
data entry, and setting up specifications for what data must be entered, how it
will be entered, and when it will be entered.
— Analysis of information. Analysis means summarizing the information, draw-
ing conclusions from it, and creating graphical depictions of what the
information is saying. Your task here is to assign people to do the analysis,
and provide specifications for how the data is to be analyzed, how it is to be
reported, and what reporting formats will be used.
— Storage, archiving, and retrieval. This includes assigning individuals to
handle day-to-day storage and retrieval, as well as setting specifications for
backing up data and for archiving it.
— Systems documentation. Whatever system you choose, it must be docu-
mented. Remember that you will be straining your PMIS during project
execution. You may need to adjust it, or even repair it, to improve its perfor-
mance during this phase of the project. Good documentation will allow
support staff to make the adjustments and repairs efficiently, without losing
data or backing up the project schedule.
• Evaluate the effectiveness of the PMIS for your project.
— Don’t rely too much on the PMIS. Be proactive in managing problems rather
than waiting for the PMIS to report a problem before addressing it.
— Avoid the temptation to manage the PMIS instead of the project.

Example: Execution of a Project Plan at a Construction Company

The project team for a construction company has completed their project plan and is
well into execution. Using the services of a systems analyst, they designed and imple-
mented a PMIS that includes manual and computerized methods.
The team analyzed the needs of the project and balanced cost and benefit to develop a
work authorization system. The system requires an email to be sent to notify the
appropriate people that work can begin on the next component.
Each Monday morning the team has a status review meeting. Before the meeting, the
project manager sends out the most recent open task report. During the meeting, the
person responsible for a task reports on its progress. If problems or barriers are identi-
fied, the administrative assistant logs them in the issues log and the issue is assigned to
an individual.

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LESSON 13
ACTIVITY 13-1
Identifying the Responsibilities for Directing and
Managing Project Execution
Scenario:
In preparation for the business transformation, the PMO will implement a PMIS that all project
teams will use to gather, analyze, communicate, and store project information. The PM Train-
ing Roll-Out project team will be the first team within the organization to use the system. You
have completed your project planning and the project is ready to begin. You now have to coor-
dinate and direct both the technical and organizational aspects of the project.

1. You need to assist the systems analyst in the creation of a PMIS that is workable for
your project. In order to design an effective PMIS, what are the inputs that a systems
analyst should know about the project that the PMIS will manage?
✓ a) What people will have access to the information?
✓ b) When will the information be needed?
✓ c) Who will incorporate the information into the system?
d) Who is the customer?

2. As the project manager, you have made sure all organizational policies and procedures
were followed, and the contract training vendor is familiar with their responsibilities.
What would you do next?
a) Call a meeting with the project sponsor so she can commence work.
✓ b) Set up a work authorization system.
c) Work with a systems analyst to create a PMIS.
d) Collect work performance information.

3. An activity did not start on its scheduled date. The responsible team, Team 1, claimed
that they could not start the activity because its predecessor activity did not show a
completion date in the latest status report. Team 2 claimed that they had completed
the activity on time and had followed the appropriate procedure for updating its
completion status. What are some things you would do to investigate why the status
report was not up to date?
Review the status for the activities in the PMIS since it is the central point of data collec-
tion for activity status. If you discover that the completion status for the activity is not
reflected in the system, alert the PMIS technical experts so that the cause can be identi-
fied. Along with the current system for activity updates, you may also ask resources to
communicate their activity progress on a weekly basis through a quick email or phone call
until the original system is proven.

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TOPIC B
Identify the Monitor and Control
Project Work Process
With your project execution well on its way, you need to monitor and control changes to the
project’s performance baseline so that you can best ensure that it meets expectations for sched-
ule and cost. Change control and several other tasks are part of the monitor and control project
work process. In this topic, you will identify best practices for the monitor and control project
work process.
As a project manager, it is your responsibility to deliver your project on time, on budget, and
to the required specifications. By monitoring and controlling the project work, you will be bet-
ter positioned to ensure that your project meets stakeholders’ expectations for time, cost, and
quality performance and maintain an efficient and effective flow of work throughout the project
life cycle.

The Monitor and Control Project Work Process

The monitor and control project work process involves tracking, reviewing, and regulating the The Monitor and Control
project processes to meet the project’s performance objectives. Monitoring includes collecting, Project Work Process
measuring, and distributing performance information, as well as reviewing trends to make pro-
cess improvements. Controlling involves identifying corrective or preventive actions or
replanning and tracking the execution of action plans. When executed regularly, the monitor
and control project work process gives the project management team a closer look at the
strengths of the project and identifies weaknesses. Monitoring and controlling occurs through-
out the project from inception to closeout.

Figure 13-4: The monitor and control project work process.

The monitor and control project work process is not one specific task; it is an overarching process that is ongo-
ing, cyclical, interactive, and interlocking.

Change Categories
Project changes can be classified into three broad categories.

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LESSON 13
Category Description
Corrective action Documented direction on actions that must be carried out to
help bring the future project performance requirements back on
track and conform with the current project management plan.
Preventive action Documented direction on actions that must be implemented to
diminish the effects of any negative risks.
Defect repair Formally documented measures that must be undertaken to
address the defects in the project components, which are recom-
mended either to be repaired or replaced.

Monitor and Control Project Work Inputs

Monitoring and controlling project work uses several inputs.

Input Description
Project management plan Contains all subsidiary management plans and baselines that must be
considered when performing the monitor and control project work pro-
cess and describes each step of the project, including the way it is
executed, monitored, and closed.
Performance reports Provide key information such as current project status, significant
accomplishments for the given period, scheduled activities (activities
completed vs. those that should have been completed), issues, and fore-
casts.
Enterprise environmental Include governmental or industry standards, stakeholder risk tolerances,
factors and project management information systems.
Organizational process assets Include organizational communication requirements, financial control
procedures such as reporting time and accounting codes, and lessons
learned databases.

Monitor and Control Project Work Tools and

Techniques
Expert judgment is the only tool and technique a project manager can use to monitor and con-
trol project work.

Tools and Techniques Description

Expert judgment Used by the project management team to understand the data obtained
from the monitor and control processes. Based on the interpretation,
the project manager and the project team identify the necessary actions
to make sure that the project performance is aligned with the project
expectations.

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 LESSON 13
Monitor and Control Project Work Outputs
Monitoring and controlling project work results in several outputs.

Output Description
Change requests Issued as a result of comparison between actual and planned
results. Change request may result in modifying project scope,
policies, procedures, cost and budgets, or a rework of project
schedules. Documents such as the project management plan and
product deliverables may also be impacted by change requests.
Project management plan updates Include the project management plan components such as the
schedule management plan, cost management plan, quality man-
agement plan, and scope, schedule, and cost performance
baselines.
Project document updates Include forecasts, performance reports, and issue log.

Monitor and Control Project Work Process Best

Practices
During the monitor and control project work process, the project manager tracks, reviews, and Monitor and Control Project
regulates the project processes to meet the project’s performance objectives. Effective monitor- Work Process Best Practices
ing ensures that necessary preventative actions are taken in order to control project (2 Slides)
performance.

Guidelines:
To effectively monitor and control project work, follow these guidelines:
• Compare and evaluate project performance with the project plan. If necessary,
recommend actions.
• Analyze, track, and monitor risks to make sure they are being recognized and
reported, and that response plans are being executed.
• Maintain accurate information about the project as it unfolds.
• Maintain the integrity of baselines, ensuring that only approved changes are incor-
porated.
• Provide information to support status reporting, progress, and forecasting.
• Provide forecasts to update recent cost and schedule information.
• Monitor the execution of approved changes when they occur.

Example: Monitoring and Controlling Project Work in a Software Development

Project
Mike is the project manager for the tax preparation software development project. The
project is multi-phased and is in its second phase. Mike’s programmers have been
meeting schedule deadlines and showing good time management skills. However, the
documentation department that creates user manuals and help systems works very
slowly and is making mistakes. Assessment of reviewer feedback confirmed these
observations.

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LESSON 13
Mike realizes this is a risk for the project. If the deliverables are wrong, he will lose
his customer. He decides the documentation department needs a bit more monitoring.
In the company’s procedures for documentation, it clearly states that the preliminary
software documentation must be created within three days of development of each
deliverable from the software department. Mike has created a database where the
deliverable turnaround time is recorded. After looking through information on past per-
formance, Mike sees that the accuracy of deliverables was 10 percent better than what
it is now. Mike believes that with this newly implemented database, the performance
and quality will continue to improve.

ACTIVITY 13-2
Monitoring and Controlling Project Work
Scenario:
The OGC PM Training Roll-Out project has been running smoothly, thanks in large part to the
efforts of the instructional designer, Sarah. She has been instrumental in getting all teams to
work together to meet their tight deadlines. During a crucial phase in the project, Sarah falls
ill. A less experienced designer, Kevin, is brought in to replace her. For this project, it is more
important to maintain the schedule than to maintain the cost baseline.

1. What can you, as the project manager, do to mitigate the negative effects of a staffing
change?
a) Put the project on hold until Sarah returns from sick leave.
b) Rebuild the schedule to include additional time for Kevin to complete his tasks.
✓ c) Closely monitor Kevin’s work to assess any possible risk.
d) Discuss with the team the impending change and that the team can expect to go
through the team development stages again.

2. Kevin missed an important deadline. What action can you take to help Kevin get back
on schedule?
You might recommend that another supervisor be brought in to assist him. Once you have
determined that project performance is not meeting the project plan, it becomes neces-
sary to recommend corrective action. A change in head count will have an impact on cost
and scheduling, and will require the monitoring of changes as they occur.

3. After he has been given extra help, Kevin manages to meet his next important dead-
line. What should be your next action as project manager?
a) Keep a private log for your own reference, detailing changes that have been made to
the project.
✓ b) Update recent cost and schedule changes that have resulted from recent changes.
c) Ask Kevin to closely monitor changes to the project’s cost and schedule.
d) Ask Kevin to let you know if he has any further problems as the project progresses.

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 LESSON 13
TOPIC C
Develop an Integrated Change
Control System
Now that you have identified the best practices for monitoring and controlling project work,
you understand the important steps you must take towards making sure that your project is
conducted with the appropriate internal integrity and oversight. Having a system in place to
integrate all these changes will ensure smooth project execution. In this topic, you will develop
an integrated change control system.
It is important that you keep your team members, customers, and stakeholders informed of all
the changes that are occurring to the project cost or schedule. By developing an integrated
change control system for your project, documenting its parameters, and adhering to its guide-
lines, you can reduce the risk to your project and maintain its positive forward movement.

Integrated Change Control

Integrated change control is the process of identifying, documenting, approving or rejecting, Integrated Change Control
and controlling any changes to the project baselines. Integrated change control reduces risk to
your project by governing the execution of proposed changes that will affect schedule and cost
or any other objectives of the project. It allows project managers to record the changes that are
requested, make sure that changes are implemented in a standardized and approved manner,
minimize their disruptive effect, and monitor their progression from initial request through
completion.

Change Control Systems

Definition: Change Control Systems
A change control system is a collection of formal, documented procedures for changing
official project documents; it specifies how project deliverables will be controlled,
changed, and approved. An effective change control system includes the forms, track-
ing methods, processes, and approval levels required for authorizing or rejecting
requested changes. Change control systems often specify that a Change Control Board
(CCB) will address the issues that affect cost, time, and product quality.

Example: Change Control System for an Internal Project

A project manager for an internal project documented the project change control sys-
tem. It required that any changes affecting the original scope, cost, or schedule
baselines be submitted with a standardized change request form, including a descrip-
tion of the change being requested, its relative priority, and the reason behind it. The
internal Change Control Board (CCB) would evaluate each proposed change request
for potential risks and benefits and make a decision whether to approve or reject the
change.

Change Control Boards (CCB)

A Change Control Board (CCB) is an internal unit or department responsible for not
only monitoring, controlling, coordinating, and implementing changes to all elements
of project work, but also with accepting or rejecting changes that have been requested
by customers. Normally, the CCB operates closely with the project’s sponsor, custom-

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LESSON 13
ers, and other key stakeholders. The responsibilities of the CCB will have been
delineated, documented, and agreed to by the stakeholders, customers, and project
team. Decisions made during the change control board meetings are documented and
communicated to the required stakeholders. Stakeholders can use this information to
follow-up on the necessary actions.

Causes of Project Changes

Causes of Project Changes
Performance variation is an inevitable component of project work, and can be caused by any
of several common factors.

Cause Description
Inaccurate initial estimates There are many reasons why initial time and cost estimates for com-
pleting the project work prove to be inaccurate. These reasons may
range from lack of experience, lack of information, or precedence to
inaccurate data, excessive optimism, technological difficulties, and
unreliable resources. Getting those original estimates to be as realistic
and accurate as possible makes the control process more manageable.
Specification changes Project work can open up new avenues of development and design that
were not considered during the initial planning of the project work and
scope. As new options for a product or service become apparent, cus-
tomers, sponsors, or the project manager may broaden the project’s
scope to include new specifications and deliverables.
New regulations As project work is progressing, new governmental or industry-specific
regulations may be enacted. This can be especially true for very
lengthy projects. If the new regulations are related to the ongoing
projects, project change becomes necessary. Accommodating new regu-
lations or legislation can also mean revisiting the planning process to
determine the effect the new regulations will have on resource needs,
schedule durations, and quality specifications.
Missed requirements Many times the requirements are understood by reviewing the docu-
mentation, and interviewing the end users and policy makers. However,
there are times when complete and comprehensive understanding may
not be possible.
The interviewer feels that he/she has understood the point. And the
interviewee feels that he has expressed all that matters. Although a
Requirements Traceability Matrix (RTM) is prepared, the same confu-
sion might arise in a written document. Prototyping is used where a
demonstration of functional and/or technical requirements is done.
Although all these techniques reduce the chances of missing any
requirements, it cannot guarantee that every requirement is captured.
There are always some slippages that surface at different phases in the
project.

Configuration Management
Configuration Management Definition:
Configuration management is a tool used to manage changes to a product or service
being produced. These can include changes of a technical nature, and changes in
administrative direction. Configuration management is used to:

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 LESSON 13
• Control product iterations.
• Ensure that product specifications are current.
• Control the steps for reviewing and approving product prototypes, testing stan-
dards, and drawings or blueprints.

When dealing with government contracts or other large systems, a configuration management system
is often required.

Example: Implementing Configuration Management to Control Change

Requests
An art director implemented a configuration management system specifically for con-
trolling change requests to the images and animations in customers’ advertisements.
She created a database to track the project images. When a customer identified a need
for an image or animation, the team created a new entry in the database; each entry
included the name and size of the image along with a detailed description of the ad.
Using this configuration management system, the art director could easily check the
database for new entries, assign the change requests to team members, and track them
through the approval process.

Configuration Management Systems

A configuration management system is a tool that contains procedures that help pro-
vide technical and administrative guidance for identifying and recording the
characteristics of a product or service; controlling changes made to the characteristics;
documenting the changes and the status of implementation; and verifying the product’s
conformance to the requirements. One of the subsystems of the configuration manage-
ment system is the change control system.
Configuration management systems, when combined with the integrated change con-
trol, provide standardized and effective ways of managing approved changes and
baselines within a project. Configuration control involves specifying the deliverables
and processes, while change control involves identifying, recording, and supervising
changes to project baselines.

Configuration Management Activities

Some of the configuration management activities in the integrated change control pro-
cess include:
• Configuration identification: Identifying a configuration item provides the basis
for which product configuration is defined and verified, products and documents
are labeled, changes are managed, and accountability is maintained.
• Configuration status accounting: Recording and reporting information as to
when appropriate data about the configuration item should be provided.
• Configuration verification and audit: Verifying the configuration and auditing it
ensures that the composition of the configuration items is correct and that the cor-
responding changes are registered, assessed, approved, tracked, and correctly
implemented.

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LESSON 13
Process Control Structures
Process Control Structures Definition:
A process control structure is the formal organization of the modifications made to
deliverables that are controlled by configuration management. The process control
structure defines how modifications will be reviewed, documented, delivered, commu-
nicated, and revised. The process control structure establishes standardization within
the project team, as it forces everyone working on modifications to adhere to the same
conformance standards.

Example: Process Control Structure for Modifying Software Design

A team of software engineers working on a new product would all conform to the
same process control structure when implementing modifications to the software
design. They would have a formalized system in place for reviewing proposed modifi-
cations to the product, controlling product iterations, and carrying out testing and
review cycles. Without a process control structure, the software engineers would be
slowed down by the confusion and unnecessary rework of trying to keep track of vari-
ous modifications and revisions made to the product.

How to Develop an Integrated Change Control

System
How to Develop an Integrated
Your goal in developing an integrated change control process should be, in part, to ensure that
Change Control System the project management team and the stakeholders are not surprised by schedule delays or cost
overruns. By developing a change control process, documenting its parameters, and adhering to
its guidelines, you can reduce the risk to your project and maintain its momentum.

Guidelines:
To develop an integrated change control process, follow these guidelines:
• There may already be an approved integrated change control process in common
usage within your organization, in which case it is your responsibility to imple-
ment it for your project in accordance with all relevant company procedures and
requirements.
• If there is not an integrated change control process in use at your organization, it
is your responsibility to develop one for your project. Gather any relevant histori-
cal data within the organization that relates to the process of identifying,
documenting, approving or rejecting, and controlling changes to the project
baselines.
• Identify what will be considered a change that is significant enough to require
management approval. For the sake of maintaining forward momentum on project
work, project managers will not bring minor changes to schedule and to cost esti-
mates to upper management for approval. Make sure that the organizational
expectations regarding change control have been clearly defined and documented.
How much latitude does the team have in making autonomous decisions about
changes? At what point should you bring a change request to the project manage-
ment team?
• In conversation with stakeholders and the project management team, identify these
responsible parties:

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— The people who are able to initiate change requests. These may include
stakeholders, project management team members, and customers, among oth-
ers.
— The parties who are authorized to give or withhold business approval to a
request for a change. Who will make the decision about whether or not a
change is necessary and appropriate?
— The person who has the authority to approve additional funding, overtime
costs, and purchase orders.
— The parties who will be responsible for executing the work necessary to sat-
isfy the requested change, as well as evaluating the work for quality
assurance.
— The person(s) who will be responsible for managing changes. In some orga-
nizations, this may be the project manager, but in other organizations, it may
be one or more functional managers.
— The parties who are responsible for prioritizing changes and making qualita-
tive decisions about them. Is this change imperative to the success of the
project, or merely nice to have if time and resources allow?
• Identify how change requests must be approved. Some organizations might require
written approval from customers before changes to the scope, schedule baseline,
and budget can be implemented.

Example: Developing an Integrated Change Control System in an Independent

Company
A project manager at a small, independent company will be responsible for following
the organization’s guidelines regarding change control. He will first need to determine
if there is a formal change control process in place; if there is not, he will take on the
responsibility of developing one for his project. He will begin by gathering all relevant
information and documentation, and will identify the changes that require management
approval.
He will proceed to identify who the key players are within the management team who
need to approve or initiate change requests. This will be very important when it comes
to asking for additional funding for the project or deadline extensions. He will identify
who will manage changes and give authorization for expenditures. He will also need to
document who needs to give consent to change requests, and whether the consent of
customers is required.

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LESSON 13
DISCOVERY ACTIVITY 13-3
Developing an Integrated Change Control System
Scenario:
The OGC’s PM Training Roll-Out project has a very tight deadline, as well as a strict budget.
You are concerned that any possible changes could negatively affect project performance
baselines. You need to ensure that there is a standardized method for handling changes to
project work.

1. Who will you involve in the change control process for the PM Training Roll-Out project
and what is their role in the change control process?
The change control process should involve the OGC selected senior executives and strate-
gic planning individuals who are the key stakeholders. Their role will be to identify what
will be considered a significant enough change from each baseline to require management
approval. You should also include the PMO.

2. The IT department informs you that the project software upgrade will have a signifi-
cant delay in delivery. In the risk register, you accounted for a delay due to the
software upgrade, but this delay is much longer than originally anticipated. What
action should you take first?
a) Coordinate changes across knowledge areas.
✓ b) Document the change request in a change control system.
c) Update the project plan to reflect changes.
d) Bring the information to the stakeholders for evaluation and approval.
e) Identify corrective action to take to resolve the problem.

3. The procurement manager contacted the software vendor and was able to secure a
beta version of the project software. The beta version may have some minor bugs, but
it will be available in time for the training. Based on your change control process, what
further action, if any, should you take?
Document the problems regarding the beta version and its flaws, the actions taken to
work within these issues, and the reasoning behind your decision to use the beta version
of the software.

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TOPIC D
Utilize the Integrated Change Control
System
By managing changes to performance baselines, you will be able to ensure that your project
stays on course. This is a key element in the process of monitoring and controlling project
work. In this topic, you will make use of the integrated change control process.
A great project manager is an effective manager of change, able to anticipate, respond to, and
deal with the changes that will inevitably arise on any project. Project managers want to be
able to master this key area by utilizing the change control process. This is the best way to
take control of changes that arise and minimize their disruptive effect on your project’s bottom
line.

The Perform Integrated Change Control Process

The perform integrated change control process is the formal method of governing and organiz- The Perform Integrated
ing the manner in which changes will be requested, reviewed, approved or rejected, Change Control Process
implemented, controlled, and coordinated. Its goal is to make sure that changes to the project’s
baselines are managed with the least amount of disruption to important project parameters such
as cost, time, and quality.
All change requests must be recorded in the change management or configuration management
system. Change requests follow the processes specified in the configuration management sys-
tem. These processes may need information about the estimated time and cost impacts for
implementing the changes. The change control process also ensures that the appropriate parties
such as stakeholders, project team members, and/or customers are aware of and approve of
changes to the project that will affect time, cost, and quality.

Figure 13-5: The perform integrated change control process.

Example: Performing Integrated Change Control on a Website Redesign Project

A project manager is assigned to work on a website redesign project. The site has been
developed and the project team has presented the draft site to the company’s manage-
ment team for feedback and approval. One team member suggests that the site’s
functionality should be extended to include tools for the sales team. In accordance with
the company’s integrated change control process, the project manager completes the

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LESSON 13
documentation for the change control board, including the cost, impact to current
schedule, and change in the scope. After reviewing his documentation, the change con-
trol board agrees that added functionality would be valuable. The customers and other
stakeholders are notified about this change and it is recorded in the change manage-
ment system.

Perform Integrated Change Control Inputs

The perform integrated change control process requires several inputs.

Input Description
Project management plan Describes each step of the project including the way it is
executed, monitored, and closed.
Work performance information Periodically collected information about project activities being
performed to accomplish the project work.
Change requests Include corrective actions, preventive actions, and defect repairs.
This may result in modifying project scope, policies, procedures,
cost, and budgets, or a rework of project schedules. Corrective
and preventive actions do not generally affect the project
baselines, but the performance against baselines.
Enterprise environmental factors Include project management information systems that can influ-
ence the integrated change control process. The PMIS includes
automated tools such as scheduling software tools or information
collection and distribution system.
Organizational process assets Include process assets such as:
• Change control procedures, which will also include steps used
to modify official company standards, policies, and plans and
to approve, validate, and implement changes.
• Procedures used to approve and issue change authorizations.
• Process measurement databases used to collect and create
measurement data on products and processes.
• Project files such as scope, cost, schedule, and performance
measurement baselines.
• A configuration management knowledge base that contains
the versions of all documents such as the official standards
and procedures of the company.

Perform Integrated Change Control Tools and

Techniques
There are two tools and techniques a project manager can use to integrate change control.

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Tools and Techniques Description
Expert judgment People with skills to manage and support the technical and manage-
ment details of all requested changes in the project can be asked to sit
on the change control board. People who can provide expert judgment
include consultants, customers, sponsors, subject matter experts, PMO,
and industry groups.
Change control meetings Meetings held by the change control board to review and approve
changes. All decisions made during the change control board meetings
are communicated to the stakeholders.

Perform Integrated Change Control Outputs

The perform integrated change control outputs are the changing request status updates, project
management plan updates, and project document updates.

Output Description
Change request status updates Status of all change requests (approved or unapproved) should
be updated in the change request log when updating the process
documents.
Project management plan updates Any actions needed to define, integrate, and coordinate all sub
plans into a project management plan. Documents that may be
updated during the process include subsidiary management plans
and baselines that have been changed as a result of the change
control process. Changes made to the baselines should not affect
the past performance data.
Project document updates Documents such as change request logs and other documents
that are affected by the change control process may be updated
during the perform integrated change control process.

Change Management Advantages

Effective change management presents several advantages to project managers, including: Change Management
• Faster response time. Advantages
• Maximum traceability of changes.
• Increased team awareness of change needs.
• Increased engagement of team and stakeholders, internally and externally.
• Fuller team support for change requirements.
• An organizational framework for moving forward effectively.

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LESSON 13
Formal Acceptance of Project Work
Formal Acceptance of Project
Formal acceptance of project work is the process for securing approval for completing the
Work remainder of the project work. It requires change requests to be documented and analyzed for
their impact on other aspects of project work including time, cost, quality, and risk. It includes
a receipt, or documented acknowledgment, that the terms of the contract have been satisfied. It
also validates that the acceptance criteria will still be satisfied as a consequence of this change.

How to Utilize the Integrated Change Control

System
How to Utilize the Integrated
Managing changes to performance baselines ensures that the original project scope and the
Change Control System integrity of performance baselines are maintained. Ensuring that changes are agreed upon and
continuously managing changes as they occur minimizes the impact changes may have on
project time, cost, and quality concerns.

Guidelines:
To effectively utilize the change control process for managing changes in the project
performance baselines, follow these guidelines:
• Make sure your change control system is cost-effective. It should not cost more
money to implement than it saves through controlling.
• Establish or make use of an existing CCB composed of project stakeholders to
evaluate change requests.
• Document the effect the changes have on the project performance baseline.
• Obtain approval from the appropriate parties for all change requests before imple-
menting the change.
• Use configuration management to document and control changes to original prod-
uct characteristics.
• Coordinate changes across knowledge areas as appropriate. For example, does a
proposed schedule change affect cost, risk, quality, and/or staffing?
• Use performance reports to measure project performance and assess whether plan
variances require corrective action. Make sure performance reports are timely and
accurate to increase the effectiveness of control decisions.
• Identify corrective action necessary to bring expected performance in line with the
project plan.
— Determine the source and severity of the problem.
— Review the project plan and objectives.
— Consider factors inside and outside the project that may influence corrective
action decisions.
— Identify alternative options available.
— Choose from among the alternatives by evaluating the impact of each alterna-
tive on cost, schedule, and quality.
• Update the project plan to reflect changes made that affect performance baselines.
• Document the causes of variances, the steps taken to correct performance prob-
lems, and the rationale behind the decision-making process to avoid similar
problems on future projects.

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Example: Change Control Process for an Elementary School-Age Reading
Project
As the project team for an elementary school-age reading program moves through the
execution phase, Ben, the project manager, monitors progress by reviewing perfor-
mance reports and evaluating any variances to the original scope definition and
performance baselines. When variances are identified, the project management team
examines the causes and determines the corrective action necessary to bring future per-
formance in line with the project plan. They diligently document the lessons learned
for the benefit of future projects.
As change requests are generated, both Ben and the project’s CCB review and evaluate
their impact on performance baselines as outlined in the change control system. When
changes are made that affect performance baselines, Ben updates the project plan to
reflect the changes. Using configuration management methods such as the image track-
ing database, all changes to the original characteristics of the course are controlled and
tracked. The project team’s efforts enable them to effectively maintain the original per-
formance baselines and scope definition and keep the project on track.

DISCOVERY ACTIVITY 13-4

Utilizing the Change Control Process
Scenario:
Working with the senior executives at OGC and with the PMO, a formal change control pro-
cess has been put in place for all OGC Business Transformation projects as well as a change
control board, which includes the Business Transformation program manager, the PMO direc-
tor, and the CCB administrator. You are reviewing the formalized CCB process and
summarizing the following for your team:
When a change in the project appears to be necessary or desirable, the initiator of a change
completes a Change Request form, attaches any supporting material, and submits it to the per-
son responsible for change management in the project (it could be the program/project
manager) for review and concurrence. The program/project manager (or whoever responsible)
reviews or ensures that the change request is reviewed by the people/bodies responsible for
reviewing the request for validity, completeness, and accuracy, and forwards the request to the
director. The director reviews and disposes of the request in one of the following ways:
• Reject: Indicates disagreement with the proposed change on the request form; it is
rejected and returned to the program manager.
• Concur: Indicates agreement with the proposed change on the request form; it is
returned to the program manager for submission to the CCB administrator to set
up a meeting.
• Approve: Recommends approval without a meeting of the CCB. Notes the reason
for, and any conditions of, approval on the decision page of the Change Request
form and forwards it to the CCB administrator.
The PMO, upon receipt of change request decisions, records the information in a database to
track all change request patterns.

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LESSON 13
1. The internal team responsible for assembling documentation for the external vendor
cannot meet their contracted deliverable. What actions should you take?
✓ a) Identify required corrective action to resolve the problem.
b) Update the project plan to reflect these changes.
✓ c) Recommend corrective actions to the CCB.
d) Use configuration management to document and control changes to the original ven-
dor contract.

2. What are the tasks that you should consider when determining appropriate corrective
actions?
a) Record how corrective actions should be tracked.
✓ b) Identify alternative options available.
✓ c) Determine the source of the problem and its severity.
✓ d) Review the project plan and objectives.

3. OGC’s change control process states, “The PMO, upon receipt of change request deci-
sions, records the information in a database to track all change request patterns.”
What benefits do you see in tracking change request patterns?
Answers will vary, but may include: it may be helpful to see a breakdown as to how many
change requests were due to contractual agreements. They will be able to do research to
find other projects that have had similar change requests and patterns.

TOPIC E
Close the Project or Phase
Administratively
You and your project team have successfully carried out your project plan, produced work
results, and controlled the project’s performance baselines. It is time to tie up all the loose
ends and close your project or phase. In this topic, you will close the project or phase.
Ending a project or phase is equally important as starting the project or phase. As a project
manager, the way in which you end your project or phase says a great deal about you to your
stakeholders. Obtaining formal acceptance of your project’s or phase’s final product, service,
or result ensures that the project or phase is properly closed.

The Close Project or Phase Process

The Close Project or Phase
The close project or phase process involves closing out all project activities and formally end-
Process ing the project or, in the case of multi-phase projects, closing out a specific project phase.
During this process, the project manager reviews all previous documents and the project man-
agement plan to ensure that all project work is complete, the objectives are met, and the

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 LESSON 13
project can be considered to be closed. This process also establishes procedures that help vali-
date and document deliverables, formalize acceptance of those deliverables, and document the
reasons for termination and any actions taken if a project has not been successfully completed.
The process includes activities required for closing the project or phase administratively.

Figure 13-6: The close project or phase process.

Close Project or Phase Inputs

Several inputs are necessary to initiate the close project or phase process.

Input Description
Project management plan Contains key information, including descriptions of the
deliverables and criteria for their delivery.
Accepted deliverables Include deliverables that have met the acceptance criteria and
have been formally signed off by the customer.
Organizational process assets Include existing guidelines or policies about project closure, his-
torical information, and the lessons learned from previous
projects.

Close Project or Phase Tools and Techniques

Only one tool and technique is available to project managers while closing a project or phase.

Tools and Techniques Description

Expert judgment Either internal (experienced managers) or external (consultants) persons
can provide expert guidance during the closing process.

Close Project or Phase Outputs

There are two main outputs of the close project or phase process.

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LESSON 13
Output Description
Final product, service, or result tran- The official delivery and acceptance by the customer or sponsor.
sition Ideally, this acceptance is documented in writing for storage in
the project archives.
Organizational process assets Updates to the organization’s process assets include:
updates • Project files: Documents resulting from project activities that
include project management plan, project calendars (scope,
cost, schedule, and project), risk registers, change management
documentation, planned risk response actions, and risk impact
documents.
• Project or phase closure documents: Includes completion
and transition documents.
• Historical information: Includes historical project documenta-
tion and lessons learned, which are transferred to the
organization’s knowledge base for use by future projects or
phases.

Administrative Closure
Administrative Closure
Administrative closure involves verifying and documenting project results to formalize project
or phase completion. During the administrative closure process, the project team gathers and
updates project documentation and relevant records and reports. Project results are compared
against customer and stakeholder expectations and requirements. A properly completed admin-
istrative closure process ensures that the project or phase requirements were met and formal
acceptance was granted.

Project Records to Archive

Project Records to Archive
During administrative closure, it may be beneficial to archive selected project records:
• The project management plan with its subsidiary plans and supporting detail.
• Project performance records, audit reports, and financial records.
• Contract documentation.
• Copies of all communications, status reports, meeting minutes, and change requests.
• Relevant project databases.
• Staff evaluations.
• Lessons learned reports and the final project report.
• Formal acceptance documentation.

Outstanding Items
It may be helpful to construct a checklist of outstanding items that must be resolved,
addressed, or completed before the customer will accept the final work results. Make
sure to include the actions taken to resolve any outstanding issues and any time frames
associated with completion.

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Lessons Learned Reports
Definition: Lessons Learned Reports
Lessons learned reports are documents that capture salient and helpful information
about the work done in a project or a project phase; they identify both the project
team’s strengths and areas for improvement. They can be formal or informal, depend-
ing on the organizational norms or requirements. They are compiled for the benefit of
future project teams, so that people can capitalize on the organization’s knowledge
base about work that has already been done and avoid repeating mistakes and also
benefit from ongoing organizational learning.

Example: Lessons Learned When Launching a New Product Line

After a particularly challenging project involving the launch of a new product line, the
project manager compiled a lessons learned report. The information came from several
sources, including a final meeting with key team members and stakeholders, at which
the participants were asked about what went well on the project and what they would
do differently next time. The project manager documented their responses into a report
for future reference; it captured the challenges that had been overcome, suggestions
that were generated, and other lessons that had been learned.

Considerations of Lessons Learned

During administrative closure, project managers should take into account some considerations Considerations of Lessons
of lessons learned. Learned

Consideration Description
Scheduling lessons learned These include any relevant scheduling problems or issues. They
also document the management strategies that were implemented
to deal with schedule or resource constraints.
Conflict management lessons learned These include any issues that arose within the team or between
the team and customers. They include documentation of the
nature and source of the conflict as well as the impact that the
conflict had on the project. The documentation should also
specify how management intervened in response to the conflict.
Sellers lessons learned New seller experience and performance should be documented
and provided to the procurement department.
Customer lessons learned If a customer is excessively litigious or unreasonable to work
with, that information should be conveyed to the sales and legal
departments as well as documented in the lessons learned reposi-
tory.
Strategic lessons learned Those that typically impact some aspect of the organization’s
project management methodology or significantly improve a tem-
plate, form, or process. These address the questions: Can we
reuse this project’s artifact to get more done with the same
resources and/or deliver work sooner?

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LESSON 13
Consideration Description
Tactical lessons learned Those that answer the question: If we were to do this type of
project again, what should we stop, start, and continue so that we
can execute flawlessly? They focus on developing recommenda-
tions, reviewing recommendations with other managers in other
departments, developing implementation plans, and implementing
those plans.
Other aspects of lessons learned Project managers should take into account scope, schedule, cost,
quality, and customer satisfaction, as well as any corrective
action taken in response to issues.

Closeout Meetings
Closeout Meetings Definition:
Closeout meetings are sessions held at the end of a project or phase; they involve dis-
cussing the work and capturing lessons learned. Closeout meetings may include
stakeholders, team members, project resources, and customers. They typically follow a
formal agenda and may require official minutes to be recorded. Not all organizations or
projects require closeout meetings. Some organizations require the minutes from close-
out meetings to be completed in full, approved by management, and preserved in a
specific manner.

Example: Fire Safety Closeout Meetings

A project manager responsible for fire safety equipment and inspections would hold a
closeout meeting at the conclusion of the inspection process. He would invite the
stakeholders, project team members, and representatives from the fire marshal’s office.
They would review inspection documentation records; complete and sign inspection
certificates; review, approve, and sign the plans for evacuation procedures; and docu-
ment the inspections and testing of fire safety equipment. Those signed, official
documents would be filed both with the fire marshal and at the company in accordance
with fire safety procedures.

Varieties of Closeout Meetings

Some organizations require official closeout meetings so that they can obtain the cus-
tomers’ formal project acceptance, while others use them as an opportunity to discuss
the project with the customers as a prelude to soliciting additional business. Other
organizations use closeout meetings for internal purposes, for the edification of the
staff and improvement of internal processes. From an organizational standpoint, good
endings lead to good beginnings on subsequent projects.

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How to Close the Project or Phase
Administratively
Procedure Reference: Close a Project or Phase How to Close the Project or
Phase Administratively
Each phase of the project must be properly closed to ensure that valuable information
is safeguarded for future projects. To properly close a phase or project, follow these
steps:
1. Some organizations and application areas have a project termination checklist that
may be useful when closing out a project or phase. You may find it useful to pre-
pare one if there is not one available. This helps to ensure that you are thorough
in your administrative closeout.
2. Gather and organize performance measurement documentation, product documen-
tation, and other relevant project records for ease of review by stakeholders.
3. Release project resources.
4. Update records to ensure that they reflect final specifications. Be sure to update
the resource pool database to reflect new skills and increased levels of proficiency.
5. Analyze project success and effectiveness and document lessons learned.
6. Prepare lessons learned reports and a final project report.
7. Obtain project approval and formal project acceptance. Demonstrate to the cus-
tomer or sponsor that the deliverables meet the defined acceptance criteria to
obtain formal acceptance of the phase or project. This may involve preparing an
end-of-project report or giving a presentation.
8. Archive a complete set of indexed project records.
9. Celebrate the success of the project with the team and other stakeholders.

DISCOVERY ACTIVITY 13-5

Closing a Project
Scenario:
Your good project planning and control has resulted in the OGC PM Training Roll-Out project
coming to a successful close. The final project deliverable is complete. You have collected the
performance measurement reports and updated product documents and other relevant project
records for archiving. Before you can close your project, you need to obtain formal project
approval from the project sponsor. You have scheduled a meeting for the following afternoon.

1. Are your project records ready for review by the project sponsor? Why or why not?
Yes, because you have collected performance measurement and product documentation
as well as other relevant project records to archive.

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LESSON 13
2. What document will you prepare before obtaining formal acceptance from your project
sponsor to officially complete the project?
You should prepare a final project report. You should also complete a lessons learned
report.

3. In this case, what might constitute formal acceptance?

Answers will vary, but may include: a formal presentation to stakeholders followed by a
memo from the project sponsor that the project is complete. Formal acceptance docu-
mentation should be distributed to the appropriate stakeholders and stored with the
project archives. If the customer were external, you might also need to receive their for-
mal acceptance in writing.

4. What types of documentation or computer files should you store in the project
archives?
Answers will vary, but may include: the project plan, project performance records, con-
tract records, names of team members, or financial records.

Lesson 13 Follow-up
In this lesson, you directed and managed project execution, monitored and controlled project
work, integrated change control, and learned how to effectively close a project. Executing and
monitoring project work according to your project management plan ensures that your project
finishes on time, within budget, and with the required quality. In addition, closing the project
efficiently provides valuable lessons learned and input to your organization’s future projects.
1. How can you make the change management processes followed in your organization
more effective?
Answers will vary, but may include: implementing an integrated change control system
for the projects in accordance with all the relevant company procedures and require-
ments and by clearly identifying the roles responsible for initiating, authorizing, and
approving change requests, and effectively managing the approved changes. It is also
important to consider the ideas of the team members and stakeholders for the change
control systems.
2. What steps do you plan to take to improve the project closure process in the future?
Answers will vary, but may include: defining the closure procedures for closing project or
phases and procurements; documentation; final results transition; and final verification
of the products received from vendors or delivered to buyers.

480 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

Follow-up FOLLOW-UP
1. How do you think that applying a standards-based approach to project management
will help you be successful in managing future projects?
Answers will vary, but may include: by applying the standardized project management
processes, you can carry out the key tasks required to authorize and start a project. You
can also develop a standard-based project management plan and all necessary subsidiary
plans. It also helps in defining, sequencing, monitoring, analyzing, anticipating, acting
and reporting on the project activities. Finally you can efficiently complete and close the
project on time, on budget with high quality, and leverage the lessons learned when con-
ducting the project.
2. How do you anticipate using the project management skills learned in this course to
your advantage in your current position?
Answers will vary, but may include: as an individual aspiring to reach greater heights in
the project management profession, the project management skills will help inculcate
the practice of following a structured and organized way of executing and closing a
project, prepares you to face and resolve unexpected problems that may arise while man-
aging projects, and even helps you gain knowledge and be on par with the standards that
have been widely approved and recognized.

What’s Next?
This course provided you with a solid foundation in the generally recognized good practices on
most projects, most of the time, across industries including Construction, Manufacturing, Edu-
cation, Government, Engineering, Health Services, Consulting, and Information Technology. To
expand your breadth of knowledge, consider taking the CompTIA® Project+® (2009 Objec-
tives) course, which delves into the unique challenges of managing IT projects and may help
you to prepare for professional certification in CompTIA® Project+®. In addition, you can take
the Project Management Professional (PMP®) Certification: Fourth Edition - Comprehensive,
Program Management Professional (PgMP®)SM Credential, and Introduction to Project Port-
folio Managementcourses.

481
NOTES

482 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 APPENDIX A

APPENDIX A
Code of Ethics and
Professional Conduct
The PMI Code of Ethics and Professional Conduct
The PMI Code of Ethics and Professional Conduct provides a framework for ethical behavior
and professional conduct by project management professionals. These guidelines relate to your
practice of project management both within the profession and beyond, in your interactions
with customers and the public. The purpose of the code is to instill confidence in the project
management profession and to help an individual become a better practitioner. The code relates
to values considered most important to the global project management community: responsibil-
ity, respect, fairness, and honesty.
Upholding Responsibilities to the Profession
Responsibilities to the profession include compliance with all applicable laws as well as orga-
nizational rules and policies. To uphold responsibilities to the profession, consider the
following guidelines:
• Take ownership for the decisions we make or fail to make, the actions we take or fail to
take, and the consequences that result.
• Accept only those assignments that are consistent with our background, experience, skills,
and qualifications.
• Fulfill the commitments that we undertake; do what we say we will do.
• Protect any proprietary or confidential information that has been entrusted to us. Report
possible violations of the PMI Code of Ethics and Professional Conduct by individuals in
the field of project management, and cooperate with PMI concerning ethics violations and
the collection of related information.
• Disclose to clients, customers, owners, or contractors, significant circumstances that could
be construed as a conflict of interest or an appearance of impropriety.
• Behave in a truthful and ethical manner. This includes complying with all applicable laws,
regulations, and ethical standards governing professional practice, respecting the intellec-
tual property developed or owned by others, and providing truthful advertising concerning
your qualifications and services.

Appendix A: Code of Ethics and Professional Conduct 483

APPENDIX A
Example of Responsibilities to the Profession: David was a project manager supervising the
expansion of a large municipal public library. Stakeholders in this project included government
agencies, taxpayers, the voters who had voted to authorize the city to issue bonds for the
project, and private donors who had contributed more than $5 million towards costs.
Several noncertified project managers were working on David’s team. David not only had to
accurately represent his own credentials and qualifications when working with project stake-
holders, but also to behave ethically when mentoring his proteges. When they asked him for
special tutoring and exam tips, David said no. Although he wanted to see the less-experienced
project managers on his team achieve certification status, he could not breach the confidential-
ity of the CAPM exams by offering them inappropriate coaching or advice.
David also had to concern himself with even the appearance of impropriety. He had to make
sure that none of the private donors accrued inappropriate benefits by making contributions to
the building campaign. He maintained transparency with the project schedule and its books,
keeping them open for inspection, so that all the stakeholders could monitor the work that was
being done and how funds were being spent.
Upholding Responsibilities to the Customer and to the Public
A project manager’s responsibilities to customers and to the public relate to the ethics of pub-
lic representations, confidentiality, and conflicts of interest. To uphold your responsibilities to
customers and the public, consider the following guidelines:
• Provide truthful representations in all of your advertising, public statements, and in any of
your estimates concerning costs, your services, and your expected results.
• Uphold the policies, rules, regulations, and laws that govern your work, professional, and
volunteer activities.
• Negotiate in good faith.
• Respect the property rights of others.
• Respect the confidentiality of sensitive information.
• Ensure that a conflict of interest does not compromise the legitimate interests of a client
or customer, or influence your professional judgments.
• Refrain from offering or accepting inappropriate payments, gifts, or other forms of com-
pensation for personal gain.
Example of Responsibilities to the Customer and to the Public: Project managers’ responsi-
bilities to their customers and to the public include projects that are publicly funded or that
have an impact on public safety. When a municipality hires a project management firm to
oversee construction of a public bridge, for example, the burden of responsibility is on the firm
to ensure that contractors are working within applicable laws.
When the construction costs skyrocketed during the building of a public elementary school,
one proposed solution was to lower costs by employing teams of undocumented workers, in
violation of state and federal labor laws. Such failure to uphold responsibilities to the custom-
ers and to the public may leave project managers vulnerable to losses from litigation and
damage to reputation.
Adhering to Other Responsibilities
In addition to the Code of Ethics and Professional Conduct, the PMI has identified several
additional professional and social responsibilities for project managers. To maintain compliance
with additional professional and social responsibilities, consider the following guidelines:
• Adhere to appropriate ethical and legal standards. Upholding such standards of profession-
alism will contribute to the integrity of the field and set a positive example for others to
follow.

484 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 APPENDIX A
• Advance the field of project management by contributing ideas and research findings to
the shared body of knowledge. Share professional expertise and experience to help others
increase their skills and competence in the field.
• Promote interaction within the project management community by contributing to a cul-
ture of understanding and respect. Share information regarding successes, challenges, and
obstacles overcome in order to help others improve their professional skills.
• Demonstrate transparency in the decision-making process.
• Earnestly seek to understand the truth. Strive to create an environment in which others
feel safe to tell the truth.
• Do not engage in or condone behavior that is designed to deceive others, including but
not limited to, making misleading or false statements, stating half-truths, providing infor-
mation out of context, or withholding information that, if known, would render your
statements as misleading or incomplete.
Example for Other Responsibilities: Hurricane Katrina struck the coastal areas of Louisiana
and Mississippi in the United States in 2005, resulting in more than 1,000 deaths and billions
of dollars in property losses. In response, a group of PMI leaders formed the Project Manag-
ers’ Disaster Recovery Coalition in a shared effort to provide project management, planning,
and logistics services to devastated areas. The coalition’s stated goals were two-fold: “to assist
fellow project managers from PMI chapters in stricken areas; and to provide professional ser-
vices to governments, companies, and organizations in the effort to rebuild.” This is a notable
example of project managers’ adherence to their additional professional and social responsibili-
ties.

Appendix A: Code of Ethics and Professional Conduct 485

NOTES

486 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 APPENDIX B

APPENDIX B
Interpersonal Skills Required
for a Project Manager
Interpersonal Skills
Interpersonal skills are abilities that an individual should possess to work harmoniously and
efficiently with others. Being in the project management profession, it is important that you
develop a balance of conceptual, technical, and interpersonal skills that will enable you to ana-
lyze situations and deal with them appropriately. Some of the important interpersonal skills
critical to effectively manage a project are:
• Leadership
• Team building
• Motivation
• Communication
• Influencing
• Decision making
• Political and cultural awareness
• Negotiation
Leadership Skills
Leadership is the capacity of a person to guide and inspire others to achieve results. The abil-
ity to lead can be characterized as learning from one’s mistakes, building relationships, taking
initiatives, and inspiring others through positive influence. Characteristics of effective leader-
ship include self-awareness, personal accountability, and personal integrity. These
characteristics are important for a manager to establish rapport, enhance credibility, and gain
others’ trust.
Though the leadership capabilities of a manager are important throughout all the phases of a
project, it is critical at the beginning of a project or phase where the emphasis will be to com-
municate the vision and motivate and inspire team members for higher project performance.
Leadership Style

Appendix B: Interpersonal Skills Required for a Project Manager 487

APPENDIX B
Leadership style indicates how a person prefers to interact with others in various situations. It
is based on low or high assertiveness and low or high responsiveness. An understanding of
characteristics of leadership styles will help you, as a leader, to assess the behaviors, feelings,
and tendencies that comprise self-awareness.

A four-quadrant approach best represents leadership styles. Many categorizations of leadership

styles are based on the concepts of assertiveness and responsiveness. Of course, this is not an
exact method of determining a leader’s personal style, but it is useful for generalizing how
leaders make decisions and interact with other people. Variations may exist on a situational
basis. No one style of leadership works for every situation, and no one person will always be
using the same style in all interactions. However, knowledge of characteristics of these styles
is helpful when considering your interactions with others.
Assertiveness
Assertiveness refers to the degree of effort that a person puts into influencing others and their
surroundings. If you interact with others and your surroundings with the intention of influenc-
ing them, then you may be high in assertiveness. You would seek to understand, but not
necessarily to be understood by others. Conversely, if you exhibit low assertiveness, then you
are most likely not noticing your own influence on others and your surroundings. Generally,
you may make decisions based on others’ analyses and perceptions, rather than your own.
Responsiveness
Responsiveness refers to the degree of effort that a person puts into responding to others and
their surroundings. If you put more energy into responding to others and your surroundings
than on completing tasks, you are probably closer to high responsiveness. If you tend to focus
more on tasks than ideas, then you are probably closer to low responsiveness.
Team Building Skills
Team building is an ongoing process of helping the project team work collaboratively, rather
than individually, to achieve a common purpose. Good leadership and team building activities
cultivate a work environment that fosters teamwork, creates a sense of ownership across the
team, helps build mutual trust, facilitates the exchange of high quality information, and enables
sound decision making and effective project control. Good team building skills help you to
handle project related issues as a team without making individual team members accountable
for those issues. It is essential for any manager to develop a good team environment that pos-
sesses these qualities.
Certain barriers deter good teamwork. It is the prime duty of a manager to help the team over-
come these barriers to perform good teamwork.

488 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 APPENDIX B
Barriers to Teamwork Description
Withholding information Team members sometimes do not share their knowledge.
Encourage your team members to share their knowledge and
experience. Holding back information hinders effective prob-
lem solving and lowers team effectiveness.
Guarded ideas If team members feel they will be punished or receive nega-
tive reactions from freely sharing their ideas, they will tend
to be very cautious.
Uncontested ideas Team members may avoid challenging each other’s ideas.
While this may appear to be a team that is unified, it is more
likely that team members are masking their feelings or are
unwilling to share information. If they challenge each other’s
ideas, they can discover innovative ways to solve problems.
Ineffective meetings Meetings need to be well structured to be productive. Provide
opportunities for all members to participate and make deci-
sions.
Unrealistic goals Team members sometimes set unreachable targets for them-
selves. Team members need to continually clarify
expectations and control scope creep, which is the tendency
of projects to expand beyond their original bounds.
Unhealthy competition It can happen that team members compete with each other
instead of working together as a team. Intra-team rivalry can
prevent your team from successfully accomplishing its goals.
Wariness Team members do not always trust each other. You need to
instill a sense of confidence in the abilities of individual team
members and in the ability of the team to overcome problems
together.

Motivation Skills
Motivation skills are imperative for managers to get work done from their project team mem-
bers and improve team performance. Motivation is what makes a team member want to
accomplish goals with a high level of quality rather than just doing the minimum work
required. A manager should understand that all individuals in the team are unique and have
their own expectations, values, and objectives. Some of the motivation factors that individuals
consider necessary and important are job satisfaction; challenging work; a sense of accomplish-
ment, achievement, and growth; financial compensation; and rewards and recognitions.
Motivational Techniques
Consider a variety of methods of recognizing employees’ contributions:
• Say “Thank you.”
• Ask their advice and give them credit for ideas.
• Greet your employees when you see them.
• Invite them to coffee or lunch, alone or with members of the team.
• Give verbal praise in private, in a team meeting, or in small groups.
• Give team members a chance to shine. Allow them the opportunity to speak at a confer-
ence or a meeting.
• Allow increased autonomy.

Appendix B: Interpersonal Skills Required for a Project Manager 489

APPENDIX B
• Communicate their achievements to higher level management.
• Send employees to seminars or conferences and ask them to report back to the team.
• Give awards and commendations.
• Or, make speeches that recognize individual contributions.
Communication Skills
Effective communication is where everyone is kept informed, knows exactly what to do, and
has all of the information to do their jobs. It is essential that a manager is able to clearly
express his or her ideas to others, and that the manager understands what other people are try-
ing to say. The ability to motivate, delegate, organize, solve problems, and obtain information
depends on effective communication. Listening is another important aspect of communication.
By using effective listening techniques, a manager can manage conflicts, make appropriate
decisions, and provide suitable solutions.
Influencing Skills
A manager who possesses influence can get along well with others and prefers to use persua-
sion, as opposed to coercion, when interacting with others. The ability to influence someone is
based on credibility, trust, support, and collaboration. A manager can achieve a level of influ-
ence by demonstrating good listening and responding skills, a sense of humor, and the ability
to express oneself. Influential managers tend to be sociable and optimistic, and they demon-
strate an obvious enthusiasm for their work. Managers who can apply influence get results
because people want to work with them.
Decision Making Skills
In the business world, you do not often make decisions alone. Major decisions are the result of
collaboration and negotiation, so as a manager you need to establish your credibility in order
to affect the decision making process. You must employ sound decision making skills and
engage in active collaboration. Given the complexity of many business decisions that require
input from multiple sources, you must establish your credibility as a decision maker and learn
to foster critical thinking when interacting with your project team.
Six Phases of Decision Making
Project managers along with the team can use the six-phase model for better decision making.

Phase Involves
Define the problem Exploring and clarifying the problem or situation.
Generate solutions or alternatives for Brainstorming ideas, solutions, or alternatives for the problem.
the problem
Put ideas into action Evaluating the pros and cons of the discussed alternative and
selecting the best solution for implementation.
Plan for solution action Contributor’s acceptance and commitment to make the solution
work.
Plan for solution evaluation Evaluation, post-implementation audit, and lessons learned.
Evaluate the outcome and process Evaluating how well the problem was solved and project goals
achieved.

Political and Cultural Awareness Skills

490 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 APPENDIX B
Political skills and cultural awareness are among the managerial skills that should be acquired
to effectively manage projects in an organization. Political environments, internal or external to
the organization, will have a huge impact on a project. The right kind of political awareness
and effective political leadership is therefore necessary to build an environment of trust and
create a win-win atmosphere in the organization.
Cultural differences can either be individual or corporate in nature and may involve both inter-
nal and external stakeholders. There might be situations when people working on a project
come from diverse backgrounds and their cultural upbringing and beliefs may differ from each
other. These differences when not understood properly may sometimes impact project progress,
affect the decision making process, and lead to unnecessary stress in the work environment,
which in turn affects project performance. To effectively manage cultural diversity, it is essen-
tial to get to know about the individual team members, and communication planning should be
made a mandatory task as part of the overall project plan.

The word “politics” in this context does not refer to governmental or public politics, but to the politics of profes-
sional relationships.

Negotiation Skills
Negotiation is an approach used by individuals or organizations with mutual or opposite inter-
ests to come together to reach a final agreement. Negotiation is indispensable to project
management and, when done effectively, will contribute to the success of a project. Some of
the skills or behaviors that managers can adapt to negotiate successfully are:
• Analyzing the situation.
• Differentiating the needs and wants of both parties.
• Focusing on issues and interests rather than on positions.
• Being realistic when making proposals.
• Impressing the other party while giving concessions to indicate that you are providing
them something of value.
• Ensuring a win-win situation for both parties at the end of the deal.
• Communicating in an appropriate manner.

Appendix B: Interpersonal Skills Required for a Project Manager 491

NOTES

492 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 APPENDIX C

APPENDIX C
®
Updates to the PMBOK Fourth
Edition Guide
The release of the PMBOK® Fourth Edition guide by the PMI® continues to provide excel-
lence in the project management profession. This standard greatly focuses on maintaining
consistency in the usage of process names and bringing clarity to the content that is easy to
comprehend and implement.
The following are the major differences between the third and fourth editions of the PMBOK®.
• The usage of verb-noun format for all the process names.
• The decrease of 44 processes to 42 with few process changes.
• Deleted two old processes: Develop Preliminary Scope Statement and Plan Scope.
• Added two new processes: Collect Requirements and Identify Stakeholders.
• Reorganized six processes as four in the Project Procurement Management knowl-
edge area.
• Combined the Plan Purchases and Acquisitions and Plan Contracting processes
as the Plan Procurements process.
• Combined the Request Seller Responses and Select Sellers processes as the
Conduct Procurements process.
• Changed the Contract Administration process to the Administer Procurements
process.
• Changed the Contract Closure process to the Close Procurements process.
• Renamed two processes.
• Manage Stakeholders to Manage Stakeholder Expectations.
• Close Project to Close Project or Phase.
• Moved the Manage Project Team and Manage Stakeholder Expectations processes
from the Monitoring and Controlling process group to the Executing process group.
• A differentiation between the project management plan and the project documents has
been provided.
• A clear distinction between the elements of the project charter and project scope statement
is accommodated.
• A standardized approach is adopted for documenting inputs and outputs.

Appendix C: Updates to the PMBOK® Fourth Edition Guide 493

APPENDIX C
• A clear distinction between the enterprise environmental factors and organizational pro-
cess assets has been made throughout the processes.
• A defined approach for discussing requested changes, preventive actions, corrective
actions, and defect repairs is employed.
• A new appendix describing the key interpersonal skills necessary for a project manager is
given.

494 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 APPENDIX D

APPENDIX D
Project Management
Processes
Here is a comprehensive list of all project management processes covered in this course.
The Develop Project Charter Process
Develop project charter is the first process in the project integration management knowledge
area. The purpose of developing a project charter is to formally launch and authorize a new
project or to authorize an existing project to continue into its next phase.

The Develop Project Management Plan Process

The develop project management plan process involves documenting the appropriate actions to
define, create, integrate, and coordinate the subsidiary management plans as one single plan.

Appendix D: Project Management Processes 495

APPENDIX D

The Collect Requirements Process

In the collect requirements process, the project manager defines and documents the stakehold-
ers’ needs and expectations to meet the project objectives.

The Define Scope Process

During the define scope process, the project manager defines the scope of the project and final-
izes a project scope statement.

The Create WBS Process

The create WBS process is the method of dividing the project deliverables into smaller, more
manageable components.

496 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 APPENDIX D

The Verify Scope Process

Verify scope is the process of demonstrating to stakeholders that they have received what they
have been promised in a given deliverable and formalizing their acceptance.

The Control Scope Process

Control scope is the process of monitoring project scope and holding changes to the project
scope baseline in check by:
• Evaluating change requests to determine the need and impact of the change to project
objectives.
• Making sure changes are agreed upon.
• Managing the actual changes to ensure that they are implemented correctly and that they
are effective.

Appendix D: Project Management Processes 497

APPENDIX D
The Define Activities Process
The define activities process is the identification and documentation of the specific activities
that must be performed to produce the project’s deliverables.

The Sequence Activities Process

The sequence activities process is a planning process that involves identifying and document-
ing interactivity dependencies among project activities for the purpose of creating the project
schedule.

The Estimate Activity Resources Process

The estimate activity resources process involves determining specific resources necessary for
completing project activities.

The Estimate Activity Durations Process

498 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 APPENDIX D
The estimate activity durations process involves the act of estimating the duration of work that
will be needed to complete individual project activities using the available resources.

The Develop Schedule Process

The develop schedule process is the act of defining specific start and end dates for each project
activity.

The Control Schedule Process

Control schedule is a process of monitoring schedule performance and controlling changes to
the schedule baseline.

Appendix D: Project Management Processes 499

APPENDIX D

The Estimate Costs Process

Estimate costs is the process of projecting the total expenditures necessary for the completion
of your project.

The Determine Budget Process

Determine budget is the process of allocating the overall cost estimates to individual activities
or work packages across the project life cycle.

The Control Costs Process

500 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 APPENDIX D
Control costs is the process of monitoring cost performance and controlling changes to the cost
baseline, while influencing the causes of changes.

The Plan Quality Process

Plan quality is the process of putting plans into place to ensure that a project will satisfy its
stated objectives or business needs.

The Perform Quality Assurance Process

The perform quality assurance process is a method of evaluating overall project performance
through planned, systematic activities; it creates confidence that the project will employ the
appropriate processes and satisfy standards for quality.

Appendix D: Project Management Processes 501

APPENDIX D

The Perform Quality Control Process

The perform quality control process involves monitoring project performance to determine if it
complies with relevant quality standards and identifying ways to eliminate causes of unaccept-
able performance.

The Develop Human Resource Plan Process

Develop human resource plan is the process of identifying, documenting, and assigning project
roles, responsibilities, and reporting relationships.

The Acquire Project Team Process

502 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 APPENDIX D
The acquire project team process involves making the identified resources available to the
project. Resource selection may be driven by different factors such as collective bargaining
agreements, or other internal or external reporting relationships.

The Develop Project Team Process

The develop project team process is an on-going effort to build a cohesive team that benefits
from good communication and a foundation of trust. Its goal is to enhance the team’s collec-
tive performance and improve their skills so that you increase the likelihood of meeting project
objectives.

The Manage Project Team Process

The manage project team process monitors individual performance, gives feedback, solves
issues, and organizes changes to improve project performance.

The Identify Stakeholders Process

Appendix D: Project Management Processes 503

APPENDIX D
During the identify stakeholders process, the project manager identifies all stakeholders that are
impacted by the project and documents information that is relevant regarding their interests,
involvement, and impact on project success.

The Plan Communications Process

Plan communications is the process of ensuring timely and appropriate generation, collection,
dissemination, storage, and ultimate disposition of project information.

The Distribute Information Process

The distribute information process involves getting the right information to the right people,
both internally and externally, at the right time.

The Manage Stakeholder Expectations Process

The manage stakeholder expectations process aims at managing communications to meet the
needs and expectations of the stakeholders.

504 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 APPENDIX D

The Report Performance Process

Report performance is the process of gathering and communicating information regarding the
current status of a project as well as projections for progress over time.

The Plan Risk Management Process

Plan risk management is the process of deciding how to plan and execute the risk management
activities for a project.

The Identify Risks Process

Appendix D: Project Management Processes 505

APPENDIX D
Identify risks is an iterative process of identifying the risks and triggers facing a project. It
requires an understanding of the project’s schedule, its costs, and its quality management plan.

The Perform Qualitative Risk Analysis Process

Perform qualitative risk analysis is the process of assessing, ranking, and prioritizing risks for
subsequent analysis.

The Perform Quantitative Risk Analysis Process

Perform quantitative risk analysis is the process of numerically assessing the probability and
impact of each risk and determining the extent of the overall project risk.

506 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 APPENDIX D

The Plan Risk Responses Process

Plan risk responses is the process of examining each risk and corresponding response alterna-
tive, determining which response will improve the likelihood of a positive outcome.

The Monitor and Control Risks Process

The monitor and control risks process is the process of responding to identified and unforeseen
risks. It involves tracking identified risks, identifying new risks, implementing risk response
plans, and monitoring their effectiveness.

The Plan Procurements Process

Appendix D: Project Management Processes 507

APPENDIX D
The plan procurements process allows project managers to document project purchasing deci-
sions, specify the approach to be followed for project procurements, and identify potential
sellers to meet the purchase requirements of the project.

The Conduct Procurements Process

In the conduct procurements process, project managers will obtain seller responses, select a
seller, and award contracts to the identified seller for the procurement of the required product,
service, or result from the seller.

The Administer Procurements Process

The administer procurements process is the process of managing the relationship with the
seller. During administer procurements, the project manager applies other project management
processes to the contractual relationship and integrates the coordination of the outputs from
these processes into the overall management of the project.

508 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 APPENDIX D

The Close Procurements Process

The close procurements process is the process of completing each project procurement by
ensuring that contractual obligations have been met on both sides and resolving any outstand-
ing issues.

The Direct and Manage Project Execution Process

The direct and manage project execution process involves carrying out the project management
plan to produce a product or provide a service so as to meet the project objectives.

The Monitor and Control Project Work Process

The monitor and control project work process involves tracking, reviewing, and regulating the
project processes to meet the project’s performance objectives.

Appendix D: Project Management Processes 509

APPENDIX D

The Perform Integrated Change Control Process

The perform integrated change control process is the formal method of governing and organiz-
ing the manner in which changes will be requested, reviewed, approved or rejected,
implemented, controlled, and coordinated.

The Close Project or Phase Process

The close project or phase process involves closing out all project activities and formally end-
ing the project or, in the case of multi-phase projects, closing out a specific project phase.

510 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
LABS

LESSON LABS
Due to classroom setup constraints, some labs cannot be keyed in sequence immediately fol-
lowing their associated lesson. Your instructor will tell you whether your labs can be practiced
immediately following the lesson or whether they require separate setup from the main lesson
content. Lesson-level lab setup information is listed in the front of this manual in the course
setup section.

LESSON 1 LAB 1
Reviewing Project Management Fundamentals
Activity Time:
15 minutes

Scenario:
In this lab, you will have an opportunity to review the CAPM certification exam related infor-
mation that was presented in this lesson.

1. A project stakeholder asked you to create a financial plan for your project. Preparing a
financial plan will require:
a) Program management skills
b) Industry specific skills
c) Financial subject matter expertise
✓ d) Both project management and industry specific skills

2. Which is not an attribute of a project?

a) Having a definite starting date
✓ b) Having no definite end date
c) Creating a product, service, or result
d) Acquiring resources

Lesson Labs 511

LESSON
3.
LABS A long-standing client has asked for a special component to be created for one of his
test engines. Your organization creates a standard contract with the customer and
your manager assigns this project to you. The project was launched because of:
✓ a) A customer request.
b) A change in the technology your customer is creating.
c) A legal requirement (contractual).
d) An organizational need.

4. In most organizations, project managers are not responsible for:

a) Identifying project requirements.
✓ b) Selecting the projects that need to be initiated.
c) Balancing demands for time, cost, scope, and quality.
d) Establishing clear and achievable project objectives.

5. Which is not a characteristic of a project?

a) Constrained by limited resources
b) Planned, executed, and controlled
c) Creates a unique product or service
✓ d) Can be ongoing and repetitive

6. Which is not a general management skill?

✓ a) Motivating a project team.
b) Purchasing and procurement.
c) Sales and marketing.
d) Contracts and commercial law.

7. A construction company won a contract to build a 77-story condominium building. The

building will have 650 condos, a parking garage, indoor and outdoor pools, two floors
for retail, two floors of offices, and several shared community rooms. Which option
best describes this program?
a) A standardized approach to project management within an organization.
b) A standardized approach to project management with multiple projects coordinated
together.
✓ c) A collection of related projects managed in coordination to gain control that will not
necessarily be available if the projects were managed independently.
d) A collection of related projects all contributing to one deliverable.

512 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
8. Which statement regarding project stakeholders is not correct?
✓ a) Negative stakeholders must be ignored if the project has to be brought to a success- LABS
ful completion.
b) Stakeholders have different levels of responsibility and authority when participating
in a project and these can change over the project’s life cycle.
c) Some key stakeholders include the project manager, the performing organization,
the project team members, the customer, and the sponsor.
d) Stakeholder expectations may be difficult to manage because stakeholders often
have conflicting objectives.

LESSON 2 LAB 1
Recognizing Project Management Processes
Activity Time:
20 minutes

Scenario:
In this lab, you will have an opportunity to review the CAPM certification exam related infor-
mation that was presented in this lesson.

1. You are hired as the project manager for a large global service provider. A project
team member informs you that a particular task is taking more time than what was
allotted. You are surprised because you had not anticipated this delay, and you call a
status review meeting of your team to determine whether this variance requires an
appropriate response. You are in which phase of the project management process
group?
a) Initiating
b) Executing
✓ c) Monitoring and controlling
d) Planning

2. In which process group will all the project requirements be completed?

a) Planning
✓ b) Executing
c) Monitoring and controlling
d) Closing

Lesson Labs 513

LESSON
3.
LABS In a project, schedule development, cost estimating, and cost budgeting will be done
as part of which project process group?
a) Executing
b) Monitoring and controlling
c) Closing
✓ d) Planning

4. Which knowledge area do you think will include the creation of the project charter?
a) Project scope management
b) Project cost management
✓ c) Project integration management
d) Project communications management

5. In a kick-off meeting for your project, you provided information to your team members
about the different process groups that will be followed during project implementa-
tion. According to the PMI, what are the project management process groups?
a) Conceptualizing, Initiating, Executing, Monitoring and Controlling, and Closing.
✓ b) Initiating, Planning, Executing, Monitoring and Controlling, and Closing.
c) Initiating, Verifying, Executing, Monitoring and Controlling, and Closing.
d) Initiating, Planning, Executing, Controlling, and Administrative Closure.

6. You are in the planning phase of your project and are considering processes that need
to be implemented within the planning phase. Which processes should you consider
when you are in the planning phase?
a) Developing project charter, identifying stakeholders, distributing information, and
conducting procurements.
✓ b) Developing project management plan, collecting requirements, defining scope, and
planning quality.
c) Monitoring project work, controlling schedule, performing quality control, and con-
trolling risks.
d) Performing integrated change control, verifying scope, reporting performance, and
administrating procurements.

7. Which process is a part of the initiating process group?

✓ a) Develop project charter
b) Develop project management plan
c) Estimate costs
d) Collect requirements

8. Which knowledge area ensures that the various elements of the project are properly
coordinated?
a) Project quality management
b) Project human resource management
c) Project scope management
✓ d) Project integration management

514 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
9. True or False? The planning process group includes processes for creating a Work
Breakdown Structure (WBS). LABS
✓ True
False

10. Which project management process group takes more project time and resources?
a) Planning
b) Designing
c) Integrating
✓ d) Executing

11. Which project management process group involves estimating costs and determining
budget?
✓ a) Planning
b) Initiating
c) Monitoring and Controlling
d) Executing

12. The information from the planning process group is a direct input to which process
group?
a) Initiating
b) Designing
✓ c) Executing
d) Closing

13. Which statements best describe interactions between project management process
groups?
✓ a) Outputs from one project management process become inputs to others.
✓ b) Once a project is initiated, you move into the planning processes where you develop
a project management plan.
c) Once a project is initiated, you move into the executing processes where you develop
a project management plan.
✓ d) The loop continues between planning, executing, and monitoring and controlling
until the project’s objectives are completely met.

14. Which best describes the project scope management knowledge area?
a) Includes processes and activities that are used to identify, define, and coordinate the
processes and activities within the project management process groups.
b) Includes processes that ensure the effective use of the project team members.
✓ c) Includes processes and activities to ensure that the project comprises all work
required, and only work required, to successfully complete the project.
d) Includes processes and activities that help ensure that the project is completed
within the estimated and approved budget.

Lesson Labs 515

LESSON
15. Which best describes rolling wave planning?
LABS a) Starts only when the previous phase is complete.
b) Contains phases that start prior to the completion of its preceding phase.
✓ c) Deals with progressive detailing of the project management plan.
d) Contains phases that start prior to the beginning of its preceding phase.

16. Which options best describe the characteristics of a project life cycle?
✓ a) The cost and staffing levels reach the peak once work is carried out and drop rapidly
upon project completion.
b) The cost and staffing levels are low once work is carried out and reach the peak upon
project completion.
✓ c) The influences, uncertainties, and risks involved with stakeholders are high at the
project start and diminish over the life of the project.
d) The influences, uncertainties, and risks involved with stakeholders are low at the
project start and high over the life of the project.

LESSON 3 LAB 1
Initiating a Project
Activity Time:
20 minutes

Scenario:
In this lab, you will have an opportunity to review the CAPM certification exam related infor-
mation that was presented in this lesson.

1. What is the basic purpose of a feasibility analysis?

a) To determine the major activities within the project and break them down into com-
ponent work packages.
✓ b) To determine if the organization should do the project based on economic and/or
societal costs associated with what is being proposed.
c) To link the project to strategic goals.
d) To determine how to manage a project throughout its life cycle.

516 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
2. Which sorting and rating system allows experts to be located in remote areas and
remain anonymous, yet participate in group decision making? LABS
a) Decision tree
b) Weighted factor
✓ c) Delphi technique
d) Criteria profiling

3. Which component is not a part of a project charter?

a) Business case
b) Project objectives
c) Product description
✓ d) Project WBS

4. In which case is ″contract″ used as an input to the develop project charter process?
✓ a) If the project is being done for an external customer.
b) If the project statement of work is not prepared.
c) If the project is being done for an internal customer.
d) If the project is being done for high revenue.

5. While doing a feasibility analysis of a project, what are the factors that you take into
account?
Answers will vary, but may include factors such as description of the problem that the
project is expected to solve, estimate of the costs and time to implement each alterna-
tive, statement of project goals and major development milestones, and so on.

6. Choose the component that should always be included in the project charter.
a) A breakdown of the functions and activities to be performed on the project.
b) A list of the project stakeholders and their areas of responsibilities.
c) A schedule of project activities.
✓ d) A statement of project goals, via a project SOW, and authorization of the project
manager to use organizational resources on the project.

7. Which one or more of these is a common reason for an organization to undertake a

new project?
✓ a) Meeting a customer’s needs.
✓ b) Gaining a competitive advantage in the market.
c) Identifying best practices.
✓ d) Meeting regulatory requirements.

Lesson Labs 517

LESSON
8.
LABS Choose the component that a formal feasibility study is likely to contain.
a) Determinations about when and whether to make significant investments in capital
expenditures.
✓ b) Estimate of the cost and time to implement each alternative.
c) Likelihood of the project to meet capital budgeting targets.
d) Rating of the relative priority of a number of projects.

9. Which is a quick and objective method for evaluating project proposals?

a) Screening system
✓ b) Weighting system
c) Team-based evaluation system
d) Capital budgeting system

10. Which input in the develop project charter process includes policies, procedures and
guidelines, and the process measurement database?
a) Project statement of work
b) Contract
✓ c) Organizational process assets
d) Enterprise environmental factors

11. Do you prepare a business case for your projects in your organization? If yes, what are
its components?
Answers will vary, but may include components such as business need, stakeholders, stra-
tegic risks, benefits evaluation, contingency plan, and so on.

12. Which could be a constraint in your project execution?

a) SOW
b) Criteria profiling
✓ c) Contract
d) Sponsor

13. Who could be the typical stakeholders for a project charter?

Answers will vary, but may include the project team members, the customer or vendor,
the functional managers, the finance or accounting department, project sponsors, and so
on.

14. Do you prepare a formal project management plan as part of project management in
your organization? If yes, what are the components of the project management plan?
Answers will vary, but may include subsidiary plans, detailed description of tasks, tools,
and techniques to be used during the course of project execution, performance measure-
ment baselines, and so on.

518 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
15. What is the primary purpose of a project management plan?
a) To define the work to be completed to reach the project end date. LABS
b) To define the work needed in each phase of the project life cycle.
c) To prevent any changes to the scope.
✓ d) To define how the project is executed, monitored, controlled, and then closed.

LESSON 4 LAB 1
Administering Project Scope
Activity Time:
20 minutes

Scenario:
In this lab, you will have an opportunity to review the CAPM certification exam related infor-
mation that was presented in this lesson.

1. Which project management processes are included in the scope management knowl-
edge area?
✓ a) Collect requirements
✓ b) Create WBS
✓ c) Define scope
d) Develop project management plan
e) Develop project charter

2. Who prepares the scope baseline?

a) The sponsor
✓ b) The project team
c) The project manager
d) The stakeholders

3. Which elements are included in a project scope statement?

a) Detailed project risks
✓ b) Project justification and deliverables
✓ c) Project description and objectives
d) Schedule and costs for the project

Lesson Labs 519

LESSON
4.
LABS Which component is a graphical representation of the deliverables included in the
project?
a) Requirements traceability matrix
✓ b) Work breakdown structure
c) Organizational breakdown structure
d) Project schedule

5. Which technique involves activities such as brainstorming, nominal group technique,

the Delphi technique, idea or mind mapping, and affinity diagram to identify the
requirements for a project?
a) Group decision making techniques
b) Facilitated workshops
✓ c) Group creativity techniques
d) Questionnaires and surveys

6. Which monitoring and controlling process belongs to the project scope management
knowledge area?
a) Collect requirements
b) Define scope
c) Create WBS
✓ d) Verify scope

7. Why will you use a WBS numbering system for a project?

a) To make cost estimates.
✓ b) To identify the level of the work in the overall project.
c) To make duration estimates.
d) To identify risks.

8. Which option is true for a WBS?

✓ a) Each descending level represents an increase in detail of work.
b) Each ascending level represents an increase in detail of work.
c) Level of detail does not change with position of work on the WBS.
d) Each descending level represents a decrease in detail of work.

9. If a project is terminated early because of funding problems, how will you incorporate
the verify scope process to do anything further?
a) Verify correctness of the work results produced.
b) Determine project performance through date.
✓ c) Document extent of completion.
d) Create lessons learned documentation.

520 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
10. What is meant by the code of accounts?
a) A numbering system used to define activities in the statement of work. LABS
✓ b) A numbering system that identifies the specific accounting category for each element
of project work.
c) A numbering system that rates activity durations for each work package.
d) A numbering system for analyzing cost based on expert opinion.

11. What is the purpose of scope definition?

a) Create an overall strategy for approaching the project.
b) Define which tasks are included in a project and which tasks are not included.
✓ c) Provide a common understanding of the project’s major objectives by identifying
what is within scope and what is currently out of scope.
d) Define the quality parameters affecting project procurements.

12. Which process involves defining and documenting the stakeholders’ needs and expec-
tations to meet the project objectives?
a) The define scope process
b) The develop project management plan process
✓ c) The collect requirements process
d) The create WBS process

13. What are inputs to the verify scope process?

a) Deliverables formally signed off or acknowledged by sponsors or customers.
✓ b) Project scope baseline of all planning processes.
✓ c) Requirements matrix linking the requirements with their source.
✓ d) Completed deliverables validated by the perform quality control process.

14. What is the objective of the verify scope process?

✓ a) Obtaining formal acceptance of the project scope.
b) Ensuring correctness of work results.
c) Obtaining approval to proceed with project execution.
d) Documenting the lessons learned.

15. Which technique allows you to determine if the requirements have been met?
a) Templates
✓ b) Inspection
c) WBS
d) Scope statement

Lesson Labs 521

LESSON
16. Which could be an appropriate WBS code for a work package at the fourth level in a
LABS WBS where the top level is 1.0?
a) 1.2.4
b) 1.4
✓ c) 1.1.1.1
d) 1.1

17. Which tool and technique would you use to create the WBS?
✓ a) Decomposition
b) WBS dictionary
c) Lateral thinking
d) Functional analysis

18. True or False? A work package can be further subdivided if it can be assigned to more
than one individual person or group.
True
✓ False

19. You are asked to decompose the WBS deliverables. Which activity would you perform
during decomposition?
a) Assign unique ID numbers to each deliverable.
✓ b) Break the deliverables down into smaller components.
c) Arrange the deliverables into categories, based on risk.
d) Organize the deliverables, based on which project team is responsible for their
completion.

20. During the planning phase of your project, your project team discovered another
method to complete a portion of the project scope. This method is safer for the
project team, but may cost more for the customer. This is an example of:
a) Risk assessment
✓ b) Alternative identification
c) Alternative selection
d) Product analysis

21. What are the inputs to the define scope process?

a) Product analysis, alternatives identification, expert judgment, and facilitated work-
shops
✓ b) Organizational process assets, project charter, requirements documentation
c) Project management plan, requirements documentation, requirements traceability
matrix, and validated deliverables
d) Organizational process assets, project scope statement, and requirements documen-
tation

522 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
22. Which document links the requirements to their origin and tracks them throughout the
project life cycle? LABS
a) Requirements management plan
b) Stakeholder register
c) Requirements documentation
✓ d) Requirements traceability matrix

23. Which technique involves decision making methods such as Unanimity, Majority, Plu-
rality, and Dictatorship?
✓ a) Group decision making techniques
b) Facilitated workshops
c) Interviews
d) Questionnaires and surveys

LESSON 5 LAB 1
Calculating Project Time
Activity Time:
20 minutes

Scenario:
In this lab, you will have an opportunity to review the CAPM certification exam related infor-
mation that was presented in this lesson.

1. Which options refer to additional time included in the schedule as recognition of

schedule risk?
✓ a) Contingency
b) Dummy activities
✓ c) Reserve
✓ d) Buffer

2. Which process is done after the completion of activity listing?

a) Identifying risk
b) Estimating cost
c) Estimating activity durations
✓ d) Sequencing activities

Lesson Labs 523

LESSON
3.
LABS Which process involves identifying and documenting interactivity dependencies?
a) Developing schedule
✓ b) Sequencing activity
c) Defining activity duration
d) Defining scope

4. What is the final output when using decomposition in the define activities process?
a) Deliverables
b) Work packages
✓ c) Activities
d) Schedule

5. What is the output of the define activities process?

a) The schedule
✓ b) The activity list
c) The WBS
d) The SOW

6. What is the output after estimating durations for project activities?

✓ a) Activity duration estimates and activity attributes (updates)
b) Activity resource requirements and activity attributes (updates)
c) Project schedule network diagrams and activity attributes (updates)
d) Activity attributes and milestone list

7. What are the inputs you need for the define activities process?
a) Scope baseline, activity list, activity attributes, and milestone list.
b) Enterprise environmental factors, organizational process assets, activity list, and
activity attributes.
✓ c) Scope baseline, enterprise environmental factors, and organizational process assets.
d) Decomposition, templates, rolling wave planning, and expert judgment.

8. What are the tools and techniques you would use for the define activities process?
a) Activity list, activity attributes, milestone list, and requested changes
b) Enterprise environmental factors, organizational process assets, activity list, activity
attributes, and project management plan
c) Enterprise environmental factors, organizational process assets, project scope state-
ment, WBS, WBS dictionary, and project management plan
✓ d) Decomposition, templates, rolling wave planning, and expert judgment

524 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
9. While defining the activities of your project, what are the expected outputs during the
process? LABS
a) Activity list, activity attributes, project management plan, and milestone list
b) Decomposition, templates, rolling wave planning, expert judgment, and planning
component
c) WBS, WBS dictionary, project management plan, and milestone list
✓ d) Activity list, activity attributes, and milestone list

10. What are the expected outputs of the sequence activities process?
a) PDM, schedule network templates, dependency determination, and applying leads
and lags
b) Activity list, activity attributes, milestone list, and requested changes
✓ c) Activity list (updates), activity attributes (updates), and project schedule network
diagrams
d) Decomposition, templates, rolling wave planning, expert judgment, and planning
component

11. You created a diagram with representation of project activities and their logical rela-
tionships. What do you call this process?
a) Activity list (updates)
b) Activity attributes (updates)
c) Requested changes
✓ d) Project schedule network diagrams

12. What are the possible inputs for the estimate activity resources process?
a) Project scope statement, activity list, activity attributes, milestone list, and
approved change requests
✓ b) Enterprise environmental factors, organizational process assets, activity list, activity
attributes, and resource calendars
c) Enterprise environmental factors, organizational process assets, project scope state-
ment, WBS, WBS dictionary, and project management plan
d) Wave planning, expert judgment, and planning component

13. When you establish an understanding among stakeholders regarding guidance and steps
to be followed while dealing with schedule changes in a project, which option will you
consider?
✓ a) Schedule management plan
b) Schedule updates
c) Change requests
d) Schedule change control system

Lesson Labs 525

LESSON
14. What are the tools and techniques of the estimate activity resources process?
LABS a) PDM, schedule network templates, dependency determination, and applying leads
and lags
b) Enterprise environmental factors, organizational process assets, activity list, activity
attributes, resource availability, and project management plan
✓ c) Expert judgment, alternatives analysis, published estimating data, project manage-
ment software, and bottom-up estimating
d) Decomposition, templates, rolling wave planning, expert judgment, and planning
component

15. What are the outputs of the estimate activity resources process?
a) PDM, schedule network templates, dependency determination, and applying leads
and lags
b) Activity list, activity attributes, milestone list, and requested changes
c) Activity list (updates), activity attributes (updates), project schedule network dia-
grams, and requested changes
✓ d) Activity resource requirements, resource breakdown structure, and project docu-
ment updates

16. What are the inputs to the estimate activity durations process?
a) Project scope statement, activity list, activity attributes, milestone list, and
approved change requests.
b) Enterprise environmental factors, organizational process assets, activity list, activity
attributes, resource availability, and project management plan.
✓ c) Enterprise environmental factors, organizational process assets, activity list, activity
attributes, project scope statement, activity resource requirements, and resource
calendars.
d) Wave planning, expert judgment, and planning component.

17. What are the tools and techniques of the estimate activity durations process?
a) PDM, schedule network templates, dependency determination, and applying leads
and lags.
b) Enterprise environmental factors, organizational process assets, activity list, activity
attributes, resource availability, and project management plan.
c) Expert judgment, alternatives analysis, published estimating data, project manage-
ment software, and bottom-up estimating.
✓ d) Expert judgment, analogous estimating, parametric estimating, three-point esti-
mates, and reserve analysis.

18. What are the outputs for the estimate activity durations process?
a) PDM, schedule network templates, dependency determination, and applying leads
and lags.
✓ b) Activity duration estimates and project document updates.
c) Activity list (updates), activity attributes (updates), project schedule network dia-
grams, and requested changes.
d) Activity resource requirements, activity attributes (updates), RBS, requested
changes, and resource calendar (updates).

526 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
19. Top-down estimating is also known as ________ estimating.
a) Organizational LABS
b) Parametric
✓ c) Analogous
d) Primary

LESSON 6 LAB 1
Creating the Project Schedule
Activity Time:
15 minutes

Scenario:
In this lab, you will have an opportunity to review the CAPM certification exam related infor-
mation that was presented in this lesson.

1. To shorten the project schedule, you ask a functional manager for skilled resources on
a critical path task to reduce the duration of that task. What is the process called?
a) Fast-tracking
✓ b) Crashing
c) Resource leveling
d) Staffing plan

2. On the project schedule update, it is seen that a couple of tasks show up with negative
float. What does this imply to your project?
a) These tasks are not on the critical path.
b) These tasks are ahead of schedule.
c) These tasks have been crashed.
✓ d) The project is likely to be delayed beyond the planned completion schedule.

3. If project time and cost are not as important as the number of resources used each
month, which option is the best course of action?
a) Perform a crashing.
b) Fast-track the project.
✓ c) Perform resource leveling.
d) Analyze the life-cycle costs.

Lesson Labs 527

LESSON
4.
LABS Which option is true when developing the schedule for the project and determining
the critical path?
a) You calculated the most probable start date and finish dates, float time, and
weighted average estimates.
b) You calculated the activity dependency, pessimistic, and optimistic duration esti-
mates.
✓ c) You calculated the early and late start dates, early and late finish dates, and float
times of all activities.
d) You calculated the optimistic, pessimistic, and most probable duration estimates,
and the float times of all activities.

5. How is the total float of a task determined in the critical path?

a) LS-EF
✓ b) LF-EF
c) EF-LF
d) ES-LS

6. Which is true regarding the critical path?

a) It should never be compressed.
b) It allows for looping and branching.
c) The critical path technique is the same as fast tracking.
✓ d) All tasks on the critical path have zero float.

7. In your project, you realize the importance of determining the start and finish dates
for project activities. If the project start or end dates are not realistic, then the
project may not be completed on time. This is done as part of:
a) Free float.
b) Total float.
✓ c) The develop schedule process.
d) Resource leveling.

8. Which is a correct attribute of the critical path?

✓ a) It determines the longest total duration that the project can take to complete.
b) It has the smallest amount of float.
c) It has the maximum number of activities in the project network diagram.
d) It is the path with the most expensive project activities.

9. What kind of a relationship is implied when completion of a successor is dependent on

initiation of its predecessor?
a) FS
b) FF
c) SS
✓ d) SF

528 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
10. Your project has a critical path of twenty-three weeks. What is the impact on the criti-
cal path if the management wants you to complete the project in twenty weeks? LABS
a) Duration of the critical path increases by three weeks.
b) Duration of the critical path decreases by three weeks.
✓ c) Duration of the critical path remains the same.
d) Duration of the critical path cannot be determined.

11. During the creation of a project plan, you want to find the critical path of the project.
Which tool would you use to determine the critical path?
a) WBS
✓ b) Network diagram
c) Scope management plan
d) Project charter

12. The project has three critical paths. How does this affect the project?
a) It makes it easier to manage.
✓ b) It increases the project risk.
c) It requires more people.
d) It makes it more expensive.

LESSON 7 LAB 1
Reviewing Cost and Budget Estimates
Activity Time:
15 minutes

Scenario:
In this lab, you will have an opportunity to review the CAPM certification exam related infor-
mation that was presented in this lesson.

1. Identify the sources from where you can obtain cost estimate information.
✓ a) Trade organizations, vendors, and suppliers.
✓ b) Past project experience and current project team members.
c) Project schedule.
✓ d) Commercial databases.

Lesson Labs 529

LESSON
2.
LABS What should be included in a project cost baseline?
✓ a) Estimates of the most likely project costs.
b) Management reserves.
c) Unforeseen expenditures for the project.
✓ d) Assumptions for the estimates.

3. What step will a project manager take to help prevent cash flow problems?
a) Use the contingency reserves of other projects.
✓ b) Make efforts to engage the finance department to put in place a cash flow forecast.
c) Make sure customers are financially stable.
d) Request additional funding from project sponsors.

4. Which cost estimating method requires managers to use their experience, historical
information from similar projects, and expert judgment to determine a total project
cost or time estimate?
✓ a) Analogous or top-down estimating
b) Parametric estimating
c) Bottom-up estimating
d) Revenue estimating

5. Which are inputs to the determine budget process?

a) Activity cost estimates, resource calendars, funding limit reconciliation, and cost
aggregation.
b) Basis of estimates, scope baseline, resource calendars, and reserve analysis.
✓ c) Activity cost estimates, scope baseline, project schedule, and contracts.
d) Activity cost estimates, scope baseline, project schedule, and cost performance
baseline.

6. Which is a method of adjusting, spending, scheduling, and resource allocation in order

to bring expenditures into alignment with budgetary constraints?
a) Cost aggregation
✓ b) Funding limit reconciliation
c) Reserve analysis
d) Activity cost estimation

7. Which guidelines allow you as the project manager to reconcile the costs with the
funding that has been approved by the sponsor?
✓ a) Map the project budget, scope statement, and schedule to the funding available.
✓ b) Involve the project sponsor.
c) Consider adding in a contingency amount to accommodate the risk of incurring extra
expenses.
✓ d) Partner formally with the company’s financial decision makers.

530 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
8. You are checking the cost estimate provided by a newly trained project lead, and you
find that the costs to be incurred for the rest of the project are inaccurate. Which for-
mula would you use to calculate a new estimate for your EAC?
LABS
a) EAC = (AC+(BAC-EV)/CPI)
✓ b) EAC = AC+ETC
c) EAC = AC+BAC-EV
d) EAC = AC+EV

9. Which is the output from the estimate cost process?

✓ a) Activity cost estimates
b) Project scope management plan
c) Project scope statement
d) WBS

10. Analogous estimating is also known as ________ estimating.

a) Bottom-up
b) Parametric
✓ c) Top-down
d) Analytical

11. A method of estimating the cost for each work package in the WBS is known as
________ estimating.
a) Top-down
b) Analytical
c) Parametric
✓ d) Bottom-up

Lesson Labs 531

LESSON
LABS LESSON 8 LAB 1
Identifying Quality Control Parameters
Activity Time:
15 minutes

Scenario:
In this lab, you will have an opportunity to review the CAPM certification exam related infor-
mation that was presented in this lesson.

1. When is it appropriate to conduct quality assurance audits to control the project qual-
ity?
a) At the beginning of the planning phase.
✓ b) At regular intervals throughout the project life cycle.
c) In the executing phase.
d) At the closure of the project.

2. As project manager for monitoring quality in customer service, which tool would you
use to determine project performance over a period of time?
a) Milestone chart
✓ b) Trend chart
c) Fishbone diagram
d) Control chart

3. Which statement is true?

a) Inspection ensures avoidance of rework.
b) Prevention keeps defects from reaching the customer.
c) Inspection reduces random variation in the output of the process.
✓ d) Prevention ensures that errors are kept out of the process.

4. What is the difference between quality assurance and quality control?

✓ a) Quality assurance refers to a structured review of the deployment and adherence to
the planned quality management processes, while quality control refers to monitor-
ing specific work results to determine compliance with planned quality standards.
b) Both are one and the same.
c) Quality assurance is for checking the project management results for compliance to
required standards, while quality control is to determine compliance of the products
of the project.
d) Quality assurance is performed by the project team, while quality control is per-
formed by the quality department.

532 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
5. What is a Pareto diagram?
a) A plot of results over time. LABS
✓ b) A histogram that contains the frequency of occurrence and category of an identified
cause arranged in a descending order.
c) A plot of group average and groups.
d) A histogram that contains the frequency of occurrence and range of an identified
cause.

6. Which task is not addressed by performing quality control?

✓ a) Monitoring the project activity that is directed toward completion of defined scope.
b) Monitoring the production of the project deliverable so that it complies with relevant
quality standards.
c) Monitoring the project management results so that it complies with the project
objectives.
d) Identifying corrective actions to eliminate noncompliance to quality parameters in
the project deliverables.

7. When is the quality control process performed?

a) At the beginning of project execution.
b) At the completion of all the project deliverables.
✓ c) Throughout the project.
d) When advised by the quality control department.

8. Which term aptly describes the phrase ″conformance to specifications″?

a) Grade
b) Scope
✓ c) Quality
d) Technical information

9. Who defines quality?

a) The Engineering staff
b) The Marketing staff
c) The CEO
✓ d) The customer

10. What is quality planning?

a) Carrying out a cost-benefit analysis.
✓ b) Determining applicable quality standards and processes to satisfy them.
c) Flowcharting.
d) Deriving a quality policy.

Lesson Labs 533

LESSON
11. What is the difference between a standard and a regulation?
LABS a) Standards are mandatory; regulations are not.
b) Standards and regulations are both optional.
c) Regulations and standards are essentially the same.
✓ d) Regulations are usually mandatory; standards may be considered optional.

12. What are the various outputs of the perform quality assurance process?
a) Requested changes, quality management plan, quality metrics, and project manage-
ment plan (updates).
b) Requested changes, quality audits, process analysis, organizational process assets
(updates), and project management plan (updates).
✓ c) Requested changes, recommended corrective actions, organizational process assets
(updates), and project management plan (updates).
d) Requested changes, quality audits, organizational process assets (updates), and
project management plan (updates).

13. What does the center line on a control chart depict?

a) UCL
b) LCL
✓ c) Mean of the process
d) Standard deviation of the process

14. What is the measurement of a particular product characteristic, which has only two
results—pass or fail— known as?
a) Variable sampling
✓ b) Attribute sampling
c) Statistical sampling
d) Pareto analysis

534 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
LESSON 9 LAB 1 LABS
Organizing Human Resources for a Project
Activity Time:
15 minutes

Scenario:
In this lab, you will have an opportunity to review the CAPM certification exam related infor-
mation that was presented in this lesson.

1. Which of these tasks are examples for training a project team?

a) Feedback
✓ b) Computer-based
✓ c) Mentoring
✓ d) Coaching

2. What would be the important reasons behind the efforts taken by the project manager
to foster motivation?
✓ a) To help the team work through a temporary setback.
✓ b) To help the team to overcome a lack of confidence.
✓ c) To accomplish early “wins” in the project’s life cycle.
d) To ensure that there are no activities that have late start criteria.

3. What does co-location mean?

a) That the team members are distributed geographically.
✓ b) That the team is located in one physical location.
c) That the team uses a war room.
d) That the team members work from home.

4. Which of the following can be said to be a team motivation factor?

a) Perks
✓ b) Rewards and recognition
c) Strictness
d) Documentation

5. Which of the following may change in the course of project execution?

✓ a) Team abilities
✓ b) Team capabilities
✓ c) Team size
d) Project concept

Lesson Labs 535

LESSON
6.
LABS Among the conflict resolution approaches, which approach is the most preferred by
project managers?
a) Compromise
✓ b) Confrontation
c) Forcing
d) Withdrawal

7. Which of the following statements best describes an issue log?

a) It should be short.
b) It should be interesting.
✓ c) It should be written.
d) It should be informal.

8. In which team development stage do team members control issues as they emerge?
a) Forming
b) Performing
✓ c) Storming
d) Adjourning

9. Which develop project team tool or technique talks about activities that help the team
develop into a mature, productive team.
a) Ground rules
b) Interpersonal skills
✓ c) Team-building activities
d) Training

536 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
LESSON 10 LAB 1 LABS
Devising Effective Communication Methods
Activity Time:
20 minutes

Scenario:
In this lab, you will have an opportunity to review the CAPM certification exam related infor-
mation that was presented in this lesson.

1. Which inputs do you consider when identifying stakeholders for your project?
✓ a) Project charter
✓ b) Procurement documents
c) Performance reports
d) Information distribution tools

2. What are the tools and techniques of the identify stakeholders process?
a) Project charter
✓ b) Stakeholder analysis
c) Organizational process assets
✓ d) Expert judgment

3. What are the outputs of the identify stakeholders process?

✓ a) Stakeholder register
b) Organizational process assets
✓ c) Stakeholder management strategy
d) Procurement documents

4. Which statement is true of stakeholder analysis?

a) It contains the list of the identified project stakeholders with information on their
identification, assessment, and stakeholder classification details.
b) It provides information to indicate if the project involves procurement or is based on
an established contract.
✓ c) It is the formal process of identifying all of the stakeholders by gathering and analyz-
ing quantitative and qualitative information.
d) It defines an approach to increase the support and minimize negative impacts of
stakeholders throughout the entire project life cycle.

Lesson Labs 537

LESSON
5.
LABS Which statement is true of a stakeholder analysis matrix?
✓ a) A document that describes the strategies to manage the stakeholders of a project.
b) A management strategy that is created to ensure increase in support and to minimize
the negative impacts of stakeholders throughout the entire project life cycle.
c) A document that identifies stakeholders of a project with information that includes
their identification, assessment, and stakeholder classification.
d) A matrix that provides information to indicate if the project involves procurement or
is based on an established contract.

6. Which best describes a communications management plan?

a) A management strategy that is created to ensure increase in support and to minimize
the negative impacts of stakeholders throughout the entire project life cycle.
✓ b) A document that describes the project team’s approach to communicating project
information.
c) A document that describes the strategies to manage the stakeholders of a project.
d) A document that identifies stakeholders of a project with information that includes
their identification, assessment, and stakeholder classification.

7. What are the tools and techniques of the plan communications process?
a) Stakeholder register
✓ b) Communication requirements analysis
c) Stakeholder management strategy
✓ d) Communication models

8. What are the outputs of the plan communications process?

✓ a) Communications management plan
✓ b) Project document updates
c) Communication models
d) Stakeholder management strategy

9. What are the tools and techniques of the distribute information process?
a) Organizational process assets updates
b) Organizational process assets
✓ c) Communications methods
✓ d) Information distribution tools

10. What is the output of the distribute information process?

a) Performance reports
b) Communications management plan
✓ c) Organizational process assets updates
d) Project document updates

538 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
11. What are the tools and techniques of the manage stakeholder expectations process?
✓ a) Communications methods LABS
b) Change log
c) Issue log
✓ d) Interpersonal skills

12. Which inputs do you consider when managing stakeholder expectations for your
project?
✓ a) Stakeholder register
✓ b) Stakeholder management strategy
✓ c) Issue log
d) Change requests

13. What are the outputs of the manage stakeholder expectations process?
✓ a) Organizational process assets updates
✓ b) Change requests
c) Communications methods
d) Change log

14. What are the outputs of the report performance process?

a) Work performance information
✓ b) Performance reports
c) Work performance measurements
✓ d) Change requests

15. What are the tools and techniques of the report performance process?
a) Performance reports
✓ b) Variance analysis
✓ c) Forecasting methods
d) Work performance information

16. Which inputs do you consider when implementing the report performance process in
your project?
✓ a) Work performance information
✓ b) Work performance measurements
c) Forecasting methods
✓ d) Budget forecasts

Lesson Labs 539

LESSON
LABS LESSON 11 LAB 1
Reviewing Analyzing Risks and Planning Risk Responses
Activity Time:
20 minutes

Scenario:
In this lab, you will have an opportunity to review the CAPM certification exam related infor-
mation that was presented in this lesson.

1. Which phrase would you use to describe the significance of the negative impact of
threats or the positive impact of opportunities?
a) Cost, time, scope, and quality
b) Sources of the risk events
c) Types of risk responses
✓ d) Very low, low, moderate, and high

2. What is the purpose of a qualitative risk analysis?

✓ a) Assess the impact and likelihood of the identified risks actually occurring.
b) Analyze numerically the impact of each risk on the overall project objective.
c) Determine if the risk responses have been implemented as planned.
d) Select alternative strategies for dealing with risks.

3. Which is not a characteristic of the project’s risk event?

a) It has a cause.
b) The event, if it occurs, has a consequence.
c) It impacts the project objectives.
✓ d) The probability of occurrence of the event is zero.

4. Which option best describes “transference”?

a) Reducing the probability of an adverse risk event to an acceptable level.
b) Changing the project plan to eliminate the risk.
✓ c) Shifting responsibility for a response and possible impact of a risk to a third party.
d) Developing a contingency plan.

540 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
5. As a project manager, you are responsible for determining the risks that could impact
the project. Which process is this task categorized in? LABS
a) Plan risk management
✓ b) Identify risks
c) Perform qualitative risk analysis
d) Plan risk responses

6. What are the four main areas that project managers typically consider when discussing
risks?
a) Methods, materials, metrics, and people.
b) Initiation, planning, executing, and closing.
✓ c) Time, cost, quality, and scope.
d) Design, supply chain, production, and marketing.

7. Which phrase best describes SWOT?

a) An analysis of strengths, weakness, options, and timing.
✓ b) An analysis of strengths, weakness, opportunities, and threats.
c) An elite project team that comes in and fixes project risks and threats.
d) A rating system with ratings of 1 to 100.

8. What do you call a specific occurrence that may impact the project in the future,
either positively or negatively?
✓ a) Project risk
b) Risk factor
c) Risk-opportunity dichotomy
d) Expected value

9. When is it appropriate to accept a project risk?

a) It is never appropriate to accept a project risk.
b) All risks must be mitigated or transferred.
c) It is appropriate to accept a risk if the project team has never completed this type of
project work before.
✓ d) It is appropriate to accept a risk only if the risk is in balance with the reward.

10. What are residual risks?

a) The same as secondary risks.
b) A direct result of implementing a risk response.
✓ c) Those that remain after risk responses have been implemented.
d) Those risks that have no impact on the project budget or schedule.

Lesson Labs 541

LESSON
11. In risk response planning, you are in the process of developing options, and determin-
LABS ing actions to reduce threats to your project’s objectives. When you show the results
of your risk response planning, the project sponsor is not comfortable with the risks in
the project and suggests that the project scope be decreased. This scenario is an
example of:
a) Inappropriate risk management
✓ b) Risk avoidance
c) Risk mitigation
d) Risk transfer

12. During the project’s life cycle, risk identification:

a) Is no longer needed during the closing phase of a project.
b) Is done during the implementation and planning phases only.
c) Is done during the planning phase only.
✓ d) Should take place during each project phase.

13. In your project, you have identified natural disasters as potential risks. The project
sponsor is of the opinion that at the project level, no steps can be taken to deal with
such risks and suggests creating a contingency reserve (five percent of the project
budget) that could be used in case of disaster situations. This scenario is an example
of:
a) Risk mitigation
✓ b) Risk acceptance
c) Risk avoidance
d) Bad policy decision

14. For what reasons are the network diagramming method and/or flowcharting used in
risk identification?
✓ a) To determine the root cause of a project risk.
✓ b) To show the affect of a particular risk on a project.
c) To indicate areas of the WBS that should be redrawn as a result of risk identification.
d) To identify all the possible risks for a project.

15. For what reasons is the Delphi technique often used during risk identification?
a) It emphasizes the potential impact of risk by telling about incidents that illustrate
the consequences of ignoring the risk.
✓ b) It ensures all stakeholder inputs are received and the risk process is not unduly influ-
enced by a small number of persons.
✓ c) It motivates stakeholders to invest in the risk identification process through the use
of anonymous input via questionnaires.
d) It identifies the overall project risks and focuses on a particular project segment or
work package.

542 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
16. Which selection lists processes of risk management?
a) Risk management planning and risk recovery. LABS
✓ b) Qualitative risk analysis and quantitative risk analysis.
c) Risk documentation and risk monitoring.
d) Risk identification and risk avoidance.

17. Jennifer is a publisher. In order to make sure that her writer delivers on time, she
inserts a penalty clause for late delivery into her writer’s contract. Which risk
response is Jennifer using?
a) Risk avoidance
b) Risk transference
c) Passive acceptance
✓ d) Risk mitigation

18. Which risk response can be categorized as either passive or active?

a) Risk avoidance
b) Risk mitigation
✓ c) Risk acceptance
d) Risk transference

19. When is additional response development needed during risk response control?
a) When the organization is restructuring.
b) When the project objectives change.
c) When the contingency reserves are used up.
✓ d) When the original risk response is not working as expected.

Lesson Labs 543

LESSON
LABS LESSON 12 LAB 1
Reviewing Project Procurements
Activity Time:
20 minutes

Scenario:
In this lab, you will have an opportunity to review the CAPM certification exam related infor-
mation that was presented in this lesson.

1. Which statement best describes the “Time and Materials” contract?

a) The buyer pays the seller one fixed price.
✓ b) The buyer pays the seller for time and expenses of project work.
c) The buyer pays the seller a fee, plus a percentage of profit.
d) The buyer pays the seller their allowable costs plus a fee.

2. In which contract does the buyer reimburse the seller’s allowable costs (defined by the
contract) plus a fee?
a) Firm fixed price plus incentive contract.
✓ b) Cost plus incentive fee contract.
c) Time and materials contract.
✓ d) Cost plus fixed fee contract.

3. In which contract does the buyer reimburse the seller’s allowable costs (defined by the
contract) plus a predefined fee?
a) Firm fixed price plus incentive contract.
b) Cost plus incentive fee contract.
c) Time and materials contract.
✓ d) Cost plus fixed fee contract.

4. Which is used to evaluate each seller’s proposal and make comparisons among differ-
ent proposals?
a) Procurement documents
b) Procurement statements of work
c) Teaming agreements
✓ d) Source selection criteria

544 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
5. Which document provides a description of the work authorized to be performed by a
supplier? LABS
a) Project plan
✓ b) Procurement statement of work
c) Responsibility assignment matrix
d) Work breakdown system

6. Which document includes the Invitation for Bid and Request for Proposal?
a) Procurement statements of work
✓ b) Procurement document
c) Requirements documentation
d) Procurement management plan

7. What does the project manager do when requesting seller responses?

a) Plans purchases
✓ b) Solicits quotations
c) Selects a seller
d) Evaluates project progress

8. Which allows potential sellers to ask questions about the project and its requirements?
a) Advertised bids
✓ b) Bidder conference
c) Sellers conference
d) Annual meeting

9. Which is included on a qualified sellers’ list?

✓ a) Sellers’ names
b) Procurement documents
c) Proposals
d) Advertised bids

10. Which provides a pass or fail mechanism for criteria critical to project success?
a) Weighted scorecard
b) Expert judgment
c) Seller rating system
✓ d) Screening system

Lesson Labs 545

LESSON
11. Which document sent to prospective sellers provides information regarding the
LABS requirement specifications and needs of your project?
a) Procurement management plan
b) Project documents
✓ c) Procurement document
d) Request for information

12. Which is a legal contractual agreement signed between the organization and an exter-
nal entity to form a partnership in a buyer-seller arrangement between them?
a) Procurement contract
✓ b) Teaming agreement
c) Seller proposal
d) Purchase order

13. Which are tools and techniques for the conduct procurement process?
a) Bidder conferences, SWOT analysis, independent estimates, expert judgment.
b) Procurement negotiations, advertising, contingent response strategies, proposal
evaluation techniques.
c) Independent estimates, make-or-buy decisions, qualified seller lists, source selection
criteria.
✓ d) Bidder conferences, independent estimates, expert judgment, procurement negotia-
tions.

14. Which are outputs of the conduct procurement process?

✓ a) Procurement contract award
b) Qualified seller list
✓ c) Resource calendars
✓ d) Selected sellers

15. True or False? A procurement contract is a mutually binding agreement that details the
obligations of only the seller.
True
✓ False

16. Which output of the conduct procurement process lists the quantity, availability, and
utilization of project resources?
a) Project management plan
b) Procurement contract
✓ c) Resource calendar
d) Seller proposal

546 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
17. Which are inputs to administer procurements?
✓ a) Work performance information LABS
✓ b) Contracts
c) Procurement performance reviews
✓ d) Approved change requests

18. Which are suitable contract performance milestones?

✓ a) Partial deliveries of the requirements.
b) Deferred deliveries of the requirements.
✓ c) Completion of selected portions of the project work.
✓ d) Delivery of preliminary versions of the product.

19. Which of these are true of supplier provided component surveillance?

a) Is illegal monitoring of a supplier’s performance.
✓ b) Is a good way to mitigate risk of supplier nonperformance.
c) Is not a suitable acceptance procedure.
✓ d) May include making site visits.

20. As a buyer, what is the purpose of an on-site visit to a supplier?

a) Assess the engagement of the workforce.
b) Determine if your supplier’s employees are legal workers.
✓ c) Determine contract performance.
d) Develop a change control system.

21. Which statement is true of the contract change control system?

a) Belongs to the seller rather than the project organization.
✓ b) Contains all of the forms, performance tracking, and procedural information needed
to deal with contract changes.
c) Does not feed information into the project’s change control system.
d) Does not include procedures for reviewing and resolving contract disputes.

22. Which inputs do you consider when closing project procurements?

✓ a) Project management plan
✓ b) Procurement documentation
c) Procurement audits
d) Negotiated settlements

23. What are the tools and techniques of the close procurements process?
a) Organizational process assets updates
✓ b) Procurement audits
✓ c) Negotiated settlements
✓ d) Records management system

Lesson Labs 547

LESSON
24. What are the outputs of the close procurements process?
LABS ✓ a) Closed procurements
b) Request for Proposal
c) Negotiated settlements
✓ d) Organizational process assets updates

LESSON 13 LAB 1
Integrating Project Workflow
Activity Time:
15 minutes

Scenario:
In this lab, you will have an opportunity to review the CAPM certification exam related infor-
mation that was presented in this lesson.

1. What is true of lessons learned during the project?

a) Should be documented only in the closeout report.
b) Should consist of only project data.
✓ c) Should be documented throughout the project.
d) Should consist of only things that went well during project execution.

2. Which activities are included in an orderly close-out process?

✓ a) Formal acceptance by the customer.
b) Project milestone review.
✓ c) Closure of all contracts.
✓ d) Administrative closure and final reporting.

3. Which is true of a formal project handoff?

a) It is a bad idea because it embroils the project in the customer’s political intrigues.
✓ b) It can positively shape perceptions of the product by highlighting product benefits.
c) It should only be held if the customer pays extra for this service.
d) It is used to collect, archive, and distribute project information on a project.

548 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 LESSON
4. At what points does administrative closure occur in a project?
✓ a) At the end of the project. LABS
✓ b) At the end of each project phase.
✓ c) Upon delivery of pre-specified milestone deliverables.
d) After installing the project management enterprise software.

5. Which is true of project archives?

a) Should never contain computerized records, because they may not be retrievable in
later software.
✓ b) Should include key information, such as baselines and performance data.
c) Should be handed to the sponsor at the end of the project.
d) Should be updated only at the end of the project.

6. Which content categories should the final project report include?

✓ a) Administrative performance and recommendations.
b) Work breakdown structure.
✓ c) Project structure and recommendations.
✓ d) Project management performance and recommendations.

7. For what reasons is publishing a project close-out schedule a good idea?

a) It helps keep people motivated by imposing a deadline.
✓ b) It provides a sense of order in a time of fluctuating team membership.
✓ c) It helps team members who are leaving to understand what they must accomplish or
hand off before they can move to a different position.
d) It provides stakeholders with information on the status of the project.

8. Which is the output of the close project or phase process?

a) Project management plan updates.
✓ b) Final product, service, or result transition.
c) Contract closure.
d) Work performance information.

9. Which element is a collection of formal, documented procedures that defines the steps
by which the project may be changed?
a) Managing by objective
✓ b) Change control system
c) Managing by exception
d) Configuration management

Lesson Labs 549

LESSON
10. Who is responsible for ensuring that changes are processed through the integrated
LABS change control process?
a) Project sponsor
b) President
✓ c) Project manager
d) Functional manager

11. Which statements are true of change requests?

✓ a) Must be documented.
✓ b) Can come from anyone.
c) Will not affect the project scope.
✓ d) Must be subjected to an integrated change control process.

12. Which manual or automated tool and technique is used to collect, archive, and distrib-
ute project information on a project?
✓ a) Project management information system
b) Communications plan
c) Project management enterprise software
d) Communications and feedback system

13. What does integrated change control deal with?

a) Coordinating scope, schedule, costs, resources, and other plans to create a consis-
tent project plan.
✓ b) Coordinating changes across the entire project.
c) Coordinating several activities across the project.
d) Managing project plan.

550 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 ADDITIONAL
INSTRUCTOR
NOTES

ADDITIONAL INSTRUCTOR
NOTES
This section provides notes that aid in teaching the course. They provide the instructor with
helpful information and may contain alternate tasks for instructor-based classroom demonstra-
tions.

Lesson 2 page 38
You have several options to choose from to allow students to complete the activities:
• Ask students to work independently and then review the questions to solicit their answers.

• Ask students to work in small groups and then have each group provide their answers to the class.

• Review each question as a group and allow students time to respond.

• Ask students to complete an activity as homework and review the questions and possible answers the next day.

Additional Instructor Notes 551

NOTES

552 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 GLOSSARY

GLOSSARY
360-degree feedback Actual Cost
The collection of performance data from sev- (AC) The total amount of costs incurred while
eral key sources, including peers, managers, accomplishing work performed, either during
and subordinates. completion of a schedule activity or during
the completion of a work breakdown structure
8/80 rule component.
A general guideline regarding work packages:
they require more than 8 and fewer than 80 administer procurements process
hours of effort to complete. The process of managing the relationship with
the seller.
80/20 rule
A general guideline with many applications; administrative closure
in terms of controlling processes, it contends The project management process of verifying
that a relatively large number of problems or and documenting project results to formalize
defects, typically 80 percent, are commonly project or phase completion.
due to a relatively small number of causes,
typically 20 percent. aggregated cost
A method of cost budgeting that requires the
AC adding together of the estimated activity costs
See Actual Cost. to establish an estimate for a work package,
then for each work package, and on an itera-
acquire project team process tive basis until there is a single estimated cost
The process of identifying the core competen- for the whole WBS. This also produces a
cies required for a project, identifying where baseline for measuring a project’s cost perfor-
they will come from, and computing the asso- mance.
ciated costs.
agile project management
activities on the critical path Taking an iterative approach to managing a
See critical activities. project throughout its life cycle; it allows the
project manager to continually re-evaluate
activity dependency
progress, development, and priorities and
A logical relationship that exists between two
make adjustments as needed.
project activities.
alternatives identification
activity
The act of generating different plans for
A discrete scheduled component of work per-
achieving project goals.
formed during the course of a project; it has
an estimated duration, cost, and resource analogous estimating
requirements. A top-down estimating technique using dura-
tions of previous similar activities to estimate
activity
future durations.
Any element of project work that requires
action to produce a deliverable.

Glossary 553
GLOSSARY
analyzing variances task bottom-up estimating
Involves taking data concerned with work A method of estimating the cost for each
results and measuring that data against the work package in the WBS. The estimates are
specifications and operational definitions then rolled up or aggregated for progressively
included in the project plan. higher levels within the WBS.

anticipatory breach breach of contract

An unavoidable indication that the other party Failure to meet some or all of the obligations
will not be able to produce the performance of a contract. It may result in damages paid to
necessary to fulfill an agreed-upon contract. the injured party, litigation, or other ramifica-
tions.
AON
See Precedence Diagramming Method. Budget at Completion
(BAC) The total budgeted cost of the project
APT at completion.
See Autonomous Project Team.
Budgeted Cost of Work Performed
assumptions (BCWP)
The statements that must be taken to be true See Earned Value.
in order to begin project planning.
Budgeted Cost of Work Scheduled (BCWS)
attribute sampling data See Planned Value.
Data that is counted, such as a number of
product defects or customer complaints. business requirements
The pressing organizational needs that drive
audit decision makers to sponsor projects and to
See inspection. prioritize competing projects.
Autonomous Project Team business risk
(APT) PMOs that are exclusively assigned to The inherent risk in any business endeavor
handle large projects and programs. that carries the potential for either profit or
loss.
average
The number that typifies the data in a set. It capital budgeting
is calculated by adding the values of a group A decision-making process used to evaluate
of numbers and dividing that total by the fixed asset purchases.
number of objects included.
causes of variance
BAC The sources or reasons for deviations from
See Budget at Completion. the expected standard in a process or item.
baseline CCB
An approved time phased plan for a project, See Change Control Board.
work breakdown structure component, work
package, or activity, plus or minus approved Change Control Board
scope, cost, schedule, and technical changes. (CCB) An internal unit or department charged
with monitoring, controlling, coordinating,
benchmarking and implementing changes to all elements of
A method of addressing the evaluation of a project work and with accepting or rejecting
group’s business or project practices in com- changes that have been requested by custom-
parison to those of other groups. It is used to ers.
identify best practices in order to meet or
exceed them.

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 GLOSSARY
change control system communications requirements analysis
A collection of formal, documented proce- An investigation that leads to a clear articula-
dures for changing official project documents tion of the stakeholders’ communications
and how project deliverables will be con- needs; it helps the project manager make
trolled, changed, and approved. effective choices regarding the technologies to
be recommended in the communications man-
checklist agement plan.
A job aid that prompts employees to perform
activities according to a consistent quality communications requirements
standard. The project stakeholders’ documented com-
munications needs.
close procurements process
The project management process of complet- communications technology
ing each project procurement by ensuring that The technologies used for communications
contractual obligations have been met on both planning.
sides and resolving any outstanding issues.
completion contract
close project or phase process A type of contract that is completed when the
The process of closing out all activities and seller delivers the product to the buyer and
formally closing the project or, in the case of the buyer accepts the product.
multi-phase projects, a specific project phase;
it involves the administrative closure proce- conditional branch
dure and the contract closure procedure. Activities that will be implemented only
under specific conditions.
closeout meetings
Sessions held at the end of a project or phase conduct procurements process
in which you discuss and document areas for The process of obtaining seller responses,
improvement and capture lessons learned for selecting a seller, and awarding contracts to
use in future projects. the identified seller for the procurement of the
required product, service, or result from the
closing process seller.
A group involving processes that are used to
formally close all project activities. configuration management
A controlling tool for applying technical and
co-location administrative direction and surveillance to
The placing of most or all key team members manage changes that affect the function or
in the same physical location to make com- characteristics of the product or service being
munication easier and enhance team produced.
performance and team spirit.
conflict management
collect requirements process The application of one or more strategies for
The process of defining and documenting the dealing with disagreements, struggles, and
stakeholders’ needs and expectations to meet compatibility issues that may be detrimental
the project objectives. to team performance.

communications management plan constraints

A document that describes the project team’s The factors that limit the way that the project
approach to communicating project informa- can be approached.
tion.
contingency allowances
Additional funds that are sometimes built into
cost estimates to allow for unanticipated
events, or known unknowns.

Glossary 555
GLOSSARY
contingency plans Cost Performance Index
A risk response strategy developed in (CPI) A measurement of cost performance
advance; it is meant to be used in the event used to determine whether the project is over
that identified risks become reality. or under budget. The formula for calculating
CPI is CPI = EV/AC.
contingency reserve
A predetermined amount of additional time, Cost Plus Award Fee contracts
money, or resources set aside in advance to (CPAF contracts) A cost-reimbursable contract
be used to further the project’s objectives in which ensures that the seller is reimbursed for
the event that unknown risks or accepted all legitimate costs. The majority of the fee is
known risks become reality. earned based on the satisfaction of certain
broad subjective performance criteria defined
contract change requests and incorporated into the contract.
Any requested change to contract terms.
Cost Plus Fixed Fee contracts
contract (CPFF contracts) A cost-reimbursable contract
A mutually binding agreement that details the which ensures that the seller is reimbursed for
obligations of the buyer and seller. all allowable costs for performing the contract
work. The seller receives a fixed fee payment
control chart
calculated based on the initial estimated
A graph used to analyze and communicate the
project costs.
variability of a process or project activity
over time. Cost Plus Incentive Fee contracts
(CPIF contracts) A cost-reimbursable contract
control cost process
which ensures that the seller is reimbursed for
The project management process of monitor-
all allowable costs for performing the contract
ing cost performance and controlling changes
work. The seller also receives a predeter-
to the cost baseline.
mined target fee with provision of an
control schedule process incentive fee.
The project management process of monitor- Cost Variance
ing schedule performance and controlling
(CV) The difference between the earned value
changes to the schedule baseline.
and the actual cost incurred to complete that
control scope process work. The formula for calculating CV is CV
The project management process of determin- = EV - AC.
ing whether changes to project scope are cost-benefit analysis
needed and monitoring and managing the
A comparison of the predicted costs versus
changes when they occur.
the predicted benefits of a project.
cost baseline
cost-reimbursable contract
A time-phased budget that will monitor and
This contract provides sellers a refund of the
measure cost performance throughout the
expenses incurred while providing a service,
project life cycle.
plus a fee representing seller profit.
cost of capital
CPAF contracts
Average after-tax interest rate at which the
See Cost Plus Award Fee contracts.
project investment would be financed. Also
called the hurdle rate. CPFF contracts
See Cost Plus Fixed Fee contracts.
cost of quality
The total cost of efforts to achieve an accept- CPI
able level of quality in the project’s product See Cost Performance Index.
or service.

556 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 GLOSSARY
CPIF contracts decision tree
See Cost Plus Incentive Fee contracts. A type of screening system decision model
that uses a branch diagram to choose among
CPM two different alternatives. Incorporates prob-
See Critical Path Method. abilities of occurrence and the costs or
rewards of each decision.
crash cost plotting methods
Techniques for analyzing the crash costs define activities process
through creating a graph or visual representa- The identification and documentation of the
tion. specific activities that must be performed to
produce the project’s deliverables.
crashing
A schedule compression method that analyzes define scope process
cost and schedule trade-offs to determine how A process in which the project manager
to obtain the greatest schedule compression defines the scope of the project and creates a
for the least incremental cost. project scope statement.
create WBS process deliverable
The method of subdividing the project The end result of work; it can be a product,
deliverables and project work into smaller, service, or outcome that responds to a busi-
more manageable components. ness need or fits the sponsor’s requirements.
criteria profiling Delphi technique
A decision model used to evaluate and score A group technique that extracts and summa-
alternatives on each criterion. rizes anonymous group input to choose
among various alternatives. Often used to
critical activities
arrive at an estimate or forecast.
The activities that are on the critical path.
Design of Experiments
critical chain method
(DOE) A technique to systematically identify
An analysis method that allows you to con-
varying levels of independent variables.
sider resource limitations and adjust the
schedule as appropriate to work within those determine budget process
limitations. The process of allocating the overall cost esti-
mates to individual activities or work
Critical Path Method
packages across the project life cycle.
(CPM) A schedule network analysis method
that uses a sequential finish-to-start network develop human resource plan process
logic and calculates one early and late start The process of identifying, documenting, and
and finish date for each activity using a single assigning project roles, responsibilities, and
duration estimate. reporting relationships.
critical path develop project charter
The network path that has the longest total The project management process of authoriz-
duration in a project or work package. ing the project or phase.
CV develop project management plan process
See Cost Variance. A process in which subsidiary management
plans are integrated into a singular plan.
decision tree analysis
An assessment of the data obtained using the
decision tree method to evaluate various pos-
sible outcomes.

Glossary 557
GLOSSARY
develop project team process enterprise environmental factors
The on-going effort to develop a cohesive Internal or external factors that can have a
team with good communication in order to positive or negative influence on the project
enhance their collective performance so that outcome.
you increase the likelihood of meeting project
objectives. estimate activity durations process
The planning process of estimating the num-
develop schedule process ber of work units needed to complete
The act of defining specific start and end individual project activities.
dates for each project activity.
estimate activity resources process
direct and manage project execution pro- Determining what resources will be used to
cess fulfill project activities.
The process of carrying out the project plan
to produce the product or provide the service. Estimate at Completion
(EAC) A forecast of total costs needed to
distribute information process complete the project; it is used to predict and
The process of getting the right information control cost problems.
to the right people at the right time.
estimate costs process
DOE The process of projecting the total expendi-
See Design of Experiments. tures necessary for the completion of your
project.
EAC
See Estimate at Completion. Estimate to Complete
(ETC) A forecasting technique, based on a
Earned Value Management new estimate that is more accurate and com-
(EVM) A methodology that measures project prehensive; it is independent for all
progress by comparing actual schedule and outstanding work.
cost performance against planned performance
as laid out in the schedule and cost baselines. ETC
See Estimate to Complete.
Earned Value
(EV) A composite measurement of both actual EV
cost and time performance in relation to See Earned Value.
scheduled or planned cost and time perfor-
mance; it was formerly called the Budgeted EVM
Cost of Work Performed (BCWP). See Earned Value Management.

effect-based risk classification executing process

A way of analyzing the major risks that are A group involving processes that help accom-
inherent to a project that could have an plish tasks defined by the project management
impact on its success. These major risks plan.
include time, cost, quality, and scope.
Expected Monetary Value (EMV) analysis
effort A method of calculating the average outcome
The number of person-hours or person-days when the future is uncertain.
required for completion of an activity.
express warranty
elapsed time A warranty in which the pre-determined stan-
The actual calendar time required from start dard for quality or performance is specified,
to finish of an activity. May or may not be either in a formal warranty or in the manufac-
the same as duration. turer’s description of the product.

558 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 GLOSSARY
facilitated workshops Fixed Price with Economic Price Adjust-
Group sessions that bring together key stake- ment contracts
holders to define the project or product (FP-EPA contracts) A fixed-price contract type
requirements for the project. with special provision to allow pre-defined
final adjustments to the contract price due to
fast-tracking changed conditions.
The process of compressing total project
duration by performing some activities con- float
currently that were originally scheduled The amount of time an activity can be
sequentially. delayed from its ES without delaying the
project finish date and/or the consecutive
feasibility analysis activities. Also called “slack.”
An analysis that provides technical and opera-
tional data to management to help determine flowchart
if a project will work for the organization or A diagram that shows the relationships of
if an alternative should be pursued. various elements in a system or process.

FF force majeure
See Finish-to-Finish. A common clause added to contracts that
addresses the actions from both the parties
FFP contracts when an extraordinary circumstance beyond
See Firm Fixed Price contracts. the control of either party occurs.
Finish-to-Finish formal acceptance of project work
(FF) The precedence relationship between two The process for securing approval for com-
activities where the predecessor activity must pleting the remainder of the project work; it
finish before the successor activity can finish. requires change requests to be documented
Can be expressed as, “Activity A must finish and analyzed for their impact on other aspects
before Activity B can finish.” of project work including time, cost, quality,
and risk.
Finish-to-Start
(FS) The precedence relationship between two FP-EPA contracts
activities where the predecessor activity must See Fixed Price with Economic Price Adjust-
finish before the successor activity can start. ment contracts.
Can be expressed as, “Activity A must finish
before Activity B can begin.” FPIF contracts
See Fixed Price Incentive Fee contracts.
Firm Fixed Price contracts
(FFP contracts) A commonly used contract free float
type favored by most buying organizations The amount of time an activity can be
because the price for products or services is delayed without delaying the ES of any activ-
set at the outset and not subject to change ity that immediately follows it.
unless the scope of work changes.
FS
fixed price contract See Finish-to-Start.
Also called a lump sum contract, it estab-
lishes a total price for a product or service. fundamental breach
The seller agrees to perform the work at the A breach of contract so serious that it negates
negotiated contract value. the very foundation of the contract.

Fixed Price Incentive Fee contracts funding limit reconciliation

(FPIF contracts) A fixed-price contract that is A method of adjusting, spending, scheduling,
flexible in that it allows for deviation from and resource allocation in order to bring
performance. Financial incentives are tied to expenditures into alignment with budgetary
achieving metrics that are agreed to earlier. constraints.

Glossary 559
GLOSSARY
GERT information-gathering technique
See Graphical Evaluation Review Technique. Any method or approach used to collect data
that will assist the project team in identifying
Graphical Evaluation Review Technique risks to the project.
(GERT) An analysis method that provides a
graphical display of the conditional and initiating process
probabilistic treatment of logical relationships; A group that includes processes to develop a
it illustrates that not all of the activities may project charter and identify stakeholders.
ultimately be performed.
inputs
group decision making techniques Information or data that project managers
Assessment processes that assess multiple draw on, create, or gather during the course
alternatives to arrive at an expected outcome. of the project; they guide and inform the
work that will be done to achieve project
hammock activity goals.
See summary activity.
inspection
hurdle rate An official examination of work results to
Average after-tax interest rate at which the verify requirements are met; it involves mea-
project investment would be financed. Also suring, examining, and verifying results to be
called cost of capital. sure work and deliverables meet requirements
and acceptance criteria. It may also be
identify risks process
referred to as “reviews,” “product reviews,”
An iterative process of identifying the risks
“audits,” or “walkthroughs.”
and triggers facing a project.
insurable risk
identify stakeholder process
A risk that has only the potential for loss and
The process in which the project manager
no potential for profit or gain. An insurable
identifies all stakeholders that are impacted by
risk is one for which insurance may be pur-
the project and documents information that is
chased to reduce or offset the possible loss.
relevant regarding their interests, involvement,
and impact on project success. integrated change control
The process of identifying, documenting,
IFB
approving or rejecting, and controlling
See Invitation for Bid.
changes to the project baselines, which
immaterial breach include the cost baselines and schedule
A breach of contract in which there is no baselines.
resulting damage to the injured party; since interdependent projects
there are no damages, the injured party is not
Projects that are inextricably linked, because
entitled to receive compensation.
they rely on each other’s success in order to
impact scale meet a shared business or stakeholder need.
The assignment of a value that reflects the Internal Rate of Return
magnitude of the impact of a risk event on
(IRR) The discount rate that makes the Net
project objectives.
Present Value (NPV) of the future cash return
implied warranty equal to the initial capital investment.
A warranty in which the pre-determined stan- interpersonal skills
dard for quality or performance exists but is
Abilities that an individual should possess to
not specified; it takes effect if the buyer
work harmoniously and efficiently with oth-
depends on the seller’s expertise when mak-
ers.
ing a purchasing decision.

560 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 GLOSSARY
Invitation for Bid lower control limit
(IFB) Used interchangeably with RFP, an IFB (LCL) Refers to a limit which is three stan-
is most commonly used when deliverables are dard deviations below the mean in a control
commodities for which there are clear specifi- chart.
cations and when the quantities are very
large. make-or-buy analysis
A technique used to determine whether it
IRR would be more cost-effective to produce a
See Internal Rate of Return. product or service in-house or to procure it
from an outside seller.
ISO 9000 Series
A quality system standard that is applicable to manage project team process
any product, service, or process in the world. A process that monitors individual perfor-
mance, gives feedback, solves issues, and
knowledge areas organizes changes to improve project perfor-
An identified area of project management mance.
described in terms of its component processes
and defined by its knowledge requirements. manage stakeholder expectations process
The process of managing communications to
lag meet the needs of the stakeholders.
A delay in the start of a successor activity.
material breach
LCL A serious breach of contract that prevents the
See Lower Control Limit. injured party from benefiting from the con-
tract; the injured party can claim damages,
lead
but is no longer obligated to fulfill any con-
A change in a logical relationship that allows
tract commitments.
the successor activity to start before the pre-
decessor activity ends in an FS relationship. mean
The sum of the events divided by the number
leadership
of occurrences.
The capacity of a person to guide and inspire
others to achieve results. median
The number that separates the higher half of a
lease, rent, or buy decision
probability distribution from the lower half. It
A business analysis that determines the most
is not the same as the average, although the
cost-effective way to procure the necessary
two terms are often confused.
equipment for a project.
monitor and control project work process
lessons learned reports
The process of tracking, reviewing, and regu-
Formal documents that capture salient and
lating the project processes to meet the
helpful information about the work done in a
project’s performance objectives.
project or a project phase; they include infor-
mation about what worked well on the project monitor and control risks process
and areas for improvement. The process of responding to identified and
unforeseen risks.
levels of uncertainty
A way of analyzing the risks of a project monitoring and controlling process
based on how much is known about them. A group involving processes that monitor the
project execution. This group also identifies
loop
any potential problems that can be rectified.
Activity sequences that must be revisited or
repeated.

Glossary 561
GLOSSARY
Monte Carlo analysis organization chart
A technique used by project managers to A visual representation of the project’s organi-
make predictions about the optimistic, most zational structure.
likely, and pessimistic estimates for variables
in the model and simulates various outcomes organizational process assets
of the project schedule to provide a statistical Any asset that can be used to influence the
distribution of the calculated results. success of a project

motivation skills organizational structure

The ability to make a team member want to The compositional makeup of an organization
accomplish goals with a high level of quality that dictates how the various groups and indi-
rather than just doing the minimum work viduals within the organization interrelate.
required.
outputs
negative risk strategies The end results and deliverables achieved
Strategies for dealing with risk scenarios that during project management processes.
have a possible negative impact on the
outsourcing
project.
Moving beyond the organization to secure
negotiation services and expertise from an outside source
An approach used by individuals or organiza- on a contract or short-term basis.
tions with mutual or opposite interests to
parametric estimating (cost)
come together to reach a final agreement.
A technique used to predict total project costs
Net Present Value by using the project’s characteristics and his-
(NPV) The present value of an investment torical information in a mathematical model.
minus the initial investment.
parametric estimating (time)
normal distribution PDF A method of activity duration estimating in
A visual depiction of a probability density which some durations can be estimated by
function in which the data is distributed sym- multiplying a productivity rate by the quanti-
metrically in the shape of a bell with a single ties to be performed for a specific work
peak. The peak represents the mean; the sym- category.
metry indicates there is an equal number of
Pareto diagram
occurrences above and below the mean.
A bar chart or histogram that illustrates the
NPV causes of problems and their relative severity.
See Net Present Value. Used for prioritizing efforts to solve prob-
lems.
ongoing risk assessment
An iterative process of identifying, analyzing, PDF
and documenting the risks facing your See Probability Density Function.
project; it is conducted throughout the project
PDM
life cycle.
See Precedence Diagramming Method.
operations management
perform integrated change control process
The management of resources and processes
The formal method of governing and organiz-
involved in producing and delivering quality
ing the manner in which changes will be
products and services.
requested, approved or rejected, implemented,
operations reviewed, controlled, and coordinated; its goal
Ongoing and repetitive tasks that produce the is to make sure that changes to the project’s
same outcome every time they are performed. baselines are managed with the least amount
of disruption to cost, time, and quality.

562 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 GLOSSARY
perform qualitative risk analysis process Planned Value
The process of assessing, ranking, and priori- (PV) The budgeted portion of the approved
tizing risks for subsequent analysis. cost estimate to be spent during a particular
time period to complete the scheduled project
perform quality assurance process work; previously known as the budgeted cost
A method of evaluating overall project perfor- of work scheduled (BCWS).
mance through planned, systematic activities;
it creates confidence that the project will planning process
employ the appropriate processes and satisfy A group involving processes that help plan
standards for quality. and manage a project.

perform quality control process PMIS

The project management process of monitor- See Project Management Information System.
ing project performance to determine if it
complies with relevant quality standards, and PMO
identifying ways to eliminate causes of unac- See Project Management Office.
ceptable performance.
Point of Total Assumption
perform quantitative risk analysis process (PTA) A price determined by a Fixed Price
The process of numerically assessing the Incentive Fee contract (FPIF) above which
probability and impact of each risk and deter- the seller bears all the loss of a cost overrun.
mining the extent of the overall project risk.
portfolio management
plan communications process The effective management of programs and
The process of ensuring timely and appropri- independent projects to achieve strategic goals
ate generation, collection, dissemination, of an organization.
storage, and ultimate disposition of project
portfolio
information.
A collection of projects, programs, and other
plan procurements process work to achieve the strategic business objec-
A process that allows project managers to tives of an organization.
document project purchasing decisions,
positive risk strategies
specify the approach to be followed for
Strategies for dealing with risk scenarios that
project procurements, and to identify potential
have a possible positive impact on the project.
sellers to meet the purchase requirements of
the project. Precedence Diagramming Method
plan quality process (PDM) Also referred to as Activity-On-Node
(AON). A diagramming method that produces
The process of putting plans into place to
a type of project schedule network diagram
ensure that a project will satisfy its stated
that uses rectangular or circular nodes to rep-
objectives or business needs.
resent activities and arrows to represent
plan risk management process precedence relationships between activities.
The process of deciding how to plan and
precedence relationship
execute the risk management activities for a
The logical relationship between two activi-
project.
ties that describes the sequence in which the
plan risk responses process activities should be carried out.
The process of examining each risk and cor-
predecessor activity
responding response alternatives, determining
In sequencing two activities, the activity that
which response will improve the likelihood of
must take place prior to the other.
a positive outcome.

Glossary 563
GLOSSARY
present value procurement documents
The result from discounting future earnings Documents submitted to prospective sellers or
by deducting the cost of capital for an invest- service providers to solicit their proposals for
ment. the work needed.

probability and impact risk rating matrix procurement management plan

The assignment of a risk rating to risks or A document that outlines the specifications
conditions. for procuring work from outside sources; it
specifies the types of contracts that will be
Probability Density Function used, describes the process for obtaining and
(PDF) A visual depiction of probability distri- evaluating bids, mandates the standardized
bution in which the vertical axis refers to the procurement documents that must be used,
probability of the risk event and the horizon- and describes how multiple providers will be
tal axis refers to the impact that the risk event managed.
will have on the project objects.
procurement negotiation
probability distribution The process of bargaining to come to a
The scattering of values assigned to likeli- mutual agreement regarding the terms and
hood in a sample population. conditions of a contract.
probability scale Procurement Statement of Work
A graph showing the assignment of value to (PSOW) A narrative description of the
the likelihood of a risk occurring. resources, goods, or services that are being
sought from external sources to fulfill a
process control structure
project’s requirements; it is distributed to
The formal organization of the modifications
potential sellers, who will use it to evaluate
made to deliverables that are controlled by
their capability to perform this work or pro-
configuration management.
vide the services.
process improvement plan
product analysis
A subsidiary plan of the project management
An evaluation of the project’s end product
plan that describes the steps to analyze and
and what it will take to create this product.
identify areas of improvements in project pro-
cesses. product review
See inspection.
process improvement planning
The process of analyzing and identifying program management
areas of improvement in project processes and The centralized, coordinated process of man-
enumerating an action plan based on the aging all of an organization’s projects in
project goals and identified issues. accordance with the business’ strategic objec-
tives.
process
A sequence of activities designed to bring program
about a specific result in response to a busi- A set of related projects coordinated to
ness need. achieve strategic objectives and benefits of
the program.
procurement audit
A formal evaluation of both the seller’s per- progressive elaboration
formance of the contract, as well as the A process of development in which additional
effectiveness of the procurement process layers of detail are defined over the course of
itself. a project.

564 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 GLOSSARY
project charter project phase
A document that provides a clear, concise A group of related project activities that
description of the business needs that the results in the completion of a major deliver-
project is intended to address. able.

project deliverables project resource

Any tangible, measurable result or outcome Any useful material object or person neces-
required to complete a project or portion of a sary to complete project work.
project.
project risk ranking
project governance The overall risk ranking for producing the
A comprehensive methodology to control a final deliverable of the product or service of
project and ensure its success. the project.

project life cycle project risk response audit

The sequential phases of work done on a The process of examining the effectiveness of
project, including all planning, work activi- risk response plans and of the performance of
ties, and closure; it is marked by the the risk owner.
beginning and the end of the project.
project schedule network diagram
Project Management Information System A graphical representation of the sequence of
(PMIS) An automated or manual system used project activities and the dependencies among
by a project team to gather, analyze, commu- them.
nicate, and store project information.
project schedule
Project Management Office The project team’s plan for starting and fin-
(PMO) A centralized, ongoing administrative ishing activities on specific dates and in a
unit or department that serves to improve certain sequence. The schedule also specifies
project-management performance within an planned dates for meeting project milestones.
organization by providing oversight, support,
tools, and helpful methodologies to project project scope statement
managers. Defines the project and what it does and does
not need to accomplish.
project management plan
A plan that details how a project will be project selection criteria
executed in achieving the specified objectives. The standards and measurements that the
organization uses to select and prioritize
project management processes projects.
Activities that underlie the effective practice
of project management; they include all the project selection decision model
phases of initiating, planning, executing, A framework for comparing competing
monitoring and controlling, and closing a project proposals by helping decision makers
project. compare the benefits of one project alternative
with another.
project management system
A defined approach for effective project man- project selection method
agement. Any systematic approach used to analyze the
value of a proposed project in order to choose
project objectives among competing proposals.
The criteria used to measure whether a
project is successful or not. project selection
The act of choosing a project from among
project objectives competing proposals.
The measurable success criteria for the
project.

Glossary 565
GLOSSARY
project stakeholder quality management plan
A person who has a business interest in the A document that describes for project stake-
outcome of a project or who is actively holders your team’s approach to implementing
involved in its work. the quality policy; it outlines how quality
control and quality assurance will be per-
project statement of work formed.
A document that describes the products or
services that the project will supply, defines quality
the business need that it is designed to meet, The totality of features and characteristics of
and specifies the work that will be done dur- a product or services that bear on its ability to
ing the project. satisfy stated or implied needs.

project quantitative risk analysis

A temporary work endeavor that creates a A numerical method used to assess the prob-
unique product, service, or result. ability and impact of risk and to measure the
impact.
PSOW
See Procurement Statement of Work. RAM
See Responsibility Assignment Matrix
PTA
See Point of Total Assumption. random causes of variance
Those everyday occurrences that are always
PV present in project work; as such, they may be
See Planned Value. unavoidable. They may be either insignificant
and have little impact on the overall quality
Q-sorting
performance or they may have a dramatic
A decision model using groups of people to
effect on quality.
rate the relative priority of a number of alter-
natives. RBS
See Risk Breakdown Structure.
qualified sellers
The sellers who are approved to deliver the regulations
products, services, or results based on the Compliance-mandatory characteristics for spe-
procurement requirements identified for a cific products, services, or processes.
project.
relative authority
qualitative risk analysis The project manager’s authority relative to the
An approach to identify potential risk events functional manager’s authority over the
and rate their impact on project objectives as project and the project team.
high, medium, or low.
report performance process
quality assurance plan The project management process of gathering
A document that specifies a project’s stan- and communicating information regarding the
dards for quality and describes how, when, in current status of a project as well as projec-
what manner, and to what degree the project tions for progress over time.
will be reviewed and evaluated against quality
criteria. Request for Bid
(RFB) Commonly used when deliverables are
quality audit commodities for which there are clear specifi-
An independent evaluation, inspection, or cations, and when price will be the primary
review of a project’s quality assurance sys- determining factor.
tem.

566 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 GLOSSARY
Request for Information Responsibility Assignment Matrix
(RFI) Commonly used to develop lists of See RAM.
qualified sellers and to gain more input for
resource availability. review
See inspection.
Request for Proposal
(RFP) Commonly used when deliverables are reward and recognition system
not well-defined or when other selection crite- A formal system used to reinforce behaviors
ria will be used in addition to price. or performance. The purpose is to motivate
the team to perform well and to achieve and
Request for Quotation maintain the desired level of individual and
(RFQ) Commonly used when deliverables are team morale.
commodities for which there are clear specifi-
cations, and when price will be the primary rewarding individual performance
determining factor. Unlike an RFB, this solic- Giving pay increases or promotions to indi-
ited price quote is used for comparison viduals based on merit.
purposes and is not a formal bid for work.
RFB
requirements documentation See Request for Bid.
A process of describing how individual
RFI
requirements meet the business requirements
See Request for Information.
for the project.
RFP
requirements management plan
See Request for Proposal.
A document that describes how the project
requirements will be analyzed, documented, RFQ
and managed throughout the project life See Request for Quotation.
cycle.
risk analysis
requirements traceability matrix The evaluation of the probability and impact
A tabular document that links the project or of the occurrence of a risk.
product requirements to their origin and traces
them throughout the project life cycle. Risk Breakdown Structure
(RBS) A hierarchical arrangement of identi-
reserve analysis fied risks that helps project managers to
A method of activity duration estimating in organize potential sources of risk to the
which extra time is added to duration esti- project.
mates that can serve as a buffer as recognition
of scheduled risk (contingency reserves). risk data quality assessment
The evaluation of the usefulness of the avail-
resource leveling able data concerning the risk.
One of four common methods for achieving
schedule network analysis; a technique used risk management plan
to analyze the schedule model. Resource lev- A document that describes the team’s
eling allows you to readjust the work as approach to identifying risks.
appropriate.
risk register
Responsibility Assignment Matrix A document that identifies and categorizes
(RAM) A chart that links key project stake- risks, potential risk responses, and their trig-
holders to specific project deliverables or gers, or warning signs.
activities by assigning responsibility to an
individual stakeholder for each element of
work.

Glossary 567
GLOSSARY
risk tolerance sensitivity analysis
The level of risk a project manager or key A method of assessing the relative impact of
stakeholder is willing to take when the invest- changing a variable in the project to gain
ment is compared to the potential payoff. insight into possible outcomes of one or more
potential courses of action.
risk
An uncertain event that has either a positive sequence activities process
or negative effect on the project. Its primary A planning method that involves identifying
components are a measure of probability that and documenting interactivity dependencies
a risk will occur and the impact of the risk on among project activities for the purpose of
a project. creating the project schedule.

schedule baselines SF
The management-approved version of the See Start-to-Finish.
project schedule; it is drawn from the sched-
ule network analysis and includes baseline simulation
start and finish dates. A technique that uses computer models and
estimates of risk to translate uncertainties at a
schedule compression detailed level into their potential impact on
The act of shortening the project schedule project objectives at the total project level.
without affecting the project scope.
slack
schedule management plan See float.
An approach to developing, maintaining, and
managing the project schedule. source selection criteria
The standards used to rate or score proposals,
schedule network analysis quotes, or bids.
A technique used to calculate the theoretical
early and late start and finish dates for all source-based risk classification
project activities. A method of analyzing risk in terms of its
origins.
Schedule Performance Index
(SPI) The ratio of work performed to work special causes of variance
scheduled. The formula for SPI is SPI = Unusual, sporadic occurrences; they are the
EV/PV. result of some unexpected circumstance and
are typically not caused by a flaw in the over-
schedule performance measurement all production process.
Any technique used to determine how the
project is performing in terms of time as specifications
compared to its planned performance. Descriptions of the work to be done or the
service or product to be provided; they define
Schedule Variance the requirements that must be met in exacting
(SV) The measured difference between the detail.
actual completion of an activity and the
planned or scheduled completion of an activ- SPI
ity. The formula for calculating SV is EV – See Schedule Performance Index.
PV = SV.
SS
scope creep See Start-to-Start.
A change in scope that will adversely affect
cost, time, or quality and that has not been
processed appropriately through the scope
change control process.

568 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 GLOSSARY
staffing management plan Start-to-Start
A plan that forecasts what types of staff will (SS) The precedence relationship between two
work on the project, when they will be activities where the predecessor activity must
needed, how they will be recruited onto the start before the successor activity can start.
project, and when they will be released from Can be expressed as, “Activity A must start
the project. before Activity B can start.”

stakeholder analysis matrix statistical sampling

A document that describes the strategies to A technique used to determine characteristics
manage the stakeholders of a project. of an entire population based on actual mea-
surement of a representative sample of that
stakeholder analysis population.
The formal process of identifying all of the
stakeholders by gathering and analyzing quan- subproject
titative and qualitative information, and An independently manageable component of
building coalitions at the onset of a project by an existing project.
identifying their needs, objectives, goals, and
issues. successor activity
In sequencing two activities, the activity that
stakeholder management strategy must take place after the other.
A management strategy that is created to
ensure increase in support and to minimize summary activity
the negative impacts of stakeholders through- A group of related activities that are reported
out the entire project life cycle. as an aggregate activity.

stakeholder register SV
A document that identifies stakeholders of a See Schedule Variance.
project with information that includes their
T&M contract
identification, assessment, and stakeholder
See Time and Material contract.
classification.
tailoring
standard deviation
The act of determining which processes are
This is the measure of the spread of the data,
appropriate for any given project.
or the statistical dispersion of the values in
your data set. TCPI
standards See To-Complete Performance Index.
Nonmandatory guidelines or characteristics team building
that have been approved by a recognized An ongoing process of helping the project
body of experts such as the International team work collaboratively, rather than indi-
Organization for Standards (ISO). vidually, to achieve a common purpose.
Start-to-Finish team-building activities
(SF) The precedence relationship between two Specific functions or actions taken to help the
activities where the predecessor activity must team to develop into a mature, productive
start before the successor activity can finish. team.
Can be expressed as, “Activity A must start
before Activity B can finish.” teaming agreement
A legal contractual agreement between two or
more parties to form a partnership, joint ven-
ture, or other arrangement as defined by the
parties to meet the requirements of a business
opportunity.

Glossary 569
GLOSSARY
term contract TQM
A type of contract that engages the seller to See Total Quality Management.
deliver a set amount of service—measured in
staff-hours or a similar unit—over a set training
period of time. An activity in which team members acquire
new or enhanced skills, knowledge, or atti-
three-point estimates tudes.
A method of activity duration estimating in
which three types of estimates are incorpo- triangular distribution PDF
rated into a singular duration estimate A visual depiction of a probability density
scenario: most likely, optimistic, and pessi- function in which the data is skewed to one
mistic. side, indicating an activity or element presents
relatively little risk to project objectives.
Time and Material contract
(T&M contract) This type of contract includes triggers
aspects of both fixed-price and cost- Warning signs or indications that a risk is
reimbursable contracts. The buyer pays the about to occur in a project.
seller a negotiated hourly rate and full reim-
UCL
bursement for materials used to complete the
See Upper Control Limit.
project.
uniform distribution PDF
time value of money
A visual depiction of a probability density
Taking into account the cost of using capital
function in which all outcomes are equally
over a period of time.
likely to occur, so the data is shown in a
To-Complete Performance Index straight line.
(TCPI) An estimate that is derived by divid-
upper control limit
ing the budgeted cost of remaining work by
(UCL) Refers to a limit which is three stan-
the remaining project budget.
dard deviations above the mean in a control
tolerances chart.
The measurement values that determine if a
variable sampling data
product or service is acceptable or unaccept-
Data that is measured on a continuous scale,
able.
such as time, temperature, or weight.
tools and techniques
variance
Methods, templates, or approaches that
The quantifiable deviance or amount of depar-
project managers employ.
ture from the expected results for any
top-down estimating component of a product and service being
See analogous estimating. developed, including quality, schedule, and
cost.
total float
The total amount of time that an activity can verify scope process
be delayed without delaying the project finish The project management process of obtaining
date when subtracting an activity’s EF from formal acceptance of the project scope by the
its LF or its ES from its LS. stakeholders (such as sponsor, client, and cus-
tomer).
Total Quality Management
(TQM) An approach to improve business virtual team
results through an emphasis on customer sat- A team that is distributed across multiple
isfaction, employee development, and locations. Some virtual teams have occasional
processes rather than functions. physical meetings, while others may never
meet face-to-face.

570 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 GLOSSARY
waiver Work Breakdown Structure
The giving up of a contract right, even inad- (WBS) A logical grouping of project
vertently. deliverables arranged in a hierarchical struc-
ture that defines the total scope of work
walkthrough required to complete the project.
See inspection.
work package
warranty of fitness for purpose The planned work contained in the lowest-
Implied warranties that require goods to be fit level component of the work breakdown
for the usage that was intended by the buyer. structure.
warranty of merchantability work performance information
Implied warranties that require goods to be fit Periodically collected information about
for ordinary usage. project activities being performed to accom-
plish the project work.
warranty
A promise, explicit or implied, that goods or
services will meet a pre-determined standard.
The standard may cover reliability, fitness for
use, safety, and so on.

WBS dictionary
An auxiliary document containing details
about each element in the WBS; may contain
information such as code of accounts identifi-
cation, milestones, contract information, cost,
quality requirements, time estimates, or
resource information for measuring perfor-
mance and completeness.

WBS
See Work Breakdown Structure.

weighted factor
A decision model that applies a multiplier
based on importance to each criterion, which
is factored into the scoring.
weighting system
A method for quantifying qualitative data to
minimize the influence of personal bias on
source selection.

what-if scenario analysis

An analysis method that allows you to plan
for unexpected issues or problems that will
interfere with the schedule.

work authorization system

A tool for communicating official permission
to begin working on an activity or work pack-
age.

Glossary 571
NOTES

572 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 INDEX

INDEX
3-sigma rule, 253 B
360-degree feedback, 288 BAC, 213
6-Sigma limit, 253 benchmarking, 237
8/80 rule, 110 bottom-up estimating, 192
80/20 rule, 254 breaches of contract, 435
anticipatory breach, 436
A fundamental breach, 436
AC, 174 immaterial breach, 436
acquire project team process, 272 material breach, 436
activities, 108 Budget at Completion
vs. tasks, 109 See: BAC
activity dependencies, 118 business cases, 57
types of, 118 components of, 57
Activity-On-Node, 122 business requirements, 44
Also See: PDM business risks, 335
Actual Cost types of, 335
See: AC
administer procurements process, 431 C
administrative closure, 476 capital budgeting, 46
aggregated costs, 198 cause-and-effect diagrams, 235
agile project management, 23 causes of conflict, 289
alternatives identification techniques, 83 CCB, 463
brainstorming, 83 CDM, 123
Delphi technique, 83 Change Control Board
lateral thinking, 83 See: CCB
analogous estimating, 191 change control systems, 463
analyzing variances task, 252 change management
anticipatory breach, 436 advantages of, 471
AON, 122 checklists, 233
APT, 6 close procurements process, 440
assumptions, 79 close project or phase process, 474
attribute sampling data, 255 closing process group, 35
audits co-location, 282
See: inspections code of accounts, 89
Autonomous Project Teams collect requirements process, 70
See: APT communications management plans, 305
average, 366 creating, 310
communications requirements, 308
communications requirements analysis, 308

Index 573
INDEX
communications technologies, 309 Cost Plus Fixed Fee contracts
selecting, 309 See: CPFF contracts
completion contracts, 428 Cost Plus Incentive Fee contracts
composite organizations, 13 See: CPIF contracts
conditional branches, 123 Cost Variance
conditional diagramming methods See: CV
See: CDM cost-benefit analysis, 48
conduct procurements process, 416 cost-reimbursable contracts, 409
configuration management, 464 CPAF contracts, 409
activities, 465 CPFF contracts, 409
systems, 465 CPI, 211
conflict management, 289 CPIF contracts, 409
handling, 290 CPM, 149
conflicts crash cost plotting methods, 162
causes of, 289 crashing, 161
constraints, 79 create WBS process, 87
contingency allowances, 200 criteria profiling, 46
contingency plans, 379 critical activities, 156
contingency reserves, 380 critical chain method, 149
contract change requests, 435 critical path, 146, 156
contracts, 408 identifying, 156
completion, 428 Critical Path Method
components of, 408 See: CPM
Cost Plus Award Fee, 409 CV, 210
Cost Plus Fixed Fee, 409
Cost Plus Incentive Fee, 409 D
cost-reimbursable, 409 decision making under risk, 370
Firm Fixed Price, 409 decision tree, 46
fixed price, 409 decision tree analysis, 371
Fixed Price Incentive Fee, 409 define activities process, 110
term, 428 define scope process, 81
Time and Material, 409 deliverables, 108
control charts, 235 Delphi technique, 47
control cost process, 208 Design of Experiments
control schedule process, 170 See: DOE
control scope process, 98 determine budget process, 198
cost assignment methods, 201 develop human resource plan process, 264
50/50 percent rule, 201 develop project charter process, 55
percentage complete rule, 201 develop project management plan process, 63
weighted milestones, 201 develop project team process, 278
cost baselines, 197 develop schedule process, 143
establishing, 202 direct and manage project execution process,
452
cost of capital, 46
discounted cash flow, 46
cost of quality, 232
distribute information process, 313
Cost Performance Index
DOE, 237
See: CPI
duration, 145
Cost Plus Award Fee contracts
See: CPAF contracts

574 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 INDEX
E Fixed Price with Economic Price Adjustment
EAC, 213 contracts
early finish See: FP-EPA contracts
See: EF float, 146
early start flowcharts, 234
See: ES cause-and-effect diagrams, 235
Earned Value process, 235
See: EV force majeure, 437
Earned Value Management forecasting methods, 325
See: EVM formal acceptance of project work, 472
earned value performance, 213 FP-EPA contracts, 409
EF, 145 FPIF contracts, 409
effect-based risk classification, 339 free float, 147
effort, 133 FS
elapsed time, 133 See: Finish-to-Start
enterprise environmental factors, 10 functional organizations, 13
ES, 145 fundamental breach, 436
estimate activity durations process, 133 funding and costs
estimate activity resources process, 128 reconciling, 205
Estimate at Completion funding limit reconciliation, 200
See: EAC
G
estimate costs process, 188
GERT, 123
Estimate to Complete
Graphical Evaluation Review Technique
See: ETC
See: GERT
ETC, 213
group creativity techniques
EV, 174
affinity diagram, 72
EVM, 173
brainstorming, 72
variables of, 173
Delphi technique, 72
EVM analysis, 372
idea or mind mapping, 72
executing process group, 34
nominal group technique, 72
Expected Monetary Value analysis
group decision making techniques, 73
See: EVM analysis
express warranty, 436 H
hammock activities, 123
F
hurdle rate, 46
facilitated workshops, 72
fast-tracking, 161 I
feasibility analysis, 47
identify risks process, 346
FF
identify stakeholder process, 298
See: Finish-to-Finish
immaterial breach, 436
FFP contracts, 409
impact scales, 340
Finish-to-Finish, 119
implied warranty, 436
Finish-to-Start, 119
information-gathering techniques, 349
Firm Fixed Price contracts
brainstorming, 349
See: FFP contracts
Delphi technique, 349
fixed price contract, 409
interviewing, 349
Fixed Price Incentive Fee contracts
root cause analysis, 349
See: FPIF contracts
initiating process group, 34
inspections, 95

Index 575
INDEX
reports, 95 make-or-buy decisions, 403
insurable risks, 335 manage project team process, 286
types of, 335 manage stakeholder expectations process, 318
integrated change control, 463 material breach, 436
developing, 466 matrix organizations, 13
integrated change control system mean, 366
utilizing, 472 median, 366
interdependent projects, 20 monitor and control project work process, 459
Internal Rate of Return best practices, 461
See: IRR monitor and control risks process, 383
Invitation for Bid monitoring and controlling process group, 34
See: IFB Monte Carlo analysis, 372
IRR, 46
ISO 9000 Series, 232 N
negative risk strategies, 378
K Also See: threats
knowledge areas, 35, 36 acceptance, 379
project communications management, 36 avoidance, 378
project human resource management, 36 mitigation, 378
project integration management, 36 transference, 378
project procurement management, 36 Net Present Value
project quality management, 36 See: NPV
project risk management, 36 normal distribution PDF, 368
project scope management, 36 NPV, 46
project time management, 36
O
L ongoing risk assessment process, 358
lag, 119 operations, 6
late finish operations management, 22
See: LF opportunities, 379
late start organization charts, 14
See: LS organizational structures, 12
LCL, 236 relative authority in, 13
lead, 120 types of, 13
lease, rent, or buy decisions, 403 organizational systems, 12
lessons learned organizations
considerations of, 477 cultures of, 16
reports, 477 process assets of, 17
levels of uncertainty, 341 outsourcing, 402
known, 341
known-unknown, 341 P
unknown-unknown, 341 parametric estimating, 192
LF, 145 Pareto analysis, 254
loops, 123 Pareto diagrams, 253
lower control limit payback period, 46
See: LCL PDF, 367
LS, 145 normal distribution, 368
triangular distribution, 369
M uniform distribution, 368
make-or-buy analysis, 403 PDM, 122

576 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 INDEX
perform integrated change control process, 469 process groups
perform qualitative risk analysis process, 354 closing, 35
perform quality assurance process, 241 executing, 34
perform quality control process, 248 initiating, 34
perform quantitative risk analysis process, 363 interactions, 35
performance appraisals, 290 monitoring and controlling, 34
performance measurement analysis techniques, planning, 34
212 process improvement planning, 229
performance reporting techniques, 212 process mean, 236
performance reports processes
benefits of creating, 326 product-oriented, 33
components of, 325 project management, 32, 33
PERT, 135 tailoring, 32
plan communications process, 306 procurement audits, 442
plan procurements process, 394 elements of, 443
plan quality process, 227 lessons learned, 444
plan risk management process, 336 procurement documents, 407
plan risk responses process, 376 Invitation for Bid, 407
Planned Value preparing, 413
See: PV Request for Bid, 407
planning process group, 34 Request for Information, 407
PMIS, 454 Request for Proposal, 407
common problems of, 454 Request for Quotation, 407
PMO, 6 procurement management plans, 397
Point of Total Assumption creating, 398
See: PTA procurement negotiations, 427
portfolio management, 20 Procurement Statement of Work
portfolios, 5 See: PSOW
positive risk strategies, 379 procurements administrator
Also See: opportunities duties of, 434
acceptance, 379 product analysis techniques, 82
enhancement, 379 functional analysis, 83
exploitation, 379 quality function deployment, 83
sharing, 379 systems engineering, 83
Precedence Diagramming Method value engineering and value analysis, 83
See: PDM product reviews
precedence relationship types, 119 See: inspections
precedence relationships, 118 Program Evaluation and Review Technique
predecessor activities, 118 See: PERT
present value, 46 program management, 20
probability, 366, 368 programs, 4
objective, 368 progressive elaboration, 31
probability and impact risk rating matrix, 356 project changes
Probability Density Function causes of, 464
See: PDF project charters, 55
probability distribution, 367 creating, 58
probability scales, 340 project costs
process control structures, 466 controlling, 214
process flowcharts, 235 estimating, 193

Index 577
INDEX
project deliverables, 79 project selection
project governance, 29 criteria, 44
project interfaces, 266 methods, 45
project life cycles, 28 project selection decision models, 45
characteristics of, 29 benefit measurement models, 45
governance activities in, 30 mathematical models, 45
vs. product life cycles, 28 project sellers
project management, 3 determining, 428
Project Management Information System Project Statement of Work
See: PMIS See: SOW
Project Management Office project teams
See: PMO acquiring, 276
project management plans, 61 developing, 283
subsidiary plans, 62 managing, 290
project management processes, 32 project work
closing, 33 formal acceptance of, 472
executing, 33 projectized organizations, 13
initiating, 33 projects, 2
inputs, 33 characteristics of, 2
monitoring and controlling, 33 iterative, 30
outputs, 33 overlapping, 30
planning, 33 phase-to-phase relationships in, 30
tools and techniques, 33 sequential, 30
project management system, 15 PSOW, 401
project objectives, 79, 83 preparing, 404
project phases, 28 PTA, 411
project plans PV, 173
executing, 456
project procurements Q
administering, 437 Q-sorting, 46
closing, 444 qualified sellers, 420
project records qualitative risk analysis, 353
archiving, 476 performing, 358
project resources, 128 quality, 226
project risk management process, 334 quality assurance plans, 241
project risk ranking, 365 executing, 245
project risk response audits, 385 quality audits, 244
project risks topics of, 244
monitoring and controlling, 386 quality control
project schedule network diagrams, 121 performing, 256
creating, 125 quality management plans, 226
project schedules, 142 creating, 238
controlling, 180 quantitative analysis methods, 371
developing a draft of, 152 decision tree analysis, 371
formats of, 150 Expected Monetary Value (EMV) analysis, 371
optimizing, 163 modeling and simulation, 371
project scope sensitivity analysis, 371
controlling, 100 quantitative risk analysis, 363
project scope statements, 79 performing, 373

578 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition

 INDEX
R schedule management plans, 110
RACI chart, 268 schedule network analysis, 148
RAM, 267 Schedule Performance Index
random causes, 251 See: SPI
RBS, 338 schedule performance measurement, 175
regulations, 231 Schedule Variance
relative authority, 13 See: SV
report performance process, 323 scope creep, 98
Request for Bid scope statements
See: RFB components of, 80
Request for Proposal creating, 84
See: RFP project, 79
Request for Quotation scoring and rating systems
See: RFQ criteria profiling, 46
requirements documentation, 73 decision tree, 46
requirements management plans, 74 Delphi technique, 46
requirements traceability matrix, 75 Q-sorting, 46
attributes of, 75 weighted factor, 46
resource leveling, 150 seller responses, 423
Responsibility Assignment Matrix sensitivity analysis, 371
See: RAM sequence activities process, 116
reviews SF
See: inspections See: Start-to-Finish
reward and recognition systems, 282 simulations, 372
rewarding individual performance, 283 slack
RFB, 407 See: float
RFP, 407 source selection criteria, 412
RFQ, 407 source-based risk classification, 339
risk analysis, 341 SOW, 51
Risk Breakdown Structure external, 51
See: RBS internal, 51
risk categories, 350 preparing, 52
risk data quality assessments, 356 special causes, 251
risk management plans, 336 specifications, 402
creating, 342 SPI, 178
risk registers, 350 SS
components of, 357 See: Start-to-Start
risk response plans staffing management plans, 269
developing, 380 components of, 269
risk tolerance, 342 stakeholder analysis, 300
levels of, 342 stakeholder analysis matrix, 301
risk-related contract decisions, 397 stakeholder management strategy, 301
risks, 334 stakeholder registers, 300
stakeholder requirements
S documenting, 76
schedule baselines, 167 stakeholders, 7
establishing, 168 identifying, 302
schedule compression, 160 negative, 9
schedule control charts, 176 positive, 9

Index 579
INDEX
types of, 7 TSPI, 214
standard deviation, 366
standards, 231 U
Start-to-Finish, 119 UCL, 236
Start-to-Start, 119 uniform distribution PDF, 368
statistical sampling, 254 upper control limit
statistical sampling process, 255 See: UCL
strategic planning, 4
V
subjective, 368
variability, 253
subobjectives, 83
variable sampling data, 256
subprojects, 3
variance, 251
successor activities, 118
causes of, 251
summary activities, 123
random causes, 251
Also See: hammock activities
special causes, 251
SV, 177
variance analysis, 213
T variance analysis process, 324
T&M contract, 409 verify scope process, 93
tailoring, 32 virtual teams, 275
TCPI, 214
W
team development stages, 280
waivers, 435
adjourning, 281
types of, 436
forming, 281
walkthroughs
norming, 281
See: inspections
performing, 281
warranties, 435
storming, 281
express warranty, 436
team-building activities, 282
implied warranty, 436
teaming agreements, 397
warranty of fitness for purpose, 436
term contracts, 428
warranty of merchantability, 436
threats, 378
warranty of fitness for purpose, 436
Time and Material contracts
warranty of merchantability, 436
See: T&M contracts
WBS, 86
time value of money, 46
developing, 89
To-Complete Performance Index
weighted factor, 46
See: TCPI
weighting systems, 426
To-Schedule Performance Index
what-if scenario analysis, 150
See: TSPI
work authorization systems, 455
tolerances, 252
Work Breakdown Structure
top-down estimating
See: WBS
See: analogous estimating
work packages, 109
total float, 147
work performance information, 456
Total Quality Management
See: TQM
TQM, 230
approaches to, 230
training, 281
trend analysis, 213
triangular distribution PDF, 369
triggers, 346

580 Certified Associate in Project Management (CAPM®) Certification - Fourth Edition