PMP PDF

PMP® Exam Power Prep
PMC:DJ4:EN:000 ver.3.0
PMP® Exam Power Prep
PMC:DJ4:EN:000 ver.3.0
© Copyright CMF Solutions and TwentyEighty Strategy Execution
October 2015
All rights reserved.
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All material from A Guide to the Project Management Body of Knowledge (PMBOK® Guide) is
reprinted with permission of the Project Management Institute, Four Campus Boulevard, Newtown
Square, Pennsylvania 19073-3299, USA, a worldwide organization for advancing the state-of-the-art
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PMI did not participate in the development of this publication and has not reviewed the content for
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PMI, PMP, and PMBOK are registered marks of the Project Management Institute, Inc.
Unit 1: Introduction
Power Prep Approach
Course Guidelines
Courtesy to Your Fellow Students
The Exam
Test-taking Strategies
Top Reasons for Exam Failure
Formula List
Unit 1: Introduction
Power Prep Approach
The Power Prep approach is designed to reduce your total study time, eliminate wasted
effort on “nice to know” information that is not actually tested, and maximize your
chance of passing the PMP® exam on the first try. Many students have taken the exam
within two weeks of completing the class (some within several days).
The course covers the management topics tested by PMI (integration, scope, time, cost,
quality, human resource, communication, risk, procurement, and stakeholder). The
daily agenda involves a comprehensive review of two or three of these topics followed
by practice exams and personal study. The instructor is available to answer questions.
Key materials and a typical five-day agenda are provided below. Note that the agenda
may be modified as appropriate.
Key Materials:
 PMBOK® Guide, 5th edition, 2013
 Reference Manual (for Self-Study):
1. Unit on each testable topic
2. Drill Practice (at the end of each unit)
3. Summary of Processes (Unit 14)
4. Exercises (Unit 15)
 Course Slides
 Practice Exams
 Formula and Process Guide
Lecture and Review (5-day agenda):

Monday: Introduction, PMI Concepts, Processes, Integration, Scope
Tuesday: Time
Wednesday: Cost, Quality
Thursday: Human Resource, Communication, Risk
Friday: Procurement, Stakeholder
PMI, PMP, and PMBOK are registered marks of the Project Management Institute, Inc.
© 2015 CMF Solutions and TwentyEighty Strategy Execution. All Rights Reserved. | PMC:DJ4:EN:000 ver.3.0 1-1
Introduction
Facilitated Study, Review, and Practice Exams:

A portion of each day is devoted to study, review, and practice exams. Some
activities may be performed individually and some may be performed in groups.
Your instructor may also conduct specific review sessions depending upon the
needs of the class. The steps include:
1. Review the chapters covered during that day. Also read any referenced
pages or paragraphs from the PMBOK® Guide.
2. Engage in group study and exercises, as appropriate.
3. Review the Drill Practice topics at the end of each chapter.
4. Take the practice exams for that day’s topics.
5. Participate in question and answer sessions.
Course Guidelines
Warnings:
 Beware of your personal experience and the “real world.”
 Your individual self-study is vital.
 Watch out for information overload. Well-meaning friends may overload
you with outdated material or simply too many references!
 This is not entertaining or fun (but it’s worth it).
Slow Me Down:
 At some point you may get lost or need more time to make notes.
 Take notes and use a highlighter, even if you normally do not.
Courtesy to Your Fellow Students
 Cell phones: set on silent or vibrate during class as well as during self-study in
the afternoon.
 Take or make calls in the hallway or a conference room.
 Laptops: if you must work on something urgent, take it outside the room. No
tap, tap, tapping behind your classmate’s ear.
 Conversations: unless you can whisper and keep your conversation brief, take it
outside the room. These courtesies should also be practiced during afternoon
study.
1-2 PMC:DJ4:EN:000 ver.3.0 | © 2015 CMF Solutions and TwentyEighty Strategy Execution. All Rights Reserved.
Introduction
The Exam
 Computerized at Prometric (formerly Sylvan Learning Center)
 Multiple choice (200 questions with 4 choices per question)
 Four hours to complete the exam
 Passing score:
 25 “control” or “pre-test” questions; not counted in your score
 Need 106 out of remaining 175 to pass (a 61% score)
 Beware 65% score: all 25 control questions correct but only 105 of the
others correct (your score is 65% but you failed by one question because
the control questions do not count toward your score)
 Questions randomly generated from a test bank
 Questions jump from topic to topic (no defined sections)
 No penalty for guessing (so don’t leave any questions unanswered)
 First time pass rates:
 Approximately 60% overall
 Approximately 75% to 90% with good exam prep course
 Approximately 95% with Power Prep
Test-taking Strategies
D minus 1 (The Day Before):

 No late night cramming
 Stay in your routine
 Normal sleep, dining, and beverages
Taking the Test:

 Use the computer tutorial offered at Prometric (Sylvan).
 Immediately write formulas and important lists on scratch paper (see
formula list on last page of this unit). The test center will provide a
booklet with four sheets of scratch paper.
Introduction
 Read all the choices as there may be a better or more inclusive answer:
Example: Austin can best be described as __________________
a. the capital of Texas
b. the capital and gateway to the hill country of Texas
c. the home of the University of Texas Aggies
d. the home of the University of Texas Armadillos
[“a” is correct but “b” is more inclusive and therefore the best
answer]
 Eliminate incorrect or highly implausible choices:
Example: The capital of Alabama is ____________
a. Birmingham
b. Montgomery
c. Edmonton
d. Calgary
[You may know nothing about Alabama but you know that
Edmonton and Calgary are Canadian cities and can eliminate them.
Your chance of guessing correctly is now much better, 50% instead
of only 25%.]
 Be alert: answers to a question can sometimes be found in the stem of
another question!
 Carefully note “red flag” words such as all, always, never, and
completely. Any choice using these words is less likely to be correct.
 Look for the “odd one out” (a choice that doesn’t fit the pattern of the
other choices):
To transfer most of the cost risk to the contractor, the client may
use a ___________ contract.
a. cost plus incentive fee
b. cost plus fixed fee
c. cost plus award fee
d. fixed price
[Choice “d” stands out as a likely correct answer even if you are
clueless about contracts!]
Introduction
 Adrenaline rush during the first ten minutes:

 You’re “pumped” (may read and think faster than normal)
 Slow down and control your breathing
 Read answers from the bottom up (d, then c, then b, then a)
 Answer easy questions first to build confidence
 “RTQ” (Read the Question)!!! However, do not introduce additional
factors into the question (answer only what was asked).
 Keep the main topic in mind (If the question is about risk, then choices
involving cost, quality, procurement, and so on are probably incorrect.).
 Pass and come back later for long, complex, or unfamiliar calculations.
 Consider visiting the test site before the day of the exam. You will reduce
anxiety and ensure that you arrive on time.
 Look for “rah rah” answers: The WBS is very important! The project
manager is the key to the survival of the human race! These seemingly
“too obvious” choices are often correct and they are usually promoting the
importance of PMI and project management.
 At the test site: avoid anxiety, arrive early. You are well prepared (so do
not engage in “nervous” conversation with other test takers as anxiety can
be contagious). You must put all personal items in a locker: you may not
take any personal items (cell phone, iPod, sweater, jacket, notebook,
pens, Kleenex, water, or food) to your workstation.
 Use mnemonic devices to remember lists (for example, IPECC =
Initiation, Planning, Execution, Control, and Closeout).
 If the question is stated in the negative (i.e., which of the following is
not), try reversing the statement into which of the following is. A confusing
question is frequently made simple through this technique.
 Most exam questions fall into one of these four types:
 Basic concepts and definitions (they are usually easy, answer these
on the first pass through the exam)
 Processes, inputs, tools, and outputs (these are detailed questions
and require some memorizing, use Unit 14 for assistance)
 What to do next or first (know the sequence of the processes in
each knowledge area)
 Evaluate a scenario and draw inferences (usually wordy scenarios
and can be challenging, you may have to rely on your experience
and basic reasoning ability on some of these)
Introduction
Introduction
Top Reasons for Exam Failure

 Not reading the question correctly
 Not considering all the choices
 Introducing additional information into the question (from personal
experience)
 Over-reliance on personal experience
 Inadequate basic knowledge of project management (lack of training)
 Failure to study enough and/or not using a focused set of study materials
 Failure to practice sufficiently (practice exams)
 Failure to recognize extraneous information in the body of a question
NOTE 1: PAGE REFERENCES IN THIS REFERENCE MANUAL REFER TO THE

PMBOK® GUIDE UNLESS OTHERWISE NOTED
NOTE 2: Practice “Brain Dumping” the formula list on page 1-7 until you can
reproduce it from memory.
Introduction
Formula List
Variance Plan – Actual
Time: PERT e(t) (O + 4M + P) / 6
PERT σ (P - O) / 6
Three-Point e(t) (O + M + P) / 3
Cost: PV (Present Value) Cash Flow / (1 + i)t
BCR (Benefit Cost Ratio) Revenues / Costs (1.0 breakeven, >1 profitable, <1 loss)
TC (Total Cost) Fixed Cost + Variable Cost
Earned Value (EV):
CV = Cost Variance EV - AC (negative variance is cost overrun)
SV = Schedule Variance EV - PV (negative variance is behind schedule)
CPI = Cost Performance Index EV / AC (less than one is cost overrun)
SPI = Schedule Performance Index EV / PV (less than one is behind schedule)
EAC = Estimate at Completion BAC / CPI (Variances typical of future)
EAC = Estimate at Completion AC + (BAC - EV) (Variances not typical of future)
EAC = Estimate at Completion AC + [(BAC-EV) / (CPI x SPI)] (Considers cost & schedule)
ETC = Estimate to Complete EAC - AC (variance typical) or BAC - EV (variance atypical)
VAC = Variance at Completion BAC - EAC
TCPI = To Complete Performance Index (BAC - EV) / (BAC - AC) or (BAC-EV) / (EAC-AC)
Percent Complete EV / BAC (how much project work is completed)
Percent Spent AC / BAC (what percent of budget has been spent)
EV Rules: Percent Complete Rule EV = % complete x PV
50-50 Rule EV = 50% x Budget (take remaining 50% at completion)
Percent Complete (Total Project) EV = % complete of entire budget x BAC
EV Acronym Changes: PV BCWS (Budgeted Cost of Work Scheduled)
EV BCWP (Budgeted Cost of Work Performed)
AC ACWP (Actual Cost of Work Performed)
Quality/Sigma: Plus / Minus One Sigma 68.3%
Plus / Minus Two Sigma 95.5%
Plus / Minus Three Sigma 99.7% (Defect rate of 3 per thousand)
Plus / Minus Six Sigma 99.9997% (“The Five 9’s”: Defect rate of 3.4 per million)
Communication channels [N x (N -1)] / 2 where N = number of team members
Risk: EMV (Expected Monetary Value) Amount at stake x Probability
Decision tree (probability of a path) Multiply probabilities along the path
Probability Event (A) Not Happening 1 - Probability (A)
Probability (A & B) Probability (A) x Probability (B)
Probability of Heads Twice in a Row 50% x 50% = 25%
Procurement: (Ceiling Price - Target Price) + Target Cost
Point of Total Assumption (PTA) Buyer Share
Contract Fee Adjustment (Target Cost – Actual Cost) x seller’s share
Contract Fee (or profit) Target Fee + Fee Adjustment
Contract Price Cost + Fee (or Profit)
Unit 2: PMI Concepts
Introduction: PMBOK® Guide Chapter 1
Organizational Influences and Project Life
Cycle: PMBOK® Guide Chapter 2
Self-Study
Appendix I: PMI® Code of Ethics and Professional Conduct
Appendix II: International Project Management

(PMBOK® Guide, Chapters 1 and 2)
This unit covers testable material from the first two chapters of the PMBOK® Guide.
Even though the first two chapters are not considered official knowledge areas, they
contain basic concepts that are often tested.
Chapter 1, PMBOK® Guide: Introduction (Chapter 1 provides basic definitions

and concepts)
Purpose of the PMBOK® Guide: Advances the profession of project

management by:
 Setting forth guidelines for generally recognized good practices. The
suggested practices are not meant to be applied uniformly in every case but,
instead, should be adjusted for the needs of any given project.
 Providing and promoting a common vocabulary.
 Establishing guidelines for ethical and professional conduct. The PMI® Code
of Ethics and Professional Conduct sets forth basic obligations for
responsibility, respect, fairness, and honesty that apply globally. This
material is no longer tested as extensively as it once was. The historical
details are contained in Appendices I and II at the back of this unit.
 Responsibility: Act in the best interests of society, public safety, and the
environment. Only accept assignments you are qualified for. Report unethical
conduct to management and/or PMI. Only file ethics complaints if substantiated by
facts. Uphold laws and regulations that govern your work.
 Respect: Listen to others; respect norms and customs of others. Respect
physical and intellectual property. Be professional even if not reciprocated. Don’t
use power for personal gain. Handle conflict directly; negotiate in good faith. Do not
act in an abusive manner.
 Fairness: Be transparent, impartial, and objective when making decisions. Never
discriminate, make opportunities equally available. Disclose real or potential conflicts
of interest.
 Honesty: Never make statements that are misleading, false, only partially true,
out of context, or not timely. Do not mislead others for personal gain.
Project: A project is a temporary endeavor undertaken to create a unique

product, service, or result (PMBOK® Guide, p. 3). All page references are to the
PMBOK® Guide unless otherwise noted.
 Temporary means the project has a definite beginning and ending (finite
duration). Temporary does not necessarily indicate a project of short
duration.
 Unique means the product or service is different in some distinguishing way

from all similar products or services.
 In contrast, operations are characterized as “on-going and repetitive”
(PMBOK® Guide, pp. 3 and 12-13).
 The purpose of a project is to attain its objective and then terminate. The
purpose of operations is to continuously sustain the business or organization.
Numerous authors agree on two additional characteristics for describing a project:

 Requires coordination of interrelated activities (complex enough to require a
team).
 Is “progressively elaborated,” i.e., proceeds in steps or increments (PMBOK®
Guide, p. 6). Progressive elaboration allows the project plan to be
continuously improved as more detailed information and more accurate
estimates become available. The words “progressive detailing and rolling
wave planning” are also used to describe the same phenomenon.
Project management is the application of knowledge, skills, tools, and

techniques to project activities to “meet project requirements” (PMBOK® Guide, pp. 5-6).
 Managing a project includes: 1) identifying requirements, 2) addressing the
needs and expectations of stakeholders, 3) balancing quality, scope, time,
cost, risk, and resource constraints, and 4) managing the concerns of key
stakeholders.
 Project management is accomplished through the coordinated use of 47
processes integrated among the following 5 process groups: initiating,
planning, executing, monitoring/controlling, and closing.
Project constraints: Project management involves balancing the competing

and related effects of 6 constraints: scope, schedule, budget, quality, resources, and
risk. A change in any single factor often leads to associated changes in one or more of
the other factors. The first 3 constraints (scope, schedule, and budget) have been
widely known as the so-called “triple constraint”. The concept of the triple constraint
has been tested even though the language is not mentioned in the PMBOK® Guide.
The overall quality and success of a project are frequently determined by how
effectively these constraints are managed.
Program: Programs are larger in scope than projects and it is also not as clear
when a program should end. PMI says “a program is a group of projects managed in a
coordinated way to obtain benefits not available from managing them individually”
(PMBOK® Guide, p. 9). Programs often have elements of ongoing, cyclical operations.
Program Management: Program management is the application of knowledge,

skills, tools, and techniques to a program to “meet program requirements and obtain
benefits not available by managing the projects individually” (PMBOK® Guide, p. 9).
 Programs always contain related projects. For example, a satellite program

may have related projects for design, construction, test, and launch.
 Conversely, projects do not necessarily have to be part of a program.
Portfolios, Portfolio Management, and Organizational Project Management:

A portfolio is a collection of projects, programs, and operations managed as a group to
achieve strategic business objectives (PMBOK® Guide, pp. 4, 7-10)
 The projects or programs do not necessarily have to be interdependent.
 Organizations establish portfolios on the basis of criteria such as: lines of
business, types of projects, risk versus reward trade-offs, and strategic
objectives.
 A possible outcome of portfolio management might be the selection and
initiation of a new project or program.
Portfolio management aligns work with organizational strategies by selecting

and prioritizing the right projects, providing needed resources, and managing
interdependencies.
Organizational Project Management (OPM) is the overall strategy framework

for pursuing organizational goals and objectives. Portfolios, programs, and projects
exist within this OPM framework.
Organizational Governance: Most organizations use a formal governance

process that provides oversight and direction for all the work accomplished, including
operations, project management, or any other form of work (PMBOK® Guide, pp. 14-
15). Governance provides processes for establishing organizational strategies and
goals, creating criteria for measuring success, and a means to determine whether value
is added to the business. Projects, programs, and portfolios operate within the
governance process.
Project Management Office (PMO), PMBOK® Guide, pp. 10-12:

 Many organizations use PMOs to standardize project governance, facilitate
sharing of resources, and coordinate the use of standard methodologies and
tools for managing projects.
 PMOs operate on a continuum with the level of control ranging as follows:
 Supportive: PMO is in a consulting role providing training, lessons

learned, templates, and best practices. PMO degree of control is low.
 Controlling: PMO requires compliance with methodologies, tools,
templates, and forms. PMO degree of control is moderate.
 Directive: PMO takes control of projects by directly managing them.
PMO degree of control is high.
 A list of possible PMO functions is provided in the PMBOK® Guide, p. 11
Role of Operations Management vs. Project Management in Organizational

Strategy: Operations management is concerned with on-going production of goods
and services. It provides daily control of business operations in areas such as
manufacturing, accounting, maintenance, engineering, sales, and other areas
appropriate for the specific nature of the organization. Operations management applies
to work that is on-going and repetitive, and it is performed to sustain the organization
over the “long run”.
Role of the Project Manager (PMBOK® Guide, pp. 16-18): The project
manager is the critical link between the project team and other parts of the organization
so that project objectives are met and organizational strategies are achieved. PMI
identifies 3 competencies (knowledge, performance, and personal skills) and also
provides a list of interpersonal skills needed to work effectively with the team and other
stakeholders. The skills are listed at least 3 places in the PMBOK® Guide, and we will
address them in detail in the unit on human resource management.
Chapter 2, PMBOK® Guide: Organizational Influences and Project Life

Cycle
Organizational culture (PMBOK® Guide, pp. 20-21): Organizational culture

embodies vitally important factors such as norms and beliefs, methods and procedures
(degree of project management maturity), attitudes toward authority, and work ethic.
The state of culture and styles in an organization may have a profound effect on project
success.
Organizational communication (PMBOK® Guide, p. 21): Successful projects

depend heavily on effective communications, especially in today’s world of globally
connected projects. Unit 8 addresses the details of effective communication.
Organizational structure (PMBOK® Guide, pp. 21-26): PMI recognizes various

organizational structures and the exam asks numerous questions on this topic. There
are three such organizational structures:
1. Functional: This traditional structure aligns people by “specialization,” for

example, engineering, production, procurement, marketing, finance, and so on.
Employees tend to have one clear superior. Functional organizations are
sometimes called silo or stovepipe organizations. In such structures, projects
have not always enjoyed a high priority (especially when the project has been
assigned to a different division and some employees feel that the project is
simply “not my problem”). Project managers can be found at different levels in a
functional organization:
a. The project manager may be chosen from the lowest working level in a
functional organization. In this case, the project manager tends to have
extremely limited authority (PMI says “little or none”).
b. If the project manager is chosen from the Vice President’s staff, he or

she is referred to as a “project expeditor” (a phrase that is unique to PMI).
Overall authority is still relatively low but is probably greater than the traditional
functional form as the expeditor probably has easier access to powerful people
because of his/her proximity to the VP and staff. Authority is usually limited to
the division in which the expeditor works. The specific description of the
authority is “little.”
c. If the project manager is chosen from the CEO’s staff, the PM is

referred to as a “project coordinator.” Authority, while still low overall, is more
likely to extend across divisional lines and is still described as “little.”
2. Matrix: The matrix form of organization maintains the vertical functional lines
of authority, but adds a horizontal structure for the project managers. In this
approach, projects take on a more visible and official posture across corporate
divisions. Functional divisions are expected to support new projects when they
are established. In a matrix organization, project managers interact with
functional managers to acquire the resources they need to support their projects.
a. In a weak matrix the project manager has comparatively less power in

the relationship with functional managers. In a weak matrix, PMI contends that
physical proximity, relative time expenditures, and administrative relationships
favor the functional managers. Formal authority for the project manager is
considered to be limited and the project manager’s role is more like that of an
expeditor or coordinator.
b. In a balanced matrix, the sharing of power between the project

manager and the functional departments is more equal and the authority of the
project manager is considered to be in the “low to moderate” range.
c. In a “strong matrix,” power shifts more toward the project manager.

Formal authority for the project manager moves into the moderate to high range
and the project manager’s role is more similar to project-based organizations.
Key point about the matrix:

 Team members report to two or more bosses
3. Projectized: In a projectized organization, team members are assigned to a

project on a full-time basis. The project manager has extremely high authority
(“high to almost total”), including control over budgets, appraisals, work
assignments, and physical location of the team.
Advantages Disadvantages
Functional
 Easier management of specialists  More emphasis on functional
 Clear accountability and reporting specialty than project needs
 No career path
 Projects not a priority
Matrix
 Project objectives more visible  More than one boss for teams
 Improved PM control over resources  Complex information flows
(compared to functional)
 Different priorities (functional vs.
 More support from functional PM)
disciplines
 Team members are “borrowed” so
 Better utilization of resources (time- getting commitment may be difficult
sharing)
 Extensive effort needed to establish
 People maintain a “functional home” policies and procedures
 Better information flow than  Difficult resource allocation and
functional (horizontal and vertical) project priority issues
Projectized
 Ultimate authority for PM  No home when project completed
 Efficient project organization  May not maintain professionalism in
 Loyalty to the project functional disciplines
 More effective communication  Duplication of facilities, job functions,
(physical collocation of the team) and individual resources
See Table 2-1 in the PMBOK® Guide, p. 22 for a summary of these organizational
forms.
Organizational Process Assets (OPA): OPA includes all of an organization’s

processes, policies, procedures, and knowledge bases that may influence the success
of a project. Some organizations have a strong PMO and well-developed project
management methodologies. PMI has divided OPA into the following two categories
(PMBOK® Guide, pp. 27-28):
Note: Organizational Process Assets is used as an input to 38 of 47

processes (81%).
Category 1 (Processes and Procedures aligned with process groups):
 Initiating and Planning:

 Guidelines for tailoring standard processes to meet specific project
needs.
 Specific organizational standards (HR, health, safety, ethics, and
project management policies; quality control policies, e.g., process
audits and checklists; and project life cycles.
 Templates (example formats for such items as the risk register,
WBS, schedule network diagrams, and contract formats).
 Executing and Monitoring/Controlling:
 Change control procedures (applies to changes of all types:
product changes, changes to project documents, and so on).
 Financial controls (time reporting, budgetary reviews/controls,
standard contract clauses).
 Issue and defect management procedures.
 Work authorization procedures (ensures that the right work is done
at the right time and in the right sequence).
 Standard criteria for work instructions, proposal evaluation, and
performance measurement.
 Closing:
 Project closure guidelines and requirements (lessons learned, final
audits, project evaluations, product validations and acceptance
criteria).
Category 2 (Corporate Knowledge Base): The knowledge base that stores

information and allows retrieval when needed.
 Project files: e.g., baselines, calendars, schedule network diagrams,

and risk registers
 Historical information (results from previous, similar projects) and
lessons learned databases
 Process measurement databases
 Defect management databases
 Configuration management knowledge base
 Financial databases
Enterprise Environmental Factors (EEF): All projects occur within an

environment that influences the potential for success (PMBOK® Guide, p. 29). The
factors in this environment may help or hinder project outcomes and may include, but
are not limited to, the following 13 examples:
 Organizational culture, structure, and processes

 Geographic distribution of facilities and resources
 Government or industry standards that may apply to your business
 Existing infrastructure (facilities and equipment)
 Existing human resources (skill sets)
 Personnel system (staffing, performance reviews, overtime policies, etc.)
 Work authorization systems (system to ensure the right work is done at the
right time and in the right sequence)
 Marketplace conditions (competition and contractors available for
outsourcing)
 Stakeholder risk tolerance
 Political climate
 Organization’s communication system
 Commercial databases for cost estimating and risk analysis
 Project management information systems (includes tools such as scheduling
software, configuration management, information collection/distribution
systems, and internet/web interfaces).
Note: Enterprise Environmental Factors is used as an input to 27 of 47

processes (57%).
Stakeholders (PMBOK® Guide, p. 30): A project stakeholder is anyone

(individual or organization) that is involved in a project, may be affected by the results of
the project, or may exert influence over the project. PMI emphasizes the importance of
identifying and managing key stakeholders. PMBOK® Guide, edition 5, included a new
knowledge area for stakeholder management (Unit 13). Key stakeholders may, among
others, include the following (PMBOK® Guide, pp. 32-33):
 Project manager
 Functional managers
 Project team
 Customer/user
 Sponsor (provides funding and other critical resources)
 PMO
 Performing organization (the enterprise whose employees are most
directly involved in the work)
 Sellers and business partners
 Citizens and society that may be affected by the project
Important issues in stakeholder management:

 Stakeholder requirements must be incorporated into the project
management plan. Therefore, project teams must identify and
communicate with stakeholders early in the project.
 Stakeholder identification is a continuous process.
 Overlooking potentially “negative” stakeholders can increase risk of failure.
 If stakeholder expectations come into conflict, the resolution should
generally favor the customer.
 On some projects, the customer provides the functions of a sponsor. A
separate internal sponsor may not be used.
Project Team (PMBOK® Guide, pp. 35-38): The project team consists of
people with the right knowledge and skills to carry out the work. They come from
various groups and how they interact is affected significantly by the
organizational structure chosen for the project. PMI defines the following roles
for project teams:
 Project management staff: Perform management activities such as

scheduling, budgeting, and reporting.
 Project staff: Members of the team who carry out the work outlined in the
deliverables.
 Supporting experts: Functional experts often referred to as SMEs
(subject matter experts) who perform functions such as procurement,
finance, engineering, quality control, and so on.
 User or customer representatives: Those who act as liaisons to accept
deliverables, advise on requirements, and ensure proper coordination.
 Sellers: Vendors, suppliers, and contractors. They are external sources
providing various portions of the work and there is generally some form of
contract or legal agreement in place.
 Business partners and members: External companies with a special
relationship (alliance, certified provider of certain specialized work).
Members of these business partners are sometimes assigned to work on
the project team to ensure proper coordination and communication.
Characteristics of a Project Life Cycle
 Has sequential or over-lapping phases (logical subsets of work for ease of

planning, management, and control).
 Cost and staffing levels are low at the start, peak in the middle, and fall off.
 Level of uncertainty and risk is greatest at the start; chance of successful
completion grows higher as the project continues.
 Ability of stakeholders to influence the project outcomes is greatest at the
start and grows progressively lower.
 Cost of changes is lower at the start and higher as the project continues.
Self-Study
Drill Practice: PMI Concepts
Question Answer
1. What are enterprise environmental factors 1. An input to 27 of 47 project management

(EEF)? processes, EEF are various factors that
influence project success, such as:
Organizational structure
Geographic location of facilities/resources
Government and industry standards
Existing resources and infrastructure
Personnel system
Work authorization system
Marketplace conditions
Risk tolerance
Political climate/Communication systems
Commercial databases
Information system (p. 2-8)
2. What is work authorization? 2. A procedure to sanction work so it’s done

at the right time and in the proper sequence.
Usually done in writing but may be verbal on
smaller projects. (pp. 2-7/8)
3. Name 3 major types of stakeholders. 3. Stakeholders include those who are:

involved in the project,
may be affected by the project,
or may influence the project (p. 2-9).
4. With respect to stakeholders, what 4. Stakeholder requirements must be included

information must be included in the project in the project management plan. Therefore,
management plan? project teams must identify and communicate
with stakeholders early in the project (p. 2-9).
5. Which organizational structure would tend 5. The matrix requires both vertical and
to have the most complex information and horizontal information flows (p. 2-6).
communication flows?
6. What is the relevance of project 6. The project team must identify the needs
stakeholders in achieving project success? and expectations of stakeholders and then
continue to manage them carefully.
Stakeholders can have a positive or negative
effect (p. 2-9).
7. If there is a conflict, which stakeholder is 7. The customer (p. 2-9).

generally considered the most important?
8. What is the difference between a program 8. Programs are larger in scope, often involve
and a project? several interrelated projects, and have a less
definite end date (pp. 2-1/2).
9. What is a project? 9. A temporary endeavor undertaken to create

a unique product, service, or result (pp. 2-1/2).
Temporary means the project has a definite

beginning and ending. It does not necessarily
mean the project is short in duration.
Unique means the product or service is

different in some distinguishing way from
similar products or services. In contrast,
operations are on-going and repetitive.
10. What is project management? 10. The application of knowledge, skills, tools,
and techniques to project activities to meet
project requirements (p. 2-2).
11. What are the four basic obligations 11. Responsibility, respect, fairness, and
established by the PMI® Code of Ethics and honesty (p. 2-1). More detail is contained in
Professional Conduct? Appendix I, p. 2-13.
12. What activities do portfolio managers 12. Portfolio managers are involved in
engage in? selecting and initiating projects and programs
that support the strategic objectives of the
overall organization (p. 2-3).
13. When does an important stakeholder have 13. As part of the initiating process; the earlier
the greatest chance to influence project the better (p. 2-10).
outcomes?
14. When is the amount at stake the greatest 14. The farther you are into the project
on a project? timeline, the more investment there is that
could be lost if the project failed or were
cancelled. For example, there is more at
stake (investment to potentially lose) late in
executing compared to early in executing (p. 2-
10 and slide 2-31).
15. Where would you look for lessons learned 15. OPA (Organizational Process Assets) in
or historical files? the knowledge base (p. 2-8).
16. In which organizational structure does the 16. Projectized (p.2-6).
project manager have the most authority?
Appendix I
PMI® Code of Ethics and Professional Conduct
Note: PMI no longer tracks exam questions on professional and social responsibility in
a separate category. Instead, any such questions are simply part of the structure for the
five process groups. There do not appear to be a significant number of questions on
this topic.
The PMI® Code of Ethics and Professional Conduct may be found on the PMI web site.
It is also contained in the PMP® Handbook. It is approximately 6 pages long and is
paraphrased here for your convenience.
The Code Applies to:
 All PMI members
 Anyone holding a PMI certification
 Anyone who is a candidate for a PMI certification
 Anyone serving PMI in a volunteer capacity
Structure of the Code
The code is organized into standards of conduct for 4 key values:
1. Responsibility
2. Respect
3. Fairness
4. Honesty
The First Key Value: Responsibility

Responsibility is taking ownership for:
 Decisions we make or fail to make
 Actions we take or fail to take
 The consequences that result
Anyone subject to this code of conduct is expected to:
1. Make decisions and take actions based on the best interests of society, public
safety, and the environment.
2. Only bid and accept assignments for which you are qualified based on your
background, experience, and skills.
3. Be fully aware of and uphold all relevant policies, rules, regulations, and laws
that govern your work, whether professional or volunteer (You are responsible
to know relevant laws and regulations).
a. Do not engage in theft, fraud, corruption, embezzlement, bribery, or any illegal
behavior. Do not accept inappropriate gifts.
b. Do not take or misuse the intellectual property of others.
c. Do not engage in slander or libel.
d. Do not condone or assist others in illegal behavior.
4. Report unethical or illegal conduct to management and, if appropriate, to
those affected by the conduct (never hide bad news).
5. Report violations of this code to PMI. Also, cooperate with PMI in the
collection of information.
6. Only file ethics complaints when they are substantiated by facts.
a. Abstain from accusations if you do not have all the facts.
b. Pursue disciplinary action against anyone who knowingly makes false
allegations.
7. Pursue disciplinary action against anyone who knowingly makes false
allegations or retaliates against individuals who raised ethics concerns.
The Second Key Value: Respect

Respect includes:
 Showing high regard for ourselves, others, and the resources
entrusted to us. Resources may include people, money, reputation,
safety, and environmental concerns.
 Respect fosters trust, builds cooperation, and encourages diversity.
Again, those governed by this code are expected to:
1. Inform themselves about the norms and customs of others; avoid behaviors
that might be disrespectful.
2. Listen to others; actively seek to understand them.
3. Whenever a conflict or disagreement occurs, work directly with the parties
involved. For example, never escalate a problem without first attempting to
work out a solution.
4. Conduct themselves in a professional manner, even when it is not
reciprocated.
5. Negotiate in good faith.
6. Not use their expertise or position to influence decisions or actions so that
they benefit at someone else’s expense.
7. Not act in an abusive manner toward others. PMI defines abusive manner as
conduct that results in physical harm or feelings of fear, humiliation, or
exploitation in another person.
8. Respect the property rights of others (including intellectual property).
The Third Key Value: Fairness

Fairness includes:
 The duty to be impartial and objective.
 Conduct that is free from self-interest, prejudice, or favoritism.
Those governed are expected to:
1. Be transparent in making decisions. Ensure that all authorized parties have
equal access to timely and accurate information.
2. Examine their impartiality and objectivity; be alert to the possibility of
conflicting loyalties and conflicts of interest.
3. Disclose real or potential conflicts of interest to appropriate stakeholders. A
conflict of interest exists when someone has loyalties to more than one party
(referred to as “competing loyalties”) and is in a position to influence
outcomes.
4. When a real or potential conflict of interest exists, do not make decisions or
take actions until:
a. Full disclosure to relevant stakeholders has occurred.
b. They have an approved mitigation plan and stakeholders have agreed.
5. Provide equal access to information (to those authorized). For instance,
during the procurement process, they must ensure that all bidders have equal
access to the same information.
6. Make opportunities equally available to qualified candidates.
7. Not hire, fire, reward, or punish anyone on the basis of personal
considerations such as favoritism, nepotism, or bribery. Also, do not award or
deny contracts based on the same factors.
8. Not discriminate against others based on gender, race, age, religion,
disability, nationality, or sexual orientation.
The Fourth Key Value: Honesty

Honesty is the duty to understand the truth and act in a truthful manner,
especially regarding communications and personal conduct.
Those governed are expected to:
1. Earnestly seek to understand the truth. Do not engage in or condone
attempts to deceive others.
2. Be truthful in their communications and conduct.
3. Not provide information that is incomplete, misleading, out of context, or
represents a “half-truth”.
4. Provide accurate information in a timely manner. Also report bad news in an
accurate and timely manner.
5. Make commitments and promises in good faith.
6. Create an environment in which others feel safe to tell the truth.
7. Not engage in dishonest behavior for personal gain or at the expense of
someone else.
Appendix II
International Project Management
PMI has endorsed the following reference in their guidelines for managing international
projects.
Doing Business Internationally: The Guide to Cross-Cultural Success by Terence

Brake (1st edition) and Danielle Walker, et al (2nd edition)
The questions in this area focus primarily on the ethical dilemmas that face project
managers who must manage across borders, cultures, and differing management
philosophies. Above all, Terence Brake indicates that project managers in cross-
cultural situations must be adaptable. The ability to embrace diversity and accept the
norms of other cultures is also important. You should remember that “ethnocentrism”
is bad (if you are a project manager facing international challenges). Ethnocentrism is
the inherent belief that your own culture is superior, leading to difficulty in accepting the
customs practiced by your counterparts in other countries. Ethnocentrism may easily
lead to condescending behavior toward international partners and, therefore, may cause
damage to such projects.
The following is a summary of key points from the Terence Brake and Danielle
Walker book, Doing Business Internationally:
Global Cultural Orientation

Variable Orientation Description
Environment Control People dominate their environment; it can be

changed to fit human needs
(Control-oriented cultures use planning, analysis, and control
activities extensively. Behavior tends to be task and results
centered. Protestant religious beliefs tend toward a control
orientation.)
Harmony People should live in harmony with their

environment
(Scandinavian countries and the Dutch tend to exhibit this
behavior, which prefers that we live in harmony with nature
and with each other. This approach avoids confrontation
and over-emphasizing the word “I.” Confucianism and
Buddhism emphasize living in harmony with the world.)
Environment Constraint Environment (fate, luck) constrains people

(Islam, Hinduism, and, to an extent, Catholicism tend to
believe that events are often controlled outside our ability to
change things.)
Time Single Focus Concentrate on one task at a time; commitment to

the schedule
(Meetings have set agendas; organizational structure tends
toward functional areas. Manufacturing environments tend
to operate this way.)
Multi Focus Emphasis on multiple tasks and relationships

(Organizational structure tends toward matrix, flexibility to
satisfy multiple demands is important, and accomplishment
of goals is centered on strong relationships rather than
abstract plans.)
Fixed Punctuality defined precisely

(Good time management and punctuality are critical.
Deadlines are serious; time is tracked carefully. “Time is
money.” Being on time is a sign of respect and competence.
Switzerland and Germany are examples.)
Fluid Punctuality defined loosely

(Responsible behavior takes care of requirements and
relationships without making time the main consideration.
Delays are expected and deadlines are flexible. Greece,
Spain, Italy, and Portugal are examples.)
Past High value placed on tradition

(Change is resisted; historical continuity is important.
Precedents guide decision making.)
Present Short term orientation aimed at results

(Aimed at quick results; plans are relatively short-term and
based on present demands.)
Future Willingness to trade short term gain for long term

results
(Long-term vision; recruitment directed at future needs, not
just the present.)
Action Doing Task centered; stress placed on productive activity

and achievement
(Emphasis on achieving goals and completing tasks. Many
U.S. Americans often define themselves with their job title
first.)
Being Relationship centered; working for the moment;

experience rather than accomplishment
(Affiliations, trust, and relationships are valued; quality of life
is important. In business, “getting to know each other” is
important. Latin Americans, Africans, and those from the
Middle East describe themselves in terms of family, clan, or
some type of affiliation, not just job title.)
Communication High Context Shared experience make certain things

understood without stating them. Rules for
speaking and behaving are implicit in the setting.
(Understanding depends on the context of the situation, not
just the words. Strength of the relationship, body language,
eye contact, the use of silence, and other factors influence
communication. Business is personal and trust is critical.
Examples of countries with a preference for high context
communication include Japan (Asia in general), the Middle
East, and Latin America. Examples: Silence may be a
strategy that allows others to save face or keep options
open. Contracts are short and general; faith is in the spirit of
the agreement, not numerous written clauses.)
Low Context Exchange of facts is favored. Information is

primarily in words and is stated explicitly.
(Favors explicit documentation and the literal meaning of
words. Business is conducted on the basis of detailed,
explicit criteria. Communication technology such as email
would be preferred, whereas a high context communicator
would prefer face to face meetings. Contracts are detailed
and specific.)
Direct Explicit one or two way communication including

conflict identification and management
(Value open handling and immediate resolution of conflict.
“Give it to me straight.” Dealing with conflict is considered
constructive and important.)
Communication Indirect Implicit communication and conflict avoidance

(Avoid direct confrontation over contentious issues. Avoid
causing embarrassment, shame, or loss of face.)
Expressive Emotional and personal with stress on

relationships
(Successful communication characterized by emotional
connection. Emotions are expressed and shared through
voice level, expressive body language, touching, hugging,
storytelling, and so on. Failure to share emotions in an
expressive culture may be seen as coldness or even deceit.)
Instrumental Unemotional with stress on task achievement

(Communication is rational, pragmatic, and issue-oriented.
Attention to detail and accuracy are more important than
style. Emotion may be seen as unprofessional.)
Space Private Preference for distance between individuals

(Proxemics) (Interpersonal distance is maintained physically and socially.
Individual offices and/or partitioned cubicles provide
demarcations and boundaries. A comfortable distance for
Asians, Latin Americans, or Arabs would be too close for
comfort for most U.S. Americans.)
Public Preference for close proximity; group orientation

(Value open access and close physical proximity.
Collaboration and relationships are important. Interactions
tend to be personal and informal.)
Power Hierarchy Value on power differences between

individuals/groups
(Differing degrees of power, status, and authority exist.
Planning is more autocratic; chain of command is
sacrosanct. Delegation of authority is limited.)
Equality Value on minimizing levels of power

(Value the absence or reduction of hierarchy. Status
symbols such as titles are not important. Power, respect,
and privilege must be earned. Goals tend to be mutually
determined and agreed upon (sounds like MBO). Authority
is delegated more easily.)
Individualism Individualistic I over WE

(Focus on the individual and his or her achievements.
Performance appraisals and rewards tend to be focused on
the individual rather than the group. Speaking one’s mind is
a sign of honesty and is respected.)
Collectivist WE over I
(Focus on loyalty to cohesive groups. Harmony is more
important than speaking one’s mind. Morale may be harmed
by placing workers in competition for a promotion or reward.
Group decisions take precedence over individual decisions.
Planning is done according to shared values of the group.
Promotion based on things like seniority rather than merit.)
Universalistic Focus on abstract rules of what is true, correct,

and appropriate (which can be applied to all)
(Favors the consistent application of rules and procedures.
Tends toward the creation of models to predict behavior.
Some countries find these models too simplistic in the
messy, complicated situations of the real world.
Universalism tends toward detailed contracts. Country
examples include the U.S., Germany, Sweden, the U.K., and
Switzerland.)
Particularistic Focus is on relationships before abstract rules;

weight is given to changing circumstances and
personal obligations
(Emphasizes differences, uniqueness, and exceptions.
Avoids “one size fits all” solutions. Contracts are not set in
stone but are only guides. Rules and regulations are less
important than social networks and relationships.)
Structure Order High need for predictability and rules; conflict is

threatening
(Seek to reduce uncertainty; security and predictability are
highly valued. Change is threatening; there is a preference
for rules, regulations, and stability. Cultures that value order
tend to have hierarchical structures and decision making
based on avoiding failure.)
Flexibility Tolerance of unpredictable situations and

ambiguity
(More tolerant of the unknown and deviations from
procedures. Risk taking and improvising are considered
natural. Conflict and dissent are okay. Leaders provide a
broad strategy and then delegate performance to others.)
Thinking Inductive Reasoning based on experience and

experimentation
(Derives principles and theories from the analysis of data
and facts. The amassing of facts and statistics is valued and
considerable reliance is made upon methodologies and
measurements. U.S. American thinking tends to be
inductive whereas the French tend to be deductive.)
Deductive Reasoning based on theory and logic

(The power of thought is important. Gathering detailed facts
is less important than conceptual thinking. Starts with
general principles and theories to guide problem solving.
Works from general ideas to specific facts.)
Linear Preference for analytical thinking which breaks

problems into small chunks
(Preference to break problems into smaller, more
manageable chunks. Emphasis on detail and precision.
Downside: may lose sight of the big picture and the
consequences of individual actions.)
Systemic Preference for holistic thinking which focuses on

the big picture and relationships between
components.
(Stresses a more integrated approach that focuses on
connections and relationships between the individual parts.)
Global Communication Etiquette Guidelines
Watch Your Manners Be more polite and formal than usual. Use formal names
and titles until you are invited to do otherwise.
Communicate Respect Take time to learn names and titles; learn their correct
pronunciations; learn some of the host county’s
language; handle business cards with care; place them in
a special folder.
Show Patience The perception of time differs greatly from culture to

culture. Don’t always expect to be received on time even
if you have a scheduled appointment. Impatience
damages relationships.
Be Gracious Accept and give appropriate hospitality. When

entertaining, understand local customs.
Prepare Well and Seek Learn as much as you can about the foreign culture
Confirmation before making your visit. But don’t assume too much or
make hasty attributions. Whenever you can, check that
your understanding is correct.
Global Negotiation Guidelines: PMI believes that global negotiations should take
place in an atmosphere of trust and openness.
 Negotiate in good faith. Be genuine and honest.
 Learn as much about the other side as you can (cultural orientation, social,
economic, political, religious concerns.) This is the pathway to understanding.
 Prepare well; expect many questions; know your range of negotiable outcomes.
 Spend time building rapport. Be modest but confident.
 Expect ambiguity; don’t rush to attempt straightening it out. You will be perceived as
pushy.
 Respect status and power differences.
 Persuade rather than debate.
 Don’t make early concessions; be firm and make concessions only if the negotiation
is locked.
 Expect negotiations to take time. Be patient.
 Soften your directness; don’t cause the other side to lose face.
 Watch your language; avoid jargon, idioms, and so on.

 Listen to feedback carefully and ask clarifying questions.
Additional Terminology
Abusive Manner:
Treating someone in a manner which results in physical harm or creates feelings of fear,
humiliation, or exploitation.
Conflict of Interest:
A conflict of interest occurs when you are in a position to influence outcomes on behalf
of one party when such outcomes could affect other parties with whom you have
competing loyalties.
Culture Shock:
The feeling of disorientation experienced by a person suddenly subjected to an
unfamiliar culture or way of life.
Custom:
A traditional and widely accepted way of behaving or doing something that is specific to
a particular society, place, or time.
Empathy:
The power of identifying mentally with another person so that you might comprehend
their circumstances or feelings.
Ethical:
Conformity with a code of behavior for a business or particular profession. See moral.
Ethnocentrism:
A belief in the superiority of your own culture. When collaborating with international
partners, ethnocentrism may lead to condescending behavior that alienates others.
Legal:
Concerned with or based on the law.
Moral:
Concerned with principles of right or wrong behavior and the goodness or badness of
human character. Generally accepted standards of goodness and righteousness in
behavior, character, and conduct. See ethical.
Paralingual:
Factors that are ancillary to language proper. They include the pitch, tone, inflection,
rate, and amplitude of someone’s voice.
Proxemics:
The study of socially conditioned spatial factors in ordinary human relations. In English:
the study and awareness of comfortable personal distance (or space) when interacting
with other people. Are you comfortable standing very close to others or do you prefer
more distance, perhaps arm’s length?
Unit 3: Processes
Project Management Processes
Project Information
Building Blocks of the PMBOK® Guide
Additional Useful Information
Acronyms Used in this Manual
Self-Study
Unit 3: Processes
(PMBOK® Guide, Chapter 3)
This unit covers testable material from Chapter 3 of the PMBOK® Guide. Even though
the chapter is not considered an official knowledge area, it contains basic concepts that
are often tested.
Chapter 3, PMBOK® Guide: Project Management Processes
A process is a set of interrelated actions performed to achieve a pre-specified set of

products, results, or services. Processes fall into two categories: 1) product processes
are used to specify and create the desired product and 2) project processes are used to
initiate, plan, execute, control, and close the work of the project team. PMI has
organized project management processes into five groups (PMBOK® Guide, pp. 47-49).
1. Initiating: defines and authorizes the project or phase.

2. Planning: establishes project scope, refines project objectives, and defines a
course of action to attain those objectives.
3. Executing: processes performed to complete the work defined by the project
plan.
4. Monitoring and Controlling: measures and monitors progress to identify
variances from the plan so that corrective action can be taken when
necessary (including necessary changes).
5. Closing: formalizes acceptance of the project or phase and brings it to an
orderly end.
Important characteristics of these process groups follow (PMBOK® Guide, pp. 39-41):
 They are linked by the results they produce; that is, the result of one becomes
an input to another.
 They are overlapping & iterating rather than discrete, one-time events (for
example, executing the plan may uncover problems requiring an update to
the plan).
 The process groups occur in all phases of a project; that is, each phase
needs to be initiated, planned, executed, and so on. The processes also
cross phases. Closing a phase becomes the input needed to initiate the next
phase.
 The process groups are not phases; rather, the process groups are used
during each phase to get things done. For example, the design phase must
Unit 3: Processes
be initiated, planned, executed, controlled, and closed. The subsequent test

phase must also be initiated, planned, executed, controlled, and closed.
Your exam results will be provided in relation to these 5 process groups. You will
be told whether your test results were proficient (above average), moderately
proficient (average), or below proficient (below average) for each process group.
You will not be provided with a numerical score or percentage of questions
answered correctly.
Typical Activities Associated with Each Process Group. The following lists match
typical activities to the process groups in which they most likely occur.
Initiating (The exam has occasionally used the term “concept phase” for these activities)
 Perform project assessment using: available information, lessons learned

from previous projects, and meetings with stakeholders. Purpose: evaluate
the feasibility of new products or services.
 Identify key deliverables based on business requirements in order to
manage customer expectations.
 Perform stakeholder analysis to align expectations and gain support.
 Establish goals and objectives.
 Develop an initial (high-level) scope statement including: product
description, key deliverables, constraints, assumptions, time estimates, cost
estimates, resource requirements, and risks.
Two important definitions:
 Constraints: Restrictions that limit project options
 Assumptions: Factors believed to be true for planning but not known with
certainty and therefore pose a risk
 Define responsibilities of the PM.
 Conduct benefit analysis with stakeholders: validate project alignment with
organizational strategy and expected business value.
 Develop and obtain approval of the project charter.
 Inform stakeholders of the approved charter: ensure understanding of
stakeholder roles and responsibilities.
Unit 3: Processes
Planning:
 Review and assess detailed project requirements based on the project

charter (use lessons learned and requirements gathering techniques)
 Develop detailed management plans:
 Change management, scope, schedule, cost
 Quality, human resource, communication
 Risk, procurement, stakeholder
 Create a detailed scope statement
 Determine and plan who is needed on the project team
 Develop a WBS and associated WBS dictionary (detailed descriptions of
tasks in the WBS)
 Finalize needed team members and the resource management plan
 Create a network diagram and estimate durations
 Determine the critical path and develop the schedule
 Estimate costs and determine budget
 Analyze stakeholder needs, interests, and potential impact
 Develop a formal project management plan
 Obtain formal approval of the project management plan
 Conduct a kick-off meeting
Executing (sometimes also referred to as “implementing” on the exam):
 Set up a project organization

 Acquire, develop, and manage the project team
 Manage stakeholders
 Conduct team building
 Perform quality assurance by implementing the quality management plan
 Perform (execute) work packages
 Manage the flow of information in accordance with the communication plan
 Maintain stakeholder relationships by following the stakeholder management
plan
Unit 3: Processes
Monitoring and Controlling:
 Perform integrated change control

 Perform various control processes: scope, schedule, cost, quality, risk,
procurement, and stakeholder
 Measure and report project performance
 Monitor project variances
 Take corrective action
 Capture, analyze, and manage lessons learned to enable continuous
improvement
 Monitor procurement activities to verify compliance with project objectives
Closing:
 Review and accept project results:

 Procurement audits
 Product verification
 Formal acceptance
 Transfer ownership of deliverables to the appropriate stakeholders
 Evaluate results (lessons learned)
 Update and archive records
 Obtain feedback from relevant stakeholders
 Reassign resources (release team)
Unit 3: Processes
Project Information (PMBOK® Guide, pp. 58-59): PMI has refined the terminology
associated with project information as follows:
 Work performance data: Data are the raw measurements of work

activities; these data have not been analyzed or interpreted yet.
Examples would include: 1) Task A took 4 days or 2) The percentage of
defective items this month was 3%.
 Work performance information: Data become information by analyzing
the performance outcomes in the context of actual project events.
Information provides meaningful status of deliverables, the overall status
of change requests, forecasts of future project spending, and so on. Data
would tell us how long certain tasks took whereas information would tell us
whether the overall project is behind schedule or not.
 Work performance reports: Reports are the electronic or physical
presentation of work performance information using status reports,
memos, electronic dashboards, and so on. Work performance reports are
used to raise issues and generate decisions.
Unit 3: Processes
Building Blocks of the PMBOK® Guide (Knowledge Areas, Process Groups, and
Processes), pp. 60-61:
PMI has organized their body of knowledge using three fundamental building blocks:
knowledge areas, process groups, and processes. The table on page 3-7 of this
reference manual illustrates the relationships among these building blocks.
Knowledge Areas: Each knowledge area (shown as the column on the left) has a
corresponding chapter in the PMBOK® Guide. They represent management areas that
must be handled by any project manager. In other words, project managers must
manage scope, time, cost, quality, human resources, and so on.
Process Groups: In the real world, management of projects also tends to unfold in a
somewhat chronological fashion. A potential project is investigated and authorized
(initiated), then planned, executed, and closed. Throughout the project, progress is
continually monitored and controlled. PMI refers to these five chronological steps as
process groups and indicates that they typically occur on most projects. They are
shown as the other five columns on the table. Definitions for each process group were
shown previously.
Processes: The body of the table identifies 47 processes. Each row shows the
processes that belong to that knowledge area. Each column shows the processes that
belong to that process group.
The following mnemonic devices may help you memorize the knowledge areas and
process groups. For the ten knowledge areas, the saying is, “I Should Take Control
and Quit Helping Customers Ruin Project Success;” (the first letter of each word
represents a knowledge area). For the five process groups, the mnemonic is IPECC.
Knowledge Areas Process Groups

I = Integration Initiating
S = Scope Planning
T = Time Executing
C = Cost Controlling
Q = Quality Closing
H = Human Resource
C = Communication
R = Risk
P = Procurement
S = Stakeholder
Unit 3: Processes
PMBOK® Guide Process Groups

Table 3-1, p. 61
Knowledge Monitoring &
Areas Initiating Planning Executing Controlling Closing
4. Integration 1. Develop 2. Develop project 3. Direct & 4. Monitor & control 6. Close
Management project management plan manage project work project or
charter project work 5. Perform phase
integrated
change control
5. Scope 1. Plan scope management 5. Validate scope

Management 2. Collect requirements 6. Control scope
3. Define scope
4. Create WBS
6. Time 1. Plan schedule 7. Control schedule

Management management
2. Define activities
3. Sequence activities
4. Estimate resources
5. Estimate durations
6. Develop schedule
7. Cost 1. Plan cost management 4. Control costs

Management 2. Estimate costs
3. Determine budget
8. Quality 1. Plan quality management 2. Perform 3. Control quality

Management quality
assurance
9. Human 1. Plan human resource 2. Acquire

Resource management project team
3. Develop
Management project team
4. Manage
project team
10. 1. Plan communications 2. Manage 3. Control

Communication management communications communications
Management
11. Risk 1. Plan risk management 6. Control risks

Management 2. Identify risks
3. Perform qualitative analysis
4. Perform quantitative
analysis
5. Plan risk responses
12. Procurement 1. Plan procurement 2. Conduct 3. Control 4. Close

Management management procurements procurements procurements
13. Stakeholder 1. Identify 2. Plan stakeholder 3. Manage 4. Control

Management stakeholders management stakeholder stakeholder
engagement engagement
Note: There are 26, 48, 62, 50, and 14 exam questions from each of the process groups,
respectively. These numbers include any questions on professional responsibility.
Unit 3: Processes
Additional Useful Information
The following 3 pages address: 1. PMI’s distinction between the contents of the project
management plan and other project documents and 2. The acronyms used in this
manual.
Project Management Plan vs. Project Documents

PMBOK® Guide, Table 4-1, p. 78 (provided here for convenience)
Project Management Plan Project Documents

Change management plan Activity attributes Project staff assignments
Communications management plan Activity cost estimates Project statement of work
Configuration management plan Activity duration estimates Quality checklists
Cost baseline Activity list Quality control measurements
Cost management plan Activity resource requirements Quality metrics
Human resource management plan Agreements Requirements documentation
Process improvement plan Basis of estimates Requirements traceability matrix
Procurement management plan Change log Resource breakdown structure
Scope baseline: Change requests Resource calendars

 Project scope statement
 WBS and WBS dictionary
Quality management plan Forecasts: cost and schedule Risk register
Requirements management plan Issue log Schedule data
Risk management plan Milestone list Seller proposals
Schedule baseline Procurement documents Source selection criteria
Schedule management plan Procurement statement of work Stakeholder register
Scope management plan Project calendars Team performance assessments
Stakeholder management plan Project charter Work performance data

Project funding requirements Work performance information
Project schedule Work performance reports
Project schedule network diagrams
Unit 3: Processes
Acronyms Used in this Manual
Acronym Meaning Knowledge Area

ADM Arrow Diagram Method Time
AOA Activity on Arrow Time
AON Activity on Node Time
BAC Budget at Completion Cost
BCR Benefit Cost Ratio Cost
CCB Change Control Board Integration
CPAF Cost Plus Award Fee Procurement
CPFF Cost Plus Fixed Fee Procurement
CPI Cost Performance Index Cost
CPIF Cost Plus Incentive Fee Procurement
CPM Critical Path Method Time
EAC Estimate at Completion Cost
EEF Enterprise Environmental Factors Integration
EF Early Finish Time
EMV Expected Monetary Value Risk
ES Early Start Time
EPV Expected Present Value Cost
ETC Estimate to Complete Cost
EVA Economic Value Added Cost
FFP Firm Fixed Price Procurement
FPIF Fixed Price Incentive Fee Procurement
FF Finish-to-Finish Time
FS Finish-to-Start Time
GERT Graphical Evaluation Review Technique Time
IFB Invitation for Bid Procurement
IRR Internal Rate of Return Cost
JIT Just in Time Quality
LCL Lower Control Limit Quality
LF Late Finish Time
LS Late Start Time
LSL Lower Specification Limit Quality
MBO Management by Objectives Integration
Unit 3: Processes
Acronym Meaning Knowledge Area

MBTI Myers Briggs Type Indicator Human Resource
NPV Net Present Value Cost
OBS Organizational Breakdown Structure Scope, Human Resource
OPA Organizational Process Assets Integration
PDM Precedence Diagram Method Time
PERT Program Evaluation Review Technique Time
PMO Project Management Office Integration
PTA Point of Total Assumption Procurement
QA Quality Assurance Quality
QC Quality Control Quality
RAM Responsibility Assignment Matrix Human Resource
RBS Resource Breakdown Structure Time, Human Resource
RBS Risk Breakdown Structure Risk
RFI Request for Information Procurement
RFP Request for Proposal Procurement
RFQ Request for Quote Procurement
SF Start-to-Finish Time
SS Start-to-Start Time
SOW Statement of Work Procurement
SPI Schedule Performance Index Cost
Strengths, Weaknesses, Opportunities,
SWOT Risk
and Threats
TCPI To Complete Performance Index Cost
TQM Total Quality Management Quality
UCL Upper Control Limit Quality
USL Upper Specification Limit Quality
VAC Variance at Completion Cost
WBS Work Breakdown Structure Scope
Unit 3: Processes
Self-Study
Drill Practice: Processes
Question Answer
1. “Interrelated actions performed to achieve a 1. That statement is PMI’s definition of a

specified set of products or services” process (p. 3-1).
describes what PMI concept?
2. Name the five process groups. 2. Initiating

Planning
Executing
Monitoring and controlling
Closing (p. 3-1)
3. What is a constraint? 3. A constraint is any restriction that limits the

project team’s options or otherwise affects
project outcomes, e.g., limited funding,
imposed dates, or resource limitations (p. 3-2).
4. What is an assumption? 4. Factors which, for planning purposes, are

considered to be true, e.g., assuming that a
key person will be available on a given date.
Assumptions involve a degree of risk (p. 3-2).
5. In which process group are the scope and 5. The initiation process (sometimes referred
objectives usually determined? to as the concept phase). There is a high-
level scope associated with the project charter
(p. 3-2).
6. In which project process group would 6. Initiation (or historically called the concept
feasibility studies normally be performed? phase) (p. 3-2).
7. Process groups and project phases are 7. False: The process groups occur in all
interchangeable terms. True or False? phases of a project; that is, each phase needs
to be initiated, planned, executed, controlled,
and closed. For example, a design phase
would be initiated, planned, executed,
controlled, and closed (p. 3-1).
Unit 3: Processes
8. What are the typical activities associated 8.

with the initiating process group?
Perform project assessment; evaluate
feasibility
Identify key deliverables; manage expectations
Perform stakeholder analysis
Establish goals and objectives
Determine high level:
product description, key deliverables, milestones,
constraints, assumptions, time and cost
estimates, resource requirements, and risks
Define responsibilities of the PM
Conduct benefit analysis
Develop project charter
Inform stakeholders of approved charter
(p. 3-2)

with the planning process group?
Review detailed project requirements based
on the project charter
Develop detailed management plans:
Change, scope, schedule, costs, quality, HR
Communication, risk, procurement, stakeholder
Create detailed scope statement
Determine who is needed on the project team
Develop WBS and associated dictionary
Finalize the team
Create network diagram; estimate durations
Determine critical path and develop schedule
Estimate costs and determine budget
Analyze stakeholder needs, interests, and
potential impact
Develop a formal project management plan
Obtain approval of project management plan
Hold kick-off meeting (p. 3-3)
Unit 3: Processes

with the a) executing process group and b) Executing:
monitoring and controlling process group?
Set up project organization
Acquire, develop, and manage project team
Manage stakeholders
Conduct team building
Perform quality assurance
Perform (execute) work packages
Manage flow of information in accordance with
the communication plan
Maintain stakeholder relationships (p. 3-3)
Monitoring and Controlling:

Perform integrated change control
Perform various control processes: scope,
schedule, cost, quality, risk, procurement, and
stakeholder
Measure and report project performance
Monitor project variances
Take corrective action
Capture, analyze, and manage lessons
learned
Monitor procurement; verify compliance (p. 3-4)
11. What are the activities associated with the 11.

closing process group?
Review and accept project results:
Procurement audits
Product verification
Formal acceptance
Transfer ownership of deliverables
Evaluate results (lessons learned)
Update and archive records
Obtain feedback from stakeholders
Reassign resources (release team)
(p. 3-4)
Unit 3: Processes
12. Which process group deals with 12. Monitoring and controlling: measures
measuring performance and calculating performance, identifies variances, and
variances? determines whether corrective action is
needed (pp. 3-1, 3-4).
13. What is the difference between work 13. Work performance data measures the raw
performance data and work performance performance outcomes of project work. For
information? example, data might determine that Task A
actually cost $500 and took 4 days. Work
performance information is the interpretation of
that data. Is Task A over budget, under
budget, or on budget? Similarly, is it ahead,
behind, or exactly on schedule? (p. 3-4)
Unit 4: Integration
Management
4.1 Develop Project Charter
4.2 Develop Project Management Plan
4.3 Direct and Manage Project Work
4.4 Monitor and Control Project Work
4.5 Perform Integrated Change Control
4.6 Close Project or Phase
Other Topics
Self-Study
Unit 4: Integration Management
Integration management unifies, coordinates, and manages the interdependencies

among all process groups and knowledge areas. It consists of the following 6
processes (this is the only knowledge area that has processes from all 5 process
groups).
Major Processes
4.1 Develop Project Charter (a charter formally authorizes a project or phase and
documents initial requirements)
4.2 Develop Project Management Plan (integrating subsidiary plans into a master
project management plan)
4.3 Direct and Manage Project Work (performing the work defined in the project
management plan to achieve the project’s objectives)
4.4 Monitor and Control Project Work (tracking, reviewing, and regulating progress
toward meeting performance objectives)
4.5 Perform Integrated Change Control (reviewing all change requests and
managing all changes to the project)
4.6 Close Project or Phase (finalizing all activities for a project or phase)
You will notice that each process has inputs, tools, and outputs. Unit 14 provides a
summary of these inputs, tools, and outputs for all 47 processes. Unit 15 provides
exercises to further assist in memorizing this vast amount of information.
4.1 Develop Project Charter (PMBOK® Guide, p. 66)
A project charter is a written document that formally recognizes and authorizes the
existence of a new project. It also documents initial requirements that satisfy
stakeholders’ needs and objectives. On this basis, a project manager is identified and
assigned as early as is feasible. PMI now recommends that the PM be assigned during
development of the charter but never later than the start of planning. The charter:
 Formally initiates the project.

 Establishes a partnership between the performing and requesting
organizations.
 Authorizes the PM to acquire and use organizational resources to accomplish
project activities.
 Provides a general, high-level description of the project objectives.
 Is signed by a senior manager, project initiator, or sponsor external to the

project (the PM may participate in creating the charter but should not sign it).
Therefore, overall approval of a project and its associated funding occur
external to project boundaries, PMBOK® Guide, p. 54, paragraph 3.3.
 Is developed as part of the initiating process group.
 Is performed before the process to identify stakeholders (the charter is an
input to Identify Stakeholders whereas the stakeholder register is not an input
to the charter).
The June 2015 PMI Exam Content Outline provides additional emphasis on the
following 3 items. These changes will affect the exam as of 1 November 2015. As the
first step in initiating a new project or phase, the charter should also:
 Identify key deliverables based on business requirements in order to manage
customer expectations.
 Conduct benefit analysis with stakeholders to ensure that the project aligns
with organizational strategies and expected business value.
 Inform stakeholders of the approved charter to ensure understanding of
stakeholder roles and responsibilities.
Develop Project Charter
Inputs Tools Outputs
1. Project statement of work 1. Expert judgment 1. Project charter

2. Business case 2. Facilitation techniques
3. Agreements
4. Enterprise environmental factors
5. Organizational process assets
Five Key Inputs for Develop Project Charter (PMBOK® Guide, p. 68):
1. Project Statement of Work (SOW): The SOW is a narrative description of

the products or services to be delivered by the project. For internal projects, the
initiator or sponsor provides the SOW based on business needs or opportunities.
For external projects, the SOW may be received from the customer as part of a
proposal or bid document. The SOW is also an important document in the
knowledge area for procurement management. It should contain:
 Business need
 Product scope description
 Strategic plan (how the project supports the organization’s goals)
2. Business Case: Typically includes a description of the business need that is

to be met as well as a cost-benefit analysis that justifies the expected investment.
3. Agreements: The contract is an input whenever the project is for an external

customer.
4. Enterprise Environmental Factors: Factors and systems that will influence

the relative success of any project, i.e., the existing environment within which a
project will be initiated. Specific environmental factors that may affect
development of the charter include (PMBOK® Guide, p. 70):
 Governmental or industry standards

 Organizational culture and structure
 Marketplace conditions (is the project feasible?)
5. Organizational Process Assets: All of an organization’s processes, policies,

procedures, and knowledge bases that may influence the success of a project.
They include (PMBOK® Guide, p. 70):
 Organizational standard processes and policies

 Templates (specifically for project charters)
 Historical information and lessons learned
Two Key Tools for Develop Project Charter (PMBOK® Guide, p. 71):
1. Expert Judgment: Used to assess the accuracy of technical, management,

and other inputs in developing the charter. Such expertise comes from any
group or individual with the appropriate knowledge, training, and experience.
Expert judgment is a tool for 28 of 47 processes (60%). Sources of expert
judgment include:
 Other units within the organization

 Consultants
 Key stakeholders (including customers)
 Professional associations
 Industry groups
 PMO
2. Facilitation Techniques: Includes the possible use of brainstorming, conflict

resolution, problem solving, and meeting management.
One Key Output for Develop Project Charter (PMBOK® Guide, p. 71):
1. Project Charter: In addition to the information provided in paragraph 4.1

above, a charter links a new project to the on-going work of the organization. In
some organizations, a project charter is not considered complete until some kind
of preliminary analysis such as a needs assessment or feasibility study has been
completed. A charter should document the following high-level information
(PMBOK® Guide, p. 72):
 Project purpose as well as business and customer needs

 Project objectives and success criteria
 High-level project description and requirements (high-level scope)
 High-level risks, budget, and milestone schedule
 Stakeholder list
 Approval requirements (acceptance criteria and who signs off on the
project)
 Name and authority of the project manager
 Name and authority of the sponsor
4.2 Develop Project Management Plan (PMBOK® Guide, p. 72)
The project management plan defines how the project will be executed, monitored,
controlled, and closed. It is a key integrative document that is usually developed by
the entire team (even though it is the PM’s responsibility to see that the plan gets
done). Development of the plan uses the outputs of the other planning processes
(scope, schedule, cost, quality, HR, communication, risk, procurement and stakeholder)
to create a consistent, coherent document that can be used to guide both execution and
control of a project. Key points include:
 The completed plan must be presented to appropriate stakeholders for
approval to proceed.
 Changes to the plan are approved using the integrated change control
process.
 The project management plan provides the guide for performing all project
work and also forms the baseline against which any changes are made.
Develop Project Management Plan
1. Project charter 1. Expert judgment 1. Project management plan

2. Outputs from other processes 2. Facilitation techniques
Four Key Inputs for Develop Project Management Plan (PMBOK® Guide, p.
74):
1. Project Charter: Described previously (PMBOK® Guide, paragraph 4.1).

Note that the output of a previous process often becomes an input to the next
process.
2. Outputs from Other Processes: The project management plan is a

collection of all the numerous “subsidiary” plans that are defined in the PMBOK®
Guide (scope, schedule, cost, quality, staffing (HR), communication, risk,
procurement, and stakeholder). The integration of these various detailed plans
forms the overall project management plan.
3. Enterprise Environmental Factors: Described earlier, the specific

environmental factors that may affect development of the project management
plan include (PMBOK® Guide, p. 74):

 Project management information systems
 Organizational structure and culture
 Infrastructure (existing facilities and equipment)
 Personnel administration (hiring, firing, performance reviews)
4. Organizational Process Assets: Described earlier, the specific

organizational process assets that may affect development of the project
management plan include (PMBOK® Guide, p. 75):
 Standardized guidelines and work instructions

 Project management plan templates
 Change control procedures
 Project files from past projects (historical information) and lessons

learned knowledge base
 Configuration management knowledge base (official company
standards for project documents)
Two Key Tools for Develop Project Management Plan (PMBOK® Guide, p. 76):
1. Expert Judgment: As with the charter (previous process), expert judgment is

used to assess the accuracy of information used in developing the project
management plan. It may specifically help with the following:
 Tailoring the project management plan to the specific needs of a particular

project
 Developing technical and management details
 Determining resource needs and skill levels
 Determining the level of configuration management
 Determining which documents should be subject to change control
2. Facilitation Techniques: Team oriented tools including brainstorming,

conflict resolution, problem solving, and meeting management are used to assist
in developing the project management plan.
One Key Output for Develop Project Management Plan (PMBOK® Guide, p.
76):
1. Project Management Plan: A formal, approved document used to manage

and control project execution. It should be distributed as defined in the
communication plan. The following subsidiary plans are integrated to form the
official project management plan (PMBOK® Guide, p. 77):
 Scope management plan (Section 5.1)
 Requirements management plan (Section 5.1)
 Schedule management plan (Section 6.1)
 Cost management plan (Section 7.1)
 Quality management plan (Section 8.1)
 Process improvement plan (Section 8.1)
 Human resource management plan (Section 9.1)
 Communications management plan (Section 10.1)
 Risk management plan (Section 11.1)
 Procurement management plan (Section 12.1)

 Stakeholder management plan (Section 13.1)
The following three baselines are also established by the project management
plan:
 Cost, Schedule, and Scope
4.3 Direct and Manage Project Work (PMBOK® Guide, p. 79)
This process involves performing the work identified in the project management plan.
Some of the activities are the responsibility of the project manager and other activities
belong to various team members. Also, work performance information describing the
actual status of required deliverables is collected and fed into the performance reporting
process (PMBOK® Guide, p. 81). The many actions performed during execution of the
project management plan include the following:
 Set up a project organization
 Acquire, develop, and manage the project team
 Obtain and manage other resources (materials, equipment, facilities)
 Lead, manage, and/or perform activities to meet project objectives
 Perform quality assurance
 Manage the flow of information in accordance with the communication
management plan
 Generate project data for status reports and forecasts
 Conduct change control and implement approved changes:
 Corrective action (bringing work results back in line with the plan)
 Preventive action (ensuring future work remains in line with the plan)
 Defect repair (modifying a nonconforming product or work result)
 Establish and manage project communication channels
 Manage risks
 Obtain quotes, bids, and proposals as needed (for outsourced work)
 Manage sellers (contractors)
 Manage stakeholders and maintain stakeholder relationships
 Collect and document lessons learned
Direct and Manage Project Work
1. Project management plan 1. Expert judgment 1. Deliverables

2. Approved change requests 2. Project management 2. Work performance data
3. Enterprise environmental factors information system 3. Change requests
4. Organizational process assets 3. Meetings 4. Project management plan updates
5. Project documents updates
Four Key Inputs for Direct and Manage Project Work (PMBOK® Guide, p. 82):
1. Project Management Plan: As stated previously (PMBOK® Guide, Section

4.2), the project management plan provides the foundation for executing the work
of the project. Especially important subsidiary plans for this process include
scope, requirements, schedule, cost, and stakeholder management plans.
2. Approved Change Requests: Changes that have been authorized and

documented. Such changes usually expand or reduce the project scope and
require the team to manage the implementation of the change.
3. Enterprise Environmental Factors: Specific environmental factors that may

influence this process include (PMBOK® Guide, p. 82):

 Organizational or customer structure and culture
 Infrastructure (existing facilities and equipment)
 Personnel administration (hiring, firing, performance reviews)
4. Organizational Process Assets: Described earlier, the specific

organizational process assets that may affect execution of the project
management plan include (PMBOK® Guide, p. 83):
 Standardized guidelines and work instructions

 Communication requirements
 Issue and defect management procedures (“how to…”)
 Issue and defect management database (historical data)
 Process measurement database (collect data on processes and

products)
 Project files from past projects (historical information) and lessons
learned knowledge base
Three Key Tools for Direct and Manage Project Work (PMBOK® Guide, p. 83):
1. Expert Judgment: Expertise provided by the project manager and the team
while executing the project management plan.
2. Project Management Information System: Provides access to automated

information tools such as scheduling software, information distribution systems,
and configuration management systems.
3. Meetings: Used to address pertinent topics during the direct and manage
work process. PMI identifies three types of meetings:
 Information exchange
 Brainstorming and/or evaluating options
 Decision making
Meetings should have a clearly defined purpose, agenda, time frame, and be
documented with minutes. While not always possible, PMI believes that face-to-
face meetings are the most effective.
Five Key Outputs for Direct and Manage Project Work (PMBOK® Guide, p. 84):
1. Deliverables: Any unique, verifiable product, result, or capability that must be

completed as part of the project management plan.
2. Work Performance Data: The raw measurements of work outcomes. Data

are gathered through execution of the work activities and are then fed to various
controlling processes for analysis and interpretation. Examples of work
performance data include:
 Start and finish dates of schedule activities

 Number of change requests
 Actual costs and durations
 Number of defects
 Deliverables completed
3. Change Requests: When issues arise during a project, change requests are
used to modify procedures, scope, cost, schedule, or quality. These changes
may lead to the use of corrective actions, preventive actions, defect repairs, or
various updates. Change requests may be optional or come from a mandatory
legal requirement. They may originate from an internal or an external source.
For the exam, be aware of possible “situational” questions that could involve
various parties (functional manager, senior manager, or customer) wanting to
make a change to the project. In all cases, the appropriate first response is to
evaluate the impact of the change and then meet with the team to discuss
alternatives. Common incorrect choices often involve meeting first with
management or the customer.
4. Project Management Plan Updates: Important elements of the project

management plan may be updated, often in response to approved changes, at
any time during the life cycle of a project. These updates may affect the
following parts of the plan:
 Scope management plan

 Requirements management plan
 Schedule management plan
 Cost management plan
 Quality management plan
 Human resource plan
 Communications management plan
 Risk management plan
 Procurement management plan
 Stakeholder management plan
 Project baselines (cost, schedule, scope, quality)
5. Project Documents Updates: May include the following
 Requirements documents
 Project logs (issue, defects, assumptions, etc.)
 Risk register
 Stakeholder register
4.4 Monitor and Control Project Work (PMBOK® Guide, p. 86)
Monitoring and controlling involves tracking, reviewing, and regulating progress

toward meeting project objectives. Monitoring provides insight into the health of the
project and identifies issues that may require attention. Controlling determines
appropriate preventive or corrective action and identifies when replanning may be
necessary. Monitoring and controlling involve the following:
 Comparing actual versus planned performance (variance analysis).

 Determining/recommending appropriate preventive or corrective action.
 Identifying risks, reporting risk status, and assuring appropriate response
plans are implemented.
 Maintaining a timely, accurate information base for 1) status reporting (where
the project currently stands; report using variances on a periodic basis), 2)
progress measurement (what has been accomplished; report using
deliverables completed), and 3) forecasting (predict final cost and schedule
performance using earned value and other techniques).
 Monitoring the implementation of approved changes.
Monitor and Control Project Work
1. Project management plan 1. Expert judgment 1. Change requests

2. Schedule forecasts 2. Analytical techniques 2. Work performance reports
3. Cost forecasts 3. Project management 3. Project management plan updates
4. Validated changes information system 4. Project documents updates
5. Work performance information 4. Meetings
Seven Key Inputs for Monitor and Control Project Work (PMBOK® Guide, p.
88):
1. Project Management Plan: Described previously (PMBOK® Guide, Section

4.2), the project management plan provides the baselines and “plan” portion of
the information needed to conduct variance analysis and create performance
reports.
2. Schedule Forecasts: Derived by comparing current schedule progress

against the schedule baseline. As a result, forecasted finish dates may be
compared to planned finish dates.
3. Cost Forecasts: The purpose is to compare forecasted total costs to planned

total costs. For projects using earned value, the EAC (estimate at completion)
formula may be used for this purpose. Unit 7 on cost management will cover the
details.
4. Validated Changes: Any changes that have been through the Perform
Integrated Change Control process and have been approved. These changes
must now be implemented.
5. Work Performance Information: Work performance data that has been

collected, analyzed, interpreted, and converted into information on the actual
status of the work. This information is used for making informed decisions and
for determining the following:
 Status of deliverables
 Implementation status for change requests
 Forecasts

influence monitoring and controlling the work include (PMBOK® Guide, p. 90):

 Company work authorization systems (is the right work being done at
the right time?)
7. Organizational Process Assets: The specific organizational process assets

that may affect monitoring and controlling the work include (PMBOK® Guide, p.
91):
 Organization communication requirements

 Financial controls procedures (time reporting, accounting codes)
 Issue and defect management procedures
 Risk control and change control procedures
 Process measurement database (collect data on status of processes

and products)
 Lessons learned database
Four Key Tools for Monitor and Control Project Work (PMBOK® Guide, p. 91):
1. Expert Judgment: Appropriate subject matter experts are used to correctly

interpret the information collected by the monitoring and controlling process.
2. Analytical Techniques: Forecasting possible outcomes may be

accomplished through the use of any of the following techniques:
 Regression, trend, or variance analysis

 Earned value management
 Root cause analysis, failure mode and effect analysis (FMEA)
 Fault tree analysis
 Forecasting methods, grouping methods, causal analysis
3. Project Management Information System: Provides access to automated

tools such as scheduling, cost, resource, performance indicators, and various
databases.
4. Meetings: PMI states that the project team and other stakeholders typically
hold two types of meetings: user groups and review meetings. They further
indicate that meetings may be face-to-face (preferred), virtual, formal, or informal.
Four Key Outputs for Monitor and Control Project Work (PMBOK® Guide, p.
92):
1. Change Requests: As a direct result of comparing planned and actual

results, change requests may be issued to adjust the project as deemed
necessary. These changes may expand or reduce the scope of the project
(management functions and activities) or product (features and functions
embodied in the final product). As before, changes may involve:
 Corrective action (actions taken to bring expected future performance

back in line with the plan)
 Preventive action (actions taken to reduce the probability of negative
consequences)
 Defect repair (identification of a defect with a recommendation for

either repair or replacement)
2. Work Performance Reports: The physical or electronic representation of

work performance information to enable awareness, action, or decisions.
3. Project Management Plan Updates: Updates to the plan because of

monitoring and controlling activities include:
 Scope and requirements management plans

 Schedule and cost management plans
 Scope, schedule, and cost baselines
4. Project Documents Updates: Updates to project documents because of

monitoring and controlling activities include:
 Schedule and cost forecasts

 Work performance reports
 Issue logs
4.5 Perform Integrated Change Control (PMBOK® Guide, p. 94)
Projects almost never run exactly according to the plan and, accordingly, changes are a
normal part of project management. Integrated change control is performed constantly
throughout the entire project life cycle to effectively manage the change process. The
integrated change control process includes reviewing all change requests as well as
approving and managing changes to any of the following: deliverables, organizational
processes, project documents, and the project management plan. The following
activities are part of integrated change control:
 Identifying that 1) a change is needed or 2) a change has occurred.

 “Influencing factors” that lead to informal, uncoordinated changes (i.e.,
preventing people from circumventing the required process). Informal
changes often lead to a phenomenon known as “scope creep.”
 Reviewing, analyzing, and approving requested changes promptly (Usually
done by a CCB, i.e., change control board. However, small changes may be
designated to another party so that the CCB can pay proper attention to
larger, more significant changes.).
 Managing approved changes, including all necessary documentation,

tracking, and approval procedures.
 Maintaining the integrity of established baselines (Current baselines must be
adjusted to reflect approved changes.).
 Reviewing and either approving or denying all recommended preventive and
corrective actions.
 Coordinating the effect of changes across the entire project (e.g., A change in
the schedule may affect cost, quality, risk, and staffing requirements.).
 Documenting the likely impact of requested changes (CCB).
Configuration management and change control work together to accomplish three

primary objectives:
 Establish a consistent method for requesting changes to established

baselines. The system must assess the potential value of all requested
changes.
 Improve the project by evaluating the likely impact of all requested changes
(i.e., approve good changes and reject bad ones).
 Provide effective communication mechanisms so that stakeholders are aware
of all changes.
Other key information about change control:
 Change control operates within the configuration management system. A

major goal of change control is to control emerging scope against the
baselines.
 Configuration management consists of three major activities:
1. The first major step (performed early in the project life cycle) identifies the
functional and physical characteristics of the product. This step results in the
establishment of three key baselines (scope, time, and cost).
2. The next major step controls changes to those baselines and keeps careful
records of the status of each change.
3. The last step audits the final project results to verify conformance to
requirements including any approved changes. (see PMBOK® Guide, p. 532)
 Changes may be requested at any time by any stakeholder.
 Verbal change requests should always be recorded in written form.
 Many change systems use a CCB for approving or disapproving change
requests.
 However, project managers may be authorized to approve certain change

requests (e.g., if the likely impact is below established cost or schedule
thresholds).
 In some cases, changes may be approved by the customer (as per
contractual provisions).
 On large projects, multi-tiered CCBs, with different responsibilities, may exist
(e.g., technical review versus cost review or different CCBs for each project
within a program).
 Change systems often include provisions to handle emergency changes
without prior reviews. In such cases, the change should be analyzed and
documented as soon as practical.
 Every change request must be either accepted or rejected with
documentation to support the decision.
Perform Integrated Change Control
1. Project management plan 1. Expert judgment 1. Approved change requests

2. Work performance reports 2. Meetings 2. Change log
3. Change requests 3. Change control tools 3. Project management plan updates
4. Enterprise environmental factors 4. Project documents updates
Five Key Inputs for Perform Integrated Change Control (PMBOK® Guide, p.
97):
1. Project Management Plan: The change management plan documents how

the change control process should be managed as well as the role of the CCB.
The project management plan also provides the current, approved baselines and
baselines that may be affected by any approved changes.
2. Work Performance Reports: Work performance reports of special interest to

integrated change control include schedule, cost, resource availability, and
earned value management.
3. Change Requests: Change requests are outputs with this single exception.
Integrated change control is not needed or used unless a change has, in fact,
been requested.

influence integrated change control include (PMBOK® Guide, p. 98):
 Project management information systems (scheduling tools,

configuration management system, and information collection and
distribution systems)

that may affect integrated change control include (PMBOK® Guide, p. 98):

 Procedures for approving and issuing change authorizations
 Process measurement database (collect data on status of processes
and products)
 Project files (scope, schedule, cost, calendars, network diagrams, risk
registers, risk response plans)
 Configuration management knowledge base
Three Key Tools for Perform Integrated Change Control (PMBOK® Guide, p.
98):
1. Expert Judgment: In this case, it is important to get the right subject matter
experts on the CCB.
2. Meetings: Meetings by the CCB to review change requests and either

approve or reject each request. All such meetings are referred to as change
control meetings.
3. Change Control Tools: Manual or automated tools to handle change

requests and communicate effectively with appropriate stakeholders.
Four Key Outputs for Perform Integrated Change Control (PMBOK® Guide, p.
99):
1. Approved Change Requests:

 Approved change requests are implemented through the Direct and
Manage Project Work process.
 The disposition of all change requests (approved, rejected, or pending)
is documented in the change log and other project documents.
2. Change Log: The change log documents all change requests and the
resulting decisions and associated rationale. The expected impact on project
baselines is also documented.
3. Project Management Plan Updates: Subsidiary management plans and

baselines are updated, as needed.
4. Project Documents Updates: The change request log and any documents
that are subject to the formal change control process are updated, as needed.
4.6 Close Project or Phase (PMBOK® Guide, p. 100)
This process finalizes all activities across all process groups to formally close a phase
or the entire project, as appropriate. The following activities are involved:
 When closing the entire project, the project manager should review all
information from closure of the previous phases. The purpose of this step is
to ensure that all project work is complete and that objectives have been met.
 Since project scope is measured against the project management plan, the
project manager should review the project management plan to ensure
completion of all work identified in the plan.
 The close project or phase process should also establish procedures to
document the reasons if a project is terminated before completion.
 This process also establishes the actions needed for administrative closure,
which include:
 The activities needed to satisfy the exit criteria for the phase or project.
 The activities needed to transfer the product, service, or result to the
next phase, to production, or to operations.
 Activities to collect records, audit successes and failures, document
lessons learned, and archive information for future use.
Close Project or Phase
1. Project management plan 1. Expert judgment 1. Final product, service, or result

2. Accepted deliverables 2. Analytical techniques transition
3. Organizational process assets 3. Meetings 2. Organizational process assets updates
Three Key Inputs for Close Project or Phase (PMBOK® Guide, p. 102):
1. Project Management Plan: The project plan documents the agreement

between the PM and the project sponsor as to what constitutes project
completion.
2. Accepted Deliverables: Includes those deliverables that have been accepted

as a result of the Validate Scope process (Scope Management, Section 5.5).

that may affect closure activities include (PMBOK® Guide, p. 102):
 Project or phase closure guidelines (audits, evaluations, transition

procedures)
 Historical information and lessons learned knowledge base
Three Key Tools for Close Project or Phase (PMBOK® Guide, p. 102
1. Expert Judgment: Appropriate experts ensure that closure of the project or

phase is performed using the correct standards.
2. Analytical Techniques: PMI identifies regression and trend analysis as

techniques that could be used for closeout.
3. Meetings: The types of meetings identified for this process include lessons
learned, closeout, user group, and review meetings.
Two Key Outputs for Close Project or Phase (PMBOK® Guide, p. 103):
1. Final Product, Service, or Result Transition: The name says it all. The
product, service, or result created by the phase or project must be transitioned or
delivered to the next step.
2. Organizational Process Assets Updates: The organizational process

assets that may be updated as a result of closure activities may include:
 Project Files: Archiving of files such as the project management plan,

baselines for scope, cost, schedule, and quality, project calendars, risk
registers, planned risk responses, and risk impact.
 Project or Phase Closure Documents: Completion of the project,
transfer of deliverables, and documentation if the project was terminated
early.
 Historical Information: Lessons learned and historical information, e.g.,

actual contractor performance outcomes to be stored in a past
performance database for use in selecting future contractors.
Other Topics:
Management by Objectives (MBO): MBO is a topic that has been tested but not
covered explicitly in the PMBOK® Guide. This process for setting objectives was
developed by Peter Drucker. The most famous feature of MBO is joint
development of the objectives, which means that management and the employees
collaborate to jointly establish the objectives.
For the exam, you need to know the three steps involved in using MBO: 1)
establish realistic, clearly stated objectives, 2) evaluate (measure) whether the
objectives are being met, and 3) take action if the evaluation so warrants.
You should know that an objective is “clear” if different parties can agree on a
single meaning.
You should also know that MBO will be most successful if supported by top
management.
Project Evaluation: Also not specifically covered in the PMBOK® Guide,

evaluation provides a big picture look at whether a project is meeting its basic goals
and objectives. You must be familiar with two major types of evaluation.
1) Mid-project evaluation is conducted while the project is underway to

determine a) whether the project is meeting its objectives and b) whether those
objectives are still relevant and worthwhile. These evaluations often involve
people from outside the project team so that the process is objective and
unbiased.
Potential outcomes of mid-project evaluation include:
 Identification of significant problems

 Implementation of changes
 Termination of the project
Because of the threat of a bad report card or termination of the project, the
process is often fraught with the following potential problems:
 Senior managers misusing evaluations to identify and punish poor

performers
 Senior managers misusing evaluations to pursue political agendas
 Project team members may be hostile and not cooperate with the
evaluation team (“resist the evaluation process”)
 The process can be time consuming and, in that sense, is often seen as
disruptive
 Project team may feel the process is arbitrary, political, and/or
inconsistent
2) Post-project or Final Evaluation: Conducted when the project is complete

for the purposes of lessons learned and historical data to establish baselines for
future projects.
Customer Satisfaction: From an integration and scope management perspective,

customer satisfaction is closely related to the idea of a careful and accurate needs
analysis so that stakeholder needs can be met. Recall that meeting stakeholder
needs is considered a vital part of successful project management.
Roles and responsibilities: You must know the appropriate roles for the following
key players in the project environment.
Senior management:
 Assign a project manager
 Empower the project manager
 Protect the project from outside influences
 Approve the overall project management plan
Sponsor:
 The person or group that provides financial resources for the project
(PMBOK® Guide page 32). The sponsor champions the project during
initiation and may also continue exert influence for the benefit of the
project as it proceeds. Finally, the sponsor usually leads the project
selection process through formal authorization and plays a significant
role in the development of the initial scope and charter.
Project manager:
 In charge of the project, but not necessarily the resources
 Held accountable for failure
 Plans the project (WBS, Project Management Plan, and so on)
 Develops estimates and schedules
 Assigns tasks to team members
Team members:
 Help develop WBS
 Provide estimates on their tasks
 Help create a realistic schedule
 Accomplish their tasks
 Attempt to resolve conflicts among themselves before escalating
Self-Study
Drill Practice: Integration Management
Question Answer
1. Name three main objectives of integrated 1. a) Identify a method for requesting changes
change control. to established baselines, b) Improve the
project by considering the impact of a change,
Note: All page numbers in this drill practice refer to & c) Communicate all changes to stakeholders
this reference manual unless otherwise indicated. (p. 4-15)
2. Distinguish configuration management from 2.

change control. Configuration management:
A collection of formal documented
procedures used to:
1. Identify physical and functional
characteristics of a product and
establish baseline requirements
2. Control changes to those
characteristics and keep appropriate
records
3. Audit and verify conformance to the
requirements (p. 4-15)
Change control:
A collection of formal, documented
procedures that defines how project
deliverables and documentation are
controlled, changed, and approved.
(pp. 4-14 to 4-16)
3. What is MBO? 3. Management by Objectives is a 3-step

process to:
1. Establish clear, realistic objectives
2. Measure achievement
3. Adjust performance if needed
(p. 4-20)
4. How do you know whether an objective is 4. An objective is clear if different people can
clear? agree on a single meaning.
(p. 4-20)
5. Name two kinds of project evaluation. 5. a) Mid-project evaluation is performed by
outsiders during the project to ensure the
project is meeting its objectives and that the
objectives are still relevant. b) Post-project
evaluation is performed at project completion
to identify lessons learned. (pp. 4-20/21)
6. Inputs to integrated change control include 6. Work performance reports, enterprise

the project management plan, change environmental factors, and organizational
requests, and what other three items? process assets (p. 4-16)
7. A common mechanism for approving or 7. a CCB (Change Control Board)

rejecting change requests is____. (pp. 4-14 to 4-16)
8. Name three important things that must be 8. a) Verify that exit criteria have been met
accomplished as part of closing a project. (e.g. deliverables completed), b) Products or
services have been transferred to owners or
next step, and c) Document the reasons if a
project is terminated before it is completed (p.
4-18).
9. What items should be in a project 9. The subsidiary plans and associated

management plan? components typically include:
Scope management plan
Requirements management
Schedule management plan
Cost management plan
Quality management plan
Process improvement plan
Human resource management plan
Communication management plan
Risk management plan
Procurement management plan
Stakeholder management plan
Cost, schedule, and scope baselines
(pp. 4-6/7)
10. What is the purpose of mid-project 10.
evaluation? a) Determine whether the project is meeting
its stated objectives.
b) Reassess whether the project objectives
are still relevant and worthwhile
(p. 4-20).
11. What are the six processes for Integration 11.
Management? 1. Develop Project Charter
2. Develop Project Management Plan
3. Direct and Manage Project Work
4. Monitor and Control Project Work
5. Perform Integrated Change Control
6. Close Project or Phase (p. 4-1).
12. Project management plans are usually 12. the project team (the PM is responsible
developed by ______. but must rely on various functional experts for
development of the plan) (p. 4-4).
13. What does a project charter do? 13.

1. Officially establishes the project
2. Authorizes the PM to acquire resources to
accomplish project tasks
3. Provides a general description of project
objectives (p. 4-1).
14. When is the project charter created? Who 14. The charter is normally developed as part
is responsible for it? of the initiating process group (or, historically,
PMI has also referred to the concept phase.)
Ideally, the project manager would help write
the charter but it should be signed by a senior
manager, external to the project (pp. 3-2 and 4-
1/2).
15. Input #2 for Close Project or Phase is 15. Output #1 for Validate Scope is accepted
accepted deliverables. Which of the other 46 deliverables (pp. 4-19 and 14-2).
processes creates that data?
16. Which integration management process 16. Monitor and Control Project Work (p. 4-11).
provides the primary focus on tracking,
reviewing, and regulating project progress?
Unit 5: Scope Management
Major Processes
5.1 Plan Scope Management
5.2 Collect Requirements
5.3 Define Scope
5.4 Create WBS
5.5 Validate Scope
5.6 Control Scope
Self-Study
Scope management ensures that a project includes all the work required but only the
work required to complete the project successfully. In other words, proper scope
management carefully identifies what is and what is not included in the project. The
following six processes comprise scope management.
Major Processes
5.1 Plan Scope Management (creating a scope management plan that documents
how project scope will be defined, validated, and controlled)
5.2 Collect Requirements (defining and documenting stakeholders’ needs and
requirements to meet project objectives)
5.3 Define Scope (developing a detailed description of the project and product)
5.4 Create WBS (subdividing project deliverables into smaller, more manageable
components)
5.5 Validate Scope (formalizing acceptance of completed project deliverables)
5.6 Control Scope (monitoring status of the project and product scope, and managing
changes to the scope baseline)
There are two kinds of scope (PMBOK® Guide, p. 105):
 Product scope: The features and functions embodied in the product, service,
or result. Product scope is measured against the product requirements
(Sections 5.2 and 5.3: Collect Requirements and Define Scope).
 Project scope: The management activities required to deliver the product,
service, or result. Project scope is measured against the project
management plan (Section 4.2).
The scope baseline consists of the approved versions of the project scope statement,
the WBS (work breakdown structure), and the WBS dictionary. The approved scope
baseline should only be changed using formal change control procedures. The
approved baseline is the basis for deciding whether scope requirements are being met
(especially relevant during the processes for validating and controlling scope).
5.1 Plan Scope Management (PMBOK® Guide, p. 107)
The scope management plan documents how project scope will be defined, validated,
and controlled. In essence, it provides guidance on how the other five scope
management processes are to be accomplished.
Plan Scope Management
1. Project management plan 1. Expert judgment 1. Scope management plan

2. Project charter 2. Meetings 2. Requirements management plan
Four Key Inputs for Plan Scope Management (PMBOK® Guide, p. 108):
1. Project Management Plan: The most recently approved subsidiary plans of

the project management plan (scope, schedule, cost, quality, human resource,
and so on) are used to help create the scope management plan. The information
in the project charter (next input) is also considered at this point.
2. Project Charter: Described in the PMBOK® Guide, p. 66, Section 4.1, the
charter provides high-level project and product requirements. As such, it forms a
starting point for the development of detailed requirements.
3. Enterprise Environmental Factors: Environmental factors that may

influence scope management planning include:
 Organizational culture
 Infrastructure (resource availability)
 Personnel administration
 Marketplace conditions
4. Organizational Process Assets: Organizational process assets that may

influence scope management planning include:
 Policies and procedures

Two Key Tools for Plan Scope Management (PMBOK® Guide, p. 109):
1. Expert Judgment: Refers to information received from stakeholders with

specialized knowledge about scope management plans.
2. Meetings: The project manager, sponsor, selected team members, and other
selected stakeholders may attend meetings to develop the scope management
plan.
Two Key Outputs for Plan Scope Management (PMBOK® Guide, p. 109):
1. Scope Management Plan: Is part of the overall project management plan

and describes how scope will be defined, monitored, controlled, and verified.
Components of the scope management plan include:
 Process for preparing a detailed scope statement

 Process for creating the WBS from the scope statement
 Process for maintaining the WBS
 Process for formal acceptance of project deliverables
 Process for how scope changes will be handled
2. Requirements Management Plan: Documents how requirements will be

analyzed, documented, and continuously managed throughout the project. A
requirements management plan may include, but is not limited to:
 How requirements will be planned, tracked, and reported

 Configuration management process for handling changes to the
requirements
 Requirements prioritization processes
 Product metrics
 Traceability structure: which requirements will be traced and to which
other requirements documents
5.2 Collect Requirements (PMBOK® Guide, p. 110)
Collecting requirements involves determining, documenting, and managing

stakeholders’ needs and requirements. These requirements must be captured in
sufficient detail to be measured during project execution. Project success is directly
influenced by stakeholder involvement in decomposing needs into requirements.
Requirements become the foundation for other vital project management activities:
 Requirements become the foundation of the WBS.

 Schedule, cost, quality, and procurement plans are built upon these
requirements.
Other key points:

 Requirements include the documented needs and expectations of the
sponsor, customer, and other stakeholders.
 Development of requirements begins with analysis of information contained in
the project charter, stakeholder register, and stakeholder management plan.
PMI groups requirements into the following categories:

 Business requirements: Higher-level needs of the organization such as
business opportunities and purpose of the project.
 Stakeholder requirements: Perceived needs of specific stakeholders.
Includes impacts to various organizational areas and stakeholder reporting
requirements.
 Solution requirements: Features, functions, and characteristics of the
product, service, or result that will satisfy business and stakeholder
requirements (similar to the notion of product scope mentioned at the
beginning of the unit). Includes functional, non-functional, technology,
compliance, support, training, quality, and reporting requirements.
 Transition requirements: Activities such as training and data conversion to
move from the previous “as-is” state to the future “to-be” outcome.
 Quality requirements: The criteria needed to validate successful completion
of project deliverables.
 Project requirements: Actions, processes, or conditions the project needs to
meet.
Collect Requirements
1. Scope management plan 1. Interviews 1. Requirements documentation

2. Requirements management 2. Focus groups 2. Requirements traceability matrix
plan 3. Facilitated workshops
3. Stakeholder management 4. Group creativity techniques
plan 5. Group decision-making
4. Project charter techniques
5. Stakeholder register 6. Questionnaires and surveys
7. Observations
8. Prototypes
9. Benchmarking
10. Context diagrams
11. Document analysis
Five Key Inputs for Collect Requirements (PMBOK® Guide, p. 113):
1. Scope Management Plan: Clarifies which types of requirements need to be

collected for the specific project.
2. Requirements Management Plan: Identifies the processes to be used in

defining and documenting stakeholder needs. Specific elements of the
requirements were provided in the outputs to Plan Scope Management, Section
5.1.3.2.
3. Stakeholder Management Plan: Established in Section 13.2.3.1, the

stakeholder management plan identifies required levels of stakeholder
communication and stakeholder engagement.
4. Project Charter: Described in PMBOK® Guide, p. 66, Section 4.1, the charter
provides high-level project and product requirements. As such, it forms a starting
point for the development of detailed requirements.
5. Stakeholder register: Described in Section 13.1, the stakeholder register

identifies key stakeholders who can provide information needed to develop
detailed requirements.
Eleven Key Tools for Collect Requirements (PMBOK® Guide, p. 114):
1. Interviews: Used to elicit information from stakeholders by talking to them

directly. One-on-one or group interviews with appropriate subject matter experts
are used to identify features and functions of desired deliverables. Interviews
may also be used to obtain confidential information.
2. Focus Groups: Interactive, conversational discussions guided by trained

moderators with pre-selected stakeholders and subject matter experts. The
purpose of this exercise is to document stakeholder expectations and attitudes
about a proposed product, service, or result.
3. Facilitated Workshops: Workshops are interactive, group-oriented

discussions aimed at quickly defining cross-functional requirements and,
hopefully, reconciling stakeholder differences. Well-facilitated sessions can build
trust, improve communications, and uncover issues more quickly than numerous
individual sessions. The PMBOK® Guide provides two examples:
 Joint Application Development (JAD): Sometimes called Joint

Application Design, these joint sessions bring users and developers
together to improve requirements in the software development industry.
 Quality Function Deployment (QFD): QFD is used by engineers to
develop requirements for new product developments. The process first
determines customer needs, then prioritizes them, and establishes goals
for achieving them. User stories describe the stakeholder who benefits
(role), what the stakeholder needs to accomplish (goal), and the
resulting benefit (motivation).
4. Group Creativity Techniques: The following examples are all ways for
groups to generate ideas about any desired topic. In this case, the groups are
identifying and documenting requirements.
 Brainstorming: A group-oriented technique for quickly generating
ideas about both project and product requirements.
 Nominal Group Technique: An enhanced version of brainstorming
which includes voting and prioritizing the group’s ideas.
 Idea/Mind Mapping: The non-linear diagramming of different ideas in a
group into a single map for the purpose of highlighting agreements and
differences and also generating new ideas.
 Affinity Diagram: A technique for sorting a large number of detailed,
specific ideas into logical groups.
 Multicriteria Decision Analysis: Uses a decision matrix to establish

and apply criteria such as risk levels and uncertainty.
5. Group Decision-Making Techniques: Assessment of multiple alternatives

using one of the following decision techniques:
 Unanimity: Everyone (100%) agrees on a course of action.
 Majority: A decision made with support from more than 50% of the
group.
 Plurality: Decision determined by the largest voting block in the group
(even if it represents less than 50%).
 Dictatorship: One individual makes the decision for the group (much
like the autocratic form of leadership).
6. Questionnaires and Surveys: Written sets of questions that help reach large
audiences quickly and also enable statistical analysis of data.
7. Observations: Directly viewing individuals performing project activities and

carrying out processes (sometimes called “job shadowing”). This technique is
especially helpful when people are experiencing difficulty in articulating
requirements.
8. Prototypes: The use of mock-ups and physical working models to assist

stakeholders in progressively elaborating requirements. Rapid prototyping is a
technique used specifically for elaborating requirements during the development
phase of a project.
9. Benchmarking: Compares planned or actual practices to other organizations

to 1) generate ideas for improvement and 2) provide standards for measuring
performance.
10. Context Diagrams: Context diagrams are visual depictions of product scope
such as processes, equipment or computer systems. The diagram shows how
various entities (people and other systems) interact to produce inputs and
outputs.
11. Document Analysis: A variety of documents may contain information

relevant to project requirements, including but not limited to:
 Business plans and marketing literature
 RFPs (requests for proposal), agreements (contracts, MOAs, etc.)
 Policy, procedure, and regulatory documentation
 Laws, codes, or ordinances

 Business process documentation
Two Key Outputs for Collect Requirements (PMBOK® Guide, p. 117):
1. Requirements Documentation: Describes how individual requirements meet

business needs. Requirements often start as high-level information and become
progressively more detailed as more becomes known. Before requirements are
accepted as baselines, they should be measureable, testable, traceable,
complete, consistent, and acceptable to stakeholders. The format may be a
simple listing of requirements categorized by stakeholders; or a more detailed,
elaborate approach including an executive summary, detailed descriptions, and
attachments. As previously described, requirements may be grouped into the
following categories:
 Business
 Stakeholder
 Solution (product, service, or result)
 Transition
 Quality
 Project
2. Requirements Traceability Matrix: A table that links each requirement to a

business need or project objective. The matrix provides a way to track
requirements during the project and also provides assistance in checking that
requirements have been met for purposes of project closure. The matrix must be
updated when there are changes to requirements. The tracing matches
requirements to:
 Business needs or opportunities

 Project objectives
 Project scope and WBS deliverables
 Product design and development
 Testing of deliverables
Finally, high-level requirements are matched to the more detailed requirements

that follow. An example of a traceability matrix is shown in Figure 5-6, p. 119,
PMBOK® Guide.
5.3 Define Scope (PMBOK® Guide, p. 120)
Scope definition produces a written, detailed scope statement that is crucial to project
success. This statement represents an agreement between the project team and the
customer and defines which requirements collected earlier will actually be included in
the scope and which will be excluded. The project team and appropriate stakeholders
conduct a needs assessment and use it as the basis to develop written project
requirements. Assumptions, constraints, and risks are identified and validated as
necessary. The level of uncertainty (difficulty) in defining scope will naturally be greater
with more complex projects.
Define Scope
1. Scope management plan 1. Expert judgment 1. Project scope statement

2. Project charter 2. Product analysis 2. Project documents updates
3. Requirements documentation 3. Alternatives generation
4. Organizational process assets 4. Facilitated workshops
Four Key Inputs for Define Scope (PMBOK® Guide, p. 121):
1. Scope Management Plan: Described previously, this plan establishes how

project scope will be developed, monitored, and controlled.
2. Project Charter: The high-level project description in the charter is used as a

basis for developing the detailed project scope statement.
3. Requirements Documentation: Produced by the previous process as

described in Section 5.2.
4. Organizational Process Assets: Organizational Process Assets that may

affect detailed scope definition include:
 Existing procedures and templates for project scope statements

 Project files from previous projects
 Lessons learned from previous phases or similar projects
Four Key Tools for Define Scope (PMBOK® Guide, p. 122):
1. Expert Judgment: At this step, expert judgment with respect to technical

details is especially relevant.
2. Product Analysis: This tool is helpful when the project is producing a product
rather than a service or other result. These techniques help translate project
objectives into measurable deliverables and requirements. Examples of these
techniques include product breakdown, requirements analysis, systems
engineering, value engineering, and value analysis. Project engineers use these
techniques to better understand and develop product requirements.
3. Alternatives Generation: Techniques such as brainstorming, lateral thinking

(“thinking outside the box”), and analysis of alternatives are used to identify
different possible approaches to the project.
4. Facilitated Workshops: Described previously as a tool of Collect

Requirements, PMBOK® Guide, Section 5.2.
Two Key Outputs for Define Scope (PMBOK® Guide, p. 123):
1. Project Scope Statement: The scope statement provides a detailed

description of project deliverables and the work required to create those
deliverables. Importantly, it may identify specific exclusions from project scope,
which helps improve the accuracy of stakeholder expectations. The scope
statement:
 Provides a common understanding of project scope for key stakeholders

 Describes major objectives
 Supports subsequent detailed planning
 Guides execution of the project work and provides a basis for making
future project decisions
 Provides a baseline to evaluate whether requested changes are within
the original scope or not
The scope statement typically includes directly or by reference:
 Product scope description: Characteristics of the product, service, or

result. The characteristics are subject to progressive elaboration (less
detail in earlier phases and more detail in later phases).
 Product acceptance criteria: Defines the process and explicit criteria
for acceptance of the finished work.
 Project deliverables: Includes major product deliverables and project

management deliverables such as reports and documentation.
 Project exclusions: States explicitly what is excluded from the
project.
 Project constraints: Lists any restrictions on the project such as
funding limits, imposed deadlines, or limitations on work calendars for
the team (e.g. can’t work in client facility at night)
 Project assumptions: Factors believed to be true so that planning can
be completed. The analysis also considers the resulting impact in the
event that an assumption proves to be incorrect. Assumptions
potentially pose risks both because any assumption might be incorrect
and because they are dealing with unknowns. The assumptions at this
point in the project life cycle are usually more numerous and detailed
than those listed earlier in the charter.
2. Project Documents Updates: Specific documents that may be updated

include:
 Requirements documentation
 Requirements traceability matrix
5.4 Create WBS (PMBOK® Guide, p. 125)
The WBS is a hierarchical decomposition of the work to be accomplished. The

WBS organizes and defines the total scope of the project. Work that is not in the
WBS is outside the scope of the project! The WBS provides a structured vision
of the work that must be delivered by the project.
Key points:
 The WBS subdivides the work into smaller components (this process is
called decomposition). Each descending level of the WBS represents an
increasingly detailed description of the work.
 Tasks (items) at the lowest level of the WBS are called work packages.
 The work package is the level at which the work can be adequately
scheduled, cost estimated, monitored, and controlled. Accurate work
packages are a major factor in accurate project planning.
 A detailed description of each work package is contained in a WBS
dictionary.
 A code of accounts provides a unique numerical identifier for each task in

the WBS. Similarly, a chart of accounts groups project expenses into
specific categories for the accounting system in the performing
organization. Even though this distinction exists, some people have used
the terms interchangeably.
 An OBS (organizational breakdown structure) shows which work
packages have been assigned to which organizational units.
 An important benefit of decomposing the project into smaller components
is that project participants are forced to carefully think through all aspects
of the pending effort. This process reduces the chance that activities
might be overlooked during the initial planning.
Create WBS
1. Scope management plan 1. Decomposition 1. Scope baseline

2. Project scope statement 2. Expert judgment 2. Project documents updates
3. Requirements documentation
Five Key Inputs for Create WBS (PMBOK® Guide, p. 127):
1. Scope Management Plan: Specifies how to create the WBS from the
detailed scope statement (previous process) and how to maintain the WBS
throughout the project.
2. Project Scope Statement: Described in PMBOK® Guide, Section 5.3.3.1, the

scope statement identifies major project deliverables which, in turn, may assist in
developing the high-level portion of the WBS.
3. Requirements Documentation: Establishes objectives and basic

requirements that make it possible to break the work into smaller components.
4. Enterprise Environmental Factors: Industry-specific standards for

developing a WBS are available in some instances, e.g., engineering projects
may use ISO/IEC 15288 which provides guidelines for systems engineering.

affect creation of the WBS include:
 Existing procedures and templates for the WBS

 Project files from previous projects
 Lessons learned from previous projects
Two Key Tools for Create WBS (PMBOK® Guide, p. 128):
1. Decomposition: The process of breaking project deliverables into smaller

and smaller pieces, in other words, finding the level of detail at which tasks can
be adequately planned and managed. Again, the desired level of detail is the
work package and is the level at which the cost and schedule for the work can be
reliably estimated. Be familiar with the following key factors about
decomposition:
 Generally, greater levels of decomposition improve the ability to plan,

manage, and control the work.
 However, excessive decomposition can lead to non-productive
management (tracking and reporting at an excessive level of detail).
 The WBS represents all work to be accomplished:
 Project management work is included in the WBS.
 When all detailed work is rolled up into higher levels, all the
work should be accounted for (PMI refers to this as the 100%
rule).
 Work should be decomposed to a level at which:
 It can be accurately estimated.
 It is not logical to subdivide it further.
 Individual responsibility can be assigned.
 Different deliverables can have different levels of decomposition (one
deliverable may be at level 4 while another is at level 6).
The PMBOK® Guide indicates that the first level of decomposition can be
displayed in the following ways:
 Major deliverables
 Major subprojects done by organizations outside the project team
 Phases of the project life cycle
 Hybrid mixtures of all the above (e.g., phases at the first level of
decomposition and then deliverables within each phase)
2. Expert Judgment: Technical knowledge of the work is helpful in determining

the appropriate level of decomposition. Also, templates are often available and
may represent previous experience on similar projects. PMI has a document
called the Practice Standard for Work Breakdown Structures and other industry-
specific WBS guides also exist.
The WBS may be displayed variously as an outline (appropriately indented task

list in your project management software), an organization chart, or any other
hierarchical method so that the levels of detail are visible. The correctness of the
decomposition must be verified by those who understand the work sufficiently.
Two Key Outputs for Create WBS (PMBOK® Guide, p. 131):
1. Scope Baseline: The scope baseline includes the following components:
 Project Scope Statement: The approved detailed scope statement

from the define scope process (identifies project scope, major
deliverables, assumptions, and constraints).
 WBS:
The WBS is a hierarchical decomposition of the total scope of the
work and includes:
 Work packages: the lowest level of detail shown in the WBS

and is also the level at which individual responsibility for the
work is assigned. Work packages must be assigned to a control
account.
 Control accounts: also historically referred to as cost accounts,
is the lowest level in the WBS at which organizational
responsibility is assigned. Control accounts are management
control points where cost, schedule, and scope data are
summarized and compared to earned value for performance
management. Control accounts contain one or more work
packages and may also contain planning packages.
 Planning packages: a WBS component below the control
account with known work content but lacking detailed schedule
activities associated with work packages. Some practitioners
use planning packages for estimating work farther in the future
(rolling wave planning).
 Code of accounts: provides a unique numerical identifier for
each WBS activity. Some people use the term “chart of
accounts” interchangeably.
Note: The numerical identifiers provide a mechanism for

summarizing cost, schedule, and resource information.
 WBS dictionary: A companion document to the WBS, containing a

detailed description of each work package and including information such
as:
 Description of the work and technical requirements

 Estimated cost and duration, list of schedule milestones
 Responsible resources, deliverables
 Predecessor activities (for sequencing the work)
 Code of accounts identifier (the numbering system)
 Acceptance criteria and quality requirements
2. Project Documents Updates: Approved change requests may require

updates to the requirements documentation.
5.5 Validate Scope (PMBOK® Guide, p. 133)
Scope validation is the process of obtaining formal acceptance of the project scope by
stakeholders. It involves reviewing work results to see whether tasks were completed
correctly. If a project is terminated early, scope validation should document the extent
of the work completed. Scope validation differs from quality control in that validation is
primarily concerned with acceptance of the work whereas quality control is primarily
concerned with correctness of the work. Quality control is usually performed slightly
ahead of validation, but the two processes may overlap somewhat.
Validate Scope
1. Project management plan 1. Inspection 1. Accepted deliverables

2. Requirements documentation 2. Group decision-making 2. Change requests
3. Requirements traceability matrix techniques 3. Work performance information
4. Verified deliverables 4. Project documents updates
5. Work performance data
Five Key Inputs for Validate Scope (PMBOK® Guide, p. 134):
1. Project Management Plan: The project management plan contains the

scope baseline which identifies all the work that must be performed. This
process verifies that the required work has, in fact, been completed correctly.
Components of the project management plan that may be used at this point
include:
 Scope management plan: The scope management plan specifies how

formal acceptance of completed deliverables will be obtained.
 Scope baseline: The scope baseline contains the scope statement
(product description and product acceptance criteria), the WBS
(deliverables and associated decomposition), and the WBS dictionary
(detailed description for each work package).
2. Requirements Documentation: Lists all requirements and acceptance

criteria for the project to be considered complete.
3. Requirements Traceability Matrix: Described in PMBOK® Guide, Section

5.2.3.2, this matrix links requirements to their origin (business need or
opportunity).
4. Verified Deliverables: Verified deliverables have been completed and

checked for correctness as part of the Control Quality process.
5. Work Performance Data: Described in Section 4.3.3.2, data collected at this

point may include:
 Number of nonconformities and degree of compliance

 Severity of the nonconformities
Two Key Tools for Validate Scope (PMBOK® Guide, p. 135):
1. Inspection: Activities such as measuring, examining, and validating

undertaken to determine whether work results conform to requirements.
Alternative names for inspection include reviews, product reviews, audits, and
walkthroughs.
2. Group Decision-Making Techniques: Described previously as part of

Collect Requirements, these techniques help the project team and other
stakeholders reach conclusions during validation decisions (unanimity, majority,
plurality, and dictatorship).
Four Key Outputs for Validate Scope (PMBOK® Guide, p. 135):
1. Accepted Deliverables: Accepted deliverables have met the acceptance

criteria and are formally signed off by an authorized person. The formal
documentation is forwarded to the Close Project or Phase process.
2. Change Requests: Deliverables that are not accepted must be documented

as such, including the reasons for non-acceptance. In some cases, those
deliverables may require a change request for defect repair. As usual, these
change requests are processed using integrated change control.
3. Work Performance Information: Relevant information would include 1)

which tasks have started and the extent of progress and 2) which activities have
finished and have been accepted.
4. Project Documents Updates: Any documents that describe the product or

report on actual status of the work may be updated.
5.6 Control Scope (PMBOK® Guide, p. 136)
This process monitors the status of project and product scope and also manages any
changes to the scope baseline. Successful control of scope changes prevents the
uncontrolled expansion of project scope known as “scope creep”. This process uses
integrated change control to deal with all requested changes and recommended
corrective or preventive actions. As described in the integrated change control process,
scope change control is concerned with:
 Assuring that requested changes and recommended corrective or preventive

actions are processed through integrated change control (uncontrolled
changes are known as “scope creep”).
 Managing changes when they occur (following established processes).
Establishing proper documentation, tracking, and approval levels.
 Always evaluating changes and never automatically accepting or rejecting.
Control Scope
1. Project management plan 1. Variance analysis 1. Work performance information

2. Requirements documentation 2. Change requests
3. Requirements traceability matrix 3. Project management plan updates
4. Work performance data 4. Project documents updates
5. Organizational process assets 5. OPA updates
Five Key Inputs for Control Scope (PMBOK® Guide, p. 138):
1. Project Management Plan: The scope baseline is the object being controlled
and it consists of the scope statement, WBS, and WBS dictionary. Other
relevant portions of the project management plan include the scope, change,
configuration, and requirements management plans.
2. Requirements Documentation: Described in Section 5.2.3.1. Requirements

should ideally be measurable, testable, traceable, consistent, complete, and
acceptable to stakeholders.
3. Requirements Traceability Matrix: Described in Section 5.2.3.2. The

traceability is useful in understanding the potential effect of changes in
requirements upon project needs/objectives. Recall that this matrix links each
requirement to a business opportunity or need.
4. Work Performance Data: Relevant work performance data at this point may
include the number of change requests received, number of requests accepted,
and the number of deliverables completed.

affect scope control include:
 Existing formal and informal procedures for scope control

 Monitoring and reporting methods
One Key Tool for Control Scope (PMBOK® Guide, p. 139):
1. Variance Analysis: Used to assess the magnitude of variations from the

planned scope baseline and decide whether corrective action is necessary.
Five Key Outputs for Control Scope (PMBOK® Guide, p. 139):
1. Work Performance Information: Addresses how project scope is

progressing compared to the scope baseline. The information includes scope
variances, scope changes, and forecasts of future scope performance.
2. Change Requests: If change requests occur during scope control activities,

they should be processed using integrated change control. Change requests
may result in preventive or corrective action, defect repair, or enhancement
requests. Change requests may either expand or reduce the scope of the
project.
Change requests are often the result of:

 An external event (change in a regulation)
 An error in defining the scope (omitted a required feature of the
product or omitted required tasks)
 A value-adding change (a way is found to do something better, faster,
or cheaper; for example, new technology becomes available). Value
analysis or value engineering are common examples.
3. Project Management Plan Updates: Approved changes may affect the

project triple constraint and, accordingly, the scope, cost, and schedule baselines
should be updated as required.
4. Project Documents Updates: Specific documents that may require updating

because of scope changes include requirements documentation and the
requirements traceability matrix.
5. Organizational Process Assets Updates: The historical database should be

updated with the causes of variances that have occurred, the corrective action
employed, and any other lessons learned associated with scope change control.
Other Topics: There are no additional topics for this chapter!
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Self-Study
Drill Practice: Scope Management
Question Answer
1. Product specifications should be developed 1. project engineers or technical staff

by ______. (p. 5-10, Tool #2)
All page references are to this reference manual.
2. What is Define Scope? 2. Developing a detailed description of the

project and product. Results in a detailed,
written scope statement (p. 5-9).
3. As project complexity increases, what will 3. It will probably increase (p. 5-9).
happen to the level of uncertainty in defining
the project scope?
4. What is the difference between product 4. Product scope is the features and functions
scope and project scope? designed into the product or service
(measured against product requirements).
Project scope is management activities
performed by the team (measured against the
project management plan) (p. 5-1).
5. What is the primary tool for scope 5. Inspection (p. 5-16)

validation?
6. What is scope creep? 6. Scope creep is a common name used for

uncontrolled changes that are not managed in
accordance with the guidelines of scope
control (p. 5-17).
7. What is a WBS dictionary? 7. It contains a detailed description of each

work package (pp. 5-11 & 5-14).
8. As used in a WBS, what does the term 8. A cost category that represents the work
“cost account” mean? assigned to a single responsible organizational
unit, i.e., the lowest level in the WBS at which
organizational responsibility is assigned. Also
called a control account (p. 5-14).
9. What is the WBS numbering system called 9. Code of Accounts or Chart of Accounts
and what does it provide?
Provides:
1. Allocation of budget to specific tasks
2. Tracking of performance/spending against
specific work packages (tasks)
3. Identifying the level of detail for specific
tasks (pp. 5-12 & 5-14)
Question Answer
10. What role do stakeholders play in 10. Defining stakeholders’ needs is the
collecting requirements? primary purpose of the process called Collect
Requirements. Knowing who the stakeholders
are and interviewing them in various ways is
how requirements are documented (pp. 5-3 and
5-5,Inputs #3 & #5).
11. What are the tools of collect 11.

requirements? Interviews and Focus groups
Facilitated workshops
Group creativity techniques
Group decision-making techniques
Questionnaires and surveys
Observations
Prototypes
Benchmarking
Context diagrams
Document analysis (pp. 5-6 & 5-7)
12. How does an OBS differ from a WBS? 12. OBS = Organizational breakdown
structure and is used to show which work
elements (tasks) have been assigned to which
organizational units (p. 5-12)
13. Activities at the lowest level of the WBS 13. work packages (pp. 5-11 & 5-13)
are referred to as ______.
14. What is scope validation? 14. The process of formalizing acceptance of

completed project deliverables (p. 5-15).
15. What is the difference between scope 15. Scope validation is primarily concerned
validation and quality control? with acceptance of the work; quality control is
concerned with the correctness of the work (p.
5-15).
16. What is scope control (the formal name of 16. Monitoring the status of the project and
the process is control scope)? product scope and managing changes to the
scope baseline (p. 3-17)
17. What is a WBS? 17. A hierarchical decomposition of the work

to be accomplished and defines the total
scope of the project -–work not in the WBS is
outside the scope of the project
(p. 5-11).
18. What is the tool for control scope? 18. Variance analysis (p. 5-19)
19. What is the scope management plan? 19. Documents how project scope will be
Question Answer
defined, validated, and controlled (pp. 5-1 to 5-

3)
20. What two important issues does variance 20. As part of control scope:
analysis deal with?
a ) Identifying the magnitude of variances
(plan versus actual)
b) Deciding whether corrective action is

needed (p. 5-19)
21. Change requests are outputs for which 21. Validate scope and control scope.
two scope management processes? Change requests may be issued as a result of
either of these activities and should be
handled using integrated change procedures
(pp. 5-17 & 5-19).
22. Collecting requirements is fundamentally 22. Defining and managing stakeholder

about ______. expectations (p. 5-3).
23. The subdivision of project deliverables 23. decomposition (pp. 5-11 to 5-13)
into smaller components is called ______.
24. What are the inputs for collect 24. The scope management plan,
requirements? requirements management plan, stakeholder
management plan, project charter and
stakeholder register (p. 5-5).
25. What is the Code of Accounts and what is 25. A numbering system used to identify each
another name for it? element of the WBS. Also known as a Chart
of Accounts (pp. 5-12 & 5-14).
26. What is a requirements traceability 26. A table that links each requirement to its
matrix? origin such as business needs or
opportunities, project goals, etc. (p. 5-8)
27. What is the scope baseline composed of? 27. The scope statement, the WBS, and the
WBS dictionary (pp. 5-1 & 5-14 to 5-15).
Question Answer
28. What is alternatives generation and what 28. Alternatives generation is a tool of define
is it used for? scope and is used to ensure that all
approaches to doing the work have been
considered. The PMBOK® Guide, p. 123,
identifies brainstorming, lateral thinking, and
analysis of alternatives as examples of how to
perform alternatives generation. (p. 5-10).
29. Changes in the scope may affect the other 29. scope, schedule, and cost. (p. 5-19, Output
components of the triple constraint. The triple #3, Control Scope)
constraint of project management includes
__________.
Unit 6: Time Management
Major Processes
6.1 Plan Schedule Management
6.2 Define Activities
6.3 Sequence Activities
6.4 Estimate Activity Resources
6.5 Estimate Activity Durations
6.6 Develop Schedule
6.7 Control Schedule
Other Topics
Self-Study
The questions on this topic focus heavily on scheduling techniques, network diagrams,
Gantt charts, the critical path, compressing the schedule, PERT, and float. You may or
may not have to actually work a network diagram, but you will be expected to answer
fundamental questions about the critical path, float, crashing a project schedule, and
dealing with various dependencies such as finish-to-finish or start-to-start.
Major Processes
6.1 Plan Schedule Management (establishing procedures for planning, developing,
managing, executing, and controlling the schedule)
6.2 Define Activities (identifying specific activities to be accomplished)
6.3 Sequence Activities (identifying and documenting relationships among activities)
6.4 Estimate Activity Resources (estimating type and quantity of resources needed)
6.5 Estimate Activity Durations (approximating the number of work periods to
complete individual activities with estimated resources)
6.6 Develop Schedule (analyzing sequences, durations, resource requirements, and
schedule constraints to create the schedule)
6.7 Control Schedule (monitoring the status of the project to update progress and
managing changes to the schedule baseline)
PMI indicates that defining and sequencing activities, estimating resources and
durations, and development of the schedule are discrete but tightly linked steps in
building a project schedule. On some projects, especially smaller ones, these discrete
steps are viewed and performed as a single process.
6.1 Plan Schedule Management (PMBOK® Guide, p. 145)
Plan Schedule Management establishes and documents procedures for planning,

developing, managing, executing, and controlling the project schedule.
Plan Schedule Management
1. Project management plan 1. Expert judgment 1. Schedule management plan

2. Project charter 2. Analytical techniques
3. Enterprise environmental factors 3. Meetings
Four Key Inputs for Plan Schedule Management (PMBOK® Guide, p. 146):
1. Project Management Plan: Information used explicitly at this step may

include:
 Scope baseline: The scope statement and WBS information may

be used for defining activities, estimating durations, and managing
the schedule.
 Other information: Cost and risk information may be helpful in
developing the schedule.
2. Project Charter: The charter usually contains a high-level, summary

milestone schedule that would provide a starting point in thinking about the
detailed schedule.
3. Enterprise Environmental Factors: Factors that influence the schedule

management planning process may include:
 Organizational structure and resource availability

 Project management software and published commercial data
 Work authorization systems

that may affect Plan Schedule Management include (PMBOK® Guide, p. 147):
 Lessons learned, historical information, and templates

 Schedule and change control procedures
 Monitoring and reporting tools
 Risk control procedures and project closure guidelines
Three Key Tools for Plan Schedule Management (PMBOK® Guide, p. 147):
1. Expert Judgment: Expert judgment coupled with historical information may

help apply relevant information from similar projects.
2. Analytical Techniques: Various analytical techniques may help in choosing

appropriate scheduling methodologies, estimating approaches, project
management software, and whether to employ fast tracking and/or crashing.
3. Meetings: Used to help develop the schedule management plan.
One Key Output for Plan Schedule Management (PMBOK® Guide, p. 148):
1. Schedule Management Plan: A component of the project management plan

that establishes the criteria and activities for developing, monitoring, and
controlling the schedule. The schedule management plan may establish the
following:
 Project schedule model development: The appropriate scheduling

methodology and tool may be specified.
 Level of accuracy: The acceptable range of accuracy for duration estimates
(may also include recommended amounts for contingency).
 Units of measure: The unit of measure for tracking key resources and time
might be hours, days, weeks, or months of effort. The unit of measure for
materials might be liters, tons, or cubic yards and so on.
 Organizational procedures links: The WBS provides a consistent
framework for estimating schedules.
 Project schedule model maintenance: Processes used to update schedule
status during execution of the work.
 Control thresholds: Establishes an allowable amount of variation before
corrective action is triggered. Often expressed as a percentage of deviation.
 Rules of performance measurement: Earned Value rules for calculating
how much credit to take for partially completed activities (e.g., 0-100, 50-50,
and so on). These rules are described in the cost management chapter as
part of the earned value management topic.
 Reporting formats: Formats and frequency for schedule status reports.
 Process descriptions: Schedule management processes are documented.
6.2 Define Activities (PMBOK® Guide, p. 149)
Activity definition involves identifying and documenting the specific activities that must
be performed to produce the deliverables identified by the WBS. Activities are planned
down to the work package level, which is the lowest level displayed in the WBS. PMI
also says that work packages may be decomposed another level, which is designated
as activities or schedule activities.
Define Activities
1. Schedule management plan 1. Decomposition 1. Activity list

2. Scope baseline 2. Rolling wave planning 2. Activity attributes
3. Enterprise environmental factors 3. Expert judgment 3. Milestone list
Four Key Inputs for Define Activities (PMBOK® Guide, p. 150):
1. Schedule Management Plan: Provides the level of detail necessary for

managing the work.
2. Scope Baseline: The information explicitly used at this step includes the
WBS, project deliverables, constraints, and assumptions.
3. Enterprise Environmental Factors (EEF): The relevant EEF items at this

point may include:
 Organizational structure
 Published information from commercial databases

that may affect defining project activities include (PMBOK® Guide, p. 151):
 Formal and informal activity planning procedures and guidelines

 Lessons learned knowledge base and historical information (activity
lists from previous, similar projects)
 Standardized processes and templates
Three Key Tools for Define Activities (PMBOK® Guide, p. 151):
1. Decomposition: Subdividing project activities into smaller components. The

lowest level shown in the WBS is the work package; however, work packages
can be further decomposed into “activities,” which represent the work required to
produce the work package deliverables. PMI indicates that a complete activity
list includes all the activities necessary to complete each work package.
Involving team members in the decomposition may lead to more accurate results.
2. Rolling Wave Planning: A form of progressive elaboration where work to be

performed in the near term is planned at a low level of the WBS (work package),
i.e., a highly detailed plan with as much accuracy as possible. Work farther in
the future is planned with less detail (at a higher level of the WBS, perhaps what
some practitioners call a planning package).
3. Expert Judgment: Using appropriate subject matter experts to ensure the

activity definition is accurate.
Three Key Outputs for Define Activities (PMBOK® Guide, p. 152):
1. Activity List: A comprehensive list of all activities that must be performed.

The list should include all activities (including those decomposed below the work
package level), an activity identifier (code of accounts number), and a sufficient
description of the work.
2. Activity Attributes: Much like the WBS dictionary, activity attributes include
detailed information for each activity. The amount of information increases as
the project progresses (progressive elaboration). Activity attributes include the
following information:
 Activity ID, WBS ID, and activity name

 Activity description
 Predecessor and successor activities (for sequencing)
 Logical relationships (type of dependency)
 Leads and lags
 Resource requirements
 Imposed dates, constraints, and assumptions
 Responsible resource
 Geographical area (if work is done in multiple locations)
3. Milestone List: Milestones are important points in time and they have zero
duration. Milestones may be requested or demanded by the customer,
management, the team, or may be required by the contract. Typical milestones
often include the date on which important activities should begin or end.
6.3 Sequence Activities (PMBOK® Guide, p. 153)
Activity sequencing involves identifying and documenting interactivity dependencies

(also called logical relationships). The process can be done manually, with software, or
with a combination of both. Except for the first and last, all activities must have a
predecessor and a successor. In addition to appropriate logical relationships, it may be
necessary to incorporate leads or lags to create realistic, achievable schedules.
Sequence Activities
1. Schedule management plan 1. Precedence diagramming 1. Project schedule network

2. Activity list method (PDM) diagrams
3. Activity attributes 2. Dependency determination 2. Project documents updates
4. Milestone list 3. Leads and lags
5. Project scope statement
Seven Key Inputs for Sequence Activities (PMBOK® Guide, p. 154):
1. Schedule Management Plan: Identifies the intended scheduling method for

the project.
2. Activity List: Identifies schedule activities that must be sequenced, Section

6.2.3.1.
3. Activity Attributes: An output of the previous process, Section 6.2.3.2. This

information includes predecessors and successors for each activity.
4. Milestone List: Described in Section 6.2.3.3, milestones must also be

sequenced and some milestones may have imposed dates (schedule
constraints) that may affect sequencing.
5. Project Scope Statement: Includes product characteristics that help

planners understand required activity sequences. For instance, there may be
physical or technical aspects of the work that make a mandatory dependency
necessary. The scope statement also identifies deliverables, constraints, and
assumptions which may influence sequencing decisions.
6. Enterprise Environmental Factors (EEF): EEF that may influence

sequencing include:
 Government or industry standards

 Project management information system
 Scheduling tool and work authorization systems
7. Organizational Process Assets (OPA): The specific OPA that may affect
the sequencing of project activities include (PMBOK® Guide, p. 156):
 Files from the knowledge base on scheduling methods

 Scheduling templates
Three Key Tools for Sequence Activities (PMBOK® Guide, p. 156):
1. Precedence Diagramming Method (PDM): This is one way to display a

schedule in network fashion; it is also called activity-on-node. It was developed
in the early 1960s at Stanford University and is the method that project
management software uses today. The activities are listed inside boxes (called
nodes) and are connected by lines (or arrows) to indicate sequences.
Design Test Produce
The PDM approach uses the following four types of dependencies:
 Finish-to-Start: Initiation of the successor activity depends on

completion of the predecessor activity.
 Finish-to-Finish: Completion of the successor activity depends on
completion of the predecessor activity.
 Start-to-Start: Initiation of the successor activity depends on initiation
of the predecessor activity.
 Start-to-Finish: Completion of the successor activity depends on
initiation of the predecessor activity.
The course slides show examples of each type of dependency
Finish-to-start is the most commonly used dependency, whereas PMI suggests

that start-to-finish is rarely used on actual projects.
PDMs offer several advantages over other methods (such as arrow diagrams):
 The technique provides flexibility in sequencing activities by allowing

four types of logical dependencies. By comparison, arrow diagrams are
limited to finish-to-start dependencies.
 The technique does not require the use of “dummy” activities whenever
multiple dependencies are needed in a schedule.
 Finally, the technique adds the concept of lag and lead times between
activities.
Figure 6-11, PMBOK® Guide, p. 160 shows a network using PDM.
2. Dependency Determination: The following four categories of dependencies

are used during activity sequencing:
 Mandatory dependencies: Also referred to as “hard logic,”

mandatory dependencies are inherent in the nature of the work and
often involve physical or technical limitations of some kind. For
example, you cannot shingle the roof of a building until the roof has
been built. Mandatory dependencies may also occur because of legal
or contractual requirements.
 Discretionary dependencies: Known as “soft logic” or “preferential
logic,” these optional dependencies are usually chosen because they
represent “best practices” or there is a preferred approach even though
other approaches would also be acceptable.
 External dependencies: These dependencies usually involve
interfaces outside the project and are usually outside the direct control
of the project team. Examples include waiting on delivery of hardware
from an outside source or waiting on delivery of aircraft engines before
installation in the airframe.
 Internal dependencies: Whether they are mandatory or
discretionary, these dependencies are within the direct control of the
project team (direct contrast with external dependencies).
3. Leads and Lags: Adjustment of lead and lag times may help define the
timing of the work more accurately. A lead time allows the successor (follow-on)
task to be accelerated. Conversely, a lag time delays the successor activity.
Two Key Outputs for Sequence Activities (PMBOK® Guide, p. 159):
1. Project Schedule Network Diagrams: A schematic display of the project

activities and their logical relationships, most often using PDM as the method of
display. Note: Although coverage of arrow diagrams was removed from the
PMBOK® Guide, they are still on the exam for many people.
2. Project Documents Updates: As a result of sequencing, the following

documents could be updated:
 Activity lists and attributes

 Milestone list and risk register
The course slides show visual examples of network diagrams and key
issues associated with them.
6.4 Estimate Activity Resources (PMBOK® Guide, p. 160)
Determining what resources (people, equipment, material, and facilities) will be needed,
along with the associated quantities and time frames. Resource issues also apply to
the cost estimating process.
Estimate Activity Resources
1. Schedule management plan 1. Expert judgment 1. Activity resource

2. Activity list 2. Alternative analysis requirements
3. Activity attributes 3. Published estimating data 2. Resource breakdown
4. Resource calendars 4. Bottom-up estimating structure (RBS)
5. Risk register 5. Project management 3. Project documents updates
6. Activity cost estimates software
Eight Key Inputs for Estimate Activity Resources (PMBOK® Guide, p. 162):
1. Schedule Management Plan: Identifies the desired level of accuracy and

units of measure for resources (staff hours) and schedule (whether it will be
measured in days, weeks, or other units). See Section 6.1.3.1.
2. Activity List: Resource estimates should be done for the associated

activities.
3. Activity Attributes: Activity attributes were developed during activity

definition and now provide a primary source of data for estimating the resources
required for each activity.
4. Resource Calendars: Described in PMBOK® Guide, Sections 9.2.3.2 and

12.2.3.3, the resource calendar system should provide information such as when
a resource is available for a work assignment, experience level of a given
resource, skill sets possessed by individuals, and geographical location.
5. Risk Register: Potential risk events may affect resource availability.
6. Activity Cost Estimates: The comparative cost of specific resources may

affect the decision on which resources may be selected.
7. Enterprise Environmental Factors: Information about the existing resource

infrastructure (resource availability and skill sets) would be relevant at this step.
8. Organizational Process Assets: Organizational Process Assets that would

affect the estimation of resources required to support project activities include:
 Staffing policies
 Procedures for renting or purchasing supplies and equipment
 Historical information about resource usage on similar projects
Five Key Tools for Estimate Activity Resources (PMBOK® Guide, p. 164):
1. Expert Judgment: Appropriate subject matter experts will help judge the
accuracy of resource estimates.
2. Alternative Analysis: This analysis considers the various options for doing
the work and assures that appropriate resource estimates are available. For
example, a project might pursue either of two technological possibilities; there
may be a choice between manual or automated tools/processes; or various
levels of resource capabilities may be considered.
3. Published Estimating Data: Some industries and trade groups collect and
publish cost, schedule, and resource data for specific types of work.
4. Bottom-Up Estimating: If a schedule activity cannot be estimated with

reasonable confidence, the work may be decomposed to a lower level to provide
more detail. The bottom-up approach then aggregates these estimates at higher
levels.
5. Project Management Software: Most project management software is

capable of organizing resource data for individual team members or groups
(sometimes called resource pools). The software can usually define:
 Resource availability
 Resource rates
 Resource calendars
 Resource breakdown structures (RBS)
Three Key Outputs for Estimate Activity Resources (PMBOK® Guide, p. 165):
1. Activity Resource Requirements: Identifies the type and quantity of

resources needed to support each individual schedule activity. If the work was
decomposed below the work package (schedule activity), the resource
requirements are added (aggregated) to determine total resource needs for the
work package. Estimates should include:
 The basis of the estimate (method used)

 Any assumptions that were made
 Resource availability
 Resource quantity
2. Resource Breakdown Structure: Whereas the WBS focuses primarily on

activities, the RBS is a hierarchical structure focusing primarily on resources.
The RBS identifies activities to which the resources are assigned as well as the
associated time frames. The RBS is also useful in determining whether a
resource is available in any given time period.
3. Project Documents Updates: Project documents that might be updated

include:
 Activity list
 Activity attributes
 Resource calendars
6.5 Estimate Activity Durations (PMBOK® Guide, p. 165)
Duration estimating coordinates information about activity scope, resource types and
quantities, and resource calendars so that a realistic schedule can be developed.
Duration estimating has been defined as assessing the number of work periods needed
to complete an activity. Estimates should be:
 Produced by the people most familiar with the work (or at least approved by
them). This observation refers to the importance of expert judgment.
 Progressively elaborated. In other words, estimates will usually become more
accurate as the quality of the input data improves.
 Adjusted for the effects of “elapsed time” (whether or not weekends are
treated as work periods). Note: Project management software makes it
much easier to assess the effect of these elapsed times on a project
schedule.
Duration estimating should also consider the difference between effort and duration. If
four people work 10 hours each on a task, the total effort that must be paid for is 40
person-hours. If those four people are working simultaneously, i.e., in parallel, the
duration to complete the work will be 10 hours. In summary, durations are used for
scheduling and effort is used to estimate costs.
Estimate Activity Durations
1. Schedule management plan 1. Expert judgment 1. Activity duration estimates

2. Activity list 2. Analogous estimating 2. Project documents updates
3. Activity attributes 3. Parametric estimating
4. Activity resource requirements 4. Three-point estimating
5. Resource calendars 5. Group decision-making
6. Project scope statement techniques
7. Risk register 6. Reserve analysis
8. Resource breakdown structure
Ten Key Inputs for Estimate Activity Durations (PMBOK® Guide, p. 167):
1. Schedule Management Plan: Defines the estimating method, desired level

of accuracy, and frequency for updates.
2. Activity List: Described in Section 6.2.3.1, durations must be estimated for

each activity.
3. Activity Attributes: Described in Section 6.2.3.2.
4. Activity Resource Requirements: Duration estimates are affected by how

many resources are assigned to a task (two people can usually complete a task
faster than one person). In turn, actual availability of those resources is also a
major factor. If resources prove to be unavailable, some form of outsourcing may
be required. As mentioned earlier, durations are also affected by relative levels
of experience and capability.
5. Resource Calendars: Resource calendars identify the availability and

capability of all required resources (people and equipment).
6. Project Scope Statement: Any constraints or assumptions from the scope

statement that may affect activity durations. A constraint could be that a key
stakeholder has imposed a strict deadline for completion of initial testing. An
assumption might be that hurricane activity will not disrupt product testing in your
sea coast facility and, therefore, you will meet the planned deadline.
7. Risk Register: Provides the list of potential risk events, the results of risk
analysis, and the appropriate response plans.
8. Resource Breakdown Structure: Identifies resources by category (labor,

equipment, materials) and type (skill level, grade level, etc.).
9. Enterprise Environmental Factors: Environmental factors that may affect

duration estimates include:
 Duration estimating databases

 Productivity metrics
 Published commercial information

affect duration estimates include:
 Historical information on likely durations

 Project calendars
 Scheduling methodology
 Lessons learned
Six Key Tools for Estimate Activity Durations (PMBOK® Guide, p. 169):
1. Expert Judgment: PMI recommends the use of expert judgment guided by

historical information whenever the combination is possible. Expert judgment is
crucial because of the potential number of factors that can affect durations.
2. Analogous Estimating: A form of top-down estimating, this approach uses

the actual durations of previous, similar activities to estimate the duration of
future activities. These estimates are usually adjusted by experts for differences
in complexity, size, and risk. Key points:
 The technique is usually applied in the early stages of a project when

detailed information is limited and is, therefore, considered a ballpark
guesstimate.
 Developing such an estimate is not costly, but the accuracy is limited.
 The technique is most reliable when a) the previous activities are similar
in fact and not just in appearance and b) the individuals making the
estimates have the needed expertise (for example, expert judgment was
the first tool).
3. Parametric Estimating: For some tasks, duration estimates can be derived

from the quantity needed multiplied by the appropriate productivity rate. For
example, if a drawing takes approximately 10 hours and you need 50 drawings,
the estimated duration of creating the drawings would be 500 hours.
4. Three-Point Estimating: Such estimates can improve accuracy by

considering risk. This technique calculates an expected average duration from
the following three estimates:
 Optimistic: The best-case scenario as seen by someone familiar with

the work.
 Pessimistic: The worst-case scenario as seen by someone familiar
with the work.
 Most Likely: The most likely scenario as seen by someone familiar with
the work.
In similar fashion, a well-known technique for doing the same thing is PERT
(Program Evaluation and Review Technique). The differences among PERT,
three-point estimate, and CPM (Critical Path Method) will be discussed in the
next process on schedule development.
5. Group Decision-Making Techniques: The use of group processes such as

brainstorming, Delphi, and nominal group may help teams produce more
accurate estimates. PMI also believes that this teaming process will usually lead
to increased commitment in achieving the schedule.
6. Reserve Analysis: Contingency reserves (sometimes referred to as time

reserve or buffers) are sometimes added to duration estimates to account for risk
or uncertainty. Contingency may be a percentage of the overall schedule or a
fixed number of time periods. If used, reserve time should be documented along
with assumptions and other data. Ultimately, reserve time may be used,
reduced, or eliminated (as needed).
PMI has identified the following methods for handling reserve. These methods
also apply to cost estimating.
 Contingency Reserves: This amount of time is allocated within

the schedule baseline for “known-unknowns”, i.e., the time
associated with handling identified risks. These reserves may be
associated with specific activities or aggregated into buffers (see
PMBOK® Guide, Figure 6-19, p. 178, Critical Chain).
 Management Reserves: An amount of duration withheld from the
baseline and intended for “unknown-unknowns”, i.e., unforeseen
problems that may affect the schedule.
Two Key Outputs for Estimate Activity Durations (PMBOK® Guide, p. 172):
1. Activity Duration Estimates: Quantitative assessments of the number of

work periods (hours, days, and so on) needed to complete an activity (and by
extension, to complete the entire project). PMI recommends that these estimates
should also include a range of possible results. Note: Duration estimates for
different activities are assumed to be statistically independent (the estimate of
one task does not determine or influence the duration estimate of a different
task).
2. Project Documents Updates: Documents that may be updated include:
 Activity attributes
 Assumptions inherent in the duration estimates
6.6 Develop Schedule (PMBOK® Guide, p. 172)
Schedule development builds upon the previous processes (schedule management

plan, activity list, sequencing, resource estimates, and duration estimates) to establish
the project schedule. Entering these data into a scheduling tool (usually software such
as Microsoft Project or Primavera or others) will establish planned start and finish times
for each task. The approved schedule becomes the baseline for tracking progress.
Develop Schedule
1. Schedule management plan 1. Schedule network analysis 1. Schedule baseline

2. Activity list 2. Critical path method 2. Project schedule
3. Activity attributes 3. Critical chain method 3. Schedule data
4. Project schedule network diagrams 4. Resource optimization 4. Project calendars
5. Activity resource requirements techniques 5. Project management plan
6. Resource calendars 5. Modeling techniques updates
7. Activity duration estimates 6. Leads and lags 6. Project documents
8. Project scope statement 7. Schedule compression updates
9. Risk register 8. Scheduling tool
10. Project staff assignments
Thirteen Key Inputs for Develop Schedule (PMBOK® Guide, p. 174):
1. Schedule Management Plan: Identifies the scheduling method (such as

critical path method or critical chain method) for creating the schedule.
2. Activity List: Described in Section 6.2.3.1 (identifies the activities that must
be scheduled).
3. Activity Attributes: Described in Section 6.2.3.2 (provides the details for

each activity).
4. Project Schedule Network Diagrams: Described in Section 6.3.3.1 (shows

the sequencing).
5. Activity Resource Requirements: Described in Section 6.4.3.1 (types and

quantities of resources needed).
6. Resource Calendars: Described in Sections 6.4.1.4 and 6.5.1.5 (availability

and capability of resources).
7. Activity Duration Estimates: Described in Section 6.5.3.1 (the number of

work periods needed to complete project activities).
8. Project Scope Statement: Any constraints or assumptions that may affect

the schedule. PMI has identified two categories of time constraints that may
potentially affect the schedule:
 Imposed dates: Mandates from someone else (customer, upper

management, or a court-imposed date). Project management software
allows date constraints such as “Start No Earlier Than” and “Finish No
Later Than.”
 Key events or major milestones: Completion of certain deliverables might
be desired, requested, or demanded by specified dates.
9. Risk Register: Described in Section 11.2.3.1 (identifies risk events that may
affect the schedule).
10. Project Staff Assignments: Identifies which resources are assigned to

specific activities.
11. Resource Breakdown Structure: Provides the details needed to organize

and report as to how resources are affecting the schedule.

schedule development include:
 Standards and communication channels
 Scheduling tool selected for building the schedule

affect schedule development include:
 Scheduling methodology
 Project calendar
Eight Key Tools for Develop Schedule (PMBOK® Guide, p. 176):
1. Schedule Network Analysis: Techniques that generate the project schedule

using a schedule model and various analytical techniques such as critical path
method, critical chain method, what-if analysis (simulation), resource optimization
(resource leveling and smoothing), and so on.
2. Critical Path Method: Calculates theoretical start and finish dates for all
schedule activities without regard to resource limitations. The technique:
 Uses a forward and backward pass to determine early and late times.
 Calculates available float or slack (float or slack indicates where any
flexibility in the schedule exists to delay activities without delaying the
project).
 Determines the critical path (the longest path, the path with zero float
or the least float available, the shortest possible duration for the
project). It is possible to have more than one critical path, which would
make the schedule more risky.
 The critical path may have positive total float if the project is ahead of
schedule or negative total float if the project is behind schedule.
 A near-critical path exists when the duration of a path is almost as long
as that of the critical path. If the activities on such a path are subject to
considerable risk or variation, those activities must be monitored as
carefully as those on the critical path.
Historically, the exam has asked numerous questions about PERT (Program
Evaluation and Review Technique) as well as any differences between PERT
and CPM (Critical Path Method). The course slides will examine these issues.
3. Critical Chain Method: This technique modifies the schedule to account for
limited resources. The critical path is first determined using a normal process
without resource limitations. Next, resource limitations are applied and a
resource-constrained schedule is produced. The resource-constrained critical
path is known as the critical chain.
Non-work activities called duration buffers are added to the end of activity
sequences. One of these buffers is known as the project buffer and is placed at
the end of the critical chain. Other buffers, called feeding buffers, are placed at
any point where non-critical tasks feed into the critical chain. The size of each
buffer should reflect the uncertainty associated with that sequence of tasks.
Compared to traditional approaches, the schedule is managed by monitoring the
duration buffers (comparing remaining buffer amounts to remaining activity
durations) instead of managing float and the critical path.
4. Resource Optimization Techniques: The two following techniques are

identified by PMI:
a) Resource Leveling: This technique applies when a schedule has

already been produced but one of the following problems exists with
resources:
 There are fewer resources available than the schedule requires

 Certain resources are only available at specific times
 Resource usage needs to be kept at a constant level
When any of these resource constraints exist, the goal is to balance

demand for resources with the available supply. The most popular
response is as follows:
 In time periods with too much work for the available resources, some
of the work may be moved into other time periods. This is often
done by moving tasks with available positive float. This guideline or
rule of thumb is referred to as a “heuristic” by some people.
 Note: Be aware that resource leveling tends to result in a project
duration that is longer than originally planned.
b) Resource Smoothing: Conceptually similar to resource leveling, you

must operate within predefined resource constraints or limits. The
difference is that, with smoothing, activities must be performed within the
available float. The schedule is not allowed to slip. Therefore, it may not
be possible to optimize all resources.
5. Modeling Techniques: Two highly related techniques are identified:
a) What-If Scenario Analysis: As the name suggests, this analysis uses

the power of the computer to consider various potential scenarios. In this way,
you can model the potential effects of different internal or external events, such
as: a component is not delivered on time, defective parts arrive, a labor strike
occurs, or an extreme weather problem (hurricane, blizzard, lightning strike)
occurs. This technique is related to the use of simulation programs.
b) Simulation: Monte Carlo simulation calculates numerous potential

project durations under differing assumptions and produces a distribution of
possible results with associated probabilities. There are numerous commercially
available software programs that will perform such a simulation. This process
provides invaluable feedback about the feasibility of the schedule and may also
help in devising contingency plans.
6. Leads and Lags: Leads and lags may be adjusted to develop viable, realistic
schedules. They make it easier to delay or accelerate work.
7. Schedule Compression: Seeking ways to shorten the schedule without

changing the scope. There are two primary techniques:
 Crashing: Exploring cost and schedule trade-offs to shorten the

schedule for the least incremental cost. The technique essentially
involves adding resources to critical path activities but will almost always
increase project cost.
 Fast tracking: Doing more activities in parallel (may also apply to

overlapping phases of a project, sometimes called concurrent
engineering). Note that fast tracking usually increases risk because it
requires increased coordination of resources and may result in rework.
8. Scheduling Tool: Automated scheduling tools make it easier to produce a

schedule and to track changes to the schedule.
The course Slides show additional information on Three-Point Estimates,

CPM, PERT, crashing, and fast tracking.
Six Key Outputs for Develop Schedule (PMBOK® Guide, p. 181):
1. Schedule Baseline: The approved schedule, which then becomes the plan
against which to measure performance. The schedule baseline is a component
of the project management plan and is also part of the triple constraint.
2. Project Schedule: This output refers to various possible presentations of the

resulting schedule. PMI states that schedules remain preliminary until resource
assignments have been confirmed. They also say that the schedule can be
presented in summary form (such as a high-level master schedule) or in detail.

Possible formats for presentation include:
Project schedule network diagrams which show activity dependencies

(logic) and the critical path.
Bar charts (also called Gantt charts) which are easy to read and used
frequently in presentations. Gantt charts show activity start and finish dates,
activity durations, and dependencies. They are especially good for showing
progress or variance. They may also be used to display summary tasks,
which are sometimes referred to as hammock activities (a group of related
schedule activities aggregated at a summary level).
Milestone charts: You need to know the definition of a milestone: an

important event with zero duration, that is, an important point in time.
Milestone charts are a good way to communicate high-level schedule status
to customers and upper management.
See Figure 6-21 on PMBOK® Guide, p. 183 for illustrations.
3. Schedule Data: Supporting data for the schedule include:
 Activities, attributes, milestones, assumptions, and constraints

 Resource requirements by time period (displayed in a resource
histogram)
 Alternative schedules
 Contingency reserves
4. Project Calendars: Some practitioners refer to this as the working calendar.

The default working calendar in the Microsoft Project software is Monday through
Friday, 8 am to 5 pm daily. The project calendar distinguishes time periods
available to perform work from those that are not available.
5. Project Management Plan Updates: Relevant portions of the project plan

that might be updated include the:
 Schedule baseline

 Activity resource requirements (especially if resource leveling has been
used)
 Activity attributes (any changes in resources, durations, risks,
assumptions, etc.)
 Calendar (standard working days or weeks, etc.)
 Risk register
6.7 Control Schedule (PMBOK® Guide, p. 185)
Controlling the schedule involves monitoring schedule status and managing schedule
changes. Schedule change control is concerned with the usual factors:
 Determining the current status of the schedule

 Influencing the factors that create schedule changes
 Determining (and tracking) that schedule changes have occurred
 Managing the changes as they occur
Control Schedule
1. Project management plan 1. Performance reviews 1. Work performance information

2. Project schedule 2. Project management software 2. Schedule forecasts
3. Work performance data 3. Resource optimization techniques 3. Change requests
4. Project calendars 4. Modeling techniques 4. Project management plan
5. Schedule data 5. Leads and lags updates
6. Organizational process 6. Schedule compression 5. Project documents updates
assets 7. Scheduling tool 6. OPA updates
Six Key Inputs for Control Schedule (PMBOK® Guide, p. 187):
1. Project Management Plan: As described earlier, the project management

plan contains the schedule management plan and the schedule baseline. The
schedule management plan establishes how the schedule will be managed and
how changes will be processed. The baseline is compared to actual outcomes to
determine if preventive actions, corrective actions, or changes are needed.
2. Project Schedule: The most recent, approved project schedule is the

baseline. It is this baseline that will change if schedule changes are approved.
3. Work Performance Data: Provides information on whether planned dates

have been met. Activities are classified as to whether they have started or
finished and metrics are tracked (such as actual duration, remaining duration,
and percent complete).
4. Project Calendars: Described in Section 6.6.3.4, calendars identify time

periods available for completing work and forecasting remaining work.
5. Schedule Data: Described in Section 6.6.3.3, detailed schedule data is

updated as necessary during control of the schedule.

affect schedule control include:
 Formal and informal policies regarding scheduling control (changes,
preventive action, corrective action, and monitoring actual results)
 Schedule control tools
Seven Key Tools for Control Schedule (PMBOK® Guide, p. 188):
1. Performance Reviews: Performance reviews compare and analyze planned

vs. actual performance data such as start and finish dates, percent complete,
and remaining duration. The following techniques may be used in conducting
this analysis:
 Trend analysis: Examines performance over time to determine
whether performance is improving or deteriorating. Graphical
analysis may be used to display any trends, e.g., a line graph.
 Critical path method: Identifying variances on the critical path
may provide the best insight into schedule status. Evaluating
activity variances on any near-critical paths can help identify
schedule risks.
 Critical chain method: Compares remaining buffer amounts to
buffer amounts needed to protect the schedule (based on schedule
risk).
 Earned value management: Provides schedule measures such
as schedule variance and schedule performance index. If earned
value is used, a method for measuring “in-progress” activities must
be adopted (e.g., percent complete or the 50-50 rule). An important

part of schedule control is to determine whether schedule variations
are sufficient to require responses such as corrective or preventive
actions. The details of earned value will be covered in the cost
management chapter. If earned value is not used, a generic
schedule variance may be calculated using the formula:
Plan - Actual.
2. Project Management Software: Provides the means to track planned versus

actual dates and to forecast expected future performance.
3. Resource Optimization Techniques: Used to optimize the distribution of

work against the available resources (Section 6.6.2.4).
4. Modeling Techniques: Uses what-if analysis and simulation to analyze

various scenarios and determine the probability of different schedule outcomes
(Section 6.6.2.5).
5. Leads and Lags: Used to bring the schedule back in line with the plan by
delaying or accelerating work (Section 6.6.2.6).
6. Schedule Compression: Techniques such as crashing and fast tracking to

realign the current schedule with the original plan/baseline (Section 6.6.2.7).
7. Scheduling Tool: The schedule data are updated to reflect actual progress.
Manual or automated scheduling methods are used to produce an updated
schedule.
Six Key Outputs for Control Schedule (PMBOK® Guide, p. 190):
1. Work Performance Information: For schedule purposes, the schedule

variance and the schedule performance index should be calculated and reported
to appropriate stakeholders.
2. Schedule Forecasts: Forecasts of future outcomes are updated based on

work performance information available at the time. Earned value indicators are
often used for this purpose, e.g., estimate at completion (EAC) and variance at
completion (VAC).
3. Change Requests: If change requests occur during analysis of schedule

variances, they should be processed using integrated change control.
4. Project Management Plan Updates: Updates to the project management

plan may include:
 Schedule baseline (in response to approved change requests)
 Schedule management plan (changes in the way the schedule is to be
managed)
 Cost baseline (additional costs incurred in compressing the schedule)

 Schedule data (New network diagrams may be developed to show
remaining duration and/or modifications to the original plan.).
 Project schedule (An updated schedule may be produced that reflects
approved changes.).
 Risk register (The risk register and/or risk response plans may be
updated based on the use of schedule compression techniques.).
6. Organizational Process Assets Updates: Organizational Process Assets

that may be updated as a result of schedule control include:
 The causes of variances that have occurred
 Corrective actions chosen and the rationale
 Other lessons learned with respect to schedule control
Other Topics:
Monte Carlo analysis: You should know that CPM and PERT tend to understate
schedule durations in comparison to Monte Carlo. This is because Monte Carlo
simulation can account for path convergence whereas CPM and PERT cannot.
This topic is addressed in more detail in the chapter on risk management. A
course slide visually displays this relationship.
GERT (Graphical Evaluation and Review Technique): This technique was

removed from the PMBOK® Guide but may remain on the exam. It is a
sophisticated schedule development tool that can handle loops (activities that
occur more than once) and conditional branches (activities that occur only if
something else happens first, i.e., “If–Then” logic).
Note: Additional practice network diagrams are included in the course slides
Self-Study
Drill Practice: Time Management
Question Answer
1. Name four categories of dependencies 1.

used in activity sequencing. a. Mandatory (also called “hard logic”)
b. Discretionary (also called preferred,
Note: All page numbers in this drill practice refer to preferential, or “soft logic”)
the reference manual unless otherwise indicated. c. External (work not under the direct control
of the project team)
d. Internal (work under the direct control of
the project team)
(p. 6-8)
2. Name two methods of compressing project 2. Crashing and Fast Tracking (p. 6-20).
duration.
3. Describe crashing: 3. Adding resources to critical path activities

to reduce the overall project schedule.
Usually increases cost (p. 6-20).
4. Describe fast tracking: 4. Doing activities in parallel that were initially

planned in sequence (p. 6-20).
Usually increases risk because of additional

coordination of resources and the possibility of
rework.
5. What is total float (slack)? 5. The amount of time an activity can be

delayed without delaying the project finish
date. Some practitioners also refer to total
float as either path float or shared float.
(Course slide 6-38)
6. What is free float (slack)? 6. The amount of time an activity can be
delayed without delaying the early start of any
immediate successor activities. Float owned
independently by an activity.
(Course slide 6-39)
7. What is resource leveling? 7. Any form of network analysis in which

scheduling decisions are driven by resource
management concerns (p. 6-19).
In practice, this usually means rescheduling

tasks into time periods where sufficient
resources are available.
The usual result of this practice is to push out

the project end date. Therefore, in an ideal
world, resource leveling should be limited to
activities with positive float, if possible.
8. How is schedule variance calculated? 8. Plan - Actual (pp. 1-7 and 6-23 & 24)
If a task is supposed to take five days and

actually takes ten days, the variance is
negative five days.
Negative variances mean the task took longer

than expected.
9. What are the three tools of sequence 9.

activities? Precedence diagramming method
Dependency determination
Leads and lags
(pp. 6-7 & 8)
10. What are heuristics? 10. Problem-solving techniques producing

“acceptable” or “good enough” results; often
called rules of thumb. (p. 6-19)
11. What is a milestone? 11. An activity with zero duration and

requiring no resources; normally used to mark
the beginning or ending of a task or
deliverable.
(p. 6-5)
12. What is the critical path? 12. The longest path through the project
network. Also the path with the least slack
(float).
Activities on the critical path usually have zero

float (but not always as the statement above
implies) (p. 6-18 and course slide 6-38).
13. Name three major advantages of 13.

precedence diagrams. a. They do not require dummy activities.
b. They increase scheduling flexibility by
allowing the overlapping of activities.
c. They deal with lag more easily.
(p. 6-8)
14. Name and define each of the four types of 14.
dependencies or logical relationships used in a. Finish-to-start: initiation of the successor
activity sequencing. depends on completion of the predecessor.
b. Finish-to-finish: completion of the
successor depends on completion of the
predecessor.
c. Start-to-start: initiation of the successor
depends on initiation of the predecessor.
d. Start-to-finish: completion of the
successor depends on initiation of the
predecessor (p. 6-7)
15. What are the advantages of a bar (Gantt) 15. Easy to construct and easy to read; bar
chart? charts are an easy way to show progress or
status (i.e., schedule variances) (p. 6-21).
16. Define activity duration estimating. 16. Assessing the number of work periods it
will take to complete an activity (p. 6-12).
17. What are the two outputs of estimate 17. Activity duration estimates and project
activity durations? documents updates (pp. 6-15 & 6-16).
18. What is a hammock activity? 18. A summary level task that shows the start
of the first activity and the end of the last
activity in a series of related activities. May be
displayed as part of a Gantt chart (p. 6-21).
19. What are the inputs to define activities? 19. The schedule management plan, scope
baseline, enterprise environmental factors,
and organizational process assets (p. 6-4).
20. What is the schedule baseline? 20. It is the approved project schedule; i.e.,
the original plan plus or minus approved
changes.
The baseline is used to measure and report

schedule performance. It should not be
changed without proper review and approval
(p. 6-20).
21. What information does a simulation 21. A range of potential project durations with
provide? associated probabilities (p. 6-20).
22. What is an indicator of flexibility in the 22. Activities that have positive slack (float)
schedule? provide flexibility as to start times and
resource usage (p. 6-18, tool #2).
23. What is a dummy activity? 23. A task with zero duration; used in arrow
diagram networks to correctly show multiple
dependencies (logical relationships). Not
needed in precedence diagrams (p. 6-8, tool #1
and course slides 6-28 & 32).
24. Who should develop the project 24. The project team (it is the PM’s
schedule? responsibility, but like development of most
plans, the expertise of various team members
is needed to complete the schedule) (Same
logic as for project management plan, p. 4-4).
25. What are the seven major scheduling 25.

processes? Plan schedule management
Define activities
Sequence activities
Estimate activity resources
Estimate activity durations
Develop schedule
Control schedule (p. 6-1)
26. What is a conditional diagram and what 26. GERT (Graphical Evaluation and Review
does it allow? Technique) is an example of a diagramming
technique that allows for loops (repetitive
tasks) and conditional branches (e.g., design
update only needed if inspection detects
errors).
(p. 6-25)
27. What are the differences between CPM 27.
and PERT? CPM = Critical Path Method
 Uses a single duration estimate
 Focus is on calculating float to determine
scheduling flexibility
PERT = Program Evaluation and Review
Technique
 Uses three time estimates to calculate a
weighted average duration estimate
 Allows calculation of variance so that it is
possible to assess schedule risk
 Uses a calculated expected value vs. a
single most likely estimate
(Course slides 6-78 to 6-80)
28. For schedule control purposes, what 28.

capabilities does project management a. Tracking of planned versus actual dates
software provide? (i.e., variances)
b. Forecasting the potential effects of
schedule changes
(p. 6-24, tool #2)
29. The arrow diagram method is limited to 29. Finish-to-start (p. 6-8)
what single kind of logical dependency?
30. List two ways to graphically portray a 30.

project network.  Activity-on-Arrow (Arrow Diagram)
 Activity-on-Node (Precedence Diagram)
(pp. 6-7 & 8 and course slides 6-32 to 6-34)
31. What is the relationship between the 31. The activity list includes all activities
activity list and the WBS? needed to complete the project. It includes the
schedule activities below the work packages
(pp. 6-4 & 5).
32. What is the formula to calculate a PERT- 32.
weighted average estimate? [o + 4m + p] / 6
o = optimistic time
m = most likely time
p = pessimistic time
(p. 1-7 and course slide 6-78)

33. What does the acronym PERT mean? 33. Program Evaluation Review Technique
(Course slide 6-80)
34. What is slack or float? 34. The amount of time a task can be delayed
without delaying the project (p. 6-18 and Course
slides 6-38 and 6-46).
35. What is lag? 35. The amount of waiting time between

tasks. Therefore, lag is not the same as float
(p. 6-8, tool #3)!
36. What is the schedule management plan? 36. A component of the project management
plan that specifies how the schedule will be
developed, managed, executed, and
controlled.
(pp. 6-1 and 6-3)
Unit 7: Cost
Management
Major Processes
7.1 Plan Cost Management
7.2 Estimate Costs
7.3 Determine Budget
7.4 Control Costs
Other Topics
Self-Study
Unit 7: Cost Management
The questions on this topic have historically been more difficult than average for some
exam takers because of unfamiliarity with some of the math. You will be responsible for
a broad range of cost concepts and the subject of earned value. The good news is that
you don’t have to be a certified public accountant to answer the questions; they are
approached from a project manager’s perspective.
NOTE: You may use a basic six-function calculator, which is built into the
computer at the test center. If you prefer, you may also ask for a handheld
calculator. The calculator will not be programmable or be capable of automated
statistical functions.
Major Processes
7.1 Plan Cost Management (establishing procedures for planning, managing,

expending, and controlling project costs)
7.2 Estimate Costs (estimating the total cost of all project activities)
7.3 Determine Budget (aggregating estimated costs to establish a cost baseline)
7.4 Control Costs (monitoring cost status and controlling changes to the cost baseline)
You should be aware that PMI endorses the concept of life cycle cost (also called the
“total cost of ownership”). Specifically, project teams should consider not only the
project costs, but also the entire life cycle cost of the major project deliverables. For
instance, the PM might lower project costs by reducing the number and extent of design
reviews. However, those project savings are likely to cause a substantially greater
increase in operating costs for the customer. Life cycle costs include the following
components:
 Project costs (some industries call this the acquisition cost)
 Operating and maintenance costs incurred by the user
 Disposal costs incurred at the end of an item’s useful life (must be done in a safe
and environmentally responsible manner)
NOTE: PMI observes that the ability to influence costs is greatest in the early stages of
a project and numerous government and industry studies have drawn the same
conclusion. Therefore, early scope definition is critical to successful cost performance.
7.1 Plan Cost Management (PMBOK® Guide, p. 195)
Plan cost management establishes procedures for planning, managing, expending, and
controlling project costs. This plan is a component of the project management plan.
Plan Cost Management
1. Project management plan 1. Expert judgment 1. Cost management plan

2. Project charter 2. Analytical techniques
Four Key Inputs for Plan Cost Management (PMBOK® Guide, p. 196):
1. Project Management Plan: The following three items provide information

that is useful in developing a cost management plan.
 Scope baseline: Contains the scope statement (product description,

key deliverables, constraints, and assumptions) and the WBS with the
detailed WBS dictionary.
 Schedule baseline: Defines when the costs will be incurred which is
important for the budgeting step.
 Other information: Any information from scheduling (such as
resources or changes), communications (keeping stakeholders aware
of cost issues), or risk (list of risk events, associated analysis, and
response plans) that may affect costs.
2. Project Charter: Identifies high-level cost estimates and approval

requirements for spending.
3. Enterprise Environmental Factors: Cost planning may be affected by the

following environmental factors:
 Organizational structure (PM level of authority over spending)

 Market conditions and currency exchange rates
 Published commercial information concerning resource rates, materials

costs, and equipment costs
4. Organizational Process Assets: The following organizational processes,

policies, procedures, and knowledge bases may affect cost planning:
 Financial control procedures (review of expenditures, accounting

practices, and standard procurement procedures)
 Historical information, lessons learned, and financial databases
 Formal and informal cost estimating and budgeting policies
Three Key Tools for Plan Cost Management (PMBOK® Guide, p. 198):
1. Expert Judgment: Expert judgment, guided by historical information on

similar projects, is used to develop the most appropriate cost management plan.
2. Analytical Techniques: Analytical techniques may be used for evaluating

funding choices such as self-funding, funding with equity, or funding by incurring
debt. These techniques may also be used to decide when to lease, rent,
purchase, or make the item yourself. Financial evaluations may use payback
period, return on investment, internal rate of return, discounted cash flow, and
net present value.
3. Meetings: Meetings held to develop the cost management plan. These

meetings may be attended by the project sponsor, project manager, project team
members, and other selected stakeholders.
One Key Output for Plan Cost Management (PMBOK® Guide, p. 198):
1. Cost Management Plan: As part of developing the project management plan,

a cost management plan is established which documents how estimating,
budgeting, and controlling are to be approached. Among other things, the cost
management plan may establish the following:
 Units of measure: For example, the unit of measure for tracking key
resources and time might be days, weeks, or months of effort. The unit of
measure for materials might be liters, tons, or cubic yards and so on.
 Level of precision: Will a cost estimate of $995.60 be rounded to $1000
or will a different rule be applied?
 Level of accuracy: The acceptable range for cost estimates (which may
be affected by various factors including the stage of the project life cycle
and the quality of the available data). See specific ranges of accuracy
provided in the next process (Estimate Costs).
 Organizational procedures links: The extent to which the WBS and
control accounts (cost accounts) will be used to plan and track cost
information. Using a code of accounts numerical identifier, each control
account is linked to the organization’s accounting system.
 Control thresholds: Establishes an allowable amount of variation before
corrective action is triggered.
 Rules of performance measurement: Earned Value rules for calculating
how much credit to take for partially completed activities (e.g., 0-100, 50-
50, and so on). Will be covered later in the chapter.
 Reporting formats and process descriptions: The processes of
estimating, budgeting, and control are described and desired formats for
reporting are established.
7.2 Estimate Costs (PMBOK® Guide, p. 200)
Cost estimating involves developing an estimate of the costs of all resources needed to
complete the project. The resources that need to be estimated include labor,
equipment, materials, facilities, services, and any special categories such as
contingency or an allowance for anticipated inflation.
The accuracy of estimates tends to improve as a project moves through its life cycle.
Ranges of accuracy that are used in some industries and have been tested in the past
include:
 Order of Magnitude estimates: “Ballpark” estimates without detailed data,

for example, analogous estimates. This estimate is also called a ROM
(Rough Order of Magnitude) in some organizations. The range of accuracy
is given as -25 to +75% and would be used for initiating or project approval.
 Budget estimates: Based on slightly better data and used to establish initial
funding during the early stages of planning. The range of accuracy is given
as -10 to +25%.
 Definitive estimates: Prepared from well defined, detailed data. A bottom-
up estimate using estimates of WBS work packages is a common example of
this kind of estimate. This estimate would be done in the latter stages of
planning and be used to establish a cost baseline. Range of accuracy is -5
to +10%.
Finally, cost estimating potentially includes evaluating trade-offs among alternatives

such as spending more money in the design phase to save money during production or
operations.
Estimate Costs
1. Cost management plan 1. Expert judgment 1. Activity cost estimates

2. Human resource 2. Analogous estimating 2. Basis of estimates
management plan 3. Parametric estimating 3. Project documents updates
3. Scope baseline 4. Bottom-up estimating
4. Project schedule 5. Three-point estimating
6. Enterprise environmental 7. Cost of quality
factors 8. Project management software
7. Organizational process 9. Vendor bid analysis
assets 10. Group decision-making techniques
Seven Key Inputs for Estimate Costs (PMBOK® Guide, p. 202):
1. Cost Management Plan: Defines how costs will be managed and controlled,
including methods and levels of accuracy.
2. Human Resource Management Plan: Cost estimates may be affected by

personnel rates and any associated rewards programs. The HR plan also
contains the resource calendar with a staffing plan. This plan provides estimated
time frames for various resources.
3. Scope Baseline: The following three items form the scope baseline and
contain information that is necessary for accurate cost estimating.
 Scope statement: Contains the product description, key deliverables,
constraints, and assumptions. For cost estimating, a decision must be
made as to whether the estimates will include only direct costs or will
also include indirect costs.
 WBS: Provides a structure to organize the cost estimates into useful
categories (cost accounts or control accounts).
 WBS dictionary: Provides the detailed information of what is needed

to produce the deliverables for each work package.
4. Project Schedule: Cost estimates are closely related to what resources will
be used and for how long (activity durations). Data from Estimate Activity
Resources (Section 6.4) and Estimate Activity Durations (Section 6.5) must be
coordinated carefully with cost estimating.
5. Risk Register: The risk register should be reviewed so that projected risk
mitigation costs may be included in the cost estimates.
6. Enterprise Environmental Factors: For cost estimating purposes,

environmental factors would include:
 Market conditions (what products are actually available in the
marketplace for any portions of the project that may be outsourced)
 Commercial databases that contain cost information
7. Organizational Process Assets: The following organizational processes,

policies, procedures, and knowledge bases may affect cost estimating:
 Cost estimating policies and templates.
Ten Key Tools for Estimate Costs (PMBOK® Guide, p. 204):
1. Expert Judgment: Expert judgment, guided by historical information on

similar projects, is used to improve the accuracy of available estimating data.
Expert judgment may also assist in choosing the most appropriate estimating
method.
2. Analogous Estimating: Previously described as one of the tools for duration

estimating, the technique is also used for estimating costs. Key points are:
 Uses the actual costs from a similar project and adjusts the estimate
according to whether the current project is expected to be harder or
easier than the previous one.
 Also called top-down estimating.
 Done early in the project life cycle in most cases.
 Is a form of expert judgment.
 Less costly than other techniques but also less accurate.
 Most reliable when:

a) The previous projects were similar in fact and not just in
appearance.
b) The estimators have the needed expertise.
3. Parametric Estimating: Mathematical modeling for the purpose of predicting

project costs. The models seek factors that are highly correlated, for example,
dollars per square foot of living space in residential construction. Parametric
models are most reliable when:
a) The historical information used to develop the information was accurate

b) The parameters in the model are readily quantifiable
c) The model is scalable (works well for small as well as large projects)
4. Bottom-up Estimating: Estimating the cost of individual work items and then
“rolling up” or summarizing the estimates to get a project total. The most widely
accepted technique uses the work packages as the “individual items”. As the
items estimated get smaller, the estimates usually become more accurate but
also more costly to develop.
5. Three-Point Estimating: Used exactly in the same way that it was for
duration estimates. Three-point or PERT estimates are useful when there is
underlying uncertainty in the work. As before, optimistic, most likely, and
pessimistic estimates are used to calculate an average cost that considers the
range of uncertainty in the estimates. The formulas are the same except that the
estimates are for costs rather than durations. PMI states that the following two
distributions are used to distinguish three-point from PERT:
 Triangular distribution: Used to model the three-point method
where the average cost would be calculated as a simple average of
the three estimates. E(c) = (O + M + P) / 3
 Beta distribution: Used to model the PERT method where the
average cost is calculated with a weighted average approach
(same as for schedule). E(c) = (O + 4M + P) / 6
6. Reserve Analysis: Cost estimates must consider potential risks in the

estimates for individual activities. Extra money can be incorporated into the
estimates as “reserves” or contingency reserve. Additional money can be
incorporated into the plan in two classic ways:
 Place the money into the budget for an individual work package that is
considered risky. This approach is for handling “known unknowns,” is
referred to as contingency reserve, and the money is already in the

cost baseline. In part, this money is intended to handle the costs of
implementing risk mitigation actions for risky work packages.
 The money may be a separately planned quantity that is not
associated with specific work packages. This approach is for handling
“unknown unknowns,” i.e., situations that are difficult to predict. This
amount of money is known as management reserve, is often a
percentage of the estimated cost, and is not in the currently approved
cost baseline.
The use of either type of reserve is intended to reduce the chance of a cost
overrun and the topic is discussed further in the chapter on risk management.
7. Cost of Quality (COQ): The cost of quality includes activities such as training
and audits that are done as part of quality management (which will be covered in
more detail in the chapter on quality).
8. Project Management Software: Facilitates rapid consideration of the cost

estimates for various project scenarios.
9. Vendor Bid Analysis: Applies to outsourced work using procurement

management processes.
10. Group Decision-Making Techniques: Techniques such as brainstorming,

Delphi, or nominal group may be used to improve the accuracy of cost estimates.
PMI believes that involving people in these techniques may increase commitment
to achieving the cost estimates.
Three Key Outputs for Estimate Costs (PMBOK® Guide, p. 207):
1. Activity Cost Estimates: Quantitative assessments (usually expressed in

units of currency) of the likely costs of the resources needed to complete the
project. Cost estimates may be improved through refinements during the project
life cycle. Cost estimates should consider risks and should address the following
areas: labor, materials, supplies and services, facilities, information technology,
and special categories such as inflation and cost reserve.
2. Basis of Estimates: Should include the following information:
 Description of the work (usually WBS)

 Basis of the estimate (how it was developed: parametric, bottom-up, …)
 Assumptions and constraints
 A range of possible results

 Confidence level (related to the range, i.e., a wide range indicates less
confidence in the probability of a given outcome)
3. Project Documents Updates: Documents that may be updated as a result of

cost estimating include the risk register.
7.3 Determine Budget (PMBOK® Guide, p. 208)
Cost budgeting involves aggregating estimated cost estimates for all individual activities
or work packages so that a cost baseline can be established for measuring
performance. The baseline includes authorized budgets and contingency reserves, but
excludes management reserves (the extra amount for “unknown unknowns”).
Determine Budget
1. Cost management plan 1. Cost aggregation 1. Cost baseline

2. Scope baseline 2. Reserve analysis 2. Project funding
3. Activity cost estimates 3. Expert judgment requirements
4. Basis of estimates 4. Historical relationships 3. Project documents updates
5. Project schedule 5. Funding limit
6. Resource calendars reconciliation
7. Risk register
8. Agreements
Nine Key Inputs for Determine Budget (PMBOK® Guide, p. 209):
1. Cost Management Plan: Describes how project costs will be managed and
controlled.
2. Scope Baseline: The following three items form the scope baseline and
contain information that is relevant to establishing the cost baseline.
 Scope statement: The scope statement is relevant to budgeting if it

identifies any constraints on the expenditure of money (such as a fiscal
year that constrains when certain funds can be spent).
 WBS: Provides a structure to organize the cost estimates into useful

categories (cost accounts or control accounts). The WBS also
identifies work packages so that work may be scheduled and a
spending baseline established.
 WBS dictionary: Provides the detailed information of what is needed
to produce the deliverables for each work package.
3. Activity Cost Estimates: Cost estimates for each activity within a work
package are aggregated so that the cost of each individual work package is
known. Work package estimates can then be aggregated at the control account
level and so on.
4. Basis of Estimates: Described in PMBOK® Guide Section 7.2.3.2 (includes

scope, deliverables, how the estimate was created, assumptions, constraints,
and an estimated range of possible outcomes). This information should also
address whether indirect costs are included in the budget.
5. Project Schedule: The schedule must be known to establish when specific

costs will be incurred.
6. Resource Calendars: The availability of resources affects both the cost as

well as the timing of the work. Resource calendars were considered previously
as part of activity resource and duration estimating.
7. Risk Register: The risk register provides information necessary to account

for the costs of risk response strategies.
8. Agreements: Provides information on costs incurred through outsourcing

various portions of the work, e.g., vendor bids.
9. Organizational Process Assets: The following organizational process

assets may affect cost budgeting:
 Formal and informal cost budgeting procedures and guidelines

 Cost budgeting tools
 Reporting methods
Five Key Tools for Determine Budget (PMBOK® Guide, p. 211):
1. Cost Aggregation: Described previously. Cost estimates are established for

work packages and summarized at higher levels such as control accounts or the
project total.
2. Reserve Analysis: Also discussed under cost estimating, reserve analysis

establishes the approach for both contingency and management reserves. The
course slides show an example of how reserve analysis relates to the cost
baseline.
3. Expert Judgment: The use of appropriate subject matter experts to improve

the accuracy of the budget.
4. Historical Relationships: Described previously for duration estimating, this

technique, formerly called parametric estimating (the use of mathematical
correlations), is also used for cost estimating and budgeting. As before,
parametric models are most accurate when:
a) The historical information used to develop the information is accurate

b) The parameters in the model are readily quantifiable
c) The model is scalable (works well for small as well as large projects)
5. Funding Limit Reconciliation: Some organizations “reconcile” funding

expenditures to prevent large fluctuations in disbursements. In some cases, this
process relies on tinkering with the timing of certain activities through the use of
imposed date constraints.
Three Key Outputs for Determine Budget (PMBOK® Guide, p. 212):
1. Cost Baseline: The cost baseline is a time-phased budget used to measure

and monitor cost performance. The baseline is developed by summing
estimated costs by time period and displaying them (often in the form of an S-
curve). The approved baseline should never be changed without formal change
control procedures. Large projects may have multiple cost baselines. See
Figure 7-8 on PMBOK® Guide, p. 213. Also, the Course Slides show
examples of an S-curve and the use of reserve (contingency vs.
management).
2. Project Funding Requirements: As mentioned above, funding is not always

a smooth, continuous process. The availability of the funds usually occurs in
increments and disbursements may not automatically be spread evenly. Many
organizations attempt to smooth the process as much as possible. See Figure
7-9 on PMBOK® Guide, p. 214 for an example of the typical incremental
approach to funding.
 Risk register
 Cost estimates
 Project schedule
7.4 Control Costs (PMBOK® Guide, p. 215)
Cost control is part of integrated change control. Effective cost control requires
management of the approved cost baseline (sometimes referred to as time-phased
budget) and any changes to that baseline. The two primary factors are managing cost
variances and cost changes. Cost control includes the following:
 Influencing the factors which create changes

 Ensuring that change requests are acted on in a timely manner
 Managing the change process
 Keeping costs within authorized funding
 Detecting and understanding cost variances
 Recording all changes
 Preventing inappropriate or unapproved changes
 Informing stakeholders of changes
 Bringing expected cost overruns within acceptable limits
Control Costs
1. Project management plan 1. Earned value management 1. Work performance information

2. Project funding 2. Forecasting 2. Cost forecasts
requirements 3. To-complete performance index 3. Change requests
3. Work performance data (TCPI) 4. Project management plan
4. Organizational process 4. Performance reviews updates
assets 5. Project management software 5. Project documents updates
6. Reserve analysis 6. OPA updates
Four Key Inputs for Control Costs (PMBOK® Guide, p. 216):
1. Project Management Plan: Contains the following information used to

control costs:
 Cost baseline: The baseline (plan) is compared with actual results to

determine if changes, preventive actions, or corrective actions are
necessary.
 Cost management plan: Describes how project costs are to be
managed and controlled.
2. Project Funding Requirements: Described previously in PMBOK® Guide,

Section 7.3.3.2.
3. Work Performance Data: Includes the following status information:
 Deliverables completed or partially completed

 Costs authorized vs. costs incurred (plan vs. actual)
 Estimates for completing the work (forecasts)
4. Organizational Process Assets: The following organizational process

assets may affect cost control:
 Formal and informal cost control procedures and guidelines

 Cost control tools
Six Key Tools for Control Costs (PMBOK® Guide, p. 217):
1. Earned Value Management: Earned value is a method of performance

measurement that provides current cost and schedule status at regular intervals.
The PMBOK® Guide, pp. 217-219 describes earned value as it relates to current
status.
2. Forecasting: Work performance information through each successive

reporting period is used to predict future performance on the project, PMBOK®
Guide pp. 220-221.
3. To-Complete Performance Index: Calculates the cost performance (CPI)

that must be maintained to achieve a performance goal. Usually the preference
is to maintain the original budget (finish at the BAC) or in some cases
performance may have deteriorated to the point that the current EAC becomes
an acceptable goal. See PMBOK® Guide, p. 221.
4. Performance Reviews: Regular meetings to review and assess cost

performance information. One or more of the following techniques are normally
employed (PMBOK® Guide, pp. 222-223):
 Variance analysis: Planned versus actual performance in the areas

of cost and schedule. Three earned value formulas are used for
variance analysis (cost variance, schedule variance, and variance at
completion).
 Trend analysis: Examining performance over time and projecting to
the future to determine whether performance is improving, remaining
the same, or deteriorating.
 Earned value: A special technique that accomplishes both variance
analysis as well as trend analysis (CPI, SPI).
The course slides provide detailed coverage of earned value techniques

that you must know for the exam.
5. Project Management Software: Automates the analysis of data by tracking

the values for PV, EV, and AC.
6. Reserve Analysis: Used to monitor whether contingency and management

reserves need adjusting (increased or decreased).
Six Key Outputs for Control Costs (PMBOK® Guide, p. 225):
1. Work Performance Information: This involves the actual documentation and

communication of calculated measurements such as CV, SV, CPI, SPI, VAC,
and TCPI. This information is documented and communicated to appropriate
stakeholders.
2. Cost Forecasts: Calculations such as EAC should be recorded and

communicated to stakeholders.
3. Change Requests: Change requests may lead to changes in the budget

(increase or decrease) and, as usual, change requests must be processed using
integrated change control.
4. Project Management Plan Updates: Components of the project

management plan that may be updated as a result of cost control include:
 Cost baseline: The baseline (plan) is compared with actual results to

determine if changes, preventive actions, or corrective actions are
necessary. In some cases, cost variances are so severe that the
baseline must be extensively revised to produce a realistic budget.
 Cost management plan: Describes how project costs are to be
managed and controlled (PMBOK® Guide, Introduction to Chapter 7, p.
193).
 Cost estimates
 Basis of estimates

that may be updated as a result of cost control include:
 Causes of variances
 Corrective actions chosen and the reasons
 Other lessons learned as a result of cost control
Other Topics:
Financial management tools and concepts:
 Opportunity cost: The cost of choosing one alternative and giving up the
potential benefits of another alternative. The concept has special relevance
to project selection; failure to accurately assess opportunity costs may cause
a company to miss projects that would yield the best financial returns.
 Sunk cost: Expended costs which you no longer control; “water over the
dam” so to speak. Sunk costs represent money already spent that cannot be
recovered. Financial management principles have long held that sunk costs
should be ignored when deciding whether to spend additional funds to
complete a project.
NOTE: The course slides cover numerous financial methods that have been
tested.
 Payback period: The amount of time until net cumulative cash flows are
greater than zero, that is, the point at which the project first makes a net
cumulative profit. When comparing projects, the shortest payback period
indicates the project that will become profitable most quickly. However,
payback period may ignore the potential magnitude of the profit.
 Benefit-Cost Ratio (BCR): BCRs provide a measure of expected

profitability by dividing expected revenues by expected costs for a project.
Key points for the exam:
 A BCR of 1.0 means that expected benefits (revenues) and costs are
equal, in other words, you have a “break-even” project.
 A BCR less than 1.0 means that costs are expected to exceed
revenues, in other words, the project is expected to lose money.
 A BCR greater than 1.0 is a profitable project; the higher the ratio the
better the project. For example, a BCR of 3.0 means that every dollar
invested in the project will generate a gross payback of $3.00.
 Present Value: Present value provides financial evaluation of future cash

flows to 1) judge the expected profitability of a project and 2) compare
projects for project selection purposes. The exam has historically focused
primarily on concepts, but you may have to do some calculations as well.
Key points for the exam:
 PV is the value today of a future cash flow.
 Payment today is worth more than payment tomorrow.
 Conversely, a cost incurred today is more costly than a cost incurred

tomorrow.
PV = Vt / (1 + i)t
Vt = the amount of a cash flow “t” time periods from now
i = interest rate (also called discount rate)
t = time period
Real-world projects do not consist of a single cash flow and, therefore, the
concept of evaluating multiple cash flows becomes necessary to properly
evaluate real projects. Discounted cash flows (DCF) and net present value
(NPV) are used to evaluate the estimated cash flows of real projects. DCF
calculations convert future cash flows into their present-day value. NPV uses
the calculations from discounted cash flows to determine whether a project will
recover any initial investment and make a profit.
 Internal Rate of Return (IRR): The IRR is an estimate of a project’s

profitability expressed as a percentage. It can be thought of as an average
rate of return. The definition is frequently stated as “the interest rate that
makes the present value of the costs (outflows) equal to the present value of
the revenues (inflows).” The higher the IRR, the better the project.
 Return on Investment (ROI): ROI is another profit indicator usually

expressed as a percentage. The classic formula is earnings divided by
investment. The challenge in the real world is for an organization to decide
how to measure earnings and investments. There are numerous ways to do
so and no single “correct” way really exists. When specifically applied to
projects, the formula is (Benefit-Cost) / Cost. If you measure “benefits” as
revenues, the formula becomes (Revenue-Cost) / Cost. ROI also happens to
equal BCR-1.
 Parametric estimates: Rely on mathematical relationships between two or

more characteristics of a project. You may be tested on two related concepts:
1. Regression analysis: Statistical modeling that represents parametric

relationships in a graphical display. For example, regression analysis
could model the relationship between the number of scope changes and
overall project cost. The relationship would likely show that as the number
of changes increases, the overall cost would also increase.
Number of scope changes
2. Learning curve: A frequently used parametric model in some

industries, the learning curve shows that the time it takes to perform some
tasks will decrease as we perform the task more frequently. Specifically,
learning curve theory says that each time we double the number of times
we have performed a task, the time it takes to perform the task will
decrease in a regular pattern. Learning curve modeling, which often uses

regression analysis, can determine the rate at which the improvement
(learning) occurs.
 Depreciation of capital: When money is spent to purchase capital

equipment, there are several ways to write the expense off of taxable income:
 Straight line method: Takes an equal credit during each year of the
useful life of the equipment.
 Accelerated depreciation methods: Used to write off the expenses
faster. You should know the names of two of these methods (double
declining balance and sum of the years digits).
 Value analysis (also called value engineering): Value analysis is a cost
reduction tool that involves a careful analysis of a design or item to 1) identify
all of the functions the item provides and 2) at what cost. The approach then
evaluates 3) whether each function is really necessary and whether it can be
provided at a 4) lower cost without degrading performance or quality.
 Law of diminishing returns: Situations where you put more and more into
something and get less and less back. For instance, investing more and
more money into technical performance improvements will often eventually
reach the point of diminishing returns.
 Variable versus fixed costs: Variable costs rise directly with the size of the
project, for example, labor and materials costs consumed directly by the
project. Fixed costs are nonrecurring expenses such as establishing a
production line or purchasing equipment. Fixed costs do not change because
you decide to produce more units.
 Direct versus indirect costs: Direct costs are incurred directly by a specific
project and include such items as salaries of project staff, materials used
directly on the project, subcontractors’ costs, and so on. Indirect costs are
the organization’s cost of doing business, and prorated shares of those costs
are often allocated to various projects in the form of overhead costs.
Examples include security guards, electricity, fringe benefits, insurance, and
taxes.
 Working capital: Current assets minus current liabilities.
Self-Study
Drill Practice: Cost Management
Question Answer
1. In earned value, how is a cost variance 1. EV - AC or BCWP - ACWP

calculated?
If $3,000 worth of work has been
Note: All page numbers in this drill practice refer to accomplished (BCWP) and it cost $2,800 to
the reference manual unless otherwise indicated. complete that work (ACWP), the cost variance
is positive $200, indicating a cost underrun
(Course slide 7-47).
2. In earned value, how is a CPI calculated? 2. EV / AC or BCWP / ACWP
The CPI uses the same numbers as a cost

variance, but divides them to create a ratio.
If BCWP is $1,000 and ACWP is $1,000, the
CPI is 1.0 meaning that cost performance is
exactly according to plan.
(Course slide 7-47)
3. What is the EAC and how is it calculated? 3. The estimate at completion is a revised
estimate of total project cost and can be
calculated several ways (Course slides 7-50 to
7-52).
EAC = BAC / CPI (primary formula which
assumes that current performance will
continue into the future)
EAC = AC + (BAC-EV) (which assumes that
remaining work will be accomplished at the
original budgeted rate)
EAC = AC + [(BAC-EV) / (CPI x SPI)] (which
is used if you need to also consider the effect
of the schedule if you have an imposed
deadline)
4. What is accelerated depreciation? 4. A way to write capital expenses off

corporate taxes more quickly (p. 7-18).
5. Name two methods of accelerated 5.

depreciation.  Double declining balance
 Sum of the years digits
(p. 7-18)
6. What is working capital? 6. Current assets minus current liabilities
(p. 7-18).
7. What is the purpose of management 7. Reduce the chance of a cost overrun

reserve? (p. 7-8).
8. What is a BCR? 8. A benefit-cost ratio is calculated by the

formula:
Revenues / Costs
A ratio greater than 1.0 indicates a profitable

project (p. 7-16).
9. What is value analysis and how does the 9. A cost reduction tool comprised of four
process work? major steps:
a. Analyze a proposed design (determine
inherent functions)
b. Determine relative cost of each function
c. Assess whether each function is really
needed
d. Assess how to provide the necessary
functions at the lowest cost without
compromising quality or performance
(p. 7-18).
10. What is the cost management plan? 10. A component of the project management
plan that documents how estimating,
budgeting, and controlling are to be handled
(pp. 7-3 & 4).
11. What is an IRR? 11. The internal rate of return is an estimate

of a project’s profitability expressed as a
percentage.
It can also be thought of as an average rate of

return. The higher the percentage, the better
the project profit (p. 7-17).
12. What is a bottom-up cost estimate? 12. A bottom-up estimate uses three primary
steps:
a. Create a project WBS
b. Do detailed cost estimates for each work
package
c. Add the cost estimates to provide
estimates for higher levels in the WBS
(pp. 7-4 and 7-7).
13. What is an approximate range of accuracy 13. -5 to +10 percent (p. 7-4).
for a bottom-up estimate?
14. What is payback period? 14. The first time period in which net
cumulative revenues exceed net cumulative
costs.
Helps assess which project might become

profitable most quickly (p. 7-16).
15. Regression analysis relies on what kind of 15. Parametric (p. 7-17).
cost estimating?
16. What is an opportunity cost? 16. The benefit that is lost by investing in a
given project instead of an alternative.
(p. 7-15)
17. What is the cost baseline? 17. A time-phased budget used to measure
and monitor cost performance on a project (p.
7-11).
18. What is cost control? 18.

a. Influencing the factors which create
changes
b. Ensuring requested changes are agreed
upon
c. Managing the actual changes as they
occur
d. Determining that the cost baseline has
changed (p. 7-12).
19. What is a sunk cost? 19. Costs already expended and no longer
under your control.
They are considered irrelevant when deciding

whether to spend more money to finish a
partially completed project (p. 7-15).
20. A BCR (benefit cost ratio) greater than 20. False. A BCR greater than one indicates
zero indicates a profitable project. True or a profitable project. Example: Assume
false? revenues are estimated at $50,000 and the
cost estimate is $100,000. The BCR would be
0.5 (greater than zero) but the project would
lose $50,000 (p. 7-16).
21. What is the learning curve theory? 21. The learning curve theory holds that costs
will decrease as you get better at doing a
repetitive task. Formally stated, the learning
curve approach says:
Unit costs will decrease in a regular pattern

each time the number of units produced is
doubled (pp. 7-17 & 18).
22. Present value is ______. 22. the value today of future cash flows
(p. 7-16).
23. Distinguish variable from fixed costs. 23.

Variable costs rise directly with the size of the
project, e.g., labor cost & materials consumed
directly by project work.
Fixed costs are non-recurring, start-up

expenses such as establishing a production
line or purchasing equipment (furniture, test
equipment). Fixed costs do not change when
you decide to produce more units (p. 7-18).
24. Distinguish direct from indirect costs. 24.

Direct costs are incurred directly by a specific
project, e.g., salaries of project staff, materials
used directly on the project, subcontractors’
costs, and so forth.
Indirect costs are the organization’s cost of

doing business and prorated shares of those
are often allocated to various projects in the
form of overhead costs. Examples include
security guards, electricity, fringe benefits,
insurance, and taxes (p. 7-18).
25. If variable costs are $100 per unit and 25.

fixed costs are $2,000:
a. What is the cost of producing 10 units? a. (10 x 100) + 2,000 = $3,000

b. What is the cost of producing an extra
10 units? b. 10 x 100 = $1,000 (p. 7-18)
26. Is ROI related to BCR in any way? 26. Yes. They both use revenues and costs
in the calculations. The difference is that ROI
subtracts costs from revenues in the
numerator. The result is that ROI = BCR-1.
To get ROI as a percentage, simply multiply
the ROI by 100. (p. 7-17).
27. Using more and more resources and 27. Law of diminishing returns (p. 7-18).
getting less and less resulting output describes
what law?
28. What document provides the basis to 28. WBS (a component of the scope baseline)
identify all the work that will incur costs on a (p. 7-5, Input #3).
project?
29. If: 29.

PV (BCWS) = $2,200 a. SV = 2,000 - 2,200 = - $200; behind
schedule
EV (BCWP) = $2,000
AC (ACWP) = $2,500 b. CV = 2,000 - 2,500 = - $500; cost overrun
BAC = $10,000
c. VAC = BAC - EAC (therefore need to
a. What is the schedule status? calculate the EAC)
b. What is the cost performance thus far? EAC = BAC / CPI where CPI = EV / AC
c. What is the expected variance at project CPI = 2,000 / 2,500 = .80
completion? EAC = 10,000 / .80 = $12,500
Finally, VAC = 10,000 - 12,500 = -$2,500; the

project is expected to finish with a $2,500 cost
overrun (pp. 7-13/14 and Unit 7 slides).
30. What is a Life Cycle Cost (LCC) estimate? 30. A cost estimate covering the entire cost of
ownership for the customer, i.e., the cost of
the project (acquiring the product or service),
the costs of operating and maintaining the
item, and disposition costs if appropriate (p. 7-
1).
31. What are the two conditions under which 31. Analogous estimates, while less costly
analogous estimating works best? than other techniques, are also less accurate.
They are most reliable when:
a. The previous projects used for comparison
are similar in fact and not just in appearance,
and
b. The estimators have the needed expertise
(p. 7-7).
32. Identify the three outputs of estimate 32.

costs. Activity cost estimates
Basis of estimates
Project documents updates
(pp. 7-8 & 9)
33. In earned value, what is the 50-50 rule? 33. It is one way to determine how much work
has been completed on a project, i.e., the
BCWP.
If a task is budgeted to cost $100, credit is

taken for half ($50) when the task begins and
the other half is credited only when the task is
complete.
The rule is most accurate if work packages are

approximately the same size
(pp. 7-3/4 and course slides, Unit 7).
34. When is parametric modeling most 34.

reliable? a. The historical information used to develop
the model was accurate
b. The parameters used in the model are in
fact quantifiable
c. The model is scalable (appropriate for small
and large projects) (p. 7-7, Tool #3).
35. What five types of supporting detail are 35.

recommended for cost estimating? Description of the work
Basis for the estimate (how developed)
Constraints and assumptions
The range of possible results
Confidence level (pp. 7-8 & 9).
36. What is the cost baseline? 36. A time-phased budget used to measure
and monitor cost performance. Often
displayed in the form of an S-curve (p. 7-11).
37. Is it possible to have multiple cost 37. Yes, especially on larger projects where
baselines? one might want to measure different aspects
of cost performance (p. 7-11).
38. How is present value calculated? 38.

PV = Vt / (1 + i)t
Vt = cash flow in time period “t”

i = the interest rate
t = the relevant time period (p. 7-16)
39. What is an order of magnitude estimate? 39. A guesstimate or ballpark estimate usually
done early when detailed information is not
available.
Range of accuracy is -25 to +75 percent

(p. 7-4).
40. What is a definitive estimate? 40. A detailed, accurate estimate prepared

from techniques such as bottom-up.
Range of accuracy is -5 to +10 percent

(p. 7-4).
Unit 8: Quality
Management
Major Processes
8.1 Plan Quality Management
8.2 Perform Quality Assurance
8.3 Control Quality
Other Topics
Self-Study
Unit 8: Quality Management
Historically, quality management questions have been difficult for some exam takers for
two major reasons: 1) over-reliance on their previous training and personal experience
(rather than carefully reviewing PMI® terminology) and 2) mathematical concepts such
as process control and standard deviation have caused difficulty for some people.
Major Processes
8.1 Plan Quality Management (identifying quality requirements and standards and
how to demonstrate compliance)
8.2 Perform Quality Assurance (auditing quality requirements and quality control
measurements to ensure appropriate quality standards are used)
8.3 Control Quality (monitoring results to assess performance and recommend
necessary changes)
The PMBOK® Guide defines quality management as the processes required to ensure
that the project will satisfy the needs for which it was undertaken. PMI indicates that
their approach to quality management is intended to be compatible with the
International Organization for Standardization (ISO) as well as other well-known
approaches associated with Deming, Crosby, TQM, Six Sigma, Lean Six Sigma, and
Continuous Improvement.
PMI defines quality as the degree to which a set of inherent characteristics fulfills
requirements (PMBOK® Guide, p. 228). A critical part of the process is to identify
stakeholder needs and turn them into requirements. Needs may be explicitly stated or
implied.
Quality and grade are not the same thing. Grade is measured by features and functions
and a project team can choose a lower grade because it saves money and still meets
requirements (for example, a BMW would be nice but a Ford Focus may meet your
needs at a lower cost). However, low quality is always a problem because it means that
needs and requirements are not being met.
Although not specifically mentioned in the PMBOK® Guide, a related concept that often
appears on the exam is that of gold-plating. Gold-plating is providing a solution that
exceeds the original requirement and is bad to the extent that it may cause the project
to cost more and take longer. If the requirements are accurate, there is no reason to
exceed them (especially if doing so results in lost profits for the contractor).
PMI also distinguishes precision from accuracy. Precision is consistency or

“exactness”, which means that process outcomes have very little “scatter” or variation.
Unfortunately, outcomes could be consistently in the wrong place (i.e., not meeting the
requirements) and so accuracy is also required. Accuracy means correctness, which
means that outcomes are close to the required value.
Finally, PMI contends that achieving ISO compatibility means that quality management
must recognize the importance of:
 Customer satisfaction, which requires attention to conformance to

requirements (the project produces what it said it would) and fitness for use (the
product must satisfy real needs).
 Prevention over inspection, which holds that the cost of avoiding mistakes is
less than the cost of correcting them.
 Continuous improvement, which uses techniques such as the Shewhart plan-
do-check-act model, TQM, Six Sigma, Lean Six Sigma and the Organizational
Project Management Maturity Model (OPM3®).
 Management responsibility, which recognizes that participation of the entire
organization is needed for success, but it is the responsibility of management to
provide adequate resources and sound processes.
 Cost of quality (COQ), which refers to the total cost of conformance as well as
nonconformance. Modern quality thinking emphasizes the cost of conformance
so that defects are prevented rather than spending time and money correcting
mistakes. PMI indicates that post-project quality costs may be incurred because
of recalls, warranty work, and product returns. These post-project quality costs
should be analyzed as a part of on-going program and portfolio management.
8.1 Plan Quality Management (PMBOK® Guide, p. 231)

Quality planning involves identifying quality requirements and standards for the project
and the product and documenting how to demonstrate compliance. The resulting
quality management plan provides guidance on how quality will be managed and
validated. PMI emphasizes that quality should be planned in, not inspected in.
Although inspection is definitely part of quality management, increased inspection is
generally not considered the best path to improved quality. Quality planning should be
performed in parallel with other planning efforts such as cost, schedule, procurement,
and risk. Project planners must always remember that changes in quality may
especially affect cost, schedule, and risk.
Plan Quality Management
1. Project management plan 1. Cost-benefit analysis 1. Quality management plan

2. Stakeholder register 2. Cost of quality 2. Process improvement plan
3. Risk register 3. Seven basic quality tools 3. Quality metrics
4. Requirements documentation 4. Benchmarking 4. Quality checklists
5. Enterprise environmental 5. Design of experiments 5. Project documents updates
factors 6. Statistical sampling
6. Organizational process 7. Additional quality planning tools
assets 8. Meetings
Six Key Inputs for Plan Quality Management (PMBOK® Guide, p. 233):
1. Project Management Plan: The quality management plan is a component of

the project management plan and contains the following information:
a) Scope baseline: Comprised of the following three documents:
 Scope statement: Contains project description, major

deliverables, and acceptance criteria. Acceptance criteria provide a
method for assessing whether quality requirements have been met
and may also have an effect on overall project costs.
 WBS: Identifies the deliverables, work packages, and control
accounts used to measure performance.
 WBS dictionary: Defines technical information for completing
each activity.
b) Schedule baseline: The approved schedule including planned start

and finish times.
c) Cost baseline: Documents planned costs and the time intervals for
measuring and reporting actual cost performance.
d) Other management plans: Various subsidiary management plans

(human resource, communication, risk, procurement, and stakeholder)
may highlight areas of concern for quality management.
2. Stakeholder Register: As described earlier, the register identifies

stakeholders with an interest in the project. In this case, the focus would be on
those with an interest in or impact on quality.
3. Risk Register: May contain information on threats and opportunities that may
affect quality (Section 11.2.3.1).
4. Requirements Documentation: Captures and documents key product and

project requirements that must be met to satisfy stakeholders. Quality
management is aimed at meeting these requirements.
5. Enterprise Environmental Factors: Factors such as government or industry

regulations, rules, standards, and guidelines must be considered. For the exam,
you should know the difference between a standard and a regulation. A standard
is an optional guide that suggests preferred practices. A regulation is mandatory
and requires compliance (building codes on a construction project).
 Governmental regulations (compliance is mandatory)

 Organizational or industry rules, standards, and guidelines (which
are usually optional guides or best practices)
 Working/operating conditions for the project/product
 Cultural perceptions that may affect expectations about quality
6. Organizational Process Assets: Organizational Process Assets that might

influence the Plan Quality process include:
 Organizational quality policies, procedures, and guidelines

 Historical databases and lessons learned
 Know the PMI definition of quality policy, which is the overall
intentions and direction of an organization with regard to quality, as
formally expressed by top management
Eight Key Tools for Plan Quality Management (PMBOK® Guide, p. 235):
1. Cost-Benefit Analysis: For quality planning purposes, benefit/cost trade-offs

refer to the cost of engaging in quality management activities against the
resulting benefits to the project. The potential benefits of meeting quality
requirements include:
 Less rework
 Higher productivity
 Lower costs and increased profitability

 Increased stakeholder satisfaction
2. Cost of Quality (COQ): The total cost of efforts to achieve quality, which
includes the costs of conformance (preventing defects and assessing quality)
and non-conformance (fixing defects). Three specific categories of costs are
prevention, appraisal, and failure. Preventing defects is believed to reduce
overall costs and is preferred over costs of non-conformance.
Prevention Appraisal Failure

(Build a Quality Product) (Assess Quality) (Handle Defects)
“Conformance” “Conformance” “Non-conformance”
 Planning  Test and evaluation Internal (found by project)

 Training  Process control  Scrap
 Equipment (calibration  Inspection  Rework
and maintenance) External (found by customer)
 Liabilities (recalls)
 Warranty work
 Lost business
Also note: PMI advocates Deming’s philosophy that approximately 80-90% of

the costs of quality are the direct responsibility of management.
3. Seven Basic Quality Tools: Also known as 7QC, the seven basic quality
tools include:
a) Cause and effect diagrams: You must know that cause and effect
diagrams are also called Ishikawa or Fishbone diagrams. They are used to
illustrate the possible factors that may be causing or influencing certain
problems. The problem statement is displayed at the “head of the fishbone” and
selected stakeholders ask “why” until an actionable root cause has been
identified. One possible use of fishbone diagrams is to investigate the special
variations known as “special causes” in control charts (covered below in item 3f).
PMI also emphasizes that they may be used to stimulate thinking and discussion.
b) Flowcharts: Diagrams used to help analyze how problems occur.

Most flowcharts show activities, decision points, and the sequence in which
process steps occur. They are also called process maps because they are often
used to show the steps in a process so that problems may be eliminated and
improvements implemented. The PMBOK® Guide provides an illustration in

Figure 8-7 on page 239.
c) Checksheets: Permit data to be collected quickly in simple,

standardized formats. They are used to make data collection fast and easy. The
data most frequently collected are defect causes, number of defects, and defect
locations. The checksheet may be a simple checklist format or it may also
contain a graphic representation of an object (rental car companies sometimes
use such a picture for checking a car before you leave the lot). The data needed
to create Pareto diagrams may be collected using checksheets. Again, PMBOK®
Guide, Figure 8-7, p. 239 shows an illustration.
d) Pareto diagrams: A histogram (vertical bar chart) rank ordered to

display the most likely causes of defects in descending order. The greatest
cause of defects or variances is shown as the tallest bar on the left of the chart.
The causes are rank ordered from left to right, and the rank ordering is used to
guide corrective action, i.e., the greatest cause of variance is worked on first.
The tool was named after an Italian economist who discovered that 80% of the
wealth in a particular region in Europe was held by only 20% of the population.
This discovery eventually was dubbed the 80/20 rule, indicating the importance
of focusing efforts toward improvement on the “significant few.”
e) Histograms: A vertical bar chart that rank orders or prioritizes data. A

Pareto diagram is a specific example of such a chart.
f) Control charts: Control charts are used to determine whether a

process is stable (under control) and is therefore producing predictable results.
The charts track three major types of data: 1) specification limits are
requirements in the contract, 2) control limits define points at which corrective
action is considered, and 3) there is a planned goal (the perfect outcome).
Key points about control charts (read the following details as part of
your self-study):
 A process need not be adjusted if it is under control. However, it can be

changed to provide basic improvements at any time.
 Upper and lower control limits (UCL/LCL) must not be confused with
specification limits (USL/LSL). Control limits describe the natural
variation of a process; observations (process results) that fall within the
limits usually indicate normal, expected variations. Points outside the
limits mean that something has occurred that needs investigation and
perhaps correction. Points outside the limits are referred to as special

events or assignable causes. Typical causes of such results are:
 Equipment problems (tolerances not adjusted properly, worn out, and

so on)
 Materials problems (wrong quality/grade, defective, and so on)
 Employee problems (understaffed, poor training, and so on)
The PMBOK® Guide states that control limits are generally set at plus or
minus three sigma from the mean.
 Specification limits are the tolerances agreed to in the contract.

Whereas specification limits represent the contractual obligation, control
limits represent the natural capability of your current process. Spec limits
are sometimes referred to as the “voice of the customer.”
 Rule of Seven: When interpreting control charts, this rule of thumb

(heuristic) states that if seven or more observations in a row fall on the
same side of the mean (or if they trend constantly in the same direction—
increasing or decreasing), they should be investigated as if they have an
assignable cause. This is true even if the observations are within the
control limits. The reason for this rule is that it is extremely unlikely that
seven observations in a row would fit the pattern described if the process
is operating normally (by “extremely unlikely” we mean less than a 1
percent chance, calculated as .50 raised to the 7th power, or .0078).
 Effect of standard deviation: Recall the concept of six sigma that was
mentioned in the time management section.
Six Sigma: You should know that PMI has observed that numerous
“modern” companies have adopted Six Sigma as the standard for
measuring quality. The more traditional approach was three sigma. The
difference is that six sigma captures about 99.9997% of outcomes
whereas three sigma only captures about 99.7%. That means that
defects would occur only about 3.4 times in a million under six sigma but
they would occur three times in a thousand under three sigma. In other
words, six sigma is a much more stringent quality control requirement.
Effect of sample size on control limits: Standard deviation is one of

the factors that affects whether the upper and lower control limits are
wide or narrow in comparison to the mean in a control chart. For the
exam, be aware that larger sample sizes will tend to result in smaller
standard deviations, which in turn mean more narrow control limits. The
converse is also true, i.e., smaller sample sizes tend toward larger
standard deviations and wider control limits.
g) Scatter diagrams: Shows the relationship between two variables

known as the dependent and the independent variables. The dependent variable
is usually shown as the vertical or Y-axis and might be, for example, the defect
rate. The independent variable is usually the horizontal or X-axis and might be a
variable such as the average hours of training for an employee.
4. Benchmarking: Comparing planned or actual project practices to those of

other projects to a) generate ideas for improvement and b) provide a standard to
measure performance against.
5. Design of Experiments (DOE): A statistical technique that helps determine

how different variables influence project outcomes. Experiments are essentially
“observations conducted under controlled circumstances.” For instance,
experiments during development of an automobile may control various
combinations of tires and suspension and reveal which produces the best ride for
the target customers.
PMI suggests that DOE is especially useful for determining how much testing is
needed and for optimizing the performance of processes and/or products.
6. Statistical Sampling: Choosing part of a population for inspection. For

example, one might examine 150 of the 1,000 welds on a bridge construction
project to determine whether the welds conform to requirements. Sampling is
done to reduce the cost of quality. A sampling plan is often developed during
quality planning so that the total cost of quality is known.
7. Additional Quality Planning Tools: There are other techniques that can
assist in defining quality requirements, including:
 Brainstorming
 Force field analysis
 Nominal group technique
 Quality management and control tools (defined in Section 8.2.2.1)
8. Meetings: Meetings involving the project manager, sponsor, selected team

members, and other selected stakeholders for the purpose of developing the
quality management plan.
Five Key Outputs for Plan Quality Management (PMBOK® Guide, p. 241):
1. Quality Management Plan: Describes how the project team will implement
its quality policy. The quality plan is an input to the overall project management
plan and describes the approaches for quality assurance, continuous process
improvement, and quality control. The plan should focus on efforts early in the
project that will reduce cost and schedule problems caused by rework.
2. Process Improvement Plan: A plan that details the steps for improving
existing processes. May include activities such as:
 Process boundaries: Describes the start, purpose, and end of each

process. The following processes are normally part of quality
management: audits, metrics, benchmarking, experiments, quality
planning, and status reports.
 Process configuration: A flowchart that shows all steps and
interfaces in a process.
 Targets for Improved Performance: Self-explanatory.
 Process metrics: Measuring performance and improvements.
3. Quality Metrics: Also known as operational definitions, metrics describe how

something will be measured. Quality metrics might include failure rates and
reliability. A related project performance metric might measure whether an
activity is on time (A decision would have to be made as to whether on time
means starting on time, finishing on time, or both). Other typical quality metrics
include defect frequency, failure rate, reliability (such as MTBF, mean time
between failure), and test results (technical performance).
4. Quality Checklists: A structured tool to verify that all steps in a process have
been performed. Checklists are often used in the quality management process,
especially for complex tasks or for tasks performed frequently.
5. Project Documents Updates: Documents that may be updated as a result of

quality planning include:
 Stakeholder register (Section 13.1.3.1)
 Responsibility assignment matrix (Section 9.1.2.1)
 WBS and WBS dictionary
8.2 Perform Quality Assurance (PMBOK® Guide, p. 242)
Quality assurance involves auditing quality requirements and results from quality control
measurements to ensure the project will use appropriate quality standards and
processes.
Quality assurance creates a management system for auditing quality requirements,

reviewing organizational processes (audits), and capturing the results from quality
control in the form of QC measurements. The QC feedback is used to determine
whether adjustments are needed in the quality assurance system. Quality assurance
activities fall under the costs of conformance.
Quality assurance is also the umbrella for continuous process improvement.

Continuous improvement is aimed at identifying and reviewing all organizational
processes so that increased efficiency and effectiveness can be achieved.
Perform Quality Assurance
1. Quality management plan 1. Quality management and 1. Change requests

2. Process improvement plan control tools 2. Project management plan
3. Quality metrics 2. Quality audits updates
4. Quality control measurements 3. Process analysis 3. Project documents updates
5. Project documents 4. OPA updates
Five Key Inputs for Perform Quality Assurance (PMBOK® Guide, p. 244):
1. Quality Management Plan: Describes the approaches for quality assurance

and continuous process improvement.
2. Process Improvement Plan: Details the steps for analyzing processes to

improve project management and product development processes (Section
8.1.3.2).
3. Quality Metrics: Identifies attributes that should be measured (Section

8.1.3.3).
4. Quality Control Measurements: The results of quality control that are in turn
fed back to Quality Assurance to consider any potential changes in the
organization’s quality standards and processes. These measurements provide
evidence as to whether processes are performing to the required standards of

the organization and/or customer.
5. Project Documents: May affect quality assurance and should be monitored,

especially with respect to configuration management.
Three Key Tools for Perform Quality Assurance (PMBOK® Guide, p. 245):
1. Quality Management and Control Tools: The tools for quality planning
(Section 8.1.2) and quality control (Section 8.3.2) may also be used for quality
assurance. Other relevant tools include (see PMBOK® Guide, Figure 8-10, p.
246):
 Affinity diagrams (a kind of brainstorming tool used by a team to organize
large amounts of detailed data into logical categories)
 Process decision program charts (identifies the steps envisioned for

reaching a stated goal and highlights possible risks)
 Interrelationship digraphs (a special form of cause-and-effect diagram

aimed at examining factors in complex situations)
 Tree diagrams (conceptually similar to the decomposition of a WBS, this tool

breaks broad categories of information into finer and finer levels of detail)
 Prioritization matrices (much like a scoring model and pairwise comparisons,

this tool applies weighted criteria to rank order and prioritize any list of options)
 Activity network diagrams (used to plan the appropriate sequence for a set
of activities or tasks; examples include arrow and precedence diagrams covered
previously in the time management chapter)
 Matrix diagrams (a chart with rows, columns, and cells [problems, factors,
objectives respectively; the diagram attempts to show the strength of
relationships among these factors)
2. Quality Audits: Structured, independent reviews to identify inefficient

processes, reduce the cost of quality, and increase the percentage of accepted
products (prevent defects from occurring). The specific objectives of a quality
audit may include:
 Identify and share best practices currently being implemented

 Identify shortcomings and nonconformities
 Document the lessons learned from each audit
 Share good practices used on similar projects in the organization and
within the relevant industry
Audits may be scheduled or random, and they may be conducted by internal or

external auditors.
3. Process Analysis: Identifies and implements needed improvements by using

the process improvement plans mentioned earlier (Section 8.1.3.2).
Four Key Outputs for Perform Quality Assurance (PMBOK® Guide, p. 247):
1. Change Requests: Change requests may be used to take corrective action,

preventive action, or perform defect repair. In this case, the requested changes
may be aimed at quality improvement. As always, change requests are
processed using integrated change control (Section 4.5).
2. Project Management Plan Updates: Portions of the project management

plan that may be updated as a result of quality assurance include:

 Scope management plan
3. Project Documents Updates: May include the following:
 Quality audit reports

 Training plans
 Process documentation
4. Organizational Process Assets Updates: Any updates to established

quality standards and the quality management system.
Additional Information about Quality Assurance:
The quality assurance system should provide three things:
 Auditing
 Feedback
 Correction
Quality evaluation: There are two kinds of evaluation you should know for the
exam. They are similar to the mid-project and post-project evaluations in the
integration management chapter, and they come from the literature on education:
 Formative (also called a quality audit): Done during the project for the
purpose of making corrections.
 Summative (also called quality improvement): Done after the project

for the purpose of documenting lessons learned.
Quality responsibility: Responsibility for quality can be viewed two ways (be
careful of the exact wording on this topic):
1. Responsibility for a task: Belongs to the individual employee performing

the task.
2. Responsibility for the project: Belongs to the project manager.
8.3 Control Quality (PMBOK® Guide, p. 248)
Quality control involves monitoring and recording specific project results to assess
performance and recommend necessary changes. Project results include both product
deliverables and project performance measures such as cost and schedule.
The primary differences between quality assurance and quality control are as follows:
 Quality assurance is used during planning and executing to provide
confidence that stakeholders’ requirements will be met.
 Quality control is used during executing and closing to provide formal
documentation that acceptance criteria have been met.
Project teams should know the differences between:
 Prevention (keeping errors out of the process) and inspection (keeping errors
away from the customer).
 Attribute sampling (the result conforms or it does not; an item is dented or not
dented) and variables sampling (results are measured to determine the degree
of conformity).
 Tolerances (the result is acceptable if it’s within the range specified by the
tolerance) and control limits (the process is under control if the result falls within
the control limits).
Control Quality
1. Project management plan 1. Seven basic quality tools 1. Quality control measurements
2. Quality metrics 2. Statistical sampling 2. Validated changes
3. Quality checklists 3. Inspection 3. Verified deliverables
4. Work performance data 4. Approved change requests 4. Work performance information
5. Approved change requests review 5. Change requests
6. Deliverables 6. Project management plan
8. Organizational process assets 7. Project documents updates
8. OPA updates
Eight Key Inputs for Control Quality (PMBOK® Guide, p. 250):
1. Project Management Plan: Contains the quality management plan which

documents how quality control is to be handled.
2. Quality Metrics: Described in Section 8.1.3.3, provides information such as

MTTR (Mean Time To Repair) and MTBF (Mean Time Between Failure).
3. Quality Checklists: Described in Section 8.1.3.4.
4. Work Performance Data: Contains measures of actual progress which are

compared to planned progress. These metrics include:
 Planned vs. actual technical performance

 Planned vs. actual schedule performance
 Planned vs. actual cost performance
5. Approved Change Requests: Approved changes may affect work methods,

schedules, and defect repairs. The correct and timely implementation of
approved changes must be verified.
6. Deliverables: Described in Section 4.3.3.1 (any verifiable product or result).
7. Project Documents: Relevant documents include:

 Agreements (contracts, MOUs, and so on)
 Quality audit reports and change logs with corrective action plans
 Training plans
 Process documentation associated with use of the seven basic quality
tools

affect quality control include:
 Quality standards and policies
 Standard work guidelines
 Procedures and policies for issue reporting, defect reporting, and
communication
Four Key Tools for Control Quality (PMBOK® Guide, p. 252):
1. Seven Basic Quality Tools: Described in Section 8.1.2.3, the 7QC also
apply to quality control.
2. Statistical Sampling: Described in Section 8.1.2.6, appropriate samples are

selected and tested in accordance with the quality management plan.
Remember that sampling is done to reduce the cost of quality control.
For the exam, you should know the conditions under which sampling is most
appropriate:
 When the population is large

 When the cost of inspection is high
 When destructive testing is required
 When you believe there are not many defects
Attribute sampling looks for the presence or absence of particular defects.

Variable sampling provides the basis for control charts by numerically measuring
the degree of conformity for particular factors.
3. Inspection: The examination of a work product to determine whether it

conforms to standards. Inspections generally include measurements and may be
conducted at any level (the final product, a sub-system, or a single activity).
Inspections may also be used to validate defect repairs on previously rejected

work. As before, other names include reviews, audits, and walkthroughs.
4. Approved Change Requests Review: These reviews are designed to

ensure that approved change requests were implemented correctly.
Eight Key Outputs for Control Quality (PMBOK® Guide, p. 252):
1. Quality Control Measurements: As described in quality assurance, these

measurements are used as feedback to QA to reevaluate any quality standards
currently in use.
2. Validated Changes: Repaired or changed items are inspected and either

accepted or rejected. Rejected items may require rework.
3. Verified Deliverables: A major goal of quality control is to ensure that

deliverables are correct. Verified deliverables are inputs to Validate Scope
(Section 5.5) for formal acceptance.
4. Work Performance Information: Performance data that have been analyzed

and integrated. Relevant data for quality control purposes include:
 Causes for rejected work
 Rework associated with those rejects
 Process adjustments that have become necessary
5. Change Requests: If recommended corrective actions, preventive actions, or

defect repairs lead to change requests, the requests must be processed using
integrated change control.
6. Project Management Plan Updates: Portions of the project management

plan that may be updated include:
 Process improvement plan

 Quality standards and agreements
 Quality audit reports and change logs (for corrective actions)
 Training plans
 Process documentation associated with the use of any quality tools
8. Organizational Process Assets Updates: Recording the use of checklists

and incorporating those records into the historical database of the organization.
Other Topics:
Graphs: Serve as powerful communication tools. They allow project teams to

present data in a simple pictorial format that is easily understood. Types of graphs
include:
 Pie charts (relative or comparative effect)
 Line graphs (excellent way to show whether trends exist)
 Histograms, also called bar charts (grouping data and rank ordering, e.g.,
Pareto diagram)
Kaizen and continuous improvement: The Japanese word for continuous

improvement is kaizen. The key idea is that improving quality is not a one-time,
discrete event. Rather, it is an ongoing process involving managers and workers
alike. The purpose of continuous improvement is to reduce variances and thereby
reduce the cost of nonconformance. A related Japanese term is warusa kagen,
which identifies things that are not currently wrong, but are not exactly correct
either. In other words, these are potential emerging problems that should be
monitored.
Priority of Quality, Cost, and Schedule: Historically, quality received “lip service”
in many companies but was actually subservient to cost and schedule goals.
Modern thinking emphasizes that quality should share equal priority with cost and
schedule goals.
Design and quality: Careful design of a product or service is expected to increase

reliability and maintainability (two important measures of quality). You should
also know two related precepts:
 Quality should be designed in; not inspected in!!!
 The primary responsibility for developing design specifications rests with the
project engineers.
Just-in-Time (JIT): An inventory control approach that attempts to reduce work-in-

process inventory to zero stock. Thus, there is no buffer or reserve stock to fall
back on. Zero work-in-process inventory forces a company to find and fix quality
problems or they will constantly miss their schedule commitments.
Kanban: JIT is usually implemented through a “pull” inventory system. Workers at

a station do not automatically receive more “input” materials from preceding
workstations. Instead, the workers communicate to the preceding station when they
are ready for more work-in-process inputs. The communication mechanism is
known as kanban, and may include anything from bar coding, computerized
methods, ping pong balls routed through vacuum tubes, runners, people traveling
on bicycles, and so on.
Motivation and quality: PMI advocates the belief that increased quality is the
likely result when team members display pride, commitment, and an interest in
workmanship. One way to harm such a culture is by allowing frequent turnover of
the people assigned to the project.
Marginal analysis: Optimal quality is reached at the point where the incremental
revenue from improvement equals the incremental cost to secure it.
Taguchi method: A statistical approach that calculates a “loss function” to

determine the cost of producing products or outcomes that do not achieve a
specified target value.
Other key quality terminology:
Attribute: A quality characteristic that may be classified as conforming or not

conforming. Note also that attributes can be objective or subjective in nature.
Variable: A quality characteristic that is numerically measurable in increments.

Examples include diameter measured in inches, weight measured in pounds,
speed measured in miles per hour, battery life measured in hours, and so on.
Probability: The likelihood that something will happen. Probability for

attributes is essentially like a coin toss, a 50-50 chance that something will
occur or not. Probability for variables is more complicated and involves the
concept of probability distributions, or a range of possible outcomes. Two
familiar probability distributions are:
 Normal distribution or bell curve

 Histogram (bar chart), for example, a Pareto chart
Population: The entire group of items that we wish to measure.
Sample: Because populations can be quite large, we often examine only some
of the items hoping to get an accurate picture of the entire group at a lower
cost.
Standard deviation: A measure of the potential variations around a projected

outcome. You should memorize the following four numbers:
+/- 1 sigma 68.3% of the total population

Know that +/- 3 sigma is the “traditional” approach to setting quality

standards and also means that 99.7% of the outcomes will meet
requirements. Conversely, 3 items in a thousand will have a defect of some
kind.
By comparison, +/- 6 sigma is the more modern, and also more stringent,
approach to setting quality standards. If processes are designed to a
standard of six sigma, you will only experience defects of approximately
three per million.
TQM (Total Quality Management): Know the following statement about TQM
(p. 229, PMBOK® Guide): TQM is an approach for implementing a quality
improvement program and for achieving continuous improvement
ISO 9000: This entry is provided to clarify the references on pp. 6-1 and 6-2 at
the beginning of the chapter. ISO 9000 is one aspect of the overall International
Organization for Standardization (ISO) program. Specifically, ISO 9000
describes a set of documented standards to ensure that organizations
consistently meet certain minimum levels of performance.
Run Chart: Trend analysis is performed using a run chart, which is a line graph
that plots data points in the order in which they occur (i.e., on a time scale). The
data may show:
 Variation
 Trends (is performance improving, deteriorating, or remaining
constant?)
Self-Study
Drill Practice: Quality Management
Question Answer
1. Who is responsible for project quality? 1. The PM (the word project is the key)
Note: All page numbers in this drill practice refer to (p. 8-13).
the reference manual unless otherwise indicated.
2. An assignable cause or variance indicates 2. there is a problem that is probably not just
that ______. the result of random events and therefore
needs to be corrected
(pp. 8-6/7).
3. Who has the primary responsibility for 3. Engineering (p. 8-17).

developing design specifications?
4. In setting control limits, distinguish six 4.

sigma from three sigma. Three sigma is the “traditional” approach
which means that 99.7% of possible outcomes
will be within the tolerances of your process.
Six sigma is a more rigorous quality standard
advocated by numerous modern companies.
Six sigma captures 99.9997% of possible
outcomes.
In comparison, three sigma allows errors
approximately three times per thousand
whereas six sigma allows errors only about
three times in a million. (pp. 8-7 & 19)
5. Name the 4 major quality control tools. 5.

Seven basic quality tools:
Cause/effect diagrams, flowcharts, checksheets,
Pareto diagrams, histograms, control charts,
Scatter diagrams
Statistical sampling
Inspection
Approved change requests review
(pp. 8-15/16)
6. Define plan quality management. 6. Identifying quality requirements and

standards and documenting how to
demonstrate compliance (p. 8-2).
7. Define control quality. 7. Monitoring specific project results to assess

performance and recommend necessary
changes (p. 8-13).
8. Define quality. 8. Several definitions or concepts are

mentioned in the PMBOK® Guide (pp. 227-
229):
 The degree to which a set of inherent
characteristics fulfill project requirements.
 Conformance to requirements/specs.
 Fitness for use.
 Prevention over inspection.
 Meeting mutually agreed needs and
expectations (pp. 8-1 & 2).
9. What is the best way to improve the 9. Good design practices (designing in
reliability and maintainability of a product? reliability and maintainability), i.e., quality
should be designed in, not inspected in (p. 8-
17).
10. What is benchmarking? 10. Comparing actual or planned practices to

those of other projects or organizations in a
search for improvements (p. 8-8).
11. What are the eight tools used in quality 11.

planning? Cost-benefit analysis
Cost of quality
Seven basic quality tools
Benchmarking
Design of experiments
Statistical sampling
Additional quality planning tools
Meetings
(pp. 8-4 to 8-8).
12. What quality control tool provides a bar 12. Pareto chart (or diagram) (p. 8-6)
chart that shows the greatest source of defects
or variances on the left and the fewest defects
on the right?
13. What is kaizen? 13. A Japanese concept meaning
incremental, continuous improvement
(p. 8-17).
14. What are the two major components of 14.

quality costs?  Cost of conformance
 Cost of non-conformance (p. 8-5)
15. Who has responsibility for quality on a 15. The employee performing the task
task? (p. 8-13).
16. Under what conditions is sampling most 16.

useful? a. When the population is large
b. When the cost of inspection is high
c. When destructive testing is required
d. When you believe there are not many
defects (p. 8-15).
17. When compared to cost and schedule, 17. Quality should be of equal importance
what priority should quality have? (p. 8-17).
18. What is the Rule of Seven? 18. When using control charts, if 7
consecutive observations fall above the
midpoint, below the midpoint, or trend in the
same direction they should be investigated as
if they had a special or assignable cause.
It is extremely unlikely that 7 outcomes in a
row would be on the same side of the mean if
the process is operating normally
(p. 8-7).
19. JIT (Just in Time) attempts to reduce 19. zero stock (pp. 8-17 & 18).
work-in-process inventory to ______.
20. What does the process Perform Quality 20. Auditing quality requirements and results
Assurance involve? from QC measurements to ensure appropriate
quality standards are used
(p. 8-10).
21. What is the difference between prevention 21. Prevention is keeping errors out of the
and inspection? process. Inspection is keeping errors out of
the hands of the customer
(pp. 8-2 & 13).
22. What is the difference between attribute 22. Attribute sampling checks whether a
and variable sampling? result conforms or not. Attributes can be
objective or subjective. Variable sampling
measures the result on a continuous scale
(measures the degree of conformity)
(pp. 8-13 & 18).
23. What is the difference between special 23. Special causes are unusual events that
causes and random causes? may signal a problem that needs correction.
Random causes are simply normal process
variations, i.e., nothing is wrong (pp. 8-6 & 7).
24. Which quality control tool would help you 24. Checksheets (p. 8-6)
count the number of defects and determine
their location?
25. Name four possible benefits of high 25.

quality.  Less rework
 Increased productivity
 Lower costs and increased profitability
 Increased stakeholder satisfaction
(pp. 8-4 & 5)
26. What is the difference between control 26. Specification limits are the contractual
limits and specification limits? tolerances agreed to by the project
participants. Control limits describe the
capability of a particular process (pp. 8-6 & 7).
27. What does the term inspection mean and 27. Examination of a work product to
what are other names for the same thing? determine whether it conforms to
requirements. Inspection often involves
measurements. Also called audits, walk-
throughs, and reviews (pp. 8-15 & 16).
28. What is kanban? 28. A communication technique used to signal

that a work station is ready for more input from
the previous station in the process. Applicable
when using the JIT approach (p. 8-18).
29. What is ISO 9000? 29. An international standard that describes a

recommended quality system
(p. 8-19).
30. What are the three major types of costs 30. Prevention, appraisal, and failure (p. 8-5,
associated with conformance and Cost of Quality).
nonconformance?
31. Distinguish cost of conformance from cost 31.

of nonconformance. Cost of conformance is the cost of
preventing defects, e.g., planning, training,
product design reviews, test and evaluation,
process control, calibration, and quality audits.
Cost of nonconformance is the cost of
correcting defects and failures, e.g., scrap,
rework, repairs, handling complaints, recalls,
lost business (pp. 8-4 & 5).
32. Three standard deviations either side of 32. 99.7% (p. 8-19)
the mean of a normal distribution contains
what percent of the population?
33. What are control charts? 33. A graphic display of process results taken
over a period of time. They help determine if a
process is under control
(pp. 8-6 & 7).
34. What is trend analysis? 34. A quality management technique that

uses mathematical techniques to forecast
future outcomes based on historical results.
Scatter diagrams are one way to do trend
analysis (pp. 8-8 & 17).
35. What is the difference between grade and 35. Grade is a category or rank given to
quality? entities having the same functional use but
different features and functions (a high-end
luxury item or a simpler, cheaper version).
Quality is conformance to requirements.
Low quality is always a problem but low grade
may not be (i.e., customer chose a cheaper
solution) (p. 8-1).
36. What tool would help stimulate thinking 36. Cause and effect diagram. Note: you
and generate discussion about potential MUST know the alternate names (Ishikawa
causes of a problem? Diagram and Fishbone Diagram)
(p. 8-5)
Unit 9: Human
Resource Management
Major Processes
9.1 Plan Human Resource Management
9.2 Acquire Project Team
9.3 Develop Project Team
9.4 Manage Project Team
Other Topics
Self-Study
Unit 9: Human Resource Management
The questions on this topic focus predominantly on people and behavioral issues; there
are some questions on traditional human resource administrative functions.
Major Processes
9.1 Plan Human Resource Management (establishing roles, responsibilities,

reporting relationships, and creating a staffing management plan)
9.2 Acquire Project Team (getting the human resources needed to complete the
project)
9.3 Develop Project Team (improving competencies and interaction of team members)
9.4 Manage Project Team (tracking performance, providing feedback, resolving
issues, and coordinating changes)
Human resource management involves organizing, managing, and leading the project
team. The processes are aimed at making the most effective use of the people
associated with the project, including all stakeholders (sponsors, customers, team
members, upper management, and others). The project sponsor should work directly
with the team to assist with funding, scope questions, and influencing other key
stakeholders for the benefit of the project. PMI encourages early involvement of key
team members in the planning process to improve the plan and to increase
commitment.
The project management team, a subset of the project team, is responsible for project
management and leadership. This group is also called the core, executive, or
leadership team.
Managing and leading include:
 Influencing the project team: Involves controlling factors in the project

environment that may affect project performance. These factors include
communication, politics, cultural issues, geographic locations, and
interpersonal interactions (including personality issues).
 Professional and ethical behavior: The core management team should
behave in an ethical manner and ensure that other team members do
likewise. Unit 2, Appendix I and Appendix II, provides details of the PMI®
Code of Ethics and Professional Conduct.
9.1 Plan Human Resource Management (PMBOK® Guide, p. 258)
Human resource planning involves identifying, documenting, and assigning project

roles, responsibilities, and reporting relationships. These roles may be assigned to
individuals or to groups. It also creates the staffing management plan that addresses
how team members will be acquired and released, training needs, reward systems, and
safety issues.
The process must also identify required skill sets and consider that the project team is
competing for limited human resources.
Plan Human Resource Management
1. Project management plan 1. Organization charts and 1. Human resource

2. Activity resource requirements position descriptions management plan
3. Enterprise environmental factors 2. Networking
4. Organizational process assets 3. Organizational theory
4. Expert judgment
5. Meetings
Four Key Inputs for Plan Human Resource Management (PMBOK® Guide, p.
259):
1. Project Management Plan: Developing the human resource management

plan, which is a component of the project management plan, is supported with
other information including:
 The processes that apply to each phase of the project life cycle.
 Change and configuration management plans.
 How integrity of baselines will be maintained (often involves revised
baselines as a result of changes).
 Communication needs and methods (keep stakeholders informed).
2. Activity Resource Requirements: Human resource needs are determined

as a result of the activity resource planning conducted in time management
(Section 6.4.3.1).
3. Enterprise Environmental Factors: Factors that may influence human

resource planning include:
 Organizational culture and structure: If the organization uses a

functional stovepipe or a weak matrix structure, the project manager
would have less control and power. Conversely, projectized teams or
a strong matrix structure would confer significant control and power on
the project manager.
 Existing human resources: The skill sets as well as the number of
people currently available. It may be necessary to engage in some
form of outsourcing if in-house assets are not sufficient to support the
project.
 Personnel administration policies: The system for hiring people and
getting people assigned to specific teams.
 Marketplace conditions: Competition, the availability of contractors
who can accept your outsourcing needs, and the general state of the
economy (are training and travel currently limited and are there any
hiring freezes?).

apply to human resource planning include:
 Organizational standard processes and role descriptions
 Templates for organizational charts and position descriptions
 Lessons learned and historical information on organizational
structures that worked on previous projects
 Escalation procedures for handling issues
Five Key Tools for Plan Human Resource Management (PMBOK® Guide, p.
261):
1. Organization Charts and Position Descriptions: The PMBOK® Guide

identifies several ways to document roles and responsibilities. Figures 9-4 and
9-5 on pages 261-262 show several ways to record and display roles and
responsibilities. Review the responsibility assignment matrix (RAM) on these two
pages. A well-known example of a RAM is a RACI chart (responsible,
accountable, consult, inform).
Key points:
 The objective of this step is to make sure every work package has an
unambiguous owner. So, to avoid confusion, a RACI chart should
never show more than one person accountable for the same task.
 In addition to the various charts, project assignments are also listed in
subsidiary management plans. For example, the risk management
plan assigns risk-related activities to team members.
 A WBS displays deliverables and work packages.
 An OBS (organizational breakdown structure) displays departments,
units, or teams and can show what work they are responsible for.
 An RBS (resource breakdown structure) displays individual resources
(human, equipment, facilities) and can show what activities they are
involved in.
 The RAM is the primary tool used to display information about roles
and responsibilities (who does what). The RAM does not show the
timing of the work (see Figure 9-5, PMBOK® Guide p. 262).
2. Networking: Informal interactions for the purpose of understanding potential

political and interpersonal influences on the project. Networking may also assist
in acquiring specialized skills or in establishing beneficial external partnerships.
Examples of networking include informal conversations, lunch meetings,
attendance at conferences, and recreational activities (tennis, golf, softball,
boating, racquetball, and so on).
3. Organizational Theory: There is an abundance of published literature on

almost every form of organizational structure. The literature includes “how to”
information as well as critical success factors (what works and what does not).
4. Expert Judgment: Used to determine the following:

 Preliminary requirements and required skills
 Assess roles, preliminary effort level, and number of resources
 Determine reporting relationships
 Lead times for staffing
 Identify risks associated with acquiring, retaining, and releasing
staff members
 Compliance with government and union agreements
5. Meetings: Used so that team members can reach consensus about the
human resource management plan.
One Key Output for Plan Human Resource Management (PMBOK® Guide, p.
264):
1. Human Resource Management Plan: The following information should be

addressed:
 Roles and Responsibilities: The following items should be defined:

 Role: The work or function performed by a person on the project
(business analyst, engineer).
 Authority: The right to make decisions, apply resources, and
grant approvals.
 Responsibility: The work a team member is expected to
perform.
 Competency: Required skills and capabilities.
 Project Organization Charts: Graphic display of reporting
relationships.
 Staffing Management Plan: Describes when and how resource
requirements will be met.
 Staff acquisition: Whether resources will come from within the

organization or from outside using procurement management.
 Resource calendars: Standard working calendars must be
coordinated with project needs. A popular tool is a vertical bar
chart known as a resource histogram (see Figure 9-6, PMBOK®
Guide, p. 266). This tool may also be called a resource loading
chart.
 Staff release plan: When and how people are moved off the
project when they are no longer needed. Two benefits of
effective staff planning may include: 1) Reduced costs by moving
resources promptly when no longer needed (instead of “making
work” until the project is over), 2) Improved morale by reducing
uncertainty about future employment opportunities and providing
smooth transitions to the next job.
 Training needs: If team members do not have all the required
competencies or skills.
 Recognition and rewards system.
 Compliance and safety.
9.2 Acquire Project Team (PMBOK® Guide, p. 267)
Staff acquisition is getting the right people assigned to the project. Failure to do so in a
timely manner may affect schedules, costs, risks, quality, and ultimately customer
satisfaction.
Acquire Project Team
1. Human resource management plan 1. Pre-assignment 1. Project staff assignments

2. Enterprise environmental factors 2. Negotiation 2. Resource calendars
3. Organizational process assets 3. Acquisition 3. Project management plan
4. Virtual teams updates
5. Multi-criteria decision analysis
Three Key Inputs for Acquire Project Team (PMBOK® Guide, p. 269):
1. Human Resource Management Plan: The human resource plan (developed

by the previous process) provides information about the timing of resource
needs, skill sets required, and resource charts identifying how many people are
needed. The primary information to develop this plan includes:
 Roles, responsibilities, skill sets, and competencies
 Organization charts
 Staffing management plan (provides resource histogram and
release plans)
2. Enterprise Environmental Factors: When recruiting team members, the

following factors should be considered:
 Human resource information: Who is available, their previous
experience and ability, their interest in working on your project, and
their cost rate.
 Personnel administration policies: How is outsourcing conducted?
 Organizational structure: Functional, matrix, or projectized?
 Location: Single or multiple, domestic or international?
3. Organizational Process Assets: Relevant OPA for staff acquisition would

include organizational standard policies and procedures (HR procedures
governing staff assignments).
Five Key Tools for Acquire Project Team (PMBOK® Guide, p. 270):
1. Pre-assignment: Usually occurs in either of two circumstances, 1) particular

people were promised as part of a competitive proposal or 2) staff assignments
on an internal project were made in the project charter.
2. Negotiation: Reaching agreement with functional managers and other project

teams about whom you need and when.
3. Acquisition: When an organization does not have the requisite staff or they
are committed to other projects, the needed skills can be procured from outside
the organization. Such an action is taken in lieu of hiring and training a
permanent employee.
4. Virtual Teams: Virtual teams spend little or no time working face to face.
Given modern technology, virtual teaming makes the following approaches
possible:
 Teams with members from different geographic areas

 Use people who work from home or work different shifts
 Add special expertise even though they are not in the same location
 Pursue projects that would have been rejected due to travel costs
When using virtual teams, communication and conflict management become

more important than ever. The potential disadvantages of virtual teams include:
 Misunderstandings due to communications difficulties
 Feelings of isolation
 Difficulty sharing knowledge, experience, and information
 Cost of communications technology
5. Multi-Criteria Decision Analysis: Criteria used to rate or score potential

team members. Examples include:
 Availability, cost, and experience

 Ability, knowledge, and skills
 Attitude and international factors (location, time zones, language

abilities)
Three Key Outputs for Acquire Project Team (PMBOK® Guide, p. 272):
1. Project Staff Assignments: Recorded using an organizational chart and a

team directory.
2. Resource Calendars: Documents the time periods in which specific

resources can be used. This information must anticipate changes due to
vacations, illness, promotions, retirements, commitments to other projects, and
so on.
3. Project Management Plan Updates: The staffing plan on most projects is

subject to a variety of changes caused by issues such as gaps in required skill
sets, lack of training and experience, and accidents that require removal of an
asset from the team.
9.3 Develop Project Team (PMBOK® Guide, p. 273)
This process is aimed at improving the competencies, interactions among team

members, and the overall team environment to, in turn, improve project performance.
Includes the following:
 Team development involves:
1) Improving the ability of team members to contribute as individuals.
2) Improving the ability of the team to function effectively (includes team
spirit, cross-training, and mentoring within the group).
3) Improving trust and cohesiveness among team members.
 Also, PMI emphasizes that team development occurs throughout the entire
project life cycle.
Developing an effective team is a primary responsibility of the project manager. In

doing so, project managers must:
 Motivate the team and facilitate team building
 Promote open, effective communication
 Manage conflict constructively
 Encourage collaborative problem solving
 Manage cultural diversity on global projects (see Unit 2, Appendix II, p. 2-18 to 2-
25)
Develop Project Team
1. Human resource management 1. Interpersonal skills 1. Team performance

plan 2. Training assessments
2. Project staff assignments 3. Team-building activities 2. EEF updates
3. Resource calendars 4. Ground rules
5. Colocation
6. Recognition and rewards
7. Personnel assessment tools
Three Key Inputs for Develop Project Team (PMBOK® Guide, p. 274):
1. Human Resource Management Plan: Provides guidance about team issues

such as rewards, feedback, training, disciplinary action, and team building.
2. Project Staff Assignments: This process begins by knowing who is on the

team.
3. Resource Calendars: Identifies when team members are available for team
development activities.
Seven Key Tools for Develop Project Team (PMBOK® Guide, p. 275):
1. Interpersonal Skills: Also called “soft skills”, PMI has historically identified
the following interpersonal skills that are useful for team development. They
include:
 Problem solving: defining the problem, identifying alternatives, and
making a timely decision.
 Leadership: developing a vision and strategy and motivating others to
achieve that vision
 Influencing: getting things done even though you may have limited
formal power
 Negotiation and conflict management: conferring with others to reach
an agreement or to overcome a problem
 Communication: the exchange of information
 Motivation: “energizing people” to high levels of performance
Remember this list using the acronym PLINCM!
PMI has also identified emotional intelligence, team building, and group
facilitation skills as highly appropriate for developing the team.
2. Training: Activities to enhance performance; can be formal or informal and

may involve classroom, on-line, on-the-job, mentoring, or coaching.
3. Team-Building Activities: Can vary from a quick exercise during a meeting

to a professionally facilitated off-site experience such as a ropes course. These
activities are undertaken primarily to improve team motivation and performance.
A major goal is to encourage the team to work together to collaboratively resolve
issues that arise. Involving the team in planning and establishing rules for
dealing with conflict are examples of actions that improve team performance as a
secondary effect.
Be familiar with the following model that identifies five stages of team
development (known either as the Tuckman model or the Tuckman ladder):
 Forming: Team members meet and learn about the project and their
roles. Members often experience confusion and uncertainty at this
point. Members tend to act in an independent manner and not be
open to other team members.
 Storming: As work begins, team members may clash and compete
for desired assignments and outcomes. Opposing sub-groups may
form and differing ideas may produce conflict.
 Norming: Team members begin to adjust behavior and support the
team. Team begins to trust each other and share ideas and
information.
 Performing: Team functions as a well-organized, cohesive unit.
Issues are handled smoothly.
 Adjourning: The work is completed and the team is released from the
project. Team may feel separation anxiety if they had matured
effectively into the performing stage.
Stages may be skipped, repeated, or never achieved depending on

circumstances.
4. Ground Rules: This involves establishing clear expectations regarding

behavior. Listening, being on time, taking responsibility for communication, “be
hard on the issue but not on the person” are examples of team rules. When
established by the team itself, these rules are easier to enforce if problems arise
later.
5. Colocation: Placing team members in the same physical vicinity (also known
as a “tight matrix”) enhances communication and other team development
issues. When colocation is not possible, a “war room” may be used to help
create a better sense of identity with the project.
6. Recognition and Rewards: Actions that promote or reinforce desired

behavior. Project teams often need to implement their own systems as the
overall organization may not always meet the needs of individual projects.
Although helpful, a project team does not necessarily need a substantial budget
for rewards. Compensatory time for a job well done, access to education
opportunities, a chance to deliver the presentation to upper management, “Dove
Bar Certificates” (ice cream bar given in the spirit of a “gold star” from your
teacher), assistance in getting a computer upgrade, and the potential list is
limited only by one’s imagination.
Key points:
 Only desirable behavior should be rewarded.
 Team members should not be punished for unrealistic expectations
imposed by senior management.
 Rewarding only some team members may harm cooperation and
cohesiveness in the group.
 Public recognition is effective with many people (not all).
 Recognize performance during the project instead of waiting until
afterward.
7. Personnel Assessment Tools: Provides insights into team strengths and

weaknesses using tools such as:
 Attitudinal surveys and structured interviews
 Ability tests and focus groups
Two Key Outputs for Develop Project Team (PMBOK® Guide, p. 278):
1. Team Performance Assessments: Formal or informal assessments by the

team and by outsiders may help the team judge their effectiveness and set
continuing goals for the future. The PMBOK® Guide mentions the following
indicators of good performance:
 Project goals are met (technical, schedule, cost)
 Improvements in personal, individual skills
 Improvements in team cohesion (better communication, reduced
instances of conflict, and generally positive feelings)
 Reduced turnover rates
2. Enterprise Environmental Factors Updates: Environmental factors that

may be updated as a result of team development include personnel
administration (employee training records and skill assessments).
9.4 Manage Project Team (PMBOK® Guide, p. 279)
Managing the team involves tracking team performance, providing feedback, resolving
issues, and coordinating changes. Important management skills for managing the team
include communication, negotiation, conflict management, and leadership.
 Management of the team is complicated when members report to more than one
boss (a common challenge in matrix organizations wherein employees report to a
functional manager as well as a project manager).
 Management of these dual reporting relationships is a critical success factor in
project management.
Manage Project Team
1. Human resource management plan 1. Observation and 1. Change requests

2. Project staff assignments conversation 2. Project management plan
3. Team performance assessments 2. Project performance updates
4. Issue log appraisals 3. Project documents updates
5. Work performance reports 3. Conflict management 4. EEF updates
6. Organizational process assets 4. Interpersonal skills 5. OPA updates
Six Key Inputs for Manage Project Team (PMBOK® Guide, p. 281):
1. Human Resource Management Plan: Portions of the plan that are relevant
at this point include roles and responsibilities, organizational structure, and the
staffing management plan.
2. Project Staff Assignments: A list of team members whose performance will

be evaluated.
3. Team Performance Assessments: Ongoing formal or informal assessments

of the entire team’s performance as a group. Through this process, it is possible
to identify and resolve issues, deal with conflict, and improve team
communication.
4. Issue Log: Assigns responsibility for resolving specific issues to specific

people within a designated target date.
5. Work Performance Reports: Provides documentation of actual performance

against the plan. Areas such as cost, schedule, quality, scope validation, and
procurement audits are of special interest.
6. Organizational Process Assets: Organizational Process Assets that can

influence managing the team include:
 Certificates of appreciation
 Newsletters and websites (for recognition)
 Bonus structures
 Corporate apparel
 Other organizational perquisites (benefits offered as motivation and
rewards such as special parking or a window office)
Four Key Tools for Manage Project Team (PMBOK® Guide, p. 282):
1. Observation and Conversation: These techniques are used to remain in

touch with the feelings of team members and identify any developing problems
early.
2. Project Performance Appraisals: The need for performance appraisals

during a project depends on factors such as organizational policies on
appraisals, length of the project, and the organizational structure (for instance,
the project manager would have little input to appraisals in a weak matrix).
Feedback for appraisals can come from supervisors directly observing the project
work or it can come from external sources. A common practice involves the use
of 360-degree feedback from multiple sources (peers, superiors, subordinates,
customers).
3. Conflict Management: Team members are responsible for initially attempting

to resolve conflict at their own level (before escalating to higher levels). If conflict
escalates, the project manager should ensure that the issue is addressed early,
in private, and involves a collaborative approach. This area has historically been
the subject of numerous questions.
PMI cites seven major sources of conflict in the project environment. In

descending order of importance or likelihood, they are:
1. Schedule
2. Priorities
3. Resources
4. Technical opinions
5. Administrative procedures
6. Cost
7. Personalities
NOTE: Personality conflicts are the least likely kind of conflict on this list;
however, our intuition might lead most of us to consider personality to be a
major cause of conflict. Therefore, beware of personality conflict as a
“distractor” (incorrect) choice on these questions about conflict!
Consider using the acronym SPoRT (Schedule, Priorities, Resources,

Technical) to remember the top four sources of conflict.
Conflict can sometimes be avoided through the following techniques:
 Clear assignment of tasks (avoid ambiguity or overlapping

responsibilities)
 Inform the team:
 Exactly where the project is headed: goals and objectives
 Results of key decisions (involve the team when appropriate)
 Changes
 Make work assignments challenging and interesting
Conflict may have a negative or a positive effect on the project depending on

how it is handled. Project managers must recognize the following aspects of
conflict:
 Conflict is natural and promotes a search for alternatives.
 Conflict is a team issue; openness promotes resolution of conflict.
 Conflict resolution should focus on issues and problems, not personalities.

 Conflict resolution should focus on the present, not the past.
 PMI encourages the possibility of off-site team building as one effective
method to defuse conflict.
PMI recognizes five methods for responding to conflict. The methods were
adapted from the original work of Kenneth Thomas and Ralph Kilmann.
Technique Description
Problem Solve/Collaborate  Approaching conflict as a problem to be solved
 Using open exchange of information; searching for
alternatives that satisfy the needs of both parties,
i.e. “win-win”
 Used when the issues are too important for
compromise
 Historically, PMI called this the best method for
conflict resolution
 PMBOK® Guide now says each approach has its
place (which is what TK originally said)
 TK (Thomas and Kilmann) originally called this
collaborating
 PMI has also called this “confronting”
Compromise/Reconcile  Searching for solutions that bring “some degree of

satisfaction” to both parties (partial wins)
 May be a back-up approach if problem solving
fails or powerful parties cannot agree or there is
time-pressure for a solution
 TK: Might result in a lose-lose if solution not
supported
Technique Description
Smooth/Accommodate  Emphasizing areas of agreement rather than
areas of disagreement
 Conceding one’s position to maintain harmony
and create goodwill
 Used when contentious issues threaten ability to
reach an agreement
 Concern: the agreement may be temporary
because the difficult issue was not resolved and
will re-emerge
 TK: Called this accommodating
Withdraw/Avoid  Retreating (temporarily) from conflict

 Used when angry, belligerent behavior threatens
both the agreement and personal working
relationships
 Used when the issue is not vital to you and you do
not wish to risk damaging the relationship
 TK: Called this avoiding
Force/Direct  Satisfying your needs at the expense of others

 Results in a win-lose
 May be used in an emergency
 Should be used sparingly because of the following
2 problems: 1) creating antagonism (an enemy
waiting to get you back), 2) stalemate (the other
party has more power than you believed or simply
gets angry and won’t cooperate)
 TK: Called this competing
4. Interpersonal Skills: Appropriate interpersonal skills help a project manager

bring the best from their team members. PMI identifies the most frequently used
interpersonal skills as:
 Leadership: Among other things, leadership is the ability to effectively

communicate a vision and inspire individuals and team to high
performance.
 Influencing: Ability to be persuasive, clearly articulate positions, listen
effectively, consider all perspectives, gather important information, and
promote trust. Influencing is crucial because many project managers have
little or no direct authority over key stakeholders (functional or weak matrix
organizations).
 Decision making: The ability to negotiate, identify alternatives, and make
a timely decision.
Five Key Outputs for Manage Project Team (PMBOK® Guide, p. 284):
1. Change Requests: Staffing changes may affect the project management

plan in numerous ways (the schedule or budget may change). Staffing changes
may include rotating someone to a different assignment, outsourcing, or
replacing someone who left unexpectedly. If change requests occur because of
staffing issues, they should be processed using integrated change control.
2. Project Management Plan Updates: The human resource management plan

may be updated.
3. Project Documents Updates: The issue log, roles description, and staff
assignments may be updated.
4. Enterprise Environmental Factors Updates: Factors that may be updated

as a result of managing the team include:
 Input to performance appraisals

 Personnel skill updates

that may be updated as a result of managing the team include:

 Templates
 Organizational standard processes
Other Topics:
The course slides provide information on power, motivation theories,

leadership styles, and delegating.
Power and authority: PMI recognizes the following types of power and authority.
The concepts of power and authority in this context are almost interchangeable.
 Legitimate power (formal authority): Derived from the person’s position on

the organizational chart. In a projectized organization, project managers
usually have considerable formal authority. However, project managers tend
to operate with relatively little formal authority in other situations.
 Expert power (technical authority): Involves the project manager’s

knowledge of technical matters. Some PM’s are held in high esteem because
their knowledge and experience is recognized and respected by the team and
relevant stakeholders. This source of power is not automatically
conferred because of one’s appointment as the PM.
 Reward power (authority): To the extent that project managers can provide
things that are valued by team members, they can elicit more dedication and
cooperation from the team. Examples of rewards include monetary bonuses,
time off, furniture or computer equipment, certificate of appreciation,
assistance with access to education or a desired job, and so on.
 Referent power (authority): Citing the authority of a powerful person in the

organization who clearly has high formal authority. It is preferable to use this
authority in a positive, motivational way. However, there may be some
people who need the implied threat to make them cooperate.
 Coercive or penalty power: The basis of this power derives from the threat
of retaliation or withholding something of value. In general, PMI believes this
approach ought to be used as a last resort.
 Bureaucratic or administrative power: Gaining goodwill and “favors owed”

by navigating the administrative red tape of organizations for your team.
Radar O’Reilly in the television series M.A.S.H. provided a classic example of
working the system to get things done for people (who then owed him favors
in return).
 Interpersonal or charisma power: Influence derived from interpersonal

skills that encourages others to cooperate with you because they want to.
NOTE: PMI recommends maximum use of reward and expert power and
minimal use of coercive power.
Motivation theories: The following seven motivation and leadership theories are
of particular importance for the exam:
1. Maslow’s Hierarchy of Needs: Abraham Maslow postulated that if certain

“lower-level” human needs were not met, the higher-level needs would be
relatively unimportant. Lower-level needs included basic physical survival
necessities and safety.
 Physiological: Physical survival necessities such as food, water, and

shelter.
 Safety: Protection from threats, deprivation, and other dangers.
 Social: The need for association, affiliation, friendship, and so on.
 Self-esteem: The need for respect and recognition.
 Self-actualization: The opportunity for personal development, learning,
and fun/creative/challenging work. Self-actualization is the highest
level need to which a human being can aspire.
2. McGregor’s Theory X and Theory Y:
 Theory X: The traditional view of the work force holds that workers are
inherently lazy, self-centered, and lacking ambition. Therefore, an
appropriate management style is strong, top-down control.
 Theory Y: This view postulates that workers are inherently motivated
and eager to accept responsibility. An appropriate management style is
to focus on creating a productive work environment coupled with positive
rewards and reinforcement.
3. Herzberg’s Hygiene Factors: Hygiene factors include items such as pay,

working conditions, and attitude of the boss. Poor attention to hygiene factors
may cause low motivation and low cooperation. However, proper care of
hygiene factors is merely expected; that’s how things are supposed to be.
Therefore, proper attention to hygiene factors does not lead directly to high
motivation. For example, employees expect to have a decent office to work in
and also to be paid fairly compared to other people doing the same work.
4. Vroom’s Expectancy Theory: Victor Vroom stated that people will be

highly productive and motivated if two conditions are met: 1) people believe it is
likely that their efforts will lead to successful results and 2) those people also
believe they will be rewarded for their success.
5. McClelland’s Trichotomy of Needs: David McClelland identified three

needs that tend to motivate people:
 Need for Achievement: People with a high need for achievement

prefer tasks that provide for personal responsibility and results based on
their own efforts (not simply the result of good luck). They also prefer
quick feedback on their progress.
 Need for Power: People with a high need for power desire situations in
which they wield power and influence over others. They seek positions
with status and authority and tend to be more concerned about their level
of influence than about effective work performance.
 Need for Affiliation: People with a high need for affiliation are
motivated by being liked and accepted by others. They tend to
participate in social gatherings and may be uncomfortable with conflict.
6. Blake and Mouton’s Managerial Grid: Blake and Mouton provided a model
that measures two aspects of how people lead:
 Concern for Production: Leaders who score high on this dimension

have a high concern for results or production. They are concerned
primarily about tasks and getting things done.
 Concern for People: People who score high on this dimension have a
high concern for feelings and attitudes. They care about how employees
feel about the work place and whether employees are comfortable.
The model yields a score for each dimension where a 1 is low concern and a 9
is high concern. A 9,1 leader cares entirely about results regardless of
employee feelings. Conversely, a 1,9 leader will not push people for results if
doing so would endanger the comfortable environment of the work place. A 5,5
leader represents the ability to combine both concerns in an effective balance.
7. Myers-Briggs Type Indicator: Myers and Briggs developed a well-known

model that describes four important personality dimensions that affect human
behavior and communication:
 Extravert vs. Introvert: Indicates how we interact with the world and
where we direct our energy. Extraverts are energized by being with
other people whereas introverts are energized by spending time alone.
Extraverts think out loud whereas introverts think things through inside
their head.
 Sensing vs. Intuitive: Indicates the kind of information we naturally
notice. Sensing people trust what is certain, value common sense, and
are oriented to the present. Intuitive people like new ideas, value
innovation, and are oriented to the future.
 Thinking vs. Feeling: Indicates our preferences when we make
decisions. Thinking people are logical, detached, and analytical. They
proceed in an objective way and prefer that justice is achieved as a
result of their decisions. Feeling people are fair-hearted, involved, and
subjective. They worry about how a decision will affect others
emotionally. They identify with the emotional pain of others and prefer
tact and harmony.
 Judging vs. Perceiving: Indicates whether we prefer to live in a
structured way or a more spontaneous way. Judging people are planned
and orderly, are happiest when a decision has been made, derive
satisfaction from finishing projects, and take deadlines very seriously.
Perceiving people are spontaneous and flexible, are happiest when
options are still available, derive satisfaction from starting projects, and
consider deadlines to be “elastic.”
Leadership Styles: Know the following three leadership styles:
 Autocratic: Leader makes decisions without input, participation, or

seeking consensus.
 Democratic: Leader seeks and encourages participation, feedback,
and consensus of the group. This style is participative and seeks
decisions by consensus.
 Laissez-Faire: From the French meaning roughly “let alone” or “leave
be.” This is a passive leadership style that does not impose close
supervision or top-down directives. Works well with “high-knowledge”
experts who do not want or need to be told how to do their work.
Delegating: The process of distributing authority from the project manager to

another person working on the project. The amount of authority delegated must be
sufficient to accomplish the task. The PM may not delegate responsibility; the PM
ultimately remains responsible for correct and timely completion of the work.
Advantages of delegating:
 Develops the skills of your team

 Distributes work better
 Increases motivation among team members
 Increases productivity; gets work done more efficiently
Signs of poor delegation:
 Team is experiencing confusion and conflict

 You are always working late
 Morale is low
 Workers have frequent questions about delegated tasks
 Poor delegation or no delegation is inefficient and expensive!
How to delegate:
 Choose a person suitable for the task (expertise, availability)

 Explain the task clearly and completely
 Confer sufficient authority with respect to access to equipment, facilities,
information, and resources
 Keep in touch; monitor progress; provide assistance if needed
 Allow alternative approaches; praise a job well done
What not to delegate: You should avoid delegating certain sensitive aspects
of leadership, such as:
 Hiring
 Firing
 Pay
 Organizational policy
 Management of key stakeholders
Resource planning tools:
The following resource planning tool is not covered in the PMBOK® Guide but
has appeared on the exam:
Resource Gantt Chart: Uses the structure of a regular Gantt chart to

show who is working on which tasks at what time.
Kick-off meetings: You should know that 1) kick-off meetings are the
responsibility of the project manager (not upper management), and 2) you should
know the objectives of a kick-off meeting. The following list was published in a PMI
monograph:
Objectives of a kick-off meeting:
 Introduce team members

 Establish working relationships
 Establish lines of communication
 Set and/or review goals and objectives
 Review project status
 Review project management plan
 Identify problems and issues
 Establish responsibilities / accountabilities
 Obtain commitments
Halo Error: A tendency to rate someone consistently high or consistently low

based on preconceived notions. “First impressions can be misleading” error.
Concurrent engineering:
 A technique that overlaps tasks and phases in a project

 Also forms a multi-disciplinary, core team that works together from the
beginning of the project. The result is more work is done in parallel and
late changes are reduced.
 Concurrent engineering has a good track record in reducing costs and
improving schedules.
Additional terminology:
Fringe benefits: Standard items provided to employees such as education,

training, profit sharing, medical benefits, employer matching of social security
benefits, and so on.
Perquisites (“perks”): Special awards such as access to the executive

dining room, a company car, a corner office, special parking, and so on.
Arbitration: Disputes heard by a neutral third party. The parties usually agree
in advance that they will abide by the resulting decision.
Productivity: A ratio of output divided by input, e.g., number of items produced

per hour of labor.
“H.R. functions”: Aside from the traditional roles of recruitment and hiring,
human resource departments may provide the following functions that are
relevant to project teams:
 Training
 Career planning
 Team building
Self-Study
Drill Practice: Human Resource Management
Question Answer
1. When an employee is motivated primarily 1. Self-actualization, the highest-level need on

by a desire for personal growth, Maslow would Maslow’s hierarchy (p. 9-19).
say that person is responding to which human Note: All page numbers in this drill practice refer to
need? the reference manual unless otherwise indicated.
2. The tendency to consistently rate someone 2. halo error

high or low based on an impression is called (p. 9-23)
______.
3. In which organizational approach does the 3. Projectized

PM have the greatest authority? (p. 2-6)
4. Which resource management tool focuses 4. Responsibility matrix; also called a

on “who does what”? responsibility assignment matrix (pp. 9-3/4).
5. In which direction is the balance of power 5. Power is shifted in favor of the functional
shifted in a weak matrix? managers in a weak matrix (p. 2-5).
6. What does it mean to be an autocratic 6. Autocrats make decisions without seeking

manager? input from others (p. 9-21).
7. Name the seven tools for develop team. 7.

Interpersonal skills
Training
Team-building activities
Ground rules
Colocation
Recognition and rewards
Personnel assessment tools
(pp. 9-9 & 10)
8. What is one way to create a greater sense 8. Get and use a project war room so that the
of identity among team members? team can work in the same physical location
(p. 9-11, colocation)
9. Name five ways of dealing with conflict. 9. Problem solve/ Collaborate (Confront)
Compromise/Reconcile
Smooth/Accommodate
Withdraw/Avoid
Force/Direct (Compete) (pp. 9-15 & 16)
Question Answer
10. If both parties in a conflict employ forcing, 10. Stalemate or creating an enemy (p. 9-16)
what is a possible outcome?
11. What is concurrent engineering? 11. An attempt to lower costs and accelerate
schedules through the use of multi-functional
teams and overlapping of project phases
(p. 9-23).
12. What is the difference between a 12. A resource Gantt chart shows the timing
responsibility matrix and a resource Gantt of the tasks and a responsibility matrix does
chart? not (pp. 9-3, 9-4, and 9-23).
13. List five examples of fringe benefits. 13. Profit sharing, training, medical benefits,
education, and employer matching of social
security payments (p. 9-24).
14. Parking spaces and access to an 14. Perks, also referred to by the more formal
executive dining room are examples of name “perquisites”
______. (p. 9-24)
15. What is arbitration? 15. The hearing and resolution of a dispute by

a neutral third party (p. 9-24).
16. During a vitally important negotiation, one 16. Withdraw/avoid (p. 9-16)
of the parties has become angry and is now
acting in a confrontational, belligerent manner.
Which conflict method would be appropriate?
17. What does McGregor’s Theory X 17. Workers are inherently lazy and must be
postulate about the work force? managed with a strong, top-down approach
(p. 9-19).
18. What is the major difference between the 18. The authority of an expeditor is generally
authority of a project expeditor and that of a limited to the department or division headed by
project coordinator? his/her vice president. The authority of a
coordinator is more likely to work across
departments or divisions (p. 2-5).
19. How is productivity measured? 19. Output divided by input (p. 9-24)
20. Aside from the traditional role of hiring, 20.

name three other HR roles that affect project Training
teams.
Career development
Team building (p. 9-24)
Question Answer
21. David McClelland identified three needs 21. a) the need for achievement (people who
that motivate humans. They are ______. prefer tasks that provide for personal
responsibility and results based on their own
efforts), b) the need for power (people who
desire situations in which they wield power
and influence over others), and c) the need for
affiliation (people who are motivated by being
liked and accepted by others) (p. 9-20).
22. Name Maslow’s five levels in the 22.

hierarchy of needs from lowest to highest. Physiological
Safety
Social
Self-esteem
Self-actualization (p. 9-19)
23. What are the objectives of a kick-off 23.

meeting? Introduce team members
Establish working relationships
Establish lines of communication
Set and/or review goals and objectives
Review project status
Review project management plan
Identify problem areas/issues
Establish responsibilities/accountabilities
Obtain commitments (p. 9-23)
24. Name the sources of authority or power 24.

that a PM can draw on. Formal authority (legitimate power)
Technical authority (expert power)
Purse-string authority (reward power)
Referent power
Coercive/penalty power
Bureaucratic power
Charismatic power (p. 9-18)
25. Which conflict resolution method is least 25. Smoothing (p. 9-16)
likely to produce a lasting solution?
Question Answer
26. Which conflict resolution approach is most 26. Problem solving (p. 9-15)
likely to produce a lasting solution?
27. Distinguish roles, responsibilities, and 27.

authority. A role is the function a person performs
(engineer, analyst). A responsibility is the
work someone is expected to perform.
Authority is the right to apply resources,
make decisions, and sign approvals.
(p. 9-5)
28. When is matrix management particularly 28. On complex projects involving cross-
appropriate? functional effort (p. 2-5).
29. Name the method that identifies whether a 29.

team member may be more disposed to
Myers-Briggs Type Indicator (MBTI®)
thinking or feeling behavior when faced with a
decision. (p. 9-21)
30. Name two dangers associated with using 30.

forcing to resolve a conflict. Creation of personal antagonism
Stalemate (no resolution)
(p. 9-16)
31. a) Name six interpersonal skills (also 31. Problem solving, leading, influencing,
referred to as general management skills) that negotiating, communicating, and motivating;
apply to project management. use the acronym “PLINCM”
(pp. 9-9/10).
32. Which theory measures a leader’s 32. Blake and Mouton’s Managerial Grid
concern for production versus concern for
(p. 9-20).
people?
Unit 10:
Communications
Management
Major Processes
10.1 Plan Communications Management
10.2 Manage Communications
10.3 Control Communications
Other Topics
Self-Study
Unit 10: Communications Management
The questions on this topic are very straightforward and you can rely on “common
sense” for many of the questions. The PMI Director of Certification was once quoted as
saying, “If you know which end of the phone to talk into, you can pass this section.”
Major Processes
10.1 Plan Communications Management (determining the information needs of

stakeholders and defining a communication approach)
10.2 Manage Communications (creating, collecting, distributing, storing, retrieving,
and disposing of project information in accordance with the communications plan)
10.3 Control Communications (monitoring and controlling communications to ensure
the information needs of stakeholders are met)
The PMBOK® Guide defines communication management as “the processes that are
required to ensure timely and appropriate planning, collection, creation, distribution,
storage, retrieval, management, control, monitoring, and ultimate disposition of project
information.” PMI notes that project managers spend most of their time communicating
with stakeholders who often have different perspectives, interests, and expertise.
Effective communication can bridge potential gaps among these stakeholders and
increase the chances of successful project outcomes.
The various dimensions of communicating include the following (PMBOK® Guide, p.

287):
 Written and oral

 Formal (briefings, reports) and informal (emails and ad hoc conversations)
 Verbal (voice inflection) and non-verbal (body language; various sources
contend that non-verbal constitutes over 50% of the communication process)
 Internal (within the project) and external (customer, public, other projects)
 Vertical (bosses and subordinates) and horizontal (with peers)
 Official (published reports) and unofficial (off the record)
NOTE: The combinations of formal/informal and written/oral are especially

important for the exam. Examples are covered in the Other Topics section of this
unit.
Unit 10: Communication Management
PMI also suggests that the following general communication skills are important for
project managers:
 Active listening (paraphrasing, repeating what you heard someone say)

 Questioning and probing
 Educating to increase team’s knowledge
 Fact-finding to identify or confirm information
 Managing expectations
 Persuading and motivating
 Coaching to improve performance
 Negotiating
 Resolving conflict to prevent disruptive impacts
 Summarizing, recapping, and identifying next steps
10.1 Plan Communications Management (PMBOK® Guide, p. 289)
Communications planning involves discovering the information needs of stakeholders

and devising an appropriate communication plan based on available organizational
assets. The plan should address who needs what information, when they need it, how
they will get it, and who will give it to them. NOTE: PMI says most communication
planning should be done early in the project, but the process should be reviewed
regularly.
PMI distinguishes effective communication from efficient communication.
 Effective:
 Information to the right audience
 At the right time
 In the right format
 Efficient:
 Providing only the information needed
 Avoiding information overload
Plan Communications Management
1. Project management plan 1. Communication requirements 1. Communications

2. Stakeholder register analysis management plan
3. Enterprise environmental factors 2. Communication technology 2. Project documents
4. Organizational process assets 3. Communication models updates
4. Communication methods
5. Meetings
Four Key Inputs for Plan Communications Management (PMBOK® Guide, p.

290):
1. Project Management Plan: Provides information on how the project will be

executed, monitored, controlled, and closed.
2. Stakeholder Register: An output of the first stakeholder management

process (PMBOK® Guide, Section 13.1, Identify Stakeholders), the register
identifies potentially important stakeholders.
3. Enterprise Environmental Factors: All the factors described in PMBOK®

Guide, Section 2.1.5 are potentially relevant to communication planning.
4. Organizational Process Assets: All Organizational Process Assets are

relevant to communication planning, but lessons learned and historical
information from similar projects are of particular importance.
Five Key Tools for Plan Communications Management (PMBOK® Guide, p.

291):
1. Communication Requirements Analysis: Determines the information

needed by stakeholders. PMI says the process should focus only on information
really needed for success; in other words, beware of information overload or
distracting minutiae.
The concept of communication channels within a team is important for the exam.
You must know that as the project team grows larger, the number of
communication channels also increases. The number of channels provides a
measure of the complexity of communication on a given project. You must
know that the number of communication channels increases at greater than a

linear rate.
The following information helps determine communication requirements:

 Organization charts and stakeholder relationships
 The specific departments and functional specialties involved
 The number of people and locations
 Internal vs. external information needs
 Stakeholder information (who are they and what concerns do they
have?)
2. Communication Technology: Methods used to transfer information; the

spectrum ranges from low tech (conversations and meetings) to high tech
(automated, computerized systems). Relevant factors in choosing appropriate
technology include:
 Urgency of the need
 Current technology already in use (Is it sufficient?)
 Ease of use/Expected staffing (Is the proposed system compatible with
the team’s experience?)
 Length of the project (Will available technology change during the
project?)
 Project environment (For instance, a virtual team might depend on more
advanced technologies.)
 Sensitivity and confidentiality (Will any unusual security measures be
required?)
3. Communication Models: PMI describes the following basic communication

model in Figure 10-4 (PMBOK® Guide, p. 294):
 Encode: A sender encodes thoughts into a message that will be
understood by others.
 Transmit Message: The output of encoding is to send the message
using an appropriate medium (voice, letter, email, and so on). PMI
identifies “noise” as anything that might interfere with the transmission,
receipt, or understanding of the message (technical jargon, language
barriers, distance/time zones, lack of background information, etc.).
 Decode: A receiver translates the information into an understandable
message.
 Acknowledge: The receiver should acknowledge receipt of the message.

PMI cautions that receipt of a message does not necessarily mean that
agreement or understanding has occurred.
 Feedback/Response: Once the message has been decoded and
understood, the receiver sends a response to the original sender.
Special note for the exam: PMI says that project managers spend as much as
90% of their time acquiring and communicating information! Senders and
receivers each have important and specific responsibilities during the
communication process:
The sender is responsible for:
 Making the information clear, unambiguous, and complete
 Confirming the receiver’s understanding
The receiver is responsible for:
 Making sure the entire message was received
 Confirming the message was understood correctly. Active

listening is a relevant skill here, that is, paraphrasing to check
for understanding.
Other notes for the exam:
1) Formal communication is best handled in writing.
2) Advantages of verbal communication include: fast, immediate

feedback (ability to clarify), and supports the brainstorming
needed to solve complex problems.
3) Effective listening includes:
a. Asking for clarification

b. Repeating what you heard (seeking confirmation)
c. Watching body language (non-verbal clues)
d. Maintaining eye contact
4. Communication Methods: PMI describes three methods of sharing

information among stakeholders:
 Interactive Communication: Two or more parties at the same time,
multi-directional. Quick, efficient way to exchange information.
 Push Communication: Information sent to specific people or groups.
Does not ensure that information was received and/or understood.
 Pull Communication: Used for large volumes of information and/or
large audiences (intranet, e-learning). The information is posted which
allows recipients to pull (access) the information when needed.
5. Meetings: Provide a logical forum for the team to discuss the best way to
communicate project information and respond to stakeholders. Key points:
 Most meetings involve resolving problems and/or making decisions.
 While there are casual, informal meetings; most meetings should be
planned as to the time, place, and agenda. Minutes should be
documented and shared with appropriate stakeholders.
Two Key Outputs for Plan Communications Management (PMBOK® Guide, p.

296):
1. Communications Management Plan: The primary output of communication

planning is the communications management plan. This plan documents how
information will be handled and provides the following:
 Stakeholder communication requirements
 Information to be communicated
 Purpose (the reason the information is needed)
 Senders and receivers
 Format, medium, and technology
 Frequency (daily, weekly, monthly) plus start/end dates
 Escalation process
 Method for updating the communication plan
 Glossary of common terms
 Information flows and communication constraints (regulations,
organizational policies, or technology limitations)
2. Project Documents Updates: May include:

10.2 Manage Communications (PMBOK® Guide, p. 297)
Managing communications involves the process of creating, distributing, storing,

retrieving, and disposing of project information as established by the communications
management plan. This process distributes relevant information that has been
appropriately generated, received, and understood. The process must also allow
follow-on requests for additional information, clarification, and discussion. Effective
communication involves the use of techniques such as the following:
 Sender-receiver models: Feedback loops and barriers
 Choice of media: Written vs. oral, formal vs. informal, face to face vs. email
 Writing style: Active vs. passive voice, word choice, and sentence structure
 Presentation techniques: Body language and visual aids
 Meeting management techniques: Use of agendas and managing conflict
 Facilitation techniques: Building consensus and overcoming obstacles
 Listening techniques: Acknowledging, clarifying, and confirming
understanding
Manage Communications
1. Communications management 1. Communication technology 1. Project communications

plan 2. Communication models 2. Project management plan
2. Work performance reports 3. Communication methods updates
3. Enterprise environmental factors 4. Information management 3. Project documents updates
4. Organizational process assets systems 4. OPA updates
5. Performance reporting
Four Key Inputs for Manage Communications (PMBOK® Guide, p. 299):
1. Communications Management Plan: Describes how communications will

be planned, structured, monitored, and controlled (See PMBOK® Guide, Section
10.1.3.1).
2. Work Performance Reports: Used to collect and distribute performance and

status information. These reports should be as accurate and current as possible.
3. Enterprise Environmental Factors: Factors that may influence managing

communications include:
 Organizational structure
 Government or industry regulations/standards

influence managing communications include:
 Policies, procedures, and processes regarding communications
 Templates
Five Key Tools for Manage Communications (PMBOK® Guide, p. 300):
1. Communication Technology: Described previously (PMBOK® Guide,

Section 10.1.2.2), the important outcome here is that appropriate communication
technologies are chosen which meet the information needs of the project.
2. Communication Models: Selecting appropriate communication models.

Making sure that communication barriers (noise) are identified and managed.
3. Communication Methods: Depending on circumstances, choosing

interactive vs. push vs. pull forms of communication.
4. Information Management Systems: Distributing project information using

tools such as:
 Hard copy document management: letters, memos, reports, and press

releases
 Electronic communications management: e-mail, fax, voice mail,
telephone, video conferencing, and web publishing
 Electronic project management tools: project management software,
meeting support software, portals, and collaborative work management
tools
5. Performance Reporting: Performance reporting involves collecting and

disseminating performance information for project stakeholders. Reporting
usually focuses on scope, schedule, cost, quality, risk, and procurement.
Performance reports should analyze the differences between planned (baseline)
data and actual status. Reporting is often done on an “exception” basis (focusing
only on status that exceeds acceptable thresholds). Reporting should also be
appropriately detailed for the intended audience. Reporting includes three major
categories:
 Status reports (where the project now stands; analyzes variances)
 Progress reports (what the team has accomplished; list of deliverables
completed or partially completed)
 Forecasting (predicting future status; earned value measures such as EAC,
ETC, and VAC)
While some reports are simple, more elaborate reports may address factors such as:
 Past performance and forecasts of schedule and cost
 Current status of risks and other issues
 Work actually completed vs. work that should have been completed
 Summary of changes approved
Four Key Outputs for Manage Communications (PMBOK® Guide, p. 301):
1. Project Communications: Typical communications include performance

reports, status of deliverables, schedule progress, costs incurred, and the status
of changes. Communications are affected by urgency, appropriate method for
delivery, and the level of confidentiality required.
2. Project Management Plan Updates: Areas that may be updated include

project baselines (scope, schedule, and cost), communications management,
and stakeholder management. As a reminder, project baselines represent the
currently approved plan and actual work outcomes are compared so that
deviations (variances) can be analyzed for management control.
3. Project Documents Updates: Documents that may be updated include the

issue log, the project schedule, and funding requirements.
4. Organizational Process Assets Updates: Should include the following:
 Lessons learned documentation

 Project records: correspondence and other important information
stored in an organized fashion (project notebooks are suggested)
 Project reports and presentations
 Feedback from stakeholders
 Information provided to stakeholders (stakeholder notifications)
10.3 Control Communications (PMBOK® Guide, p. 303)
Control Communications is the process of monitoring and controlling communications

during the entire project life cycle to ensure that the information needs of stakeholders
are met effectively and efficiently. This control process may result in repeated iterations
of the previous planning and managing processes. The ultimate goal is that the project
continues to deliver the right message to the right people at the right time.
Control Communications
1. Project management plan 1. Information management 1. Work performance information

2. Project communications systems 2. Change requests
3. Issue log 2. Expert judgment 3. Project management plan updates
4. Work performance data 3. Meetings 4. Project documents updates
5. Organizational process assets 5. OPA updates
Five Key Inputs for Control Communications (PMBOK® Guide, p. 304):
1. Project Management Plan: Contains the communications management plan

described in Section 10.1.3.1. Information contained in the communications plan
that may affect controlling communications includes:
 Reason, timeframe, and frequency for distribution of required
information
 Individual or group responsible to communicate the information
 Individual or group receiving the information
2. Project Communications: At a minimum, project communications should

address the status of deliverables, schedule progress, and costs incurred.
Factors such as format, level of detail, degree of formality, and confidentiality will
vary according to individual needs of the project and its stakeholders.
3. Issue Log: Documents issues and monitors resolution. Used to facilitate

communication and ensure that important issues are not forgotten or overlooked.
Each issue should be clearly described, an appropriate action owner should be
assigned, and a target date for resolution or follow-up should be established.
4. Work Performance Data: Summarizes and organizes raw information that

has been collected. This information is then used to compare actual status to the
planned project baselines.

influence Control Communications include:
 Report templates and available communication technologies
 Policies, standards, and procedures for communicating
 Allowed communication media
 Record retention policies and security requirements
Three Key Tools for Control Communications (PMBOK® Guide, p. 306):
1. Information Management Systems: Provides standard tools for collecting,

storing, and distributing information about costs, schedule, and performance to
appropriate stakeholders. Examples of distribution formats include:
 Table reports
 Spreadsheet analysis
 Presentations
 Graphical, visual representations of performance data
2. Expert Judgment: Applies specialized technical and management

knowledge to determine the need for intervention, action plans, assigning
responsibility, and determining appropriate timeframes.
3. Meetings: Meetings provide a forum for discussing project performance and

responding to requests from stakeholders. As always, meetings should be
managed effectively with the use of appropriate locations, agendas, and
timeframes.
Five Key Outputs for Control Communications (PMBOK® Guide, p. 307):
1. Work Performance Information: Summarizes and communicates

performance data at the level needed by various stakeholders. As usual, the
data (at a minimum) typically include scope, schedule, and cost status.
2. Change Requests: Whenever controlling communications leads to a change

request, the request is reviewed using the Perform Integrated Change Control
process. Results may include:
 Revisions to costs, activities, schedules, resources, and risks
 Updates/adjustments to the project management plan and related
documents
 Recommendations for corrective or preventive actions
3. Project Management Plan Updates: Portions of the plan that may be

updated include the communications management plan, stakeholder
management plan, and human resource management plan.
4. Project Documents Updates: Documents that may be updated include

forecasts, performance reports, and issue logs.

that may affect controlling communications include:
 Causes of issues
 Reasoning for corrective actions
 Lessons learned
Other Topics:
Barriers to communication: PMI says, among other problems, the presence of

communication barriers is likely to lead to increased conflict. Examples of
communication barriers include:
 Cultural differences
 Lack of clear communication channels
 Physical and temporal distance (time zones)
 Technical language
 Distracting environment (noise, temperature)
 Poor attitudes (personal antagonism)
Effective team communication: PMI endorses six actions to improve team

communications.
1. Be an effective communicator: Project managers should foster two-way

communication by encouraging feedback and consensus building. Note that
PMI says effective communicators have high regard for the opinions and
feelings of other people.
2. Be a communications expeditor: The PM should establish both formal and

informal communication channels. PMI says the use of formal and informal
methods enhances project integration.
3. Discourage the use of communications blockers:
 It’ll never work

 The boss won’t buy it
 Get real
 That’s nice, but it’s too expensive
 We tried that … it didn’t work
4. Use a “tight” matrix: Involves physical colocation of the team in a single

location. Minimizes distractions, speeds communication and decision making,
and enhances working relationships. Not the same as a weak or strong
matrix!
5. Get a project war room: A location owned by the project team for meetings,
storage of information, and so on. Especially important if a tight matrix is not
possible. “Improves identity with the team.”
6. Make meetings effective: PMI surveys have revealed that meetings are a
major time sink for project managers. Effective use of everyone’s time is
crucial. Therefore, call meetings only when they are really needed. Follow
good meeting policies such as:
 Communicate the purpose

 Have and follow an agenda
 Identify length and location
 Include team building when possible (a favorite tool for PMI)
 Assign action items and issue minutes
Note: PMI says there are four important roles for a meeting
chairperson. They are:
1. Encourage participation
2. Handle differences of opinion
3. Prevent drift and disruption
4. Periodically summarize key issues
Role of the project manager: PMI says the key to successful communication is a
project manager who is a good communicator. This statement may seem simplistic
and obvious, however, it is indeed very true!
Documentation: Good documentation is associated with successful projects. Key

points include:
 Documentation is important regardless of project size.
 Good documentation will assist in reducing unauthorized changes in scope.
 PMI identifies the project management plan as an especially important

document:
Preparation of the plan helps reduce uncertainty (because of the analysis

involved). Distribution of the plan keeps people informed.
Organizational structure: Of the organizational structures identified by PMI,

communication and information flows are believed to be the most complex in the
matrix environment.
Examples of Formal-Informal Communication Combined with Written-Oral:
Method When Used
Formal, Written Contractual issues, project documentation, some e-

mails
Formal, Oral Presentations, speeches, some meetings
Informal, Written Memos, some e-mails, notes
Informal, Oral Conversations, some meetings
Self-Study
Drill Practice: Communication Management
Question Answer
1. Formal communication is best handled 1. in writing (p. 10-5)

_________. Note: All page numbers in this drill practice refer to
2. Communication methods is a tool for Plan 2.

Communications Management and Manage Interactive
Communications. What are the three methods Push
identified for sharing information? Pull (pp. 10-6 & 8)
3. What can a recipient of information do to 3. Practice active listening, i.e., paraphrasing

improve communication? the speaker’s message to check for
understanding (pp. 10-2, 10-5)
4. What type of communication should be 4. Formal, written (falls under the heading of
used to document customer acceptance of contractual issues) (p. 10-14)
major project deliverables?
5. Identify four aspects of effective listening. 5.

 Asking for clarification
 Repeating what you heard (feedback)
 Watching for nonverbal clues (body
language)
 Maintaining eye contact (p. 10-5)
6. Your project team just gained five new 6.

members, bringing the team size to a total of n (n - 1) / 2
ten. How many additional communication Old team: 5 (4) / 2 = 10 channels
channels must you now handle? New team: 10 (9) / 2 = 45
Additional channels = 45 - 10 = 35
(pp. 10-3 & 4)
7. What factor might increase the chances of 7.

conflict on your project? The presence of various communication
barriers (p. 10-12)
8. What is a major key to successful 8. A PM who is a good communicator

communication on a project team? (p. 10-14).
9. Approximately what percent of a project 9. According to a PMI survey, a major

manager’s time is spent acquiring and percentage (as much as 80 to 90 percent)
communicating information? (p. 10-5).
Question Answer
10. What are the primary tools recommended 10.

for communication planning? Communication requirements analysis
Communication technology
Communication models
Communication methods
Meetings (pp. 10-3 to 10-6).
11. According to a PMI survey, what 11.

communication barriers could hamper a  Cultural differences
project?  Lack of clear communication channels
 Physical/temporal distance
 Technical language
 Distracting environment (noise)
 Poor attitudes (personal antagonism)
(p. 10-12)
12. Who is the key to all project 12. The project manager (p. 10-14)
communications?
13. What is a tight matrix? 13. Providing an environment where team

members work in a single, physical office
space, i.e., colocation. This practice improves
communication and reduces distractions (p. 10-
13).
14. The use of both formal and informal 14. project integration (p. 10-13).
communication is likely to enhance____.
15. What are the responsibilities of the 15.

chairperson of a meeting?  Encourage participation
 Handle differences of opinion
 Prevent disruption/drift
 Summarize/highlight key issues
(p. 10-14)
16. Change requests is an output to which 16. Control Communication; all monitor and
communication process? control processes have change requests as an
output (p. 10-12)
17. Effective communicators have ______. 17. high regard for the opinions and feelings
of other people (p. 10-13).
18. What effect does disseminating the 18. Uncertainty is reduced and project
project management plan have on stakeholders are appropriately informed
performance? (p. 10-14).
Question Answer
19. The results of controlling communications 19. Repeated iterations of Plan

could have what possible effect on the two Communications and Manage
previous processes (plan and manage)? Communications could occur (p. 10-10).
20. Which of the following is not an input to 20.

Control Communications?
Information management systems, which is a
Project management plan tool (pp. 10-10 & 11)
Project communications
Issue log
Information management systems
21. Name six possible dimensions of 21.

communication.  Written or oral
 Verbal or non-verbal
 Internal or external
 Formal or informal
 Vertical or horizontal
 Official or unofficial
(p. 10-1)
22. Identify guidelines for effective meetings. 22.

 Clear purpose
 Agenda
 Convenient location and defined length
 Action items and minutes
 Consider team building (p. 10-13)
23. What are the five outputs for Control 23.

Communications?  Work performance information
 Change requests
 Project management plan updates
 Project documents updates
 OPA updates
(p. 10-12)
24. Name three important categories of 24.

performance reporting.  Status reporting (where project now
stands)
 Progress reporting (what the team has
accomplished)
 Forecasting (predicting future
status/progress)
(p. 10-9, performance reporting)
Question Answer
25. Name three advantages of verbal 25.

communication.  Quick
 Can clarify / use immediate feedback
 Supports brainstorming needed to solve
complex problems (p. 10-5)
26. The ______ process is part of planning 26. Plan Communications Management.
and produces what two outputs?
Communications management plan and
project documents updates (pp. 10-6 & 7).
27. What are some communication-related 27.

disadvantages of the matrix organization?  Multiple bosses
 Conflict over differing priorities
 Team members are borrowed
(commitment may be lacking)
 Team members may see only pieces of
many projects (lack sense of completion)
 Information flows are complex
(p. 2-6)
28. What are communication blockers? 28. Negative statements that kill good ideas,
such as:
 We tried that-it didn’t work

 It’ll never fly with the boss
 C’mon, get real
 That’s interesting, but it’s too expensive
(p. 10-13)
29. What is an advantage of having a project 29. Helps provide a sense of “identity” for
war room? team members (p. 10-13)
30. What are the five parts of the 30.

communication model?  Encode
 Transmit message (includes medium and
noise)
 Decode
 Acknowledge
 Feedback/Response (pp. 10-4 & 5)
Unit 11: Risk
Management
Major Processes
11.1 Plan Risk Management
11.2 Identify Risks
11.3 Perform Qualitative Risk Analysis
11.4 Perform Quantitative Risk Analysis
11.5 Plan Risk Responses
11.6 Control Risks
Other Topics
Self-Study
Unit 11: Risk Management
Some exam takers may be unfamiliar with the basic concepts of probability, expected
monetary value, and decision trees. This unit will review all these concepts so that you
should not experience any particular difficulty.
Major Processes
11.1 Plan Risk Management (defining how to conduct risk management activities)
11.2 Identify Risks (determining which risks might affect the project)
11.3 Perform Qualitative Risk Analysis (qualitative analysis and prioritizing of risks)
11.4 Perform Quantitative Risk Analysis (numerically analyzing identified risks)
11.5 Plan Risk Responses (how to enhance opportunities and reduce threats)
11.6 Control Risks (identifying new risks, tracking identified risks, implementing risk
response plans, and evaluating risk management effectiveness)
Risk is defined as an uncertain event or condition that, if it occurs, can have either a
positive or a negative effect on the project objectives. A risk may have one or more
causes and one or more impacts if it occurs.
Known risks have been identified, analyzed, and can be managed using the processes
in this knowledge area. Known risks may be assigned a contingency reserve as part of
managing them. Unknown risks cannot be ascertained or managed adequately in
advance. A common method for dealing with unknown risks is to allocate management
reserve in the form of extra money, time, or resources.
Risk management is identifying, analyzing, and responding to project risks. Risk

management involves minimizing potentially negative factors and maximizing potentially
positive factors. In other words, risk involves the opportunity for gain as well as the
potential for loss. PMI states that organizations that fail to proactively manage risks
increase the chance of negative impacts and/or project failure.
Individuals and organizations have attitudes toward risk known as risk orientation, risk
tolerance, and risk preference. Some of us are risk takers and some are cautious risk
avoiders. In any event, risk management involves balancing a potential risk against a
potential reward. Another term that describes this concept of risk vs. reward is utility
theory or utility function. In the 5th edition of the PMBOK® Guide, PMI has drawn the
following distinctions among three risk-related terms:
 Risk appetite: the degree of uncertainty an organization is willing to

accept in light of the anticipated reward (similar to utility theory).
 Risk tolerance: the amount of risk that an organization will withstand
before choosing a different response.
 Risk threshold: the level of uncertainty or impact beyond which the
organization will not tolerate the risk.
Note: PMI distinguishes uncertainty from risk. They (and others) contend that
uncertainty occurs when there is a “lack of information that makes it difficult to estimate
the likelihood of an event.”
You should know that whenever PMI refers to risk factors, the following three items
comprise those factors:
1. Risk event: The precise description of what might happen to the project.
2. Risk probability: The likelihood that the event will occur.
3. Amount at stake: The magnitude of the potential loss or gain.
Also, you should know the difference between the two following types of risk:
Business Risk Insurable Risk (“Pure”)
The normal risk of doing business. Represents only an opportunity for loss.
Presents an opportunity for gain or loss. Divided into four categories.
Should be managed: Should be insured:
Business Risk: Insurable Risk:

 Plan 1. Property damage (fire, flood, wind)
 Identify 2. Indirect consequential loss (cost of
 Qualitative Analysis cleanup after a loss, disrupted
 Quantitative Analysis business)
 Response 3. Legal liability (injury to visitors)
 Control 4. Personal injury (employee injuries;
worker compensation)
11.1 Plan Risk Management (PMBOK® Guide, p. 313)
Risk management planning is the process of deciding how to conduct risk

management activities for a project. The risk management plan is important in
obtaining initial and continuing support from stakeholders. Careful planning will almost
always improve the results from the other five processes of risk management and is,
therefore, time well spent. Risk planning should begin during the earliest stages of
project initiation and should be completed early in the project planning process.
Plan Risk Management
1. Project management plan 1. Analytical techniques 1. Risk management plan

2. Project charter 2. Expert judgment
3. Stakeholder register 3. Meetings
Five Key Inputs for Plan Risk Management (PMBOK® Guide, p. 314):
1. Project Management Plan: The risk management plan being created at this
step should be consistent with other approved subsidiary management plans
(such as the scope, schedule, cost, quality, human resource, communication,
procurement, and stakeholder plans). The scope, schedule, and cost baselines
are of special importance.
2. Project Charter: The charter would have previously documented high-level

risks and requirements.
3. Stakeholder Register: Identifies key stakeholders, some of whom may have

information or concerns about potential risks.
4. Enterprise Environmental Factors: Attitudes toward risk and the extent of

risk tolerance in the organization are major influences on the risk management
plan. These attitudes may be evident in the organization’s risk policies.

influence risk planning includes:
 Risk statement formats and standard templates
 Lessons learned
 Risk categories
 Roles, responsibilities, and common definitions
 Authority levels for decisions
Three Key Tools for Plan Risk Management (PMBOK® Guide, p. 315):
1. Analytical Techniques: Analytical techniques help define the overall risk

management context by combining assessments of two crucial factors:
 Stakeholder risk attitudes
 The overall perceived strategic risk exposure for the particular
project.
Stakeholder risk profile analysis may be used to score stakeholder risk tolerance
(how much risk they are willing to accept). Risk scoring sheets may also be used
to rate the overall risk exposure for the specific project in question.
2. Expert Judgment: Improving the risk management plan by drawing upon the
expertise of groups or individuals such as:
 Senior management and project stakeholders
 Project managers who have worked similar projects
 Subject matter experts, industry groups, and consultants
 Professional and technical associations
3. Meetings: Planning meetings (attended by key project stakeholders and other

subject matter experts) are used to help develop the risk management plan. Key
areas for discussion include relevant cost and schedule information (such as
appropriate contingency or reserve amounts), assignment of risk responsibilities,
and definitions of probability and impact. Risk templates that do not already exist
may be developed in these meetings.
One Key Output for Plan Risk Management (PMBOK® Guide, p. 316):
1. Risk Management Plan: The single output of risk planning is the risk
management plan. This plan addresses how risk identification, qualitative and
quantitative analysis, response planning, and control will be handled. The plan
may include the following:
 Methodology
 Roles and responsibilities
 Budgeting and timing
 Risk categories: May employ information from the RBS (Risk Breakdown
Structure)
 Definitions of probability and impact: How to describe or measure the
likelihood that an event will occur and the effect on project objectives if it does
occur
 Probability and impact matrix (more detail under qualitative analysis)
 Revised stakeholder tolerances: Risk planning may cause shifts in how
much risk is considered acceptable for a specific project
 Reporting formats and tracking (recording risk activities and audits)
11.2 Identify Risks (PMBOK® Guide, p. 319)
Risk identification involves determining which risk events are likely to affect the project
and documenting their characteristics. Risk identification is not a one-time event; it
is an iterative process and normally leads to qualitative analysis. New risks may
emerge at any time and continued risk identification should be performed on a
regular basis throughout the project. During the identification of a risk, it may also
become apparent what the appropriate response should be. This information should be
recorded for subsequent use in the response planning process.
Identify Risks
1. Risk management plan 1. Documentation reviews 1. Risk register

2. Cost management plan 2. Information gathering techniques
3. Schedule management plan 3. Checklist analysis
4. Quality management plan 4. Assumptions analysis
5. Human resource management plan 5. Diagramming techniques
6. Scope baseline 6. SWOT analysis
7. Activity cost estimates 7. Expert judgment
8. Activity duration estimates
9. Stakeholder register
10. Project documents
11. Procurement documents
Thirteen Key Inputs for Identify Risks (PMBOK® Guide, p. 321):
1. Risk Management Plan: Assigns roles and responsibilities for risk

identification, builds money and time into the plan to accommodate risk
identification, and provides information about risk categories that may be relevant
for the current project (output of previous section, 11.1).
2. Cost Management Plan: Cost management planning considers the risk

register as well as reserve analysis for both cost estimating and budgeting.
3. Schedule Management Plan: The schedule management plan considers

reserve analysis and also produces estimates with ranges so that an
understanding of schedule risk is already considered.
4. Quality Management Plan: Quality planning (Section 8.1) may generate

information about potential risks, especially technical risks.
5. Human Resource Management Plan: Described in Section 9.1, the staffing

management plan is especially useful in understanding human resource risks.
6. Scope Baseline: The scope statement should include any assumptions that
have been made. Assumptions are inherently risky because of the uncertainty
embedded in them. The PMBOK® Guide treats assumptions as especially
important in the chapter on risk management. Assumptions must be identified,
documented, and periodically validated as to their accuracy.
Also, recall that one of the uses of the WBS is risk identification. It is usually
easier to assess the potential risk of a specific work package than to identify risks
for the entire project. The WBS also provides a method for tracking risks at
various levels (summary, control account, and work package levels).
7. Activity Cost Estimates: If the estimates are expressed as a range (as

recommended by PMI), activities with wider cost ranges are more risky.
8. Activity Duration Estimates: Similarly, if the schedule estimates are

expressed as a range (as recommended by PMI), activities with wider schedule
ranges are considered more risky. Recall the use of PERT as one method for
evaluating schedule by estimating the inherent range in possible outcomes.
9. Stakeholder Register: Stakeholders are a major source of risk information.
10. Project Documents: The following risk-related project documents are aimed
at improving cross-team and stakeholder communication and may include:
 Project charter
 Project schedule and network diagrams
 Issue log
 Quality checklist
 Other information (any additional information proven to be valuable in
risk identification)
11. Procurement Documents: Defined in Section 12.1, procurement

documents help assess the risks associated with outsourcing.

risk identification may include:
 Published information, including commercial databases
 Academic studies and published checklists
 Benchmarking and industry studies
 Risk attitudes

influence risk identification include:
 Project files (actual historical data)
 Risk statement templates
 Lessons learned
Seven Key Tools for Identify Risks (PMBOK® Guide, p. 324):
1. Documentation Reviews: A structured review of all subsidiary management

plans (scope, schedule, cost, quality, and so on) as well as a review of all
assumptions that have been made.
2. Information-Gathering Techniques: Examples include the following:

 Brainstorming: Under the leadership of a facilitator, the project team or a
multi-disciplinary group of experts generates ideas about project risks.
The information is then refined and categorized.
 Delphi technique: A way of reaching consensus among a group of
experts who participate anonymously. The experts give responses to
specific questions. The responses are then summarized and provided to
the entire group. The anonymity prevents any participant from dominating
the results. Several iterations are usually performed to determine whether
a consensus exists among the experts. While this technique can be used
for numerous reasons, the purpose here is to identify major project risks.
 Interviewing: Conducted with experienced project managers, subject
matter experts, and other stakeholders.
 Root cause analysis: Sharpens the definition of a particular risk and
facilitates grouping of risks by cause or category.
3. Checklist Analysis: Organized by source of risk. Checklists use information

learned from previous projects and can help make risk identification quicker and
simpler. A possible disadvantage is that analysts may limit their search to a pre-
existing list. Checklists should be “pruned” occasionally and they should be
reviewed during closeout for incorporation of new information into templates for
future use. Examples of such sources of risk include:
 Technology
 Cost
 Schedule
 Internal
 External
 Procurement
 Legal
 Poor planning
 Changes in requirements
4. Assumptions Analysis: Exploring and challenging the validity of any

assumptions that have been made about the project.
5. Diagramming Techniques: May include the following:

 Cause and effect diagrams
 Flowcharts (system or process)
 Influence diagrams
6. SWOT Analysis: (Strengths, Weaknesses, Opportunities, Threats): A

technique to ensure risks are approached from a sufficient mix of perspectives.
SWOT looks at both the upside opportunities as well as the downside concerns.
The technique also considers whether the strengths, weaknesses, opportunities,
or threats come from internal organizational sources or external environmental
sources.
7. Expert Judgment: Experts with relevant experience on similar projects may

be an invaluable source of information.
One Key Output for Identify Risks (PMBOK® Guide, p. 327):
1. Risk Register: The risk register is built in stages as each risk management
process is performed. A plan is provided, risks are identified, risks are then
analyzed, response plans are developed, and on-going monitoring and control
follows next. New information is developed at each step.
At this point, the risk register contains:

 A list of potential risk events
 A list of potential responses (if known)
For the exam, also know that a risk trigger is a symptom or warning sign that a
risk is about to occur. An example might be that the cost performance index is
moving out of acceptable thresholds.
11.3 Perform Qualitative Risk Analysis (PMBOK® Guide, p. 328)
Qualitative risk analysis is the process of assessing the likelihood and impact of
identified risks and prioritizing them according to their potential effect on project
objectives. This process is accomplished using established qualitative methods and
tools. The purpose is to help the project team focus on high priority risks and also to lay
the foundation for quantitative analysis should it be needed. Qualitative analysis takes
relatively less time and is less expensive to perform when compared to quantitative
analysis.
Perform Qualitative Risk Analysis
1. Risk management plan 1. Risk probability and impact 1. Project documents

2. Scope baseline assessment updates
3. Risk register 2. Probability and impact matrix
4. Enterprise environmental factors 3. Risk data quality assessment
5. Organizational process assets 4. Risk categorization
5. Risk urgency assessment
6. Expert judgment
Five Key Inputs for Perform Qualitative Risk Analysis (PMBOK® Guide, p.
329):
1. Risk Management Plan: The risk plan provides assignment of roles and
responsibilities (for qualitative analysis activities), stakeholder risk tolerances,
definitions of probability and impact, risk categories that should be considered,
and the monetary and time resources to accomplish the risk activities.
2. Scope Baseline: The scope statement helps the team to understand the
basic nature of the project. Recurring, common projects are inherently less risky
because they have become known and are more predictable. Projects involving
state-of-the-art technology or a high degree of complexity tend to be more risky.
3. Risk Register: At this step, the list of identified risks would be available.
4. Enterprise Environmental Factors: Environmental factors that may apply to

qualitative risk analysis may include:
 Industry studies of similar projects
 Risk databases from industry or proprietary sources
5. Organizational Process Assets: Information about risks on previous, similar

projects may be used at this step.
Six Key Tools for Perform Qualitative Risk Analysis (PMBOK® Guide, p. 330):
1. Risk Probability and Impact Assessment: Risk probability is the likelihood

that a risk will occur and risk impact (consequence) is the effect on project
objectives if a risk event does occur. Qualitative descriptions of both
characteristics may range from very high to very low. These assessments are
documented as a result of interviews or meetings.
2. Probability and Impact Matrix: A matrix may be constructed that assigns

probability and impact ratings to individual risk events. The scales used to
assign the ratings could employ subjective, ordinal data such as “low, moderate,
and high”. Alternatively, the scales could use cardinal scales that are numeric.
Figure 11-10 on page 331 shows one method.
3. Risk Data Quality Assessment: The availability of data, reliability of that

data, source of the data, and uncertainty in measuring the data all have an
impact on risk. A credible risk analysis requires accurate and unbiased data.
The quality of risk data is often directly related to previous experience with
similar projects. Therefore, the risk data may be lacking or unreliable for highly
unique projects for which the performing organization has little experience.
4. Risk Categorization: The RBS (risk breakdown structure) may be helpful in

grouping risks into related categories. Risk responses can be more effective if
common patterns in the risks are known.
5. Risk Urgency Assessment: Some risks require near-term responses and

may therefore be considered more urgent.
6. Expert Judgment: Used to more accurately assess the probability and

potential impact for each individual risk event.
One Key Output for Perform Qualitative Risk Analysis (PMBOK® Guide, p.
333):
1. Project Documents Updates: The risk register and the assumptions log are
the two key documents that may be updated at this point. Updates to the risk
register may include the following:
Relative ranking or priority list for the project: The overall risk ranking
produces risk scores that can be compared among projects. The
information can be useful in several ways: support recommendations to
initiate, continue, or cancel a project; assign the right people to various
projects; and help support a benefit-cost analysis on a project.
Risks grouped by categories: Root cause analysis may reveal common

causes or patterns among certain risks.
Risks requiring near-term response: Risks that require immediate

responses should be organized into separate groups.
List of risks for additional analysis and management: Risks with high
or moderate impacts may be further analyzed using additional techniques.
“Watch list” of low priority risks: Qualitative analysis may have

revealed risks that are considered low but should be monitored for any
changes.
11.4 Perform Quantitative Risk Analysis (PMBOK® Guide, p. 333)
Quantitative analysis numerically analyzes the probability of each risk and its
consequence on project objectives. Sophisticated techniques such as Monte Carlo
simulation and decision tree analysis are used to do the following:
 Determine the probability that specific project objectives can be met.
 Quantify risk exposure so that cost and schedule reserves can be determined.
 Identify which risks require the most attention.
 Identify realistic cost, schedule, and performance targets.
There may be instances in which quantitative analysis is not needed or is not worth the
cost.
Perform Quantitative Risk Analysis
1. Risk management plan 1. Data gathering and 1. Project documents

2. Cost management plan representation techniques updates
3. Schedule management plan 2. Quantitative risk analysis and
4. Risk register modeling techniques
5. Enterprise environmental factors 3. Expert judgment
Six Key Inputs for Perform Quantitative Risk Analysis (PMBOK® Guide, p.
335):
1. Risk Management Plan: Again, the risk plan establishes roles and
responsibilities, the budget and time to do the analysis, risk categories, and
stakeholder risk tolerances.
2. Cost Management Plan: Provides the format and structure for handling cost-
related information and for handling reserves.
3. Schedule Management Plan: Provides the format and structure for handling
schedule-related information and for handling reserves.
4. Risk Register: At this step, the risk register provides a list of risks, risk
priorities, and risk categories (information from all the previous processes).
5. Enterprise Environmental Factors: Environmental factors that may

influence quantitative analysis may include:
 Industry studies of similar projects
 Risk databases available from industry groups or proprietary sources
6. Organizational Process Assets: Organizational Process Assets that can

influence quantitative analysis include information from previous, similar projects.
Three Key Tools for Perform Quantitative Risk Analysis (PMBOK® Guide, p.
336):
1. Data Gathering and Representation Techniques: These techniques

include:
 Interviewing: Interviews with appropriate subject matter experts yield
data required to build probability distributions. A common approach is
shown in Figure 11-13, page 336, in which experts provide three
estimates (low, most likely, and high). This approach is very much like
the PERT technique discussed in the time management area.
 Probability Distributions: The outcome of interviewing is a
probability distribution (Figure 11-14 on page 337 shows two
examples).
2. Quantitative Risk Analysis and Modeling Techniques: Common

techniques include:
 Sensitivity Analysis: Also known as “what if” analysis, sensitivity
analysis uses the power of the computer to determine which risks have
the most potential impact on the project. The technique considers the
effect of variations on project outcomes. For example, if you vary the
duration of a given task, what is the effect on project costs, quality, and
resource usage? Tornado diagrams may be used to assess the potential
impact of highly uncertain variables on the rest of the project. Specifically,
tornado diagrams compare the relative importance of variables with a high
degree of uncertainty to variables that are more stable. Figure 11-15 on
page 338 of the PMBOK® Guide shows an example of a Tornado diagram.
 Expected Monetary Value Analysis: A statistical concept that
calculates a long-term average outcome. EMV is quite simply
multiplying the probability of an event by the dollar amount at stake.
EMV analysis is often used in conjunction with decision trees. A
decision tree is a diagram that depicts the interactions of possible
events. The process yields the probabilities and/or expected monetary
value of various possible outcomes. See Figure 11-16 on page 339
of the PMBOK® Guide for an example. The course slides provide
examples.
 Modeling and Simulation: Using data from subject matter experts, a
computer software program uses random number generators and input
values from a probability distribution to simulate possible project
outcomes. Figure 11-17 on page 340 of the PMBOK® Guide shows
the data from a simulation.
Key points about simulation:
 Most common form is Monte Carlo.
 Can quantify a variety of potential risks, including schedule and cost.
 Produces a distribution of possible outcomes with associated

probabilities.
 By comparison, PERT and CPM analyses understate project duration

because they cannot account for path convergence.
 The results of a Monte Carlo simulation are significantly affected by the

choice of statistical distribution.
3. Expert Judgment: Subject matter experts are needed to provide data and
validate the results.
One Key Output for Perform Quantitative Risk Analysis (PMBOK® Guide, p.
341):
1. Project Documents Updates: The primary document updated at this point is

the risk register. The following new information may be provided:
 Probabilistic analysis of the project: A forecast of possible cost and

schedule outcomes along with associated confidence levels. In other
words, a probability distribution showing possible cost and schedule
results.
 Probability of achieving cost and time objectives: A quantitative
analysis showing the probability of achieving the current project
objectives (given the current knowledge of project risks).
 Prioritized list of quantified risks: A list of risks that pose the
greatest threat (or opportunity) for the project.
 Trends in quantitative risk analysis results: If there are any trends
in project performance, repetitive analysis will usually show them.
11.5 Plan Risk Responses (PMBOK® Guide, p. 342)
Risk response planning is the process of determining how to enhance opportunities or

reduce threats. Response planning assigns one or more people as “response owners”
and addresses risks according to their priority. Various risk analysis tools, such as
decision trees, may be used to evaluate and choose the best response strategies.
Response planning should consider the following factors:
 The response is appropriate for the severity of the risk.
 The response is cost effective and timely.
 The response is agreed upon and realistic.
 The response is owned by a specific person (assigned action item).
Plan Risk Responses

1. Risk management 1. Strategies for negative risks or threats 1. Project management plan
plan 2. Strategies for positive risks or updates
2. Risk register opportunities 2. Project documents updates
3. Contingent response strategies
4. Expert judgment
Two Key Inputs for Plan Risk Responses (PMBOK® Guide, p. 343):
1. Risk Management Plan: As before, the risk plan assigns people who own
specific risks, defines the thresholds for whether a risk is low, moderate, or high,
and provides the time and budget to conduct response activities.
2. Risk Register: Based on the results from the previous processes,

identification and analysis, the risk register provides the following information:
 Identified risks and priority
 Root causes and risks grouped by categories
 List of potential responses
 Risk owners and risk triggers (symptoms and warning signs)
 Risks requiring near-term response
 Watch list of low risks that should be periodically monitored
Four Key Tools for Plan Risk Responses (PMBOK® Guide, p. 343):
1. Strategies for Negative Risks or Threats: May be addressed with one or

more of the following:
 Avoid: This strategy attempts to eliminate a threat, if possible. One

possible approach is to adopt an alternative strategy in one of the
following ways: 1) reduce scope or change project objectives, 2) allow
the schedule to slip, 3) adopt a proven technical approach instead of a
more innovative, risky one, or 4) use a substitute component that does
not have the same risk.
 Transfer: PMI suggests that you may consider transferring

(deflecting) a risk to another party through numerous practices:
 Insurance and performance bonds
 Warranties and guarantees
 Outsourcing (also called procurement or subcontracting)
 Contract type (a fixed price contract transfers cost risk to the
seller and a cost reimbursement contract transfers cost risk to the
buyer)
Note: Transferring a risk does not eliminate the risk. It merely
gives someone else the responsibility to manage that risk.
 Mitigate: Actions taken to reduce the probability or the impact of a
risk. Earlier preventive approaches are usually more productive than
repairing the damage after it occurs. Examples of mitigation include:
 Adopting less complex approaches
 Conducting more tests
 Designing redundancy and back-up systems into critical
components and subsystems
 Choosing more stable, proven suppliers
 Accept: This approach may be used for negative risks or threats and
for positive opportunities. Passive acceptance is taking no action and
dealing with the problems (or opportunities) if and when they occur.
Active acceptance is almost always handled using extra money, time,
or resources (known as contingency reserve).
Note: PMI states that avoidance and mitigation are appropriate for critical
risks with high impact, whereas transference and acceptance are more
appropriate for less critical risks with relatively low impact.
2. Strategies for Positive Risks or Opportunities:
 Exploit: This strategy attempts to maximize the chance of reaching an

opportunity. It uses approaches such as: assigning the most talented
resources available, using new technologies to reduce costs and
durations, providing better quality than planned, and eliminating
uncertainty. The sponsor should exert influence where needed.
 Share: This strategy involves joint ventures, strategic alliances, and

other collaborative arrangements to share risks, share costs, and take
advantage of technical synergies (each party performs the portion of
the project that they do best).
 Enhance: This strategy is conceptually the opposite of mitigating
negative risks; the enhance strategy attempts to increase the
probability and positive impact of positive opportunities. Methods for
doing so may include:
 Maximizing any natural advantages such as superior technology
or better global supplier relationships
 Adding more resources to finish earlier (i.e., crashing)
 Accept: Used when the organization prefers not to actively pursue an
opportunity, but will accept the results if they occur without undue
effort. For example, the organization might not wish to divert
resources from a more promising opportunity.
Note: The acceptance strategy is associated with the word “low”. A

project may accept a low negative risk or a low (unexciting) opportunity.
3. Contingent Response Strategy: A response plan that is used only when

certain events occur. This approach is appropriate when planners feel that future
warning symptoms will provide adequate time to implement the response activity
if the conditions begin to occur. For example, a particular risk response strategy
may be triggered only if a specific milestone is missed.
4. Expert Judgment: As always, people with the right experience, training, and
knowledge should be used for the task at hand (in this case, for response
planning).
Two Key Outputs for Plan Risk Responses (PMBOK® Guide, p. 346):
1. Project Management Plan Updates: Elements of the plan that may be

updated as a result of response planning include:
 Procurement management plan
 Human resource management plan
 Scope baseline (scope statement, WBS, WBS dictionary)
 Schedule baseline
 Cost baseline
2. Project Documents Updates: Updates to the risk register may include:

 Risk owners and assigned responsibilities
 Agreed-upon response strategies
 Risk triggers and warning signs
 Budget and schedule needed to implement planned responses
 Contingency plans, fallback plans, residual and secondary risks
 Contingency reserves
Other document updates may include:
 Assumptions log
 Technical documentation
 Change requests
11.6 Control Risks (PMBOK® Guide, p. 349)
Control Risks is the process of keeping track of identified risks, ensuring that risk
response plans are implemented, evaluating the effectiveness of risk responses,
monitoring residual risks, and identifying new risks. The purpose of control is to
determine whether:
 Risk responses have been implemented.
 Risk responses were effective (or new responses are needed).
 Project assumptions are still valid.
 Any risk triggers have occurred.
 Risk exposure has changed.
 Policies and procedures are being followed.
 Any new risks have emerged.
Control Risks
1. Project management plan 1. Risk reassessment 1. Work performance information

2. Risk register 2. Risk audits 2. Change requests
3. Work performance data 3. Variance and trend analysis 3. Project management plan updates
4. Work performance 4. Technical performance 4. Project documents updates
reports measurement 5. OPA updates
5. Reserve analysis
6. Meetings
Four Key Inputs for Control Risks (PMBOK® Guide, p. 350):
1. Project Management Plan: Contains the risk management plan which

assigns people, risk owners, and the resources needed to carry out risk
monitoring activities.
2. Risk Register: Provides the list of identified risks, risk owners, agreed
responses, risk triggers (symptoms and warning signs), residual and secondary
risks, watch list of low priority risks, and planned reserves.
3. Work Performance Data: The status of the work is a major input to risk
control. Performance reports give insights into whether risks are occurring and
whether response plans need to be implemented. Specific status of interest
includes:
 Deliverable status
 Schedule progress
 Costs incurred
4. Work Performance Reports: These reports analyze the work performance

data just mentioned to create status reports and forecasts using various methods
such as earned value.
Six Key Tools for Control Risks (PMBOK® Guide, p. 351):
1. Risk Reassessment: The project team should regularly check for new risks
as well as “reassessing” previously identified risks. At least three possible
scenarios should be considered: a) new risks may have emerged and a new
response plan must be devised, b) if a previously identified risk actually occurs,
the effectiveness of the response plan should be evaluated for lessons learned,
and c) if a risk does not occur, it should be officially closed out in the risk
register.
2. Risk Audits: Evaluate and document the effectiveness of risk responses as

well as the effectiveness of the processes being used. Risk audits may be
incorporated into the agenda of regularly scheduled status meetings or may be
scheduled as separate events.
3. Variance and Trend Analysis: Used to monitor overall project performance.

These analyses are used to forecast future project performance and to determine
if deviations from the plan are being caused by risks or opportunities.
4. Technical Performance Measurement: Using the results of testing,

prototyping, and other techniques to determine whether planned technical
achievements are being met. As with trend analysis, this information is also used
to forecast the degree of technical success on the project.
5. Reserve Analysis: Compares the remaining reserves to the remaining risk to

determine whether the remaining reserve is adequate to complete the project.
Recall that the fundamental purpose of reserves is to reduce the chance of cost
and schedule overruns.
6. Meetings: Risk management should be an agenda item at the regular team

meetings.
Five Key Outputs for Control Risks (PMBOK® Guide, p. 353):
1. Work Performance Information: Work performance information has been

analyzed and provides a mechanism to support on-going project decision
making.
2. Change Requests: When contingency plans are implemented, it is

sometimes necessary to change the project management plan. A classic
example is the addition of extra money, time, or resources for contingency
purposes. These change requests may lead to recommended corrective
actions or recommended preventive actions.
Corrective actions may include contingency plans (devised at the time a risk
event is identified and used later if the risk actually occurs) and workarounds
(passive acceptance of a risk where no action is taken until or unless the risk
event actually occurs). The major distinction is that workaround responses are
not planned in advance.
3. Project Management Plan Updates: Again, if approved changes have an

effect on risk information or processes, the project management plan should be
revised accordingly.
4. Project Documents Updates: Updates the risk register by recording the

outcomes of risk monitoring activities such as risk reassessment and risk audits.
Also records which risk events have actually occurred and whether the
responses were effective
5. Organizational Process Assets Updates: Includes templates for the risk

plan and risk register, and lessons learned.
Other Topics:
Probability Theory:
 Probability of heads on a coin toss (50%)
 Probability of heads on the fifth coin toss (50%, the probability on each
coin toss is independent of the others)
 Probability of heads two times in a row (25%: multiply the probabilities

of each separate event = .50 times .50)
 If the probability of event A is 30%, the probability of event A not

happening is 70%, in other words, 1 - P(A).
 If the probability of an event occurring during any given month is .20, the
probability that the event will not occur during the third month is .80.
 What is the probability that the event would not occur two months in a
row? (.80 x .80 = .64)
 If the P(A) is .50 and the P(B) is .60, the probability that both A & B
would occur is .30 (multiply the probabilities).
Risk versus estimating range: When estimating, the wider the range is, the
more uncertain the project is.
 Example: Which range of cost outcomes poses the greatest risk?
a. $100,000 +/- $10,000

b. $95,000 to $110,000
c. $88,000 to $105,000
Note: You are looking for the estimate with the widest range.
Self-Study
Drill Practice: Risk Management
Question Answer
1. Define risk management. 1. The process of identifying, analyzing, and

Note: All page numbers in this drill practice refer to
responding to risk factors throughout the life of
the reference manual unless otherwise indicated. a project (p. 11-1).
2. When should project risks be identified? 2.

 At the beginning of the project.
 During the planning for each phase of the
project.
 Before approval of major scope changes.
 In other words, continuously throughout
the entire project (pp. 11-3 and 11-5).
3. Name three risk factors. 3.

Risk event
Risk probability
Amount at stake (p. 11-2)
4. What are the six major risk processes? 4.

Plan risk management
Identify risks
Perform qualitative risk analysis
Perform quantitative risk analysis
Plan risk responses
Control risks
(p. 11-1)
5. Which scheduling technique explicitly 5. PERT (p. 11-7, input #8)
considers risk?
6. What are the recommended ways of 6.
deflecting or transferring risk to another party? Warranties
Insurance
Subcontracting (outsourcing)
Type of contract (p. 11-17)
7. Risk event A has a potential loss of 7. Expected monetary value (EMV) may be
$200,000 with a 85% chance of occurrence. used to compare the expected effect of the
Risk event B has a potential loss of $300,000 two risk events:
with a 55% chance of occurrence. Which risk EMV for risk A is .85 x 200k = $170,000 loss
event is a bigger concern? EMV for risk B is .55 x 300k = $165,000 loss
The expected losses are quite similar, but risk
A is of greater concern by a small margin.
(p. 11-14)
Question Answer
8. Name a fundamental project management 8. WBS (p. 11-7, input #6)

tool that is also useful in identifying potential
risks.
9. How would one determine the probability 9. Multiply the probability of the two events.
that two independent events would both
occur? If the probability of one event is 60% and the
other is 80%, then the probability of both
events occurring is 48% (.60 x .80).
(p. 11-22)
10. What is the primary concern of risk 10. Tracking changes in the risk factors
control? throughout the project (p. 11-19).
11. What is the purpose of including a cost 11. Reduce the chance of a cost overrun.
reserve in the project budget? (p. 11-21, tool #5)
12. What is an advantage of decision trees? 12. The ability to consider risk event
interdependencies (p. 11-14 and slide 11-45).
13. If an event has a 40% chance of 13. 60% (p. 11-22)

occurring, what is the probability that it will not
occur?
14. What are the strategies associated with 14.

response planning for negative risks?  Avoid
 Transfer
 Mitigate
 Accept
(pp. 11-16 & 17)
15. 15.
a. What is the formula for calculating expected a. Multiply the probability of the event by the
monetary value (EMV?) estimated gain or loss (in dollars).
b. If a project has a 50% chance of a $200,000 b. [.50 x 200,000] = +$100,000

profit and a 50% chance of a $100,000 loss, [.50 x - 100,000] = -$50,000
what is the expected monetary value? +$50,000
Therefore, the EMV is the sum of the products

(each product is the EMV of one possible
event)
(Course slides 11-38 to 11-41).
Question Answer
16. What are the primary tools used to 16.

quantify risks? Data gathering techniques:
- Interviewing
- Probability distributions
Quantitative modeling techniques:
- Sensitivity analysis
- Expected monetary value
- Modeling and simulation
Expert judgment
(pp. 11-13 to 11-15)
17. What is a simulation and what advantage 17.

does it provide? Most simulations are some form of Monte
Carlo analysis which “performs” the project
many times to determine possible project
outcomes with associated probabilities.
An advantage of Monte Carlo analysis is that it

can account for path convergence and is
therefore less likely to underestimate project
durations or costs.
(p. 11-14)
18. How would schedule estimates from 18. PERT estimates would tend to be more
PERT generally compare to those from Monte optimistic (possibly overly optimistic)
Carlo simulation? (pp. 11-13 & 14 and slide 11-38).
19. What is a major factor that affects the 19. The choice of probability distribution
results of Monte Carlo simulations? employed by the program (p. 11-14).
20. Is risk management concerned only with 20. No, risk management also considers the
negative or adverse factors? positive opportunities for gain (p. 9-1).
21. What is the difference between a 21.

contingency plan and a workaround? A contingency plan is a predefined action plan
in case a risk event occurs later.
A workaround is an unplanned response to a

risk event when it actually happens. It is
unplanned only in that it was not devised in
advance.
(pp. 11-21 & 22, output #2, change requests)
22. The process of determining what risk 22. identification (p. 11-5)
events may affect a project is called risk ____.
Question Answer
23. Which estimate has more risk: an 23. Estimates with a wider range of outcomes
estimate with a narrow range of outcomes or pose a greater risk as the outcomes are less
one with a wide range of outcomes? predictable.
Therefore, 30 days plus or minus 5 days is
more risky than 25 to 30 days
(p. 11-7, input #8, duration estimates).
24. What concept is described as “a lack of 24. Uncertainty (p. 11-2)

information that makes it difficult to estimate
the likelihood of an event”?
25. Would projects using new technology 25.

generally pose a lower or higher risk? A higher risk because of the additional
uncertainty (and associated rework) in design,
test, and debugging of the new approach
(p. 11-10, input #2, scope baseline).
26. What method would help you assess the 26. Tornado diagram (p. 11-14).
impact of highly uncertain variables on the rest
of the project?
27. What is the purpose of qualitative risk 27.

analysis? Improve project performance by focusing on
high-priority risks. Analyzing the probability
and impact for each risk is an important part of
this process (p. 11-10).
28. What is the purpose of quantitative risk 28. Numerically analyze the probability and
analysis? impact of each identified risk (p. 11-12).
29. What is a decision tree? 29. A diagram that depicts key interactions
among decisions and chance events. The
branches of the tree represent either decisions
(shown as boxes, e.g., conduct a test or don’t
conduct a test) or chance events (shown as
circles, e.g., passed test or failed test).
(p. 11-14 and slides 11-38 and 11-42 to 11-46)
Question Answer
30. Distinguish management reserve from 30.

contingency reserve. Management reserve is a separately planned
quantity used to allow for future situations
which are impossible to predict (“unknown
unknowns”). Use of management reserve
requires a change to the project’s cost
baseline.
Contingency reserve is a separately planned

quantity used to allow for future situations
which may be planned for only in part (“known
unknowns”). Contingency reserves are
normally included in the project’s cost and
schedule baselines
(p. 11-1 and pp. 7-7 & 8).
Unit 12: Procurement
Management
Major Processes
12.1 Plan Procurement Management
12.2 Conduct Procurements
12.3 Control Procurements
12.4 Close Procurements
Other Topics
Summary of Processes for Closing Work
Self-Study
Unit 12: Procurement Management
This knowledge area addresses the processes for purchasing or acquiring products and
services from outside the project team or organization.
Major Processes
12.1 Plan Procurement Management (documenting what to purchase, specifying the
approach, and identifying potential sellers)
12.2 Conduct Procurements (obtaining seller responses, selecting sellers, and
awarding contracts)
12.3 Control Procurements (managing procurement relationships, monitoring contract
performance, and making changes as needed)
12.4 Close Procurements (completing project procurements)
The PMBOK® Guide defines procurement management as the processes required to

acquire goods and services from outside the performing organization. PMI states that
this knowledge area addresses the topic from the perspectives of both the buyer and
the seller.
In the United States, contracts are legal, mutually binding documents and are subject to
remedy in the courts. Unless stated otherwise, you should assume that the buyer is
internal to the project team (or the team’s organization) and the seller is external to the
team.
12.1 Plan Procurement Management (PMBOK® Guide, p. 358)
Procurement planning involves deciding which products or services should be procured

from outside the organization, specifying the approach, and identifying potential sellers.
The questions to answer are whether, how, what, when, and how much to procure. The
process should consider the following:
 Potential sellers (is a buy decision feasible?)

 The desired schedule (best met through make or buy?)
 The risks associated with make vs. buy
 The appropriate type of contract
Plan Procurement Management
1. Project management plan 1. Make-or-buy analysis 1. Procurement management plan

2. Requirements documentation 2. Expert judgment 2. Procurement statement of work
3. Risk register 3. Market research 3. Procurement documents
4. Activity resource requirements 4. Meetings 4. Source selection criteria
5. Project schedule 5. Make-or-buy decisions
6. Activity cost estimates 6. Change requests
7. Stakeholder register 7. Project documents updates
Nine Key Inputs for Plan Procurement Management (PMBOK® Guide, p. 360):
1. Project Management Plan: Contains descriptions of the project need,

justification, requirements, and boundaries. The scope baseline is of special
interest at this point:
 Scope statement: Includes information such as requirements,
deliverables, constraints, assumptions, and acceptance criteria.
Constraints include required delivery dates and available skilled
resources.
 WBS: The work breakdown structure describes and organizes the
work. Is a major factor in deciding what to outsource.
 WBS dictionary: Provides the details for each work package and
control account.
2. Requirements Documentation: Requirements documentation may include:

 Project requirements
 Some requirements may have contractual or legal implications;
such as environmental, intellectual property rights, health and
safety, and the need for licenses, permits, or certifications to be
allowed to perform the work.
3. Risk Register: Some contractual agreements are chosen as a risk mitigation

strategy and, in any case, the risk register identifies specific risk concerns.
4. Activity Resource Requirements: Identifies facilities, equipment, and people

needed to handle the work. If these resources are not available in-house, the
work may be outsourced using a contract.
5. Project Schedule: Contains required timelines that may also become the
rationale for entering into a contract (cannot meet the deadline with in-house
sources) or may be needed to evaluate the ability of a prospective contractor to
meet the schedule.
6. Activity Cost Estimates: If in-house costs are high, this may be a reason to
outsource or, conversely, the information may be needed to evaluate proposals
from prospective contractors.
7. Stakeholder Register: Identifies key participants and their level of interest in

the project.
8. Enterprise Environmental Factors: Factors that may affect procurement

planning includes:
 Conditions of the marketplace:
 Is the product or service available in the marketplace?
 Are the services of a reputable contractor available at the right
time?
 Typical terms and conditions
 Unique local requirements
9. Organizational Process Assets: Organizational Process Assets may

include:
 Procurement policies and constraints:
 Is there a buying department? If not, members of the project
team may have to conduct procurement activities themselves.
 Are there any requirements that certain contracts be set aside
for small and disadvantaged business?
 Procedures for selecting contract type
 Established supplier system and/or pre-qualified sellers
PMI recognizes three broad categories of contracts. The fixed price and cost
reimbursement categories have been of greatest interest on the certification
exam.
Fixed price (also called lump sum): Appropriate when the product is
well-defined and the risks are generally felt to be low. Risk is borne by the
seller because they are legally obligated to deliver the specified product
even if they incur a financial loss in doing so.
Cost reimbursement: Appropriate when the product is initially difficult to

define (e.g., product does not exist and must be developed) and when risk
is high. Buyers agree to reimburse the seller’s actual costs plus
guaranteeing a profit. Risk is borne by the buyer. The costs include both
direct costs and indirect costs.
Time and material: A hybrid arrangement with elements of both fixed

price and cost reimbursement. On the fixed price side, the seller is paid a
preset amount per unit of service ($50 per cubic yard of gravel delivered,
$200 per hour for professional services, and so on). On the cost
reimbursement side, the dollar value is based on how much material or
time is actually used.
You must be familiar with seven specific types of contracts that fall under
the umbrella of the first two categories above (fixed price and cost
reimbursement). The course slides show examples.
Cost Plus Percentage of Cost (CPPC): Provides for reimbursement of

allowable costs plus an agreed percentage of the costs (as the seller’s
profit). This type of contract is now illegal in the U.S. federal sector and
does not provide the type of incentives that most buyers look for in a
contractual arrangement.
Cost Plus Fixed Fee (CPFF): Provides for reimbursement of allowable

costs plus a fixed fee paid proportionately as the work progresses. Risk
mostly on the buyer; used for research and development in which risk is
quite high at the beginning of the work. CPFF contracts usually have a
ceiling price that establishes an upper limit on the buyer’s financial
obligation. There is no financial reward provided to the seller for keeping
costs low.
Cost Plus Incentive Fee (CPIF): Provides for reimbursement of

allowable costs plus a calculated fee based on performance. The seller
has an incentive to control costs through a negotiated sharing
arrangement. Minimum and maximum levels of profit are established at
the outset. Again, there is often a ceiling price established by the contract.
Cost Plus Award Fee (CPAF): As always, legitimate and allowable costs
are reimbursed and an additional fee is paid. In this case, qualitative
performance criteria are defined in the contract and the fee is paid based
on the buyer’s subjective judgment of the seller’s performance. The
buyer’s decision is not usually subject to appeal. Buyers like this
arrangement because it gives them enormous leverage with their sellers.
Award fee pools may be combined with virtually any type of contract.
Fixed Price with Economic Price Adjustment (FP-EPA): If the

performance period spans multiple years, concerns may exist about
inflation and significant price changes for key materials or supplies. This
type of contract allows adjustments to compensate for these uncertainties.
An EPA clause ties pricing to an agreed financial index (e.g. consumer
price index) and final prices are adjusted according to whether the index
went up, down, or remained stable.
Fixed Price Incentive Fee (FPIF): Provides the seller with a fixed price
plus a calculated fee based on performance. This contract type is similar
in concept to CPIF in that there is a sharing arrangement that provides an
incentive to control costs. However, in a CPIF arrangement, the seller is
guaranteed a minimum profit. In an FPIF arrangement, it is possible for
the seller to lose money. Therefore, risk is shifting onto the seller in this
type of contract. FPIF contracts also have a ceiling price and a point of
total assumption (PTA). The PTA is the level of cost at which the sharing
arrangement ceases and any further costs come 100 percent from the
seller’s profit. The course slides show an example of how to calculate the
PTA.
Firm Fixed Price (Lump sum): Contracted goods and services are
furnished at an agreed fixed price. The seller bears all the risk but is
potentially rewarded with a maximum profit potential. Best suited for
situations in which risk is low and the product can be well defined.
You should also be familiar with the concept of contract incentives. Incentives
provide a “carrot” aimed at bringing the objectives of the contractor in line with
those of the buyer. Incentives can be used in conjunction with any contract type;
real world experience has shown that incentives are extremely effective.
Four Key Tools for Plan Procurement Management (PMBOK® Guide, p. 365):
1. Make-or-Buy Analysis: Determining the cost effectiveness of producing an

item in-house (make) versus procuring it from an outside organization (buy). The
analysis should consider both the direct costs as well as the indirect costs (cost
of monitoring the purchasing process). Whenever a buy decision is made, a
follow-on decision involves whether to purchase or lease.
The PMBOK® Guide also states that the analysis should consider not just the
project needs and costs but the overall organization’s needs and costs, as well.
For example, it may not be cost effective to purchase certain equipment or build
a new facility for an individual project. However, the equipment or facility may
also support other work in the rest of the organization.
2. Expert Judgment: Subject matter experts are needed to develop appropriate

evaluation criteria and judge proposals that are received. Proposals often have
financial, management, and technical considerations that are beyond the
expertise of one individual. The expertise of lawyers is often required for non-
standard procurements.
3. Market Research: Examines vendor capabilities to perform needed work.

Also assesses risks associated with vendors, technologies, materials, and
equipment.
4. Meetings: Various interchange meetings with potential bidders, including

bidder conferences, may improve the information needed to formulate an
effective procurement strategy.
Seven Key Outputs for Plan Procurement Management (PMBOK® Guide, p.

366):
1. Procurement Management Plan: Delineates the types of contracts to be

used, whether independent cost estimates will be needed, how multiple providers
will be managed, and the roles and responsibilities of contracting professionals.
The plan may include all or portions of the following:
 Types of contracts
 Whether independent estimates will be used
 Managing multiple suppliers
 Coordinating procurement with resource needs, schedules, and costs
 Formats for the statement of work and maintenance of the WBS

 Constraints, assumptions, and supplier lead times
 Managing risks
 Identifying pre-qualified sellers and metrics for performance reporting
2. Procurement Statement of Work (SOW): A narrative description of goods or

services to be supplied under contract. The SOW also defines collateral services
such as performance reporting, project reviews conducted by the buyer, post-
project support requirements, and so on. The SOW should contain enough detail
so that prospective contractors can evaluate their own ability to meet the stated
needs. Also called a statement of requirements or a statement of objectives
in some areas. The use of an SOR or an SOO often refers to a procurement
item presented as a problem to be solved (rather than a product to be
purchased).
3. Procurement Documents: Used to request proposals from prospective

sellers. Key points include:
 When the procurement is price driven, the terms bid and quotation are
used.
 When the procurement is influenced by technical considerations and
other non-financial concerns, the term proposal is used.
 A procurement can be initiated as a unilateral contract, which usually
means a purchase order for routine items at standard (catalog) prices.
Purchase orders become enforceable at the time the supplier ships the
requested items.
 Alternatively, a procurement can be initiated as a bilateral contract using
one of four approaches:
a. Request for Information (RFI): This approach is not actually an
official request for a bid. Instead, it asks for “expressions of interest,”
solicits feedback regarding capacity and capability to perform the
work, and so on. The RFI responses may be useful in developing the
qualified sellers list.
b. Invitation for Bid (Sealed Bid): Used for routine, well-defined items.
Buyer wants bids to get the best price. Does not usually involve
negotiations and no discussion is allowed.
c. Request for Quotation: Used for relatively low dollar purchases of
commodity items. Discussion between buyer and seller is permitted.
This approach may be considered a “best value” search, which
compares price to other factors such as schedule, technical merit, and

past performance of potential contractors.
d. Request for Proposal: Used for complex, nonstandard items of high
dollar value. Discussion and negotiation are usually involved.
4. Source Selection Criteria: Used to rate or score proposals. The criteria may
be objective (the PM must have a PMP®) or subjective (the PM must have
appropriate experience). Sample criteria include:
 Price and overall life cycle cost
 Understanding of need
 Technical capability
 Past performance of seller
 Financial and production capacity
 Intellectual property and proprietary rights
 Warranty
 Risk
 Management approach
5. Make-or-Buy Decisions: Written documentation of these decisions with

supporting rationale.
6. Change Requests: As always, if change requests occur during this process,

they should be handled using integrated change control.

 Requirements traceability matrix
 Risk register
12.2 Conduct Procurements (PMBOK® Guide, p. 371)
This process obtains information such as bids and proposals from prospective sellers,
selects the winning response, and awards a legally binding contract. For the exam, one
notable activity is the use of qualified seller lists. Procurement (contracting)
specialists develop such lists from a variety of sources and use them to determine who
might have the ability to perform the needed work. These lists can also speed up the
process. Another notable fact is that bidder conferences, if used, are performed as
part of this step. Independent estimates may be important if the procurement is
noncompetitive and you need to ensure that prices are fair and reasonable.
For large, complex procurements, this process may be performed numerous times for
multiple contracts. Also, a common practice is to screen the initial responses and
create a list of competitors “in the competitive range” (known to many people as the
“short list”). More detailed evaluations and negotiations are then conducted with sellers
on the short list. Another practice is the use of the “BAFO” technique (best and final
offer). The technique is used when procurement personnel want lower prices in the
proposals. Other key points:
 Weighted evaluation scores are sometimes used to establish a preferred
negotiating sequence for proposals on the short list.
 Proposals are often organized into different sections or volumes that are
evaluated separately by different experts. For example, common sections
evaluated separately are technical approach, price, schedule, management
approach, and past performance.
 In some instances, organizations prefer (as a risk mitigation strategy or as a cost
competition factor) to have multiple suppliers for certain products.
Conduct Procurements
1. Procurement management plan 1. Bidder conferences 1. Selected sellers

2. Procurement documents 2. Proposal evaluation techniques 2. Agreements
3. Source selection criteria 3. Independent estimates 3. Resource calendars
4. Seller proposals 4. Expert judgment 4. Change requests
5. Project documents 5. Advertising 5. Project management plan
6. Make-or-buy decisions 6. Analytical techniques updates
7. Procurement statement of work 7. Procurement negotiations 6. Project documents updates
Eight Key Inputs for Conduct Procurements (PMBOK® Guide, p. 373):
1. Procurement Management Plan: The procurement management plan was

an output of the previous process (Section 12.1).
2. Procurement Documents: Described in Section 12.1.3.3, an appropriate

document is chosen to request seller responses (IFB, RFQ, RFP).
3. Source Selection Criteria: The criteria were developed as an output of the

previous process (Section 12.1.3.4) and are now used to actually evaluate and
compare the various bids or proposals.
4. Seller Proposals: Prepared and submitted in response to the buyer’s

procurement document package (PDP). A proposal constitutes a legal offer and
should be constructed carefully by the seller. The PDP is sent by the buyer to
prospective sellers (based on the qualified seller list) and contains:
 A procurement document (IFB, RFQ, RFP)
 The evaluation criteria
 A cover letter with instructions: due date for the proposal, table of
contents or required format (if any), number of copies, and so on.
5. Project Documents: Project documents that may be considered at this point

include the risk register and any risk-related contract decisions.
6. Make-or-Buy Decisions: Described in Section 12.1.3.5, factors influencing

make-or-buy decisions include:
 Core capabilities of the organization (technical ability to perform the
work in-house)
 Value added by potential vendors
 Comparative risks
7. Procurement Statement of Work (SOW): Provides prospective suppliers

with clearly stated goals and requirements that must be met. The SOW may
include the following information:
 Specifications, quantity and quality desired
 Performance data and period of performance
 Work location and other requirements
8. Organizational Process Assets: Organizational Process Assets that may be

relevant include:
 Listings of prospective and previously qualified sellers
 Past experience with specific sellers
 Prior agreements
Seven Key Tools for Conduct Procurements (PMBOK® Guide, p. 375):
1. Bidder Conferences: Used to ensure all prospective sellers share a clear,

common understanding of technical and contract requirements. Most
organizations are careful to ensure that all potential sellers are given equal
treatment and information.
2. Proposal Evaluation Techniques: Most organizations that conduct major

procurements have established source selection procedures. These procedures
establish the approach for evaluating, comparing, and selecting winning
proposals. On some procurements, a screening system may be used which
imposes specific minimum criteria that must be met. A proposal may be rejected
without further review for failure to meet the criteria.
3. Independent Estimates: A procurement organization sometimes prepares its

own estimates as a cross-check or verification that the bids are fair and
reasonable. Also called “should cost” estimates, this tool is especially important
for non-competitive procurements (e.g. sole source).
4. Expert Judgment: A multi-disciplinary team of experts (financial, technical,

management) is usually required to effectively evaluate proposals.
5. Advertising: The use of general circulation sources such as newspapers and

professional journals and newsletters to expand the potential pool of sellers. In
some government jurisdictions, public advertising of new opportunities is
mandatory.
6. Analytical Techniques: Techniques used to evaluate past performance

information to ensure that prospective vendors will be capable of meeting all
stated requirements.
7. Procurement Negotiations: Clarification and mutual agreement on the

structure and requirements of the contract prior to signing. Negotiations may
address the following issues:
 Authority to make changes
 Technical and management approaches
 Proprietary rights
 Financing, payments, and price
 Schedule
The project manager may not be the lead negotiator but is usually present to
offer assistance.
Objectives of negotiation:
1. Obtain a fair and reasonable price

2. Develop and preserve a good working relationship with the other
party
Common negotiation tactics:
Deadline: “We have to catch a flight at 5:00 p.m. and must complete
the deal before we leave.”
Good cop/bad cop: One person is helpful and understanding while the
other is difficult and demanding.
Fait accompli: Pretending that some condition is essentially a “done
deal” or not negotiable at all.
Missing man: “I’m sorry, only my boss can agree to that request and he
or she isn’t here. Let’s agree to do ____________ instead. I can agree
to that.”
Limited authority: “I can’t agree to reduce the price by $100,000. I’m
only authorized to offer $50,000.”
Delay: “Let’s handle that issue at the next meeting.” May be a ploy
leading to a deadline tactic. “Oops, we’re running out of time, so let’s
sign this deal and work out any issues later.”
Personal Insults: Designed to intimidate you and/or undermine your
confidence.
Fair and reasonable: A personal appeal that may be posed with a great
deal of charm and “folksiness.” “You and I know what’s going on here.
Let’s be reasonable and work this out.”
Six Key Outputs for Conduct Procurements (PMBOK® Guide, p. 377):
1. Selected Sellers: Sellers who have been chosen as being in the competitive
range and who have submitted a proposal that has been accepted. The proposal
becomes the basis for the contract (subject to any last-minute negotiating of
terms and conditions).
2. Agreements: Agreements establish a legal relationship subject to remedy in

the courts. Agreements may be variously referred to as a contract, an
understanding, a subcontract, or a purchase order. A contract is a mutually

binding agreement that obligates the seller to provide the specified product and
obligates the buyer to pay for it.
You must know the elements of a legally enforceable contract:
 The agreement must be voluntary. There must be both an offer and an

acceptance.
 The agents must be legally authorized to enter into a legal commitment.

(The authorization can be written or verbal). In business contracts, a
delegation of procurement authority is often used to identify precisely who
is authorized to enter into a contract.
 There must be sufficient cause, which is also known as “consideration.”

An exchange of value must take place.
 The contract must be for a legal purpose.
While there may be differences, the major components in most contracts include
the following:
 Statement of work or deliverables
 Period of performance and schedule baseline
 Required performance reporting
 Place of performance and delivery
 Pricing and payment terms
 Warranty and product support
 Penalties and incentives
 Subcontractor approvals
 Handling of change requests
 Dispute resolution procedures
 Termination procedures and alternative dispute resolution procedures
3. Resource Calendars: Specific quantity and availability of contracted

resources.
4. Change Requests: If change requests are generated during the

procurement, they must be handled using integrated change control procedures.

changed include:
 Cost, schedule, and scope baselines
 Communications and procurement management plans

 Requirements traceability documentation
 Risk register
12.3 Control Procurements (PMBOK® Guide, p. 379)
The buyer and the seller both perform control (also called contract administration) to
ensure that the other party meets its contractual obligations. The process involves
monitoring performance, managing interfaces if there are multiple providers, making
changes and corrections, and processing interim payments (often called progress
payments which are based on the seller’s progress in completing the work). In some
cases, control procurements may involve managing the early termination of a contract
(by mutual agreement, for default, or for convenience of the buyer). Several key project
management processes are used to help accomplish these aims:
 Direct and manage project work (PMBOK® Guide, Section 4.3)
 Control quality (PMBOK® Guide, Section 8.3)
 Perform integrated change control (PMBOK® Guide, Section 4.5)
 Control risks (PMBOK® Guide, Section 11.6)
Control Procurements
1. Project management plan 1. Contract change control system 1. Work performance

2. Procurement documents 2. Procurement performance reviews information
3. Agreements 3. Inspections and audits 2. Change requests
4. Approved change requests 4. Performance reporting 3. Project management plan
5. Work performance reports 5. Payment systems updates
6. Work performance data 6. Claims administration 4. Project documents updates
7. Records management system 5. OPA updates
Six Key Inputs for Control Procurements (PMBOK® Guide, p. 381):
1. Project Management Plan: Contains the procurement management plan

which describes how each procurement process is to be handled.
2. Procurement Documents: The contract and the SOW are two of the most
important documents that would guide contract administration.
3. Agreements: Described in Section 12.2.3.2.
4. Approved Change Requests: May include modifications to contract terms

and conditions with the most important being any effect on the triple constraint
(scope, schedule, cost). Verbally discussed but undocumented change requests
should not be processed or implemented.
5. Work Performance Reports: Seller performance documentation in the areas

of technical achievement and performance reports (cost, schedule, resource
variances and forecasts).
6. Work Performance Data: Addresses whether quality standards are being

met, what costs have been incurred, the completion status of deliverables, and
what interim payments have been requested and/or paid.
Seven Key Tools for Control Procurements (PMBOK® Guide, p. 383):
1. Contract Change Control System: As always, establishes the procedures

by which changes can be approved. This system includes paperwork, tracking,
approval levels, and dispute resolution procedures (important for Tool #6 below).
2. Procurement Performance Reviews: A structured review of the seller’s

progress (cost, schedule, scope, quality). The purpose of these reviews is to
document successes and failures as well as demonstrate whether the seller is
able to complete the work as planned.
3. Inspections and Audits: Techniques used to check for compliance with

contract requirements. Inspections and audits are usually required by the buyer
and supported by information from the seller.
4. Performance Reporting: Documents the contractor’s relative effectiveness in

achieving contract objectives.
5. Payment Systems: The payment system includes appropriate reviews and

approvals so that interim and final payments can be made as appropriate.
Payment systems are sometimes handled by the project (larger programs) but
are frequently handled by the accounts payable department in the overall
organization.
6. Claims Administration: Contested or constructive changes are those where

the buyer and seller cannot agree on the terms (cost, schedule) for a change. In
some cases, a dispute arises over whether a work item is a change in scope or is
a legitimate part of the original scope.
If the parties cannot resolve a claim themselves, the matter is then handled
through whatever dispute resolution procedures were established in the contract.
Dispute resolution can occur during project performance or after a project has
been closed.
7. Records Management System: Used to manage contract documents and

records. Usually involves an index of contract documents with methods for
retrieval, archiving, and automation.
Five Key Outputs for Control Procurements (PMBOK® Guide, p. 384):
1. Work Performance Information (WPI): WPI provides a means to track

compliance with contracts, check the performance of vendors, and improve
forecasting, risk management, and decision making.
2. Change Requests: Processed using integrated change control. Disputed

changes are usually given special attention and documented separately.

updated include:
 Procurement management plan (to reflect approved change requests,
especially those affecting costs or schedules)
 Schedule and cost baselines (to reflect any significant variances from
the baseline or revisions to the baseline because of approved
changes)
4. Project Documents Updates: Various aspects of procurement

documentation may be updated, such as:
 The contract and schedule
 All changes and change requests
 Technical documentation including status of deliverables
 Invoices and payment records
 Contract-related inspections
5. Organizational Process Assets Updates:

 Correspondence: Key correspondence concerning audits, inspections,
change requests, warnings for unsatisfactory performance, and key
decisions. Includes the results of audits and inspections that may
identify developing problem areas.
 Handling of payments: Tracking whether required payments are
processed accurately and in a timely manner.
 Seller performance evaluation: Documentation prepared by the buyer
that assesses the seller’s ability to complete the work as planned.
12.4 Close Procurements (PMBOK® Guide, p. 386)
Contract closure supports the close project or phase process (integration management,
Section 4.6) by completing each procurement. It involves product verification (was
the work completed correctly?) and administrative closeout (updating and archiving of
records). Early termination is a special case of contract closure and can result from a
mutual decision, from default by one of the parties, or for convenience of the buyer.
The rights of the parties should be defined in a terminations clause in the contract.
Close Procurements
1. Project management plan 1. Procurement audits 1. Closed procurements

2. Procurement documents 2. Procurement negotiations 2. OPA updates
3. Records management system
Two Key Inputs for Close Procurements (PMBOK® Guide, p. 388):
1. Project Management Plan: Contains the procurement management plan

which provides guidelines for closing each procurement.
2. Procurement Documents: All documentation is collected, indexed, and filed

according to established procedures. The information can be used for lessons
learned, estimating future contracts, and evaluating contractors for future
procurements.
Three Key Tools for Close Procurements (PMBOK® Guide, p. 388):
1. Procurement Audits: Structured reviews of the procurement process to

identify successes and failures. The information is used to improve the current
project, future projects, and the overall organization. Procurement audits are
also known as lessons learned in some areas.
2. Procurement Negotiations: Final settlement of outstanding issues, claims,

and disputes using negotiation if possible. Alternate dispute resolution is used
only when necessary.
3. Records Management System: Described in Section 12.3.2.7, this system

provides a consistent, structured method for archiving all contract records.
Two Key Outputs for Close Procurements (PMBOK® Guide, p. 389):
1. Closed Procurements: The buyer provides formal, written notice that the
contract has been completed.
2. Organizational Process Assets Updates: Should include the following:

 Procurement file: An official, complete set of indexed contract
documentation.
 Deliverable acceptance: Formal, written notice that deliverables
have been accepted or rejected. Instructions on how to handle non-
conforming deliverables should be provided.
 Lessons learned documentation: Post-project evaluation is
important because it provides historical records that help in contractor
selection on future contracts (a past performance database to support
the select sellers process).
Other Topics:
Competition: Promoting competition is generally considered a wise practice.

However, there are conditions in which non-competitive procurement makes sense.
They are:
 When a particular contractor truly has a unique capability.
 When mechanisms exist to ensure the proposed price is reasonable. For
instance, you have the expertise to do an in-house, independent estimate.
 When extreme schedule pressure exists. Competitive source selections
consume considerable time in solicitation, evaluating proposals, selecting a
contractor, and negotiating the final terms and conditions.
Also note the following difference in terminology:

Single source: A choice to contract directly with your preferred supplier
(but other sources exist).
Sole source: There is only one supplier available (could be a patent
limitation or only one supplier has the technical ability).
Organizing for Contract Management: Contracting can be centralized or

decentralized. You must know the characteristics of each approach.
Centralized:
 More economical
 Supports specialization of the contracting function
 Less responsive to the specific needs of individual projects
 Works well in functionally organized companies
Decentralized:
 Project manager has more control
 Contracting more responsive to individual project needs
 Higher costs; duplication of effort
 Works best in a projectized organization
Privity of contract: A legal term that recognizes that whereas a formal contractual
relationship exists between the buyer and the prime contractor, no such relationship
exists between the buyer and the subcontractors. It is legally improper for the buyer
to bypass the contractor and deal directly with a subcontractor.
Constructive change: A statement, act, or inaction by an employee who is not

legally authorized to make changes or sign contracts. Such an act may lead to a
change which is questionable. Is the change legally authorized or not?
Foreign currency exchange: On international contracts, procedures for handling
fluctuations in exchange rates must be identified in the contract.
Backcharge: The cost of corrective action taken by a buyer and charged back to
the contractor under the terms of the contract.
Breach of contract: Failure, without legal excuse, to perform any express or
implied promise in a contract. It is also defined as an unequivocal, absolute refusal
to perform under the contract.
Force majeure: Sometimes called the Acts of Nature or Acts of God clause. A
contractor may be excused or granted relief from work not completed if the cause of
non-performance relates to these so-called Acts of Nature or God (e.g. a hurricane,
tornado, lightning strike, and so on).
Liquidated damages: An express provision in a contract that identifies a specific
monetary sum for which one of the parties will be liable if there is a breach of
contract or failure to perform. For example, if the security system being installed in
a school system is not operable by a given date, the contractor may be required to
pay $5,000 per day until the system is operating.
Standard contract clauses: Commonly used contract clauses that are already
developed (boilerplate) and have two advantages:
1. Less costly to develop
2. Less chance of a legal dispute (legally debugged through experience)
Specification: A document that specifies, in a complete, precise, verifiable
manner, the requirements, design, behavior, or other characteristics of a system,
component, product, result, or service and, often, the procedures for determining
whether these provisions have been satisfied. Examples include: requirement
specification, design specification, product specification, and test specification.
Undefined Work: Arises when time is of the essence. Need to start work but the
price and related conditions have not been negotiated yet. Often uses a letter
contract with the details to be negotiated later. Can also occur because of changes
to an existing contract; work proceeds on the basis of an undefinitized change
order.
Warranty: Establishes a required level of quality and a source of remedy for failure
to meet those standards.
Warranty of Merchantability: A promise that goods are reasonably fit for the
purpose for which they were sold.
Waiver: A party can intentionally or voluntarily relinquish rights they had under a
contract. For example, if a project manager accepts incomplete or defective work
and fails to demand correction, the contractor may be excused from meeting any
strict standards of performance.
Summary of the Two Processes for Closing Work:
Numerous students have cited concern about questions on closing the project and
closing a contract. The following review summarizes and compares these
concepts.
Integration Management, Process 4.6, Close Project or Phase (PMBOK®

Guide, p. 100):
 Involves performing the project closure portion of the project management plan
 In a multi-phase project, may apply only to the activities for the given phase
 Establishes procedures to:
1. Verify and document project deliverables
2. Formalize acceptance of deliverables by the customer
3. Investigate and document the reasons for any instance of early project
termination (before completion of the work)
Procurement Management, Process 12.4, Close Procurements (PMBOK®

Guide, p. 386):
 Supports the close project process (integration management)

 Verifies that work was completed and was acceptable
 Updates records to reflect final results and archives information for future use
 May address individual phases of a project
 Unresolved claims may be subject to litigation after contract closure
 Early termination is a special case resulting from mutual agreement or default of
either party. The buyer may have the right to terminate all or portions of a
project for cause (default) or convenience. However the seller may be
compensated for work completed or accepted (but not started). The contract
terms and conditions should address how these issues are to be handled.
4.6 Close Project or Phase

1. Project management plan 1. Expert judgment 1. Final product, service, or result transition
2. Accepted deliverables 2. Analytical techniques 2. OPA updates
3. Organizational process assets 3. Meetings a. Project file
b. Project or phase closure documents
c. Historical information
12.4 Close Procurements

1. Project management plan 1. Procurement audits 1. Closed procurements
2. Procurement documents 2. Procurement negotiations 2. OPA updates
3. Records management system a. Procurement file
b. Deliverable acceptance
c. Lessons learned
Self-Study
Drill Practice: Procurement Management
Question Answer
1. What are the four procurement 1.

management processes? Plan procurement management
Note: All page numbers in this drill practice Conduct procurements
refer to the reference manual unless Control procurements
otherwise indicated. Close procurements
(p. 12-1)
2. What are the three broad categories of 2.

contracts recognized by PMI? Fixed price or lump sum
Cost reimbursable
Time and material
(p. 12-4)
3. What are the four tools for plan 3.

procurement management? Make-or-Buy Analysis
Expert Judgment
Market Research
Meetings
(p. 12-6)
4. Name three common types of cost 4.
reimbursable contracts. Which poses the Cost Plus Fixed Fee (CPFF)
highest cost risk for the buyer? Cost Plus Incentive Fee (CPIF)
Cost Plus Award Fee (CPAF)
CPFF poses a greater risk for the buyer.

(pp. 12-4 & 5 and course slide 12-26)
5. What kind of costs should a make-or- 5. direct and indirect (p. 12-6)
buy analysis consider?
6. Name three common types of fixed 6.

price contracts. Which poses the greatest Fixed Price-Economic Price Adjustment
cost risk for the seller? Fixed price incentive fee (FPIF)
Firm fixed price (FFP)
FFP poses the greatest cost risk to the seller
(p. 12-5 and course slide 12-26).
Question Answer
7. What is a contract? 7. A mutually binding agreement which obligates

the seller to provide the specified product and
obligates the buyer to pay for it. A contract is a
legal relationship subject to remedy in the courts
(pp. 12-12 & 13).
8. What are the elements of a legally 8.

enforceable contract?  The agreement must be voluntary, i.e., there
must be both an offer and an acceptance.
 The agents must be legally authorized to enter
into the contract.
 There must be sufficient cause, i.e.,
“consideration” (an exchange of value).
 The contract must be for a legal purpose
(p. 12-13).
9. Which process may result in a make- 9. Plan procurement management

or-buy analysis? (p. 12-6).
10. Mark the following statements true or 10.

false:
a. CPFF contracts are illegal in many a. False

areas.
b. A fixed price contract shifts risk to the b. False
buyer.
c. FFP contracts offer the greatest profit c. True
potential to sellers.
d. Cost reimbursable contracts offer the d. False
greatest profit potential to sellers.
e. FFP contracts use a share ratio e. False (pp. 12-4 & 5 and course slides 12-15 to
negotiated by the buyer and seller. 12-29)
11. Identify 8 negotiating tactics. 11.

1. Deadline
2. Good cop/bad cop
3. Fait accompli
4. Missing man
5. Limited authority
6. Delay
7. Personal insults
8. Fair and reasonable (p. 12-12)
Question Answer
12. What is true of a successful 12. A successful negotiation preserves working

negotiation? relationships by satisfying the needs of both
parties, i.e., win-win
(p. 12-12).
13. What is a warranty? 13. Establishes a required level of quality and a
remedy for the buyer for failure to meet those
standards (p. 12-20).
14. Under what conditions does sole 14.
source procurement make sense  When schedule pressure exists.
(contractor selection without  When a particular contractor has unique
competition)? capabilities and qualifications.
 When mechanisms exist to ensure fair and
reasonable prices (p. 12-19).
15. How should exchange rate 15. By setting forth an agreed method in the
fluctuations be handled on multi-national contract; the actual methods vary in practice (p. 12-
projects? 20).
16. What is the purpose of contract

16. Reach and document an acceptable
negotiation?
agreement (fair and reasonable) between the
buyer and seller before the contract is signed (pp.
12-11 & 12).
17. Compare centralized and 17.
decentralized contracting. Centralized contracting is generally less
expensive, supports a higher degree of
specialization for the contracting function, and
works best in functionally-organized companies.
Disadvantages: Contracting may not be as
responsive to specific needs of a particular project
and may become a bottleneck.
Decentralized contracting gives the PM more

control and makes contracting more responsive to
individual project needs. Works best in a
projectized environment.
Disadvantages: More costly; duplication of
contracting effort (p. 12-19).
18. What is a specification? 18. A document that specifies, in a complete,

precise, verifiable manner, the requirements,
design, behavior, or other characteristics of a
system, component, product, result, or service
and, often, the procedures for determining whether
these provisions have been satisfied (p. 12-20).
Question Answer
18a. Name four specific types of 18a. Requirement specification, design

specifications. specification, product specification, and test
specification (p. 12-20).
19. What is the purpose of a contract 19. Bring the objectives of the contractor in line
incentive? with those of the buyer. Incentives can be used in
conjunction with virtually any type of contract!
(p. 12-5)
20. Under which contract type would it be 20. Fixed price (“scope creep” in fixed price
most important for the contractor to arrangements could eat up profit or even result in
control contract changes? a monetary loss) (pp. 12-4 & 5).
21. During plan procurement 21.

management, what are the ways to Unilateral is essentially a purchase order for
originate a contract? standardized, routine items. Vendors often accept
the orders automatically without even signing them
in advance.
Bilateral can be initiated one of three ways:

 IFB: Appropriate for routine items where
the buyer’s objective is simply to get the
best possible price.
 RFQ: Used for purchase of routine,
commodity items of relatively low monetary
value.
 RFP: used for complex, non-standard
items of relatively high monetary value.
 Note: An RFI only solicits expressions
of interest and does not originate a
contract.
(pp. 12-7 & 8)
22. What are source selection criteria? 22. As an output from plan procurement
management, these criteria are used to rate or
score proposals. The criteria may be objective or
subjective and can include:
 Understanding of need
 Life cycle cost
 Technical capability
 Management approach
 Financial and production capability
 Past performance
 Intellectual property and warranty
(p. 12-8)
Question Answer
23. What are the seven tools for conduct 23.

procurements (when evaluating 1. Bidder conferences
prospective contractors)? 2. Proposal evaluation techniques
3. Independent estimates
4. Expert judgment
5. Advertising
6. Analytical techniques
7. Procurement negotiations
(pp. 12-11 & 12)
24. What are the five outputs of control 24.

procurements? 1. Work performance information
2. Change requests
3. Project management plan updates
5. Organizational Process Assets updates
(pp. 12-16 & 17)
25. What is the purpose of control 25. Ensuring that buyer and seller both meet their
procurements? contractual obligations. On larger projects with
multiple providers, this function often involves
managing the interfaces among these providers
(p. 12-14).
26. Why are standard contract clauses 26. Because they are less costly to develop and
encouraged? they are legally sufficient for many contractual
situations (already tested and proven) (p. 12-20).
27. What is undefined work? 27. Arises when time is of the essence. Need to
start work but the price and related conditions
have not been negotiated yet.
Often uses a letter contract with the details to be
negotiated later.
Can also occur because of changes to an existing
contract; work proceeds on the basis of an
undefinitized change order (p. 12-20).
28. What are the tools used during close 28.
procurements? Procurement audits
Procurement negotiations
Records management system
(p. 12-18)
29. Why is a post-contract evaluation 29. To establish a historical database to assist in
important? future contractor selections; is considered part of
final lessons learned documentation (p. 12-18).
Question Answer
30. Mark the following statements about 30.

change control true or false:
a. Contract changes are not inherently a. True

bad and need not be resisted.
b. Fixed price contracts minimize the b. False
need for change control.
c. A CCB is normally responsible for c. True
reviewing change requests.
d. Changing the scope of a contract is d. True
easier with a cost reimbursable contract. (pp. 2-28 to 2-30)
(pp. 12-4 & 5)
(Course slides 12-15 to 12-29)
31. Define the term Statement of Work 31. A narrative description of products, goods,
(SOW). and services to be supplied under contract
(p. 12-7).
32. What is another term that is very 32. SOR (Statement of Requirements) or SOO
similar in meaning to SOW? (Statement of Objectives). In some industries, the
term SOR refers to procurement items presented
as a problem to be solved (p. 12-7).
33. What is an RFP and what is it used 33. RFP = Request for Proposal
for?
It is used to solicit bids from prospective
contractors (pp. 12-7 & 8).
34. Define liquidated damages. 34. A contract provision that specifies monetary
liability if a party is in breach or fails to perform.
Often associated with failure to perform on time
(p. 12-20).
35. What is a bidder conference? 35. A tool of conduct procurements, bidder

conferences are used to ensure all bidders share a
clear and common understanding of technical and
contractual requirements. Equal access to
information is emphasized (p. 12-11).
Question Answer
36. Match the appropriate procurement 36.

document to the circumstances identified
below:
a. You are purchasing 150 laptop a. RFQ (best value search for existing commodity
computers for the engineering school at items in the marketplace)
Imperial College, London, UK. You are
attempting to compare various factors
such as delivery schedule, price, and
technical specs.
b. You are redesigning university b. RFP (customized development of a solution and
classrooms to incorporate new for somewhat high monetary amounts)
technologies so that MBA students can
work interactively in teams and with the
professors.
c. You are making an annual purchase of c. IFB (also called a sealed bid, you are looking for
pencils, paper, and notebooks for the best price for routine items readily available in
employees at your company. the marketplace)
(pp. 12-7 & 8)
Unit 13: Stakeholder
Management
Major Processes
13.1 Identify Stakeholders
13.2 Plan Stakeholder Management
13.3 Manage Stakeholder Engagement
13.4 Control Stakeholder Engagement
Self-Study
Unit 13: Stakeholder Management
Stakeholder management identifies people, groups, and organizations that could impact
or be impacted by the project. The topic has increased in importance with each new
edition of the PMBOK® Guide.
Major Processes
13.1 Identify Stakeholders (identifying the interests, involvement, and impact of
people, groups, or organizations that could affect or be affected by the project)
13.2 Plan Stakeholder Management (developing appropriate management strategies
for engaging stakeholders throughout the project)
13.3 Manage Stakeholder Engagement (communicating and working with
stakeholders to meet needs and addressing issues as they occur)
13.4 Control Stakeholder Engagement (monitoring stakeholder relationships and
adjusting strategies as needed)
The PMBOK® Guide states that some stakeholders are likely to impact the project in a
positive way while others are more likely to impact the project in a negative way. It is
also true that some stakeholders have significantly more influence and power than
others. The ability of project managers to effectively manage stakeholders may literally
make the difference between success and failure. The following activities are part of
stakeholder management:
 Identify all potential stakeholders
 Assess the potential interest, influence, and power of each stakeholder
 Understand stakeholder needs and expectations
 Develop appropriate management strategies for various stakeholders
 Effectively manage issues and conflicts as they arise
 Continuously communicate with stakeholders
13.1 Identify Stakeholders (PMBOK® Guide, p. 393)
This process identifies people and organizations that may be impacted by the project
and determines their level of interest, involvement, and potential impact on project
success. It is vital to identify stakeholders early and devise strategies for maximizing
positive influences and minimizing negative impacts. Considering the limitations on a
project manager’s time and the potentially large number of stakeholders, it is also
necessary to prioritize the relative importance of each stakeholder.
Identify Stakeholders
1. Project charter 1. Stakeholder analysis 1. Stakeholder register

2. Procurement documents 2. Expert judgment
Four Key Inputs for Identify Stakeholders (PMBOK® Guide, p. 394):
1. Project Charter: The charter usually provides information about stakeholders

such as customers, the sponsor(s), and people participating in the project (team
members, project manager, departments, and external organizations).
2. Procurement Documents: If a project involves outsourcing and a contract

exists, the parties in the contract are stakeholders.
3. Enterprise Environmental Factors: Factors potentially relevant to

stakeholder identification include:
 Organizational culture and structure
 Governmental or organizational regulations or standards
 Geographical (global, regional, local) trends, practices, or habits
4. Organizational Process Assets: Factors potentially relevant to stakeholder

identification include:
 Templates for stakeholder registers
 Lessons learned from previous projects
 Stakeholder registers from previous projects
Three Key Tools for Identify Stakeholders (PMBOK® Guide, p. 395):
1. Stakeholder Analysis: Stakeholders with sufficient influence should be

managed carefully and partnerships or coalitions may be formed to maximize
project success. PMI identifies the following three steps for stakeholder analysis:
 Step 1: Identify stakeholders and their roles, expectations, and levels

of influence.
 Step 2: Analyze the potential impact of each stakeholder and classify

them using various models such as:
 Power vs. interest grid
 Power vs. influence grid
 Influence vs. impact grid
 Salience model (considers power, urgency, and legitimacy)
Note: PMBOK® Guide, Figure 13-4, p. 397 displays an example.
See course slides for an example of a Power vs. Interest Grid
 Step 3: Assess likely stakeholder responses and plan how to
influence them for their support (supporter vs. antagonist).
2. Expert Judgment: Used to assist in the identification and analysis of

stakeholders. Expertise can be obtained through individual meetings, interviews,
surveys, and focus groups.
3. Meetings: Profile analysis meetings are used to exchange information about

each stakeholder.
One Key Output for Identify Stakeholders (PMBOK® Guide, p. 398):
1. Stakeholder Register: Contains all the information on identified stakeholders

including:
 Identification (name, position, location, role, contact information)
 Assessment (expectations, potential influence)
 Classification (internal or external, supporter or antagonist)
13.2 Plan Stakeholder Management (PMBOK® Guide, p. 399)
Stakeholder planning involves developing strategies for effectively engaging key

stakeholders throughout the entire project life cycle. Key activities include:
 Identify stakeholders’ expectations so that they can be managed.

 Manage and improve communications.
 Create and maintain relationships between the project team and other
stakeholders.
 Review and, if necessary, adjust the level of stakeholder engagement as
the project progresses. Stakeholder management must be continuous
and iterative.
Plan Stakeholder Management
1. Project management plan 1. Expert judgment 1. Stakeholder management plan

2. Stakeholder register 2. Meetings 2. Project documents updates
3. Enterprise environmental factors 3. Analytical techniques
Four Key Inputs for Plan Stakeholder Management (PMBOK® Guide, p. 400):
1. Project Management Plan: Information relevant for developing the

stakeholder management plan includes:
 Techniques for communication among stakeholders
 Human resources requirements: how roles, responsibilities,
reporting, and staffing management will be accomplished
 Change management plan
 Which processes are applied to each project phase
 How work will be executed to accomplish objectives
2. Stakeholder Register: An output of the previous process, the register

identifies potentially important stakeholders.
3. Enterprise Environmental Factors: All the factors described in PMBOK®

Guide, Section 2.1.5 are potentially relevant to stakeholder planning.
4. Organizational Process Assets: All Organizational Process Assets are

relevant to stakeholder planning, but lessons learned and historical information
from similar projects are of particular importance.
Three Key Tools for Plan Stakeholder Management (PMBOK® Guide, p. 401):
1. Expert Judgment: Helps determine the level of stakeholder engagement

needed for project success at each stage of the project. For example, the
involvement of senior stakeholders such as the sponsor may be much more
important near the beginning of the project.
2. Meetings: Provide a forum for the project team and other experts to discuss
the required level of stakeholder engagement needed for success.
3. Analytical Techniques: Provides a way to compare planned engagement

levels to current, actual levels of engagement using the following classification
scheme in which stakeholders may be:
 Unaware: Unaware of project and potential impacts.
 Resistant: Aware of project and potential impacts but resistant to
change.
 Neutral: Aware of project yet neither supportive nor resistant.
 Supportive: Aware of project and potential impacts and supportive of
change.
 Leading: Aware of project and potential impacts and actively engaged in
ensuring the project is successful.
Note: See course slides for an example of this classification model.
Two Key Outputs for Plan Stakeholder Management (PMBOK® Guide, p. 403):
1. Stakeholder Management Plan: Identifies management strategies required

for effectively engaging stakeholders. The plan may document the following:
 Desired engagement level
 Stakeholder interrelationships and potential overlaps
 Information to be distributed and expected impact on stakeholder
engagement
 Time frame and frequency for distribution of required information
 Method for updating/refining the stakeholder management plan
2. Project Documents Updates: May include:

13.3 Manage Stakeholder Engagement (PMBOK® Guide, p. 404)
Managing stakeholders involves identifying and satisfying their needs, handling issues
as they occur, and maintaining stakeholder engagement throughout the project life
cycle. The intent is to increase support and reduce resistance by effectively managing
both positive and negative stakeholders. Project managers must be aware that
stakeholder influence is at its greatest potential early in the project life cycle and
decreases as the project proceeds. Effective stakeholder management decreases risk

and increases the chances of project success. The project manager is usually
responsible for managing stakeholders.
Manage Stakeholder Engagement
1. Stakeholder management plan 1. Communication methods 1. Issue log

2. Communications management plan 2. Interpersonal skills 2. Change requests
3. Change log 3. Management skills 3. Project management plan
4. Organizational process assets updates
5. OPA updates
Four Key Inputs for Manage Stakeholder Engagement (PMBOK® Guide, p.

406):
1. Stakeholder Management Plan: Addresses the following:

 Methods and technologies for stakeholder communication
 The appropriate level of interaction for various stakeholders
 Strategies for involving stakeholders in the best possible way
2. Communications Management Plan: Described in Section 10.1.3.1,

provides guidance on managing stakeholder expectations by addressing:
 Communication requirements
 Information to be communicated and who needs to receive the
information
 Escalation process
3. Change Log: A change log documents all changes that occur during a project
and records the expected impact on the triple constraint. This information must
be shared with stakeholders so that there are no surprises.

influence stakeholder management include:
 Organizational communication requirements
 Issue management procedures
 Historical information on previous projects
Three Key Tools for Manage Stakeholder Engagement (PMBOK® Guide, p.

407):
1. Communication Methods: Historically, PMI has stated that face-to-face

meetings are the preferred means for handling stakeholder issues. Described in
Section 10.1.2.4 (Plan Communications Management), communication methods
include interactive, push, and pull approaches. During stakeholder engagement,
these methods are used as appropriate.
2. Interpersonal Skills: Skills useful for managing stakeholders include the

following:
 Building trust
 Resolving conflict
 Active listening
 Overcoming resistance to change
3. Management Skills: Management skills used by a project manager with

stakeholders may include:
 Facilitate consensus on project objectives
 Build support through influencing skills
 Negotiate agreements to meet project needs
 Gain organizational acceptance of project outcomes
Five Key Outputs for Manage Stakeholder Engagement (PMBOK® Guide, p.

408):
1. Issue Log: Used to record new issues and resolution of previously existing
issues.
2. Change Requests: Some stakeholder issues lead to approved changes,

corrective actions, and preventive actions.
3. Project Management Plan Updates: Used to document changing

stakeholder requirements, ineffective communication methods that are being
replaced, and actions involving stakeholder concerns/issues.
4. Project Documents Updates: The primary document that may be updated at

this point is the stakeholder register, especially if new stakeholders are identified
or a stakeholder is no longer involved.

that may be updated include:
 Stakeholder notifications
 Project records, reports, and presentations
 Lessons learned from managing stakeholders
13.4 Control Stakeholder Engagement (PMBOK® Guide, p. 409)
Control Stakeholder Engagement is the process of monitoring stakeholder relationships

and adjusting strategies as necessary.
Control Stakeholder Engagement
1. Project management plan 1. Information management 1. Work performance information

2. Issue log systems 2. Change requests
3. Work performance data 2. Expert judgment 3. Project management plan updates
4. Project documents 3. Meetings 4. Project documents updates
5. OPA updates
Four Key Inputs for Control Stakeholder Engagement (PMBOK® Guide, p.

411):
1. Project Management Plan: Contains the stakeholder management plan

which must now be monitored as it is used to manage stakeholders (Section
13.2.3.1). The following information may be used to control stakeholder
engagement:
 Techniques for communication among stakeholders
 Human resources requirements: how roles, responsibilities, reporting,
and staffing management will be accomplished
 Change management plan
 Which processes are applied to each project phase
 How work will be executed to accomplish objectives
2. Issue Log: As before, the issue log is updated if there are new issues and
also whenever previous issues are resolved.
3. Work Performance Data: The initial measurements (raw data) of actual

outcomes as work activities are accomplished. Data of interest to project teams
may include:
 Actual durations and costs
 Actual start and finish dates
 Percentage of planned work actually completed
 Number of change requests
 Number of defects
4. Project Documents: Documents relevant to controlling stakeholder

engagement include the:
 Issue and change logs
 Project communications
Three Key Tools for Control Stakeholder Engagement (PMBOK® Guide, p.

412):
1. Information Management Systems: Provides standard tools for collecting,

storing, and distributing information about costs, schedule, and performance to
appropriate stakeholders. Examples of distribution formats include:
 Table reports
 Spreadsheet analysis
 Presentations
 Graphical, visual representations of performance data
2. Expert Judgment: Used to improve the identification of new stakeholders

and to reassess relationships with current stakeholders.
3. Meetings: Used to exchange information about the status of stakeholder

engagements.
Five Key Outputs for Control Stakeholder Engagement (PMBOK® Guide, p.

413):
1. Work Performance Information: The performance data previously collected

through various control processes are now analyzed so that the actual status of
the project may be accurately presented. Examples include:
 Cost and schedule status
 Status of change requests
 Status of deliverables
 Forecasted estimates for project completion
2. Change Requests: Analysis of performance may lead to change requests to

deal with problems. Change requests should always be processed using
integrated change control. Recommended corrective or preventive actions
should be identified.
3. Project Management Plan Updates: As a result of interactions with

stakeholders, almost any subsidiary management plan may be updated,
including:
 Cost, schedule, and scope management plans
 Change management and communications management plans
 Quality and requirements management plans

 Human resource, risk, and procurement management plans
 Stakeholder management plan
4. Project Documents Updates: Documents that may be updated include the

stakeholder register and issue log.

that may be updated include:
 Stakeholder notifications
 Project records, reports, and presentations
 Lessons learned from managing stakeholders
Other Topics: There are no other topics for this knowledge area.
Self-Study
Drill Practice: Stakeholder Management
Question Answer
1. List the processes for stakeholder 1.

management. Identify stakeholders
Plan stakeholder management
Manage stakeholder engagement
Control stakeholder engagement (p. 13-1)
Note: All page numbers in this drill practice refer to
2. List six important stakeholder management 2.

activities. Identify potential stakeholders
Assess interest, influence, and power
Identify needs/expectations
Develop management strategies
Manage issues and conflicts
Communicate (p. 13-1)
3. What is the preferred method for 3. Face-to-face meetings

communicating with stakeholders? (p. 13-7, tool #1, communication methods)
4. What is a method for classifying and 4. Power/Interest grid (p. 13-3)

ranking the importance of stakeholders?
5. What are the inputs and outputs for the 5.

process Identify Stakeholders? Inputs:
Project charter
Procurement documents
Enterprise environmental factors
Organizational process assets
Outputs:
Stakeholder register
(p. 13-2)
6. Identify stakeholders is associated with 6.
which process group? Initiating
(p. 3-7 and course slide 13-8)
7. Name three advantages of involving 7.
stakeholders in project initiating steps. a. Create a shared understanding of project
success criteria
b. Improve acceptance of deliverables
c. Improve stakeholder satisfaction
(PMBOK® Guide, p. 55, paragraph #1)
Question Answer
8. What is a possible result of failure to deal 8. Increased chance of project failure

with negative stakeholders? (pp. 2-9, 13-1).
9. Which process group aligns the 9. Initiating; Identify Stakeholders is part of

expectations of stakeholders with the purpose the initiating process group.
of the project? Which stakeholder process is (PMBOK® Guide, p. 54; RM, p. 3-7).
part of initiating?
10. Identify the inputs and outputs for Plan 10.

Stakeholder Management. Inputs:
Project management plan
Stakeholder register
Enterprise environmental factors
Outputs:
(pp. 13-4 & 5).
11. Identify the management response for 11.
each power/interest combination:
a. High power/High interest a. Manage closely
b. High power/low interest b. Keep satisfied
c. Low power/high interest c. Keep informed
d. Low power/low interest d. Monitor
(p. 13-3; course slide 13-13)
12. Distinguish customers from users. 12.
Customers are the persons or organizations
who will approve and manage the product,
service, or result.
Users are the persons or organizations who
will use the product, service, or result.
(PMBOK® Guide, pp. 30-33)
13. Name the types of stakeholders the 13.
project team might identify. Internal or external
Positive or negative
Performing or advising
(PMBOK® Guide, pp. 30-33).
14. As part of Plan Stakeholder Management, 14.
analytical techniques provide a way to Unaware
compare planned levels of stakeholder Resistant
engagement to actual levels. What five levels Neutral
of engagement are possible? Supportive
Leading
(p. 13-5; course slide 13-21)
Question Answer
15. What are the inputs and outputs for 15.

Manage Stakeholder Engagement? Inputs:
Communications management plan
Change log
Outputs:
Issue log
Change requests
Project management plan updates
OPA updates
(pp. 13-6 to 13-8)
16. Name four interpersonal skills useful for 16.
managing stakeholders. Building trust
Resolving conflict
Active listening
Overcoming resistance to change
(p. 13-7)
17. Name four management skills useful for 17.
managing stakeholders. Facilitate consensus on project objectives
Build support through influencing
Negotiate agreements
Gain acceptance of project outcomes
(p. 13-7).
18. When is the potential for stakeholders to 18. Early in the project life cycle.
influence project outcomes at its greatest? (p. 13-5).
19. Match each stakeholder process to the 19.

appropriate process group:
a. Identify Stakeholders a. Initiating
b. Plan Stakeholder Management b. Planning
c. Manage Stakeholder Engagement c. Executing
d. Control Stakeholder Engagement d. Monitoring and controlling
(p. 3-7 and course slide 13-8).
Question Answer
20. What are the inputs and outputs for 20.

Control Stakeholder Engagement? Inputs:
Project management plan
Issue log
Work performance data
Project documents
Outputs:
Work performance information
Change requests
Project management plan updates
OPA updates
(pp. 13-9 to 13-11)
21. What is the primary purpose of Control 21. Monitor stakeholder relationships and
Stakeholder Engagement? adjust strategies as necessary.
(p. 13-8)
Unit 14: Summary of 47 Project
Management Processes
Integration Management
Scope Management
Time Management
Cost Management
Quality Management
Human Resource Management
Communication Management
Risk Management
Procurement Management
Stakeholder Management
Summary of 47 project management processes (PMBOK® Guide, 5th edition, 2013)
Integration Management: processes & activities needed to properly coordinate all aspects of the project to meet stakeholder expectations.
Process Inputs Tools Outputs Process
Group
4.1 Develop Project Charter: 1. Project statement of work (SOW) 1. Expert judgment 1. Project charter Initiating
authorizes a project or phase 2. Business case 2. Facilitation techniques
3. Agreements
4.2 Develop Project Management 1. Project charter 1. Expert judgment 1. Project management plan Planning
Plan: collection of all subsidiary 2. Outputs from other processes 2. Facilitation techniques
plans 3. Enterprise environmental factors
4.3 Direct & Manage Project Work: 1. Project management plan 1. Expert judgment 1. Deliverables Executing
leading and performing the work in 2. Approved change requests 2. Project management 2. Work performance data
the plan 3. Enterprise environmental factors information system 3. Change requests
4. Organizational process assets 3. Meetings 4. Project management plan
updates
4.4 Monitor & Control Project Work: 1. Project management plan 1. Expert judgment 1. Change requests Monitoring &
constantly measure and report 2. Schedule forecasts 2. Analytical techniques 2. Work performance reports Controlling
performance; determine appropriate 3. Cost forecasts 3. Project management 3. Project management plan
preventive & corrective action 4. Validated changes information system updates
5. Work performance information 4. Meetings 4. Project documents updates
4.5 Perform Integrated Change 1. Project management plan 1. Expert judgment 1. Approved change requests Monitoring &
Control: continuously manage 2. Work performance reports 2. Meetings 2. Change log Controlling
changes & maintain a baseline 3. Change requests 3. Change control tools 3. Project management plan
4. Enterprise environmental factors updates
4.6 Close Project or Phase: 1. Project management plan 1. Expert judgment 1. Final product, service, or result Closing
procedures to close a project or a 2. Accepted deliverables 2. Analytical techniques transition
phase 3. Organizational process assets 3. Meetings 2. OPA updates
Scope Management: processes needed to ensure the project includes all the work required and only the work required to complete the project successfully;
carefully identifies what is and is not included in the project (i.e. project boundaries).
Group
5.1 Plan Scope Management: how 1. Project management plan 1. Expert judgment 1. Scope management plan Planning
scope will be defined, validated, 2. Project charter 2. Meetings 2. Requirements management
and controlled 3. Enterprise environmental factors plan
5.2 Collect Requirements: define 1. Scope management plan 1. Interviews 1. Requirements documentation Planning
and document stakeholder needs to 2. Requirements management plan 2. Focus groups 2. Requirements traceability
meet project objectives 3. Stakeholder management plan 3. Facilitated workshops matrix
4. Project charter 4. Group creativity techniques
5. Stakeholder register 5. Group decision-making
techniques
6. Questionnaires and
surveys
7. Observations
8. Prototypes
9. Benchmarking
10. Context diagrams
11. Document analysis
5.3 Define Scope: develops a 1. Scope management plan 1. Expert judgment 1. Project scope statement Planning
detailed, written scope statement 2. Project charter 2. Product analysis 2. Project documents updates
3. Requirements documentation 3. Alternatives generation
4. Organizational process assets 4. Facilitated workshops
5.4 Create WBS: subdivides the 1. Scope management plan 1. Decomposition 1. Scope baseline Planning
work into smaller, more 2. Project scope statement 2. Expert judgment 2. Project documents updates
manageable components 3. Requirements documentation
5.5 Validate Scope: formalizing 1. Project management plan 1. Inspection 1. Accepted deliverables Monitoring &
acceptance of completed project 2. Requirements documentation 2. Group decision-making 2. Change requests Controlling
deliverables. 3. Requirements traceability matrix techniques 3. Work performance
4. Verified deliverables information
5. Work performance data 4. Project documents updates
5.6 Control Scope: monitoring 1. Project management plan 1. Variance analysis 1. Work performance Monitoring &
status and controlling changes to 2. Requirements documentation information Controlling
the project scope. 3. Requirements traceability matrix 2. Change requests
4. Work performance data 3. Project management plan
5. Organizational process assets updates
5. OPA updates
Time Management: processes needed to ensure timely completion of the project.
Group
6.1 Plan Schedule Management: 1. Project management plan 1. Expert judgment 1. Schedule management plan Planning
planning, developing, managing, 2. Project charter 2. Analytical techniques
executing, and controlling the 3. Enterprise environmental factors 3. Meetings
schedule. 4. Organizational process assets
6.2 Define Activities: identifying the 1. Schedule management plan 1. Decomposition 1. Activity list Planning
activities that must be performed. 2. Scope baseline 2. Rolling wave planning 2. Activity attributes
3. Enterprise environmental factors 3. Expert judgment 3. Milestone list
6.3 Sequence Activities: identifying 1. Schedule management plan 1. Precedence diagramming 1. Project schedule network Planning
activity dependencies. 2. Activity list method (PDM) diagrams
3. Activity attributes 2. Dependency determination 2. Project documents updates
4. Milestone list 3. Leads and lags
5. Project scope statement
6.4 Estimate Activity Resources: 1. Schedule management plan 1. Expert judgment 1. Activity resource requirements Planning
estimating the type & quantity of 2. Activity list 2. Alternative analysis 2. Resource breakdown
resources needed. 3. Activity attributes 3. Published estimating data structure (RBS)
4. Resource calendars 4. Bottom-up estimating 3. Project documents updates
5. Risk register 5. Project management software
6. Activity cost estimates
6.5 Estimate Activity Durations: 1. Schedule management plan 1. Expert judgment 1. Activity duration estimates Planning
estimating durations of individual 2. Activity list 2. Analogous estimating 2. Project documents updates
activities. 3. Activity attributes 3. Parametric estimating
4. Activity resource requirements 4. Three-point estimating
5. Resource calendars 5. Group decision-making
6. Project scope statement techniques
Group
6.6 Develop Schedule: analyzing 1. Schedule management plan 1. Schedule network analysis 1. Schedule baseline Planning
sequences, durations, resource 2. Activity list 2. Critical path method 2. Project schedule
requirements, and constraints to 3. Activity attributes 3. Critical chain method 3. Schedule data
create the project schedule 4. Project schedule network 4. Resource optimization 4. Project calendars
baseline. diagrams techniques 5. Project management plan
5. Activity resource requirements 5. Modeling techniques updates
6. Resource calendars 6. Leads and lags 6. Project documents updates
7. Activity duration estimates 7. Schedule compression
8. Project scope statement 8. Scheduling tool
9. Risk register
10. Project staff assignments
6.7 Control Schedule: monitoring 1. Project management plan 1. Performance reviews 1. Work performance information Monitoring
status and managing changes to 2. Project schedule 2. Project management software 2. Schedule forecasts &
the schedule baseline. 3. Work performance data 3. Resource optimization 3. Change requests Controlling
4. Project calendars techniques 4. Project management plan
5. Schedule data 4. Modeling techniques updates
6. Organizational process assets 5. Leads & lags 5. Project documents updates
6. Schedule compression 6. OPA updates
7. Scheduling tool
Cost Management: processes for estimating, budgeting, & controlling costs so the project can be completed within budget.
Group
7.1 Plan Cost Management: 1. Project management plan 1. Expert judgment 1. Cost management plan Planning
planning, managing, expending, 2. Project charter 2. Analytical techniques
and controlling project costs. 3. Enterprise environmental factors 3. Meetings
7.2 Estimate Costs: estimating 1. Cost management plan 1. Expert judgment 1. Activity cost estimates Planning
the costs of resources needed to 2. Human resource management 2. Analogous estimating 2. Basis of estimates
complete project activities. plan 3. Parametric estimating 3. Project documents updates
3. Scope baseline 4. Bottom-up estimating
4. Project schedule 5. Three-point estimating
6. Enterprise environmental factors 7. Cost of quality
7. Organizational process assets 8. Project management software
9. Vendor bid analysis
10. Group decision-making
techniques
7.3 Determine Budget: 1. Cost management plan 1. Cost aggregation 1. Cost baseline Planning
aggregating estimated costs to 2. Scope baseline 2. Reserve analysis 2. Project funding requirements
establish a cost baseline. 3. Activity cost estimates 3. Expert judgment 3. Project documents updates
4. Basis of estimates 4. Historical relationships
5. Project schedule 5. Funding limit reconciliation
6. Resource calendars
7. Risk register
8. Agreements
7.4 Control Costs: monitoring 1. Project management plan 1. Earned value management 1. Work performance Monitoring &
status and managing changes to 2. Project funding requirements 2. Forecasting information Controlling
the cost baseline. 3. Work performance data 3. To-complete performance index 2. Cost forecasts
4. Organizational process assets 4. Performance reviews 3. Change requests
5. Project management software 4. Project management plan
6. Reserve analysis updates
6. OPA updates
Quality Management: processes to ensure the project will satisfy the needs for which it was undertaken & implement a quality management system.
Group
8.1 Plan Quality Management: 1. Project management plan 1. Cost-benefit analysis 1. Quality management plan Planning
identifying relevant quality 2. Stakeholder register 2. Cost of quality 2. Process improvement plan
requirements/standards & 3. Risk register 3. Seven basic quality tools 3. Quality metrics
documenting how the project will 4. Requirements documentation 4. Benchmarking 4. Quality checklists
demonstrate compliance. 5. Enterprise environmental factors 5. Design of experiments 5. Project documents updates
6. Organizational process assets 6. Statistical sampling
7. Additional quality planning
tools
8. Meetings
8.2 Perform Quality Assurance: 1. Quality management plan 1. Quality management and 1. Change requests Executing
ensuring the project uses all 2. Process improvement plan control tools 2. Project management plan
processes needed to meet 3. Quality metrics 2. Quality audits updates
requirements. The ultimate purpose 4. Quality control measurements 3. Process analysis 3. Project documents updates
of QA is quality improvement. 5. Project documents 4. OPA updates
8.3 Control Quality: monitoring 1. Project management plan 1. Seven basic quality tools 1. Quality control measurements Monitoring &
results for compliance & 2. Quality metrics 2. Statistical sampling 2. Validated changes Controlling
recommending necessary changes. 3. Quality checklists 3. Inspection 3. Validated deliverables
4. Work performance data 4. Approved change requests 4. Work performance information
+/- 1 sigma = 68.3% 5. Approved change requests review 5. Change requests
+/- 2 sigma = 95.5% 6. Deliverables 6. Project management plan
+/- 3 sigma = 99.7% 7. Project documents updates
+/- 6 sigma = 99.9997% 8. Organizational process assets 7. Project documents updates
8. OPA updates
Human Resource Management: processes that organize and manage the project team.
Group
9.1 Plan HR Management: 1. Project management plan 1. Organization charts and 1. Human resource Planning
establishing roles, responsibilities, 2. Activity resource requirements position descriptions management plan
reporting relationships, & creating a 3. Enterprise environmental factors 2. Networking
staffing management plan. 4. Organizational process assets 3. Organizational theory
4. Expert judgment
5. Meetings
9.2 Acquire Project Team: getting 1. Human resource management 1. Pre-assignment 1. Project staff assignments Executing
the human resources needed to plan 2. Negotiation 2. Resource calendars
complete the project. 2. Enterprise environmental factors 3. Acquisition 3. Project management plan
3. Organizational process assets 4. Virtual teams updates
5. Multi-criteria decision analysis
9.3 Develop Project Team: 1. Human resource management 1. Interpersonal skills 1. Team performance Executing
improving competencies, interaction plan 2. Training assessments
of the team, & overall team 2. Project staff assignments 3. Team-building activities 2. EEF updates
environment. 3. Resource calendars 4. Ground rules
5. Colocation
6. Recognition and rewards
7. Personnel assessment tools
9.4 Manage Project Team: tracking 1. Human resource management 1. Observation and conversation 1. Change requests Executing
performance, providing feedback, plan 2. Project performance appraisals 2. Project management plan
resolving issues, & coordinating 2. Project staff assignments 3. Conflict management updates
changes. 3. Team performance assessments 4. Interpersonal skills 3. Project documents updates
4. Issue log 4. EEF updates
5. Work performance reports 5. OPA updates
Communication Management: processes to ensure the timely & appropriate generation, collection, distribution, storage, & ultimate disposition of project
information.
Group
10.1 Plan Communications 1. Project management plan 1. Communication 1. Communications Planning
Management: developing a 2. Stakeholder register requirements analysis management plan
communication approach to meet the 3. Enterprise environmental factors 2. Communication technology 2. Project documents updates
information needs of stakeholders. 4. Organizational process assets 3. Communication models
4. Communication methods
5. Meetings
10.2 Manage Communications: 1. Communications management 1. Communication technology 1. Project communications Executing
managing information using the plan 2. Communication models 2. Project management plan
communications management plan. 2. Work performance reports 3. Communication methods updates
3. Enterprise environmental factors 4. Information management 3. Project documents updates
4. Organizational process assets systems 4. OPA updates
5. Performance reporting
10.3 Control Communications: 1. Project management plan 1. Information management 1. Work performance Monitoring &
monitoring and controlling 2. Project communications systems information Controlling
communications to ensure 3. Issue log 2. Expert judgment 2. Change requests
information needs of stakeholders are 4. Work performance data 3. Meetings 3. Project management plan
met. 5. Organizational process assets updates
5. OPA updates
Risk Management: processes concerned with planning, identifying, analyzing, responding, and controlling project risks.
Group
11.1 Plan Risk Management: 1. Project management plan 1. Analytical techniques 1. Risk management Planning
how to conduct risk 2. Project charter 2. Expert judgment plan
management activities. 3. Stakeholder register 3. Meetings
11.2 Identify Risks: determining 1. Risk management plan 1. Documentation reviews 1. Risk register Planning
which risks might affect the 2. Cost management plan 2. Information gathering techniques
project. 3. Schedule management plan 3. Checklist analysis
4. Quality management plan 4. Assumptions analysis
5. HR management plan 5. Diagramming techniques
6. Scope baseline 6. SWOT analysis
7. Activity cost estimates 7. Expert judgment
8. Activity duration estimates
9. Stakeholder register
10. Project documents
11. Procurement documents
11.3 Perform Qualitative Risk 1. Risk management plan 1. Risk probability and impact assessment 1. Project documents Planning
Analysis: prioritizing risks for 2. Scope baseline 2. Probability and impact matrix updates
further analysis or action 3. Risk register 3. Risk data quality assessment
(probability vs. impact). 4. Enterprise environmental factors 4. Risk categorization
5. Organizational process assets 5. Risk urgency assessment
6. Expert judgment
11.4 Perform Quantitative Risk 1. Risk management plan 1. Data gathering and representation 1. Project documents Planning
Analysis: numerically analyzing 2. Cost management plan techniques updates
the potential effect of identified 3. Schedule management plan 2. Quantitative risk analysis and modeling
risks. 4. Risk register techniques
5. Enterprise environmental factors 3. Expert judgment
Group
11.5 Plan Risk Responses: 1. Risk management plan 1. Strategies for negative risks or threats 1. Project management Planning
how to enhance opportunities & 2. Risk register 2. Strategies for positive risks or opportunities plan updates
reduce threats. 3. Contingent response strategies 2. Project documents
4. Expert judgment updates
11.6 Control Risks: monitoring 1. Project management plan 1. Risk reassessment 1. Work performance Monitoring
identified risks, identifying new 2. Risk register 2. Risk audits information &
risks, & evaluating risk 3. Work performance data 3. Variance and trend analysis 2. Change requests Controlling
response plans. 4. Work performance reports 4. Technical performance measurement 3. Project management
5. Reserve analysis plan updates
6. Meetings 4. Project documents
updates
5. OPA updates
Procurement Management: processes to acquire products, services, or results from outside the project team.
Group
12.1 Plan Procurement 1. Project management plan 1. Make-or-buy analysis 1. Procurement management plan Planning
Management: documenting 2. Requirements documentation 2. Expert judgment 2. Procurement statement of work
purchasing decisions, specifying 3. Risk register 3. Market research 3. Procurement documents
the approach, and identifying 4. Activity resource requirements 4. Meetings 4. Source selection criteria
potential sellers. 5. Project schedule 5. Make-or-buy decisions
6. Activity cost estimates 6. Change requests
7. Stakeholder register 7. Project documents updates
12.2 Conduct Procurements: 1. Procurement management plan 1. Bidder conference 1. Selected sellers Executing
obtaining seller responses, 2. Procurement documents 2. Proposal evaluation techniques 2. Agreements
selecting a seller, and awarding 3. Source selection criteria 3. Independent estimates 3. Resource calendars
a contract. 4. Seller proposals 4. Expert judgment 4. Change requests
5. Project documents 5. Advertising 5. Project management plan
6. Make-or-buy decisions 6. Analytical techniques updates
7. Procurement statement of work 7. Procurement negotiations 6. Project documents updates
12.3 Control Procurements: 1. Project management plan 1. Contract change control system 1. Work performance information Monitoring
managing procurement 2. Procurement documents 2. Procurement performance 2. Change requests &
relationships, monitoring contract 3. Agreements reviews 3. Project management plan Controlling
performance, and making 4. Approved change requests 3. Inspections and audits updates
changes as appropriate. 5. Work performance reports 4. Performance reporting 4. Project documents updates
6. Work performance data 5. Payment systems 5. OPA updates
6. Claims administration
7. Records management system
12.4 Close Procurements: 1. Project management plan 1. Procurement audits 1. Closed procurements Closing
completing each project 2. Procurement documents 2. Procurement negotiations 2. OPA updates
procurement. 3. Records management system
Stakeholder Management: processes required to identify stakeholders, their expectations, and appropriate management strategies.
Group
13.1 Identify Stakeholders: identifying 1. Project charter 1. Stakeholder analysis 1. Stakeholder register Initiating
the interests, involvement, & 2. Procurement documents 2. Expert judgment
influence of people & organizations 3. Enterprise environmental factors 3. Meetings
impacted by the project. 4. Organizational process assets
13.2 Plan Stakeholder Management: 1. Project management plan 1. Expert judgment 1. Stakeholder management Planning
developing appropriate stakeholder 2. Stakeholder register 2. Meetings plan
management strategies. 3. Enterprise environmental factors 3. Analytical techniques 2. Project documents updates
13.3 Manage Stakeholder 1. Stakeholder management plan 1. Communication methods 1. Issue log Executing
Engagement: communicating and 2. Communications management 2. Interpersonal skills 2. Change requests
working with stakeholders to meet plan 3. Management skills 3. Project management plan
their needs and resolve issues. 3. Change log updates
5. OPA updates
13.4 Control Stakeholder 1. Project management plan 1. Information management 1. Work performance Monitoring &
Engagement: monitoring stakeholder 2. Issue log systems information Controlling
relationships, & adjusting strategies if 3. Work performance data 2. Expert judgment 2. Change requests
appropriate. 4. Project documents 3. Meetings 3. Project management plan
updates
5. OPA updates
Unit 15: Exercises
Exercise 1: Instructions
Exercise 2: Instructions and Template
Complete Template for Exercises 1-5
Exercise 6: Review of Scheduling Concepts
Exercise 7: Network Diagram Practice
Exercise 8: Crashing Practice
Exercise 9: Cost Practice
Exercise 10: Math for the PMP Exam

Unit 15: Exercises
Your instructor may assign these exercises to small groups during class. Alternatively, you may work on them as
homework, either individually or in small study groups.
Exercises 1-5: The Building Blocks of Project Management

These exercises are intended to make you comfortable with the building blocks of the PMBOK® Guide: the ten
knowledge areas, five process groups, and 47 processes.
Exercises 6-8: Review of Scheduling Concepts

These exercises provide additional review of the differences between PDM, Arrow diagram, and Gantt charts;
network diagrams; and crashing.
Exercise 9: Cost Exercise

This exercise provides some additional practice in some of the cost and other financial considerations presented in
Unit 7.

This long set of practice problems helps prepare you for the types of math questions most frequently seen on the
exam. Do not skip the math preparation! Historically, most of the math is straightforward and is “low hanging fruit;”
there is an easily calculated right answer.
Exercise 1: Instructions
1. Using the blank template on the next page, fill in the ten knowledge areas in column one. Alternatively, you
may draw the template separately if you prefer.
2. Fill in the five process groups in the column headings for columns two through six.
3. The correct answers for each exercise can be found at the beginning of the following exercise.
Exercise 1: Blank Template
Process Groups
Knowledge Areas
Use the template below to fill in the processes that belong to Integration Management and Scope Management. As
a hint for this first exercise, there should be a total of twelve. You will complete a similar process for other
knowledge areas in the exercises which follow.
Process Groups
Initiating Planning Executing Monitoring & Closing

Knowledge Areas
Controlling
Integration
Scope
Fill in the processes for Time Management:

Process Groups
Monitor &
Knowledge Areas Initiate Plan Execute Close
Control
 Develop project  Develop project  Direct and  Monitor and  Close project or
Integration charter management manage project control project phase
plan work work
 Perform
integrated
change control
 Plan scope  Validate scope

Scope management
 Control scope
 Collect
requirements
 Define scope
 Create WBS
Process Groups
Monitor &
Knowledge Areas Initiate Plan Execute Close
Control
Time
Fill in the processes for Cost and Quality Management:

Process Groups
Monitoring &
Knowledge Areas Initiating Planning Executing Closing
Controlling
Integration charter management plan manage project control project phase
work work
 Perform
integrated
change control
Scope management  Control scope
 Collect
requirements
 Define scope
 Create WBS
 Plan schedule  Control schedule
Time management
 Define activities
 Sequence
activities
 Estimate
resources
 Estimate
durations
 Develop schedule
Cost
Process Groups
Monitoring &
Controlling
Quality
Fill in the processes for Human Resource, Communication, Risk, Procurement, and Stakeholder Management:
Process Groups
Monitoring &
Controlling
work work
 Perform integrated
change control

 Collect
requirements
 Define scope
 Create WBS

Time management
 Sequence activities
 Estimate resources
 Estimate durations
 Plan cost  Control costs

Cost management
 Estimate costs
 Determine budget
Process Groups
Monitoring &
Controlling
 Plan quality  Perform quality  Control quality
Quality management assurance
Human Resource
Communication
Risk
Procurement
Stakeholder
Complete Template for Exercises 1-5
Process Groups
Monitoring &
Controlling
work work
 Perform integrated
change control

 Collect
requirements
 Define scope
 Create WBS

Time management
 Sequence activities
 Estimate resources
 Estimate durations
 Plan cost  Control costs

Cost management
 Estimate costs
 Determine budget
Process Groups
Monitoring &
Controlling
 Plan quality  Perform quality  Control quality
Quality management assurance
 Plan human  Acquire project

Human Resource resource team
management
 Develop project
team
 Manage project
team
 Plan  Manage  Control

Communication communications communications communications
management
 Plan risk  Control risks

Risk management
 Identify risks
 Perform qualitative
risk analysis
 Perform
quantitative risk
analysis
 Plan risk responses
 Plan procurement  Conduct  Control  Close

Procurement management procurements procurements procurements
 Identify  Plan stakeholder  Manage  Control

Stakeholder stakeholders management stakeholder stakeholder
engagement engagement
Exercise 6: Review of Scheduling Concepts
1. Review the distinctive characteristics of each approach below. You must be familiar with the definitions of the
terms and which are associated with each approach.
2. Answer the questions below the table.
Precedence Diagram Arrow Diagram Gantt Chart
 Activity sequencing  Activity sequencing  Good for showing:
 Critical path  Critical path o Progress
 Dependencies:  Dependencies: o Variance
o Finish to start o Finish to start only  Displayed as bar chart
o Finish to finish  Slack / Float
o Start to start  Dummy task
o Start to finish  Arrow diagram
 Slack / Float
 Lag
1. Which of the following terms is not associated with a precedence diagram?

a. critical path
b. slack
c. lag
d. bar chart
2. What does a Gantt chart show exceptionally well?
a. dependency
b. dummy task
c. variance
d. float
Exercise 6: Review of Scheduling Concepts Solution
1. Which of the following terms is not associated with a precedence diagram?
a. critical path
b. slack
c. lag
d. bar chart
2. What does a Gantt chart show exceptionally well?

a. dependency
b. dummy task
c. variance
d. float
Exercise 7: Network Diagram Practice
Use the following problems to practice the conventions of network diagramming. Solutions follow each problem.
Network 1: Finish-to-Finish
Network 1: Finish-to-Finish Solution
Network 2: Start-to-Start with Lag
Network 2: Start-to-Start with Lag Solution
Network 3: Finish-to-Start
Network 3: Finish-to-Start Solution
Network #4
Network #4 Solution
Exercise 8: Crashing Practice
Use the following problems to practice the conventions of crashing. Solutions follow each problem.
Crashing Problem 1
Crashing Problem 1 Solution
Crashing Problem 2
Crashing Problem 3
Exercise 9: Cost Practice
Assume an interest rate of 10%. Use the data provided in the following table and then answer the questions posed
below. Solutions are on the following page.
Time Period Revenue Cost Cash Flow PV

0 $ - $10,000 $(10,000) $(10,000.00)
1 $ 6,000 $ 2,000 $ 4,000 $ 3,636.36
2 $10,000 $ 2,000 $ 8,000 $ _______
3 $10,000 $ 2,000 $ 8,000 $ 6,010.52
4 $10,000 $ 2,000 $ 8,000 $ 5,464.11
5 $ 8,000 $ - $ 8,000 $ 4,967.37
Totals = $44,000 $18,000 $26,000 $16,689.93
1. What is the PV for time period 2?
2. What is the payback period?
3. What is the BCR (Benefit Cost Ratio)?
4. What is the NPV (Net Present Value)?
5. What is the ROI (Return on Investment)?
Exercise 9: Cost Practice Solution
Time Period Revenue Cost Cash Flow PV

0 $ - $10,000 $(10,000) $(10,000.00)
1 $ 6,000 $ 2,000 $ 4,000 $ 3,636.36
2 $10,000 $ 2,000 $ 8,000 $ _______
3 $10,000 $ 2,000 $ 8,000 $ 6,010.52
4 $10,000 $ 2,000 $ 8,000 $ 5,464.11
5 $ 8,000 $ - $ 8,000 $ 4,967.37
Totals = $44,000 $18,000 $26,000 $16,689.93
1. What is the PV for time period 2? $6,611.57: Divide the cash flow of $8,000 by the time adjustment factor
which is (1+i)t = (1.1)2 = 1.1 x 1.1 = 1.21. Therefore, $8,000/1.21 = $6,611.57
2. What is the payback period? Time period 2 (first period in which the cumulative cash flow is positive; $2,000
total profit considering all revenues and costs to date)
3. What is the BCR (Benefit Cost Ratio)? BCR = Revenue/Cost = $44,000/$18,000 = 2.44. Interpretation: The
project will return $2.44 for every dollar invested.
4. What is the NPV (Net Present Value)? The sum of all PVs, which is totaled at the bottom of the PV column as
$16,689.93 (which is the expected profit after adjusting for the time value of all cash flows).
5. What is the ROI (Return on Investment)? (Benefit-Cost)/Cost = (44-18)/18 = 1.44 (as a percentage: 144%).
General Advice:
 The number of math questions ranges from 3 or 4 to as many as 25. For most people, the heaviest focus
has been on earned value management.
 Do not skip the math preparation! Historically, most of the math is straightforward and is “low hanging fruit”.
There is an easily calculated “right answer”.
 The key on the math is: practice, practice, practice
 This guide covers the types of questions most frequently seen on the exam (the quick and dirty guide)
rather than every possible math question that could ever theoretically appear.
 Solutions are found at the end of each knowledge area exercise set.
Index of Topics:
Knowledge Area Specific Type

Cost (Earned Value) Variances and Indexes
Forecasting
Other EV Questions / Exercises
Cost and Schedule PERT Basics
Cost Accuracy of Estimates
Procurement Incentive Fees and Prices
Point of Total Assumption
Risk Expected Monetary Value
Probability
Miscellaneous Communication Channels
Generic Variances
Lease vs. Buy
Cost (Earned Value) Problems
Variances and Indexes
1. You have completed $40,000 worth of work as measured by work packages. The actual cost of this work has
totaled $50,000 and the project plan called for $32,000 worth of work to be competed at this point.
a. What is the cost variance and what does it mean about performance thus far?
b. What is the cost performance index and what does it mean?
c. What is the schedule variance and what does it mean?
d. What is the schedule performance index and what does it mean?
2. The first status report on your $100,000 facility clean-up project shows that you have completed $20,000 worth of
work and have spent $25,000. At the first status report, you should have accomplished $22,000 worth of work.
a. What is the cost variance and what does it mean?
Forecasting
a. What is the BAC, EV, AC, and PV?
b. How much work remains to be done?
c. What is the EAC if current performance trends continue for the remaining work?
d. What is the EAC if current variances do not apply to the remaining work?
e. Generally speaking, does the CPI for the rest of the project need to be above 1.0 or below 1.0 if you wish to finish
on the original budget?
f. What is the formula for calculating TCPI?
2. The original project budget was $1,000,000 total. You just measured current status and found that $400,000
work has been completed at an actual cost of $500,000.
a. What is the EAC if current variances are considered typical for the remaining work?
b. What is the EAC if current variances are not considered typical for the remaining work?
Other EV Questions and Exercises
1. Using earned value management, answer the questions related to the following table:
Month PV EV AC
Jan $500 $450 $550
Feb $600 $600 $600
Mar $500 $475 $475
Apr $450 $450 $450
May $550 $500 $500
Total =
a. How much work should have been done as of the end of March?
b. How much work had actually been completed as of the end of March?
c. What is the project cost variance as of the end of May?
d. What is the project schedule variance as of the end of May?
e. In most circumstances, would you expect this project to finish on budget, with a cost overrun, or with a cost
underrun?
2. Michael and Angelo are working on a dinosaur reconstruction project and they have been assigned the teeth.
Specifically, they have been assigned to reconstruct the mouth of hydrasaur containing 2,000 teeth. Each tooth has
a planned budget of $150 and they are EACH supposed to complete 10 teeth a day.
It is the end of the 12th day and they have completed a total of 300 teeth thus far. They have spent $48,000 on this
work. Answer the following questions using earned value management.
a. What is the PV?
b. What is the EV?
c. What is the AC?
d. What is the BAC?
e. What is the schedule variance?
f. What is the SPI?
g. What is the cost variance?
h. What is the CPI?
i. What is the EAC if variances are considered typical?
j. What is the TCPI?
3. Using the diagram below, what is the cost and schedule status for the work shown, i.e. a) cost overrun or
underrun b) ahead of or behind schedule?
a)
AC
b)
EV
PV
4. A colleague dropped the following information on your desk and asked for your help. The colleague stated that
the information represented the data used in the latest calculation of TCPI. The information looked like this:
1,000,000-400,000
1,000,000-500,000
a. What is the BAC for this project?
b. What is the current CPI for this project?
c. What would the CPI need to be for the rest of the project if you expect to finish on budget?
Cost (Earned Value) Problems Solutions
Variances and Indexes
1. You have completed $40,000 worth of work as measured by work packages. The actual cost of this work has
totaled $50,000 and the project plan called for $32,000 worth of work to be competed at this point.
a. What is the cost variance and what does it mean about performance thus far?
CV = EV-AC = 40k-50k = -$10,000 which means that the project has a $10,000 cost overrun at this point.

CPI = EV/AC = 40k/50k = 0.80 which means that 80 cents worth of work is getting done for every dollar spent
(another way to indicate a cost overrun).

SV = EV-PV = 40k-32k = +$8,000 which means that the project is $8,000 worth of work ahead of schedule at
this point.

SPI = EV/PV = 40k/32k = 1.25 which means that the project is 25% ahead of schedule at this point.
a. What is the cost variance and what does it mean?

CV = EV-AC = 20k-25k = -$5,000 which means that the project has a $5,000 cost overrun at this point.

CPI = EV/AC = 20k/25k = 0.80 which means that 80 cents worth of work is getting done for every dollar spent
(another way to indicate a cost overrun).

SV = EV-PV = 20k-22k = -$2,000 which means that the project is $2,000 worth of work behind schedule at
this point.

SPI = EV/PV = 20k/22k = 0.9091 which means that the project has only completed approximately 90% of the
work it should have at this point (behind schedule).
Forecasting
a. What is the BAC, EV, AC, and PV? BAC = $100,000. EV = $20,000. AC = $25,000. PV = $22,000.
b. How much work remains to be done? Work remaining = BAC-EV = 100k-20k = $80,000 worth of work
remaining.
c. What is the EAC if current performance trends continue for the remaining work? EAC (typical) = BAC/CPI =
100k/.80 = $125,000 (expecting an overrun at completion of $25,000).
d. What is the EAC if current variances do not apply to the remaining work? EAC (atypical) = AC + (BAC-EV) = 25k
+ (100k-20k) = $105,000 (expecting an overrun at completion of $5,000).
e. Generally speaking, does the CPI for the rest of the project need to be above 1.0 or below 1.0 if you wish to finish
on the original budget? The current CPI is .80 (below 1.0; cost overrun) so the CPI for the rest of the project
would need to be above 1.0 (cost underrun) to balance out the spending and finish on budget.
f. What is the formula for calculating TCPI? Work Remaining divided by Budget Remaining = (BAC-EV)/(BAC-
AC)
2. The original project budget was $1,000,000 total. You just measured current status and found that $400,000
work has been completed at an actual cost of $500,000.
a. What is the EAC if current variances are considered typical for the remaining work?
EAC (typical) = BAC/CPI = 1,000,000/.80 = $1,250,000 (expecting an overrun at completion of $250,000).
b. What is the EAC if current variances are not considered typical for the remaining work?
EAC (atypical) = AC + (BAC-EV) = 500k + (1,000,000-400k) = $1,100,000 (expecting an overrun at completion
of $100,000).
Other EV Questions and Exercises
1. Using earned value management, answer the questions related to the following table:
Month PV EV AC
Jan $500 $450 $550
Feb $600 $600 $600
Mar $500 $475 $475
Apr $450 $450 $450
May $550 $500 $500
Total = $2600 $2475 $2575
a. How much work should have been done as of the end of March? $1600 (the total PV for Jan, Feb, and Mar)
b. How much work had actually been completed as of the end of March? $1525 (the total EV for Jan, Feb, Mar)
c. What is the project cost variance as of the end of May? CV = EV-AC = 2475-2575 = -$100 (cost overrun)
d. What is the project schedule variance as of the end of May? SV = EV-PV = 2475-2600 = -$125 (behind
schedule)
e. In most circumstances, would you expect this project to finish on budget, with a cost overrun, or with a cost
underrun? The most likely trend on cost overruns is that they tend to continue. The most likely outcome in
this case would be a cost overrun at completion.
2. Michael and Angelo are working on a dinosaur reconstruction project and they have been assigned the teeth.
Specifically, they have been assigned to reconstruct the mouth of hydrasaur containing 2,000 teeth. Each tooth has
a planned budget of $150 and they are EACH supposed to complete 10 teeth a day.It is the end of the 12th day and
they have completed a total of 300 teeth thus far. They have spent $48,000 on this work.
a. What is the PV?

$36,000 = 2 x 10 x 12 x $150 (remember it’s 2 people per day for 12 days)
b. What is the EV?

$45,000 = 300 x $150
c. What is the AC?

$48,000
d. What is the BAC?

$300,000 = 2,000 x $150
e. What is the schedule variance?

+$9,000 = EV-PV = 45k-36k (ahead of schedule)
f. What is the SPI?
1.25 = EV/PV = 45k/36k (ahead of schedule)
g. What is the cost variance?

-$3,000 = EV-AC = 45k-48k (negative variance means cost overrun)
h. What is the CPI?

0.9375 = EV/AC = 45k/48k (CPI less than 1 means cost overrun)
i. What is the EAC if variances are considered typical?

$320,000 = BAC/CPI = 300k/.9375
j. What is the TCPI?

1.01 = 255k/252k = (BAC-EV)/(BAC-AC). Need a slight underrun for remainder of the project to get back on
budget.
3. Using the diagram below, what is the cost and schedule status for the work shown, i.e. a) cost overrun or
underrun b) ahead of or behind schedule?
AC
EV
PV
a) cost overrun (whenever EV is below AC on such a diagram, it indicates a cost overrun)

b) ahead of schedule (whenever EV is above PV on such a diagram, it indicates that you are ahead of
schedule)
4. A colleague dropped the following information on your desk and asked for your help. The colleague stated that
the information represented the data used in the latest calculation of TCPI. The information looked like this:
1,000,000-400,000
1,000,000-500,000
a. What is the BAC for this project?

Original BAC = $1,000,000. The TCPI formula is (BAC-EV)/(BAC-AC). The numerator is how much work is
remaining. The denominator is how much of the original budget is still available.
b. What is the current CPI for this project?

0.80 (Looking at the numbers shows that EV is 400k and AC is 500k which yields a CPI of .80; cost overrun
at this point)
c. What would the CPI need to be for the rest of the project if you expect to finish on budget?
1.20 (Calculating the TCPI formula using the numbers shown above yields 1.20. This indicates that the
project has experienced an overrun thus far and needs an underrun for the remaining work if you expect to
finish on budget.).
Cost and Schedule (PERT Basics) Problems
PERT was developed in the 1950’s by the U.S. Navy to help manage their Polaris Submarine Program. The
concept is useful when attempting to estimate durations or costs when the outcomes are highly uncertain. Instead
of giving a single estimate, three estimates are created which establish a potential range. The range extends from
an optimistic outcome to a most likely outcome and finally to a pessimistic outcome. Again, the technique can be
applied to duration estimates (the original concept) but also equally well to cost estimates.
1. Using PERT, the following three estimates were created: the optimistic cost estimate is $200,000; the most likely
cost was estimated at $250,000; and the pessimistic estimate was given as $450,000.
a. What is the PERT calculated average cost?
b. Compared to the most likely estimate, the PERT calculated average is usually believed to be more optimistic or
pessimistic?
c. What does the acronym PERT stand for?
2. Using PERT, the following three duration estimates were created: optimistically the work will take 4 days, the
most likely duration is 6 days, and the pessimistic duration is 10 days.
a. What is the PERT calculated average duration, also known as e(t)?
b. What is the PERT standard deviation, also known as σ?
c. An estimate using Monte Carlo simulation would probably be more optimistic or pessimistic than the PERT
estimate?
Cost and Schedule (PERT Basics) Problems Solutions
1. Using PERT, the following three estimates were created: the optimistic cost estimate is $200,000; the most likely
cost was estimated at $250,000; and the pessimistic estimate was given as $450,000.
a. What is the PERT calculated average cost?

The PERT formula can be abbreviated as “4MOPS over 6” or, in the numerator, 4 times the most likely plus
optimistic plus pessimistic divided by, in the denominator, 6.
So, [(4 x 250,000) + 200,000 + 450,000] / 6 = $275,000
b. Compared to the most likely estimate, the PERT calculated average is usually believed to be more optimistic or
pessimistic?
PERT is considered more pessimistic than a single most likely estimate. In “a” above, the most likely was
$250,000 whereas PERT calculated an expected average of $275,000.
c. What does the acronym PERT stand for?

Program Evaluation & Review Technique. The name was coined in the 1950’s when the U.S. Navy
developed the technique.
2. Using PERT, the following three duration estimates were created: optimistically the work will take 4 days, the
most likely duration is 6 days, and the pessimistic duration is 10 days.
a. What is the PERT calculated average duration, also known as e(t)?

e(t) = [O + 4M + P] / 6. This is the same formula used in the previous cost example.
So, [4 + (4x6) + 10] / 6 = 38/6 = 6.33 days. If you prefer the abbreviated approach, 4MOP/6 yields the same
answer: [(4x6) + 4 + 10] / 6 = 6.33 days
b. What is the PERT standard deviation, also known as σ?

Although PMI has not tested this formula for a number of years, it was on the exam years ago and is still
lurking in the exam database. The formula is:
σ = (P-O)/6 = (10-4)/6 = 6/6 = 1 day. This metric gives insight into the likely amount of variation that could
occur when compared to the average outcome.
c. An estimate using Monte Carlo simulation would probably be more optimistic or pessimistic than the PERT
estimate?
More pessimistic. To summarize, PERT is more pessimistic than CPM and Monte Carlo simulation is the
most pessimistic of the three types of estimates.
Cost (Accuracy of Estimates) Problem
1. You have been provided a cost estimate of $100,000.
a. If the estimate was done for project approval as part of initiating, what would be the expected range of accuracy
and what name would you give it?
b. If you believe actual outcomes would range from $90,000 to as much as $125,000; what type of estimate do you
have?
c. What type of estimate would you want if you need the greatest possible accuracy? What would be the timing of
such an estimate?
Cost (Accuracy of Estimates) Problem Solution
1. You have been provided a cost estimate of $100,000.
a. If the estimate was done for project approval as part of initiating, what would be the expected range of accuracy
and what name would you give it?
Range of accuracy is from -25% to +75% and is referred to as an order of magnitude estimate. Also called a
ROM and another example in the PMBOK is the analogous estimate.
b. If you believe actual outcomes would range from $90,000 to as much as $125,000; what type of estimate do you
have?
A budget estimate, which has a range of accuracy of -10% to +25% (which is the range of the numbers given
in the question).
c. What type of estimate would you want if you need the greatest possible accuracy? What would be the timing of
such an estimate?
A definitive estimate (also called bottom-up) would be done at the end of planning when you are ready to
establish a cost baseline. The range of accuracy is -5% to +10%.
Procurement Problems
Incentive Fees and Prices
1. You are using a cost plus incentive fee (CPIF) contract with the following negotiated terms:
Target cost = $250 million Target Fee = $30 million

Min Fee = $18 million Max Fee = $40 million
Share Ratio = 60:40
a. If the final, actual cost is $300 million, what fee will the contractor earn?
b. Again, with a final, actual cost of $300 million, what price will the buyer pay?
Point of Total Assumption
2. You are using a fixed price incentive fee (FPIF) contract with the following negotiated terms:
Target cost = $370 thousand Target Fee = $40 thousand

Ceiling Price = $500 thousand Share Ratio = 80:20
a. What is the point of total assumption (PTA)?
b. If the final, actual cost is $350,000; what fee will the contractor earn?
c. If the final, actual cost is $350,000; what price will the buyer pay?
Procurement (Incentive Fees and Prices) Problems Solutions
1. You are using a cost plus incentive fee (CPIF) contract with the following negotiated terms:
Target cost = $250 million Target Fee = $30 million

Min Fee = $18 million Max Fee = $40 million
Share Ratio = 60:40 (BS: 1st number is buyer; 2nd number is seller)
a. If the final, actual cost is $300 million, what fee will the contractor earn?
First, calculate the adjustment to the target fee as follows:
(Target cost-Actual cost) x Seller’s Share
(250 mil-300 mil) x .40 = -50 mil x .40 = -$20 mil
Second, calculate the actual seller fee as follows:
Target fee + Adjustment
$30 mil - $20 mil = $10 mil (Fee calculated by the formula)
Third, check the minimum guaranteed fee
The minimum fee is guaranteed at $18 million
Since the formula calculated a lower amount, the actual fee paid will be $18 million
b. Again, with a final, actual cost of $300 million, what price will the buyer pay?
Price = Actual cost + Actual Fee $300 mil + $18 mil = $318 mil
2. You are using a fixed price incentive fee (FPIF) contract with the following negotiated terms:
Target cost = $370 thousand Target Fee = $40 thousand
Ceiling Price = $500 thousand Share Ratio = 80:20
a. What is the point of total assumption (PTA)?

The formula is as follows: [(Ceiling price-Target price)/Buyer’s share] + Target cost
Also, remember that the target price is the target cost + the target fee, which totals $410 thousand
Therefore, [(500k-410k)/.80] + 370k = (90k/.80) + 370k = $112,500 + $370,000 = $482,500
So, the share ratio and incentive arrangement no longer apply after costs reach $482,500
b. If the final, actual cost is $350,000; what fee will the contractor earn?
As before, calculate the fee adjustment and the actual fee to be paid.
Adjustment = (Target cost-Actual cost) x Seller’s share
(370k-350k) x .20 = 20k x .20 = +$4,000
Now calculate the actual fee
Actual fee = Target fee + Adjustment = $40k + $4k = $44,000
Contractor got $4,000 added to the target fee
c. If the final, actual cost is $350,000; what price will the buyer pay?
Price = Actual cost + Actual fee $350,000 + $44,000 = $394,000
The buyer got $16,000 subtracted from the target price
Risk Problems
Expected Monetary Value
1. You have arrived at Calamity Acres Gambling Resort. The above ground swimming pool and broken diving board
immediately caught your eye but you decided to make some money first. You have chosen to play a game that
works as follows. You provide $100 cash in return for one of three outcomes: 1) you win $5,000; 2) you win $200;
or 3) you win $0 (lose your money). It turns out that the probabilities for each potential outcome are 1%, 10%, and
89% respectively.
a. What is the expected monetary value (EMV) of playing this game?
b. Does the game make sense financially?
2. Your stock broker has suggested an investment with the following supporting data. There is a 60% chance the
investment will yield a net worth of $10,000. There is a 25% chance the investment will yield a net worth of $6,000.
However, there is a 15% chance the investment will yield a net worth of $0 (you could lose your investment). What
is the EMV of this investment?
3. What is the EMV of a $50,000 profit if there is a 45% chance of that particular outcome?
Probability
1. You have 2 statistically independent and mutually exclusive events. Event A has a 70% chance of occurring.
Event B has an 80% chance of occurring. What is the probability that events A and B will both occur?
2. Event A has a 60% of occurring during any of the next 5 months.
a. What is the probability that event A will not occur during both of the last 2 months?
b. What is the probability that event A will occur during both of the first 2 months?
Risk Problems Solutions
Expected Monetary Value
1a. What is the expected monetary value (EMV) of playing this game?
You must calculate the EMV for each of the 3 outcomes and then add them:
$5,000 x 1% = $50
$200 x 10% = $20
$0 x 89% = $0
The total EMV is $70
b. Does the game make sense financially?

No, it costs $100 to play and the average winnings is only $70. In the long run, you lose an average of $30
every time you play.
2. Your stock broker has suggested an investment with the following supporting data. There is a 60% chance the
investment will yield a net worth of $10,000. There is a 25% chance the investment will yield a net worth of $6,000.
However, there is a 15% chance the investment will yield a net worth of $0 (you could lose your investment). What
is the EMV of this investment?
Follow the same procedure by calculating the EMV of each possible outcome and then add them up:
$10,000 x 60% = $6,000
$6,000 x 25% = $1,500
$0 x 15% = $0
The total EMV is $7,500
3. What is the EMV of a $50,000 profit if there is a 45% chance of that particular outcome?
$50,000 x 45% = $22,500
Probability
1. You have 2 statistically independent and mutually exclusive events. Event A has a 70% chance of occurring.
Event B has an 80% chance of occurring. What is the probability that events A and B will both occur?
56% (multiply the probabilities of each event)
2. Event A has a 60% of occurring during any of the next 5 months.
a. What is the probability that event A will not occur during both of the last 2 months?
16% (the probability of not occurring during any single month is 40%; the probability of not occurring twice
in a row is 40% x 40%)
b. What is the probability that event A will occur during both of the first 2 months?
36% = 60% x 60%
Miscellaneous Problems
Communication Channels
1. You are the project manager with 5 team members working for you. You just gained 2 new team members. How
many additional communication channels must you now manage?
2. You are the project manager with 11 team members working for you. You just lost 3 team members to another
project. How many fewer communication channels need to be maintained?
Generic Variances
1. Task A had a planned duration of 6 days. It actually took 9 days. What is the variance for this task?
2. Task B was supposed to cost $3,000 and actually cost $2,800. What is the variance for this task?
Lease vs. Buy
1. You need a special piece of equipment for your energy research project. Your engineer has indicated that the
equipment will be needed for about 25 days. You must decide whether to buy the equipment or lease it for the time
needed. The following data has been collected:
If you buy, the purchase price is $2,750; a shipping fee of $1,000 and a set-up cost of another $1,000 will be
incurred; and finally the operating cost per day is $75.
If you lease, there is an installation fee of $1,250 and a daily usage fee of $250 (per day).
a. At how many days of usage would the cost of buying vs. leasing be the same?
b. Should you buy or lease?
Miscellaneous Problems Solutions
Communication Channels
1. You are the project manager with 5 team members working for you. You just gained 2 new team members. How
many additional communication channels must you now manage?
You must remember to count yourself in the numbers. You started with a total of 6 people (including
yourself) and ended as a team of 8. Therefore, you initially had 15 channels [(n x (n-1))/2]. You ended with
28 channels [(n x (n-1))/2]. The number of additional channels is 28-15 = 13.
2. You are the project manager with 11 team members working for you. You just lost 3 team members to another
project. How many fewer communication channels need to be maintained?
Use the same formula and logic. You started with a team of 12 (including yourself) and ended as a team of
9. So, you initially had 66 channels and ended with only 36. You ended with 30 fewer channels than you
had at the outset.
Generic Variances
1. Task A had a planned duration of 6 days. It actually took 9 days. What is the variance for this task?
Variance = Plan-Actual. Therefore, the variance here is -3 days (6-9). The task took 3 days longer than
planned.
2. Task B was supposed to cost $3,000 and actually cost $2,800. What is the variance for this task?
Again, Plan-Actual yields 3,000-2800 = +$200. This task cost $200 less than planned (cost underrun).
Lease vs. Buy
1. You need a special piece of equipment for your energy research project. Your engineer has indicated that the
equipment will be needed for about 25 days. You must decide whether to buy the equipment or lease it for the time
needed. The following data has been collected:
If you buy, the purchase price is $2,750; a shipping fee of $1,000 and a set-up cost of another $1,000 will be
incurred; and finally the operating cost per day is $75.
If you lease, there is an installation fee of $1,250 and a daily usage fee of $250 (per day).
a. At how many days of usage would the cost of buying vs. leasing be the same?
Solve the formula: 250X +1250 = 75X + 2750 + 1000 + 1000

The left side shows the costs to lease and the right side shows the costs to buy.
Therefore, 175X = 3500
X = 20 days (the number of days at which leasing vs. buying cost the same
b. Should you buy or lease?
Leasing is cheaper at 19 days or less

Buying is cheaper at 21 days or more
Given that the equipment will be needed for 25 days, buying is the cheaper option

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PMP® Exam Power Prep

Power Prep Approach

Courtesy to Your Fellow Students

Top Reasons for Exam Failure

Power Prep Approach

Lecture and Review (5-day agenda):

Facilitated Study, Review, and Practice Exams:

Courtesy to Your Fellow Students

D minus 1 (The Day Before):

Taking the Test:

 Adrenaline rush during the first ten minutes:

Top Reasons for Exam Failure

NOTE 1: PAGE REFERENCES IN THIS REFERENCE MANUAL REFER TO THE

Introduction: PMBOK® Guide Chapter 1

Organizational Influences and Project Life

Cycle: PMBOK® Guide Chapter 2

Appendix I: PMI® Code of Ethics and Professional Conduct

Appendix II: International Project Management

Chapter 1, PMBOK® Guide: Introduction (Chapter 1 provides basic definitions

Purpose of the PMBOK® Guide: Advances the profession of project

Project: A project is a temporary endeavor undertaken to create a unique

 Unique means the product or service is different in some distinguishing way

Numerous authors agree on two additional characteristics for describing a project:

Project management is the application of knowledge, skills, tools, and

Project constraints: Project management involves balancing the competing

Program Management: Program management is the application of knowledge,

 Programs always contain related projects. For example, a satellite program

Portfolios, Portfolio Management, and Organizational Project Management:

Portfolio management aligns work with organizational strategies by selecting

Organizational Project Management (OPM) is the overall strategy framework

Organizational Governance: Most organizations use a formal governance

Project Management Office (PMO), PMBOK® Guide, pp. 10-12:

 Supportive: PMO is in a consulting role providing training, lessons

Role of Operations Management vs. Project Management in Organizational

Chapter 2, PMBOK® Guide: Organizational Influences and Project Life

Organizational culture (PMBOK® Guide, pp. 20-21): Organizational culture

Organizational communication (PMBOK® Guide, p. 21): Successful projects

Organizational structure (PMBOK® Guide, pp. 21-26): PMI recognizes various

1. Functional: This traditional structure aligns people by “specialization,” for

b. If the project manager is chosen from the Vice President’s staff, he or

c. If the project manager is chosen from the CEO’s staff, the PM is

a. In a weak matrix the project manager has comparatively less power in

b. In a balanced matrix, the sharing of power between the project

c. In a “strong matrix,” power shifts more toward the project manager.

Key point about the matrix:

3. Projectized: In a projectized organization, team members are assigned to a

Organizational Process Assets (OPA): OPA includes all of an organization’s

Note: Organizational Process Assets is used as an input to 38 of 47

Category 1 (Processes and Procedures aligned with process groups):

 Initiating and Planning:

Category 2 (Corporate Knowledge Base): The knowledge base that stores

 Project files: e.g., baselines, calendars, schedule network diagrams,

Enterprise Environmental Factors (EEF): All projects occur within an

 Organizational culture, structure, and processes

Note: Enterprise Environmental Factors is used as an input to 27 of 47

Stakeholders (PMBOK® Guide, p. 30): A project stakeholder is anyone

Important issues in stakeholder management:

 Project management staff: Perform management activities such as

Characteristics of a Project Life Cycle

 Has sequential or over-lapping phases (logical subsets of work for ease of

1. What are enterprise environmental factors 1. An input to 27 of 47 project management

2. What is work authorization? 2. A procedure to sanction work so it’s done

3. Name 3 major types of stakeholders. 3. Stakeholders include those who are: