Infocareer - Road To Success - Courseware

Titles in this Volume :
Road to Success
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Second Edition : 2013
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Disclaimer:
The materials are prepared in conjunction with PMBOK®
edition 5 by the authors. The opinions expressed by
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II ROAD TO SUCCESS
DEDICATION
This book is dedicated to the memory of Mr.Natarajan, fondly known as

Nat, who was instrumental in bringing out the first edition and with whom
we have had the pleasure of being closely associated since the inception of
Infocareer.
-Authors
ROAD TO SUCCESS III

ACKNOWLEDGEMENT
We would like to acknowledge the meticulous efforts of Ms. Usha C Sekaran,

Ms. Sudha Ananth and Ms. Indu Govind in providing valuable inputs by
reviewing and proof-reading hundreds of drafts.
It will be remiss on our part if we fail to acknowledge and appreciate the

effort put in by the staff at Infocareer who have toiled tirelessly to bring
out this book successfully.
Special mention should be made of the efforts put in by Ms. Savitha

Dayanand of Pragathi Print Communications for patiently incorporating
the many changes that were frequently communicated to her.
-Authors
IV ROAD TO SUCCESS
PREFACE
In recent times, the need for good project management skills is more
keenly felt than ever before due to the impact of globalisation and the
ever-increasing challenges in executing projects.
Project Management is at once a science and an art. It is a science because

there are many scientific techniques available to fine tune projects towards
profit maximization with a minimal cost structure without compromising
on quality.
Project Management is an art because we practice and perfect certain

concepts to evolve a highly skilled methodology to meet the project objectives
efficiently and effectively.
Till recently, the emphasis has been on the concept of Management by

Objectives (MBO) which focuses on a set of tangible, verifiable and
measurable goals to motivate people to produce their best rather than
controlling them. Nowadays, there has been a paradigm shift to the concept
of Management by Projects (MBP) to encompass the requirements of cost
reduction, timely completion, profit maximization, quality improvement,
etc.
The practical study guide ‘Road to Success’ – Project Management, PMP®

is aimed at sharpening the project management skills of the aspiring Project
Management Professionals, PMP® and guiding them towards certification.
‘Road to Success’ – Project Management, PMP® has been modelled on the

lines of PMBOK 5th Edition. We have taken some of the key concepts and
techniques addressed in PMBOK and provided them in a condensed format
along with many real life scenarios and examples.
ROAD TO SUCCESS V
This book describes all the process groups and knowledge areas as per
PMBOK apart from additional chapters like ‘General Management Skills’,
‘Operation Research’ and ‘Fundamentals of Costing’. These chapters enable
project managers to acquire basic information which is fundamental to the
understanding of Project Management principles and techniques.
While discussing Project Time Management, a study of PERT/CPM,

Simulation Techniques and Decision Making Processes have also been
included. Similarly, while discussing Project Cost Management, Earned
Value Management concepts have also been discussed in great depth to
enhance the skills of the readers.
Practice questions are included at the end of each chapter to assess the
understanding and assimilation of the project management concepts by the
candidates. A great deal of thought and planning has gone into each one of
the questions that can be found on this book. The subject matter experts
who have spent hours coming up with the questions after each topic have
drawn upon their collective experiences in their respective fields to create
almost real life scenarios to test the ability of students to think and act in
any given situation. Answers to these questions are provided at the end of
the book.
The contents of this book have been researched from various sources
available on the subject. A bibliography is provided at the end of the book to
illustrate the various books of reference that have been used.
We welcome your suggestions/feedback. Please write to us at:

[email protected].
-Authors
CONTENTS
Chapter 1— Project Management Framework

Overview 1
1.1 What is a Project? 3
1.2 What is Project Management? 4
1.3 Portfolio, Program & Program Management Office
(PMO) 5
1.4 Projects and Strategic Planning 7
1.5 Project Management Body of Knowledge 10
1.6 Project Management Processes 10
1.7 Project Management Process Group 11
1.8 Project Management Knowledge Areas 15
1.9 Project Management Process Interactions 16
1.10 Project Management Process Mapping 16
1.11 Project Team 18
1.12 Project Life Cycle 18
1.13 Stakeholders 21
1.14 Organizational Influences on Project Management 22
1.15 Organizational Structure 23
1.16 Organizational Process Assets 28
1.17 Enterprise Environmental Factors 30
1.18 Summary 30
Practice Questions 31
Chapter 2— General Management
Overview 37
2.1 Definitions of Management 38
2.2 Planning 38
2.3 Organizing 43
2.4 Staffing 45
2.5 Leading 47
2.6 Motivation 50
2.7 Controlling 52
2.8 Summary 55
Chapter 3— Fundamentals of Cossting &

Project Selection Methodology
Overview 57
Key Terms 58
3.1 Fundamentals of Cost Accounting 58
3.2 Types of Cost 60
3.3 Methods of Costing 62
3.4 Techniques Used in Costing 62
3.5 Elements of Costing 66
3.6 Types of Expenditure 67
3.7 Working Capital 68
3.8 Profit Calculation Method 69
3.9 Project Selection Methodologies 69
3.10 Summary 73
Chapter 4— Project Integration Management

Overview 75
Key Terms 76
4.0 Project Integration Management Processes 77
4.1 Develop Project Charter 77
4.2 Develop Project Management Plan 83
4.3 Direct and Manage Project Work 86
4.4 Monitor and Control Project Work 89
VIII ROAD TO SUCCESS

4.5 Perform Integrated Change Control 93
4.6 Close Project or Phase 95
4.7 Summary 97
Chapter 5— Project Scope Management

Overview 105
Key Terms 106
5.0 Project Scope Management Processes 107
5.1 Plan Scope Management 108
5.2 Collect Requirements 111
5.3 Define Scope 117
5.4 Create WBS 120
5.5 Validate Scope 123
5.6 Control Scope 125
5.7 Summary 129
Chapter 6— Project Time Management and

Introduction to Operation Research
Project Time Management

Overview 139
Key Terms 140
6.0 Project Time Management Processes 142
6.1 Plan Schedule Management 142
6.2 Define Activities 145
6.3 Sequence Activities 149
6.4 Estimate Activity Resources 154
6.5 Estimate Activity Durations 158
6.6 Develop Schedule 164
6.0 Project Time Management Processe 142
6.7 Control Schedule 174
6.8 Summary 178
ROAD TO SUCCESS IX
Introduction to Operation Research
Overview 179
Key Terms 180
6.9 Development of Operation Research 183
6.10 Decision Analysis Models (Decision Theory) 184
6.11 Decision Tree 188
6.12 Network Analysis 190
6.13 Simulation 200
6.14 Summary 209
Chapter 7— Project Cost Management and

Earned Value Management
Project Cost Management

Overview 219
What is Cost Management? 220
Key Terms 220
7.0 Managing Project Cost 222
7.1 Plan Cost Management 223
7.2 Estimate Costs 227
7.3 Determine Budget 234
7.4 Control Cost 238
7.5 Summary 242

Overview 243
7.6 History of EVM 244
Key Terms 246
7.7 Understanding EVM 248
7.8 Forecasting 253
7.9 To–Complete Performance Index (TCPI) 255
7.10 Summary 256
X ROAD TO SUCCESS
Chapter 8— Project Quality Management
Overview 263
8.0 What is Quality? 264
Key Quality Terms 288
8.1 Plan Quality Management 291
8.2 Perform Quality Assurance 299
8.3 Control Quality 303
8.4 Summary 306
Chapter 9— Project Human Resource Management

Overview 315
9.0 Project Human Resource Management Process 316
Key Terms 316
9.1 Project Human Resource Management Process 317
9.2 Acquire Project Team 322
9.3 Develop Project Team 325
9.4 Manage Project Team 328
9.5 Summary 334
Chapter 10— Project Communications Management

Overview 341
10.0 What is Communication Management? 342
Key Terms 342
10.1 Plan Communication Management 344
10.2 Manage Communications 348
10.3 Control Communications 352
10.4 Summary 355
ROAD TO SUCCESS XI
Chapter 11— Project Risk Management
Overview 363
More on Risk 364
Key Terms 364
11.0 Project Risk Management Processes 365
11.1 Plan Risk Management 366
11.2 Identify Risks 370
11.3 Perform Qualitative Risk Analysis 375
11.4 Perform Quantitative Risk Analysis 379
11.5 Plan Risk Responses 384
11.6 Control Risks 387
11.7 Summary 390
Chapter 12— Project Procurement Management

Overview 397
12.0 What is Project Procurement Management? 398
Key Terms 399
12.1 Plan Procurement Management 401
12.2 Conduct Procurements 407
12.3 Control Procurements 412
12.4 Close Procurements 417
12.5 Summary 423
Chapter 13— Project Stakeholder Management

Overview 431
13.0 What is Project Stakeholder Management? 432
Key Terms 432
13.1 Identify Stakeholders 433
13.2 Plan Stakeholder Management 439
13.3 Manage Stakeholder Engagement 444
XII ROAD TO SUCCESS

13.4 Control Stakeholder Engagement 446
13.5 Summary 448
Chapter 14— Professional Ethics (PMI)(R) Standards

Vision and Applicability 455
14.0 Persons to Whom the Code Applies 456
Key Words 456
14.1 Responsibility 457
14.2 Respect 458
14.3 Fairness 459
14.4 Honesty 460
14.5 Business Ethics 461
14.6 How to Face a Public Crisis 463
14.7 Dos and Don’ts in Managing Global Projects 464
14.8 How to Develop Multicultural Excellence in
Global Projects 465
14.9 Across the Miles, Keep Team Members Feeling
Connected 466
14.10 Summary 466
Chapters Answers for Practice Questions 473
Reference Books 533
ROAD TO SUCCESS XIII

1
Key Terms
Project
A temporary endeavor undertaken to create a unique product, service, or
result.
Program
A group of related projects managed in a coordinated way to obtain benefits
not available from managing them individually.
Portfolio
A collection of projects or programs and other work that are grouped to
facilitate effective management of that work to meet the strategic business
objectives.
Project Management Office (PMO)

An organizational body or entity assigned to various responsibilities related
to the centralized and coordinated management of those projects under its
domain.
Project Manager
The person assigned by the performing organization to achieve the project
objectives.
Sponsor
The person or group that provides the financial resources in cash or in kind
for the project.
Stakeholder
A stakeholder can be an individual, group or organisation who may affect
or be affected by, or perceive itself to be affected by a decision, activity, out
come of the project.
2 ROAD TO SUCCESS
1.1 What is a Project?
A project is a temporary and finite effort, having a specific start and end
date. Projects are undertaken to create a unique product or service which
brings about beneficial change or added value to the performing organization.
Though the work involved in projects may be temporary, the product or

results or service created are not temporary. For example, a project to build
a national monument will create a result lasting centuries.
Projects can also have social, economic, and environmental impacts that
will outlast the duration of the project itself. Every project will create a
unique product, service or result, though there may be repetitive elements
in some projects. This repetitive element does not change the fundamental
uniqueness of the project.
A project can create:

• A product that can be either a component of another item or an item
itself
• A capability to perform a service
• A result such as an outcome or document (a research project that
develops knowledge)
Some examples of projects are:

• Developing a new product or service
• Effecting a change in the structure, staffing or style of an organization
• Developing or acquiring a new or modified information system
• Constructing a building or infrastructure or
• Implementing a new business process or procedure
Chapter – 1 3
PROJECT MANAGEMENT FRAMEWORK
1.2 What is Project Management?
Project management is the discipline of planning, organizing and managing
resources to bring about the successful completion of specific project goals
and objectives.
The temporary and finite characteristic of projects stands in sharp contrast

to processes or operations, which are permanent or semi–permanent
functional works to repetitively produce the same product or service. In
practice, the management of these two systems is often found to be quite
different, and as such requires the development of distinct technical skills
and the adoption of separate management.
As per “A Guide to the Project Management Body of Knowledge (PMBOK®

Guide)”, 5th edition, Project Management can be accomplished through the
appropriate application and integration of logically grouped project
management processes under 5 process groups.
The five process groups are:

• Initiating
• Planning
• Executing
• Monitoring and Controlling and
• Closing
Managing a project typically includes, but not limited to:

• Identifying requirements
• Addressing the various needs, concerns and expectations of the
stakeholders in planning and executing the project
• Setting up, maintaining and carrying out communications among
stakeholders who are active, effective and collaborative in nature
• Managing stakeholders towards meeting project requirements and
creating project deliverables
• Balancing the competing project constraints, which include but are
not limited to Scope, Quality, Schedule, Budget, Resources and Risks
4 ROAD TO SUCCESS
There exists a relationship between these constraints such that any change
in one factor will affect one or more remaining factors. For example, if a
schedule of a project is reduced, then the budget needs to be increased to
add additional resources to complete the same amount of work in less time.
If an increase in budget is not possible, either scope or quality must be
reduced to complete the project in the shortened duration with the same
budget.
The constraints on which the project manager has to focus differ from one
project to another. The project stakeholders may have different ideas as to
which factors are the most important, thus presenting the project
management team with a greater challenge. The project team should be
able to assess the situation and balance the demands in order to achieve
the project’s success.
1.3 Portfolio, Program & Program Management Office

(PMO)
Portfolio and Program differ in the ways in which they are managed.
1.3.1 The Portfolio Management

Portfolio Management focuses on achieving the business objectives of
organizations. A portfolio refers to a collection of projects or programs
grouped to facilitate effective management to meet the business objective.
Portfolio management refers to the centralized management of one or more
portfolios which includes identifying, prioritizing, managing and controlling
projects, programs and other related work to achieve specific business
objectives.
For example, an infrastructure company with a business objective of

maximizing the return on investment may put together a portfolio which
may include oil, gas, power, water, roads, rail and airports.
1.3.2 Program Management

Program Management is managing a group of related projects in a
coordinated way to obtain benefits and control that may not be available if
they are managed individually.
Chapter – 1 5
Program management is focused on determining the optimal approach in
managing the project interdependencies by:
• Aligning with the organizational strategic direction that may affect

the program/project goals and objective
• Prioritizing the resource allocation among projects within the
program
• Resolving conflicts and any other issues that affect the multiple
projects within the program
An example of a program would be the development of a passenger car with

projects for designing the body, engine, transmission systems, and
integration of all the components and launch of the vehicle.
1.3.3 Project Management Office (PMO)
The Project Management Office (PMO) is a centralized department or

function within the organization with a responsibility to coordinate and
manage projects under its domain. The responsibility of the PMO can vary
from providing support to the project management team to actually being
responsible for the direct management of projects.
The projects under the purview of the PMO need not be related projects.
The only thing in common between them will be that they are managed
together.
The PMO may be given the authority to act as an integral stakeholder in an

organization or to make a key decision at the beginning of the project. The
PMO can make recommendations, terminate or take other actions required
to keep the projects consistently aligned with business objectives. The PMO
may also play a vital role in selection, management, and deployment of
shared or dedicated project resources.
The primary role of the PMO is to provide support to the project managers
in various ways; some of the areas of support may include:
• Identifying and developing project management methodology, best

practices and standards
• Coaching, mentoring, training and overseeing
• Managing shared resources across all projects administered by the
PMO
6 ROAD TO SUCCESS
• Developing and managing project policies, procedures, templates and
other shared documentation across projects
• Coordinating the communication across projects
• Monitoring compliance with the project management standard
policies, procedures and templates by conducting project audits
The Project Manager and the PMO have different objectives that are driven
by requirements.
Some of the basic differences between Project and Program Manager’s role
are:
Fig. 1.1: Project Manager and Program Manager
1.4 Projects and Strategic Planning

Strategic planning is a long term plan for any organisation towards its
portfolio, mission and vision. Generally projects are utilized as a means to
achieve organizational business strategic plan. Projects are typically
authorized due to one or more of the following factors:
Market Demand
• A utility company authorizing a project to build a fiber optic network
to meet the demand for high speed internet connectivity.
Strategic Opportunity / Business Need

• An automobile company manufacturing trucks, authorizing a project
to design and develop a new car to venture into the passenger car
segment, thereby increasing its revenue.
Chapter – 1 7
Customer Request
• A software organization authorizing a project for development of new
application software for a customer.
Technological Advance
• A consumer electronics company authorizing a project to design and
develop new television sets due to advancements in display
technology.
Legal Requirement
• A power plant authorizing a new environmental pollution control
project to meet the new environmental regulations / emission norms.
1.4.1 Operation and Project Management

Operations are permanent endeavors doing repetitive jobs that produce a
product or service. Operation Management involves managing the repeated
and ongoing activities in an organization that produces a product or service.
Managing manufacturing operations in an industry serves as an example of
an operation management. Operation Management helps the organization
in standardizing the repetitive activity of producing the product or service,
whereas project management, though temporary in nature, will help the
organizations in achieving the goals, if aligned with the business strategy.
Projects intersect with operations at various stages in the product life cycle
such as:
• In each closeout phase
• When developing a new product
• When upgrading a new product
• When expanding the outputs
• When improving the operations or product development processes
Until the divestment of the operations at the end of the product life cycle.
The deliverables and knowledge are transferred between the project and
operations at intersecting points for implementation of the delivered work.
This may occur by transferring the resources from project to operation at
the end of the project or by transferring the resources from operation to
project at the start of the project.
8 ROAD TO SUCCESS
1.4.2 Role of the Project Manager
The project manager is assigned by the performing organization to direct
and manage the project to achieve the project objectives.
The role of the project manager is different from that of a functional manager
or operations manager. Where the role of the functional manager is focused
on providing management oversight in an administrative area and the role
of the operation manager focuses on core business operations, a project
manager can either report to a functional manager or report to a program
or portfolio manager depending upon the organization structure of the
performing organization.
The project manager should have a good understanding of the tools and
techniques specific to project management. But this is not sufficient to be a
good project manager. A good project manager must also possess general
management skills and any area–specific skills.
For effective project management, the project manager has to possess the
following characteristics:
Knowledge
• The project manager’s knowledge with respect to project management
Performance
• The capability of the project manager to achieve project objectives
with his/her knowledge of project management
Personal
• The behavior of the project manager when performing the project or
related activity, which includes his attitude and core personality
traits and leadership skills in guiding the project team while achieving
the project objectives and balancing the project constraints
1.4.3 Interpersonal Skills of a Project Manager

Effective project managers require a balance of ethical, interpersonal and
conceptual skills that help them analyze situations and interact
appropriately.
Chapter – 1 9
Some key interpersonal skills that are required include:
• Leadership
• Team building
• Motivation
• Communication
• Influencing
• Decision making
• Political and cultural awareness
• Negotiation
• Trust Building
• Conflict management
• Coaching
1.5 Project Management Body of Knowledge

Project Management Body of Knowledge, the PMBOK® Guide, is a standard
unique to the project management field. It describes the project management
processes, tools and techniques used to manage a project successfully
towards achieving its objective.
The PMBOK ® Guide is published by the Project Management Institute

(PMI)®, USA and has been recognized by ANSI as a standard. Currently the
5th edition of the PMBOK® Guide is in use.
The PMBOK® Guide does not address all details of every topic, and is limited
to project management processes that are recognized as good practices.
Project managers can consult other standards for additional information

on the broader contexts in which projects are accomplished.
1.6 Project Management Processes

Project management is the application of knowledge, skills, tools and
techniques of project activities to meet the project requirements. The
application of knowledge is the effective management of the appropriate
project processes.
10 ROAD TO SUCCESS
In order to make the project successful, the project management team has
to:
• Select appropriate processes required to meet the project objectives
• Use a defined approach that can be adopted to meet requirements
• Comply with requirements to meet stakeholder needs and
expectations
• Balance the competing constraints which include scope, time, cost
quality, resources and risk to produce the specific product, service
or results.
A process can be defined as a set of interrelated activities performed to

produce a pre–defined product, result or service. Each process has inputs,
tools and techniques that can be applied to perform the process and the
output. The project management processes, inputs, tools & techniques and
the outputs, as per the PMBOK® Guide are discussed in the later chapters.
1.7 Project Management Process Group

As per the PMBOK® Guide, Edition 5, there are 47 project management
processes that are grouped under five project management process groups
and ten project management knowledge areas.
The 5 Process Groups are:

• Initiating Process Group
• Planning Process Group
• Execution Process Group
• Monitoring and Controlling Process Group
• Closing Process Group
Fig. 1.2: Process Group
Chapter – 1 11
1.7.1 Initiating Process Group
The Initiating Process Group consists of all the processes that are required
to define a new project or a new phase of an existing project by obtaining
authorization to start the project or phase.
In the initiating process group, generally the following activities are carried
out:
• Defining the initial project scope
• Commitment to initial financial resources
• Identification of internal and external project stakeholders
• Selection of the Project Manager, if not already assigned
This information will be collected in the project charter along with

stakeholder register. The project becomes officially authorized once the
project charter is approved. Though the project team may help in preparing
the project charter, the approval of the project charter and funding are
external to the project team.
Following are the processes which are grouped under Intiating Process
group:
1. Develop Project Charter
2. Identify Stakeholders
These processes are discussed in detail in subsequent chapters.
1.7.2 Planning Process Group

The Planning Process group consists of all the processes that are required
to establish the scope of the project, define the objectives, and define the
course of action required to achieve project objectives. In planning process
group, the Project Management Plan and other required documents to carry
out the projects are prepared. The planning process is an iterative and
ongoing process (progressive elaboration) and must be reviewed at
appropriate intervals throughout the life cycle of the project.
In the planning process group, planning documents shall be created detailing

how the Scope, Schedule, Costs, Quality, Human Resources, Stakeholders,
Communication, Resources, Risk and Procurement will be managed in the
project.
12 ROAD TO SUCCESS
Following are the processes which are grouped in Planning Process Group:
1. Develop Project Management Plan
2. Plan Scope Management
3. Collect Requirements
4. Define Scope
5. Create WBS
6. Plan Schedule Management
7. Define Activities
8. Sequence Activities
9. Estimate Activity Resources
10. Estimate Activity Durations
11. Develop Schedule
12. Plan Cost Management
13. Estimate Costs
14. Determine Budget
15. Plan Quality Management
16. Plan Human Resource Management
17. Plan Communications Management
18. Plan Risk Management
19. Identify Risks
20. Perform Qualitative Risk Analysis
21. Perform Quantitative Risk Analysis
22. Plan Risk Responses
23. Plan Procurements Management
24. Plan Stakeholder Management
These Processes are discussed in detail in subsequent Chapters.
1.7.3 Executing Process Group

The Executing Process Group consists of the processes that are required to
be performed to complete the work as defined in the project management
plan to satisfy the project specification. The Execution process group is
concerned with coordinating all the activities and resources to perform the
activities detailed in the project management plan.
While executing the project, there may be variances in the project results
compared to the plan. The variances may be in schedule, budget or resources,
or a possibility of some risk occurance. This requires detailed analysis and
Chapter – 1 13
development of appropriate responses, resulting in change requests. The
change requests may lead to re–planning or re–baselining, if the change
requests are approved.
Following are the processes which are grouped under Executing Process
group:
1. Direct and Manage Project Work
2. Perform Quality Assurance
3. Acquire Project Team
4. Develop Project Team
5. Manage Project Team
6. Manage Communications
7. Conduct Procurements
8. Manage Stakeholder Engagement
1.7.4 Monitoring and Controlling Process Group

The Monitoring and Controlling Process Group consists of all the processes
that are required to be performed to track, review, and regulate the progress
and performance of the project. This group identifies any areas in which
changes to the plan are required and initiate the corresponding changes.
The processes in Monitoring and Controlling Process Group help to monitor,

measure and control variances in the project results and identify
appropriate responses to keep the project on track. It provides insight to
the project management team about the health of the project and identifies
any areas that require attention.
Following are the processes which are grouped in Monitoring and

Controlling Process Group:
1. Monitor and Control Project Work
2. Perform Integrated Change Control
3. Validate Scope
4. Control Scope
5. Control Schedule
6. Control Costs
7. Control Quality
8. Control Communications
14 ROAD TO SUCCESS
9. Control Risks
10. Control Procurements
11. Control Stakeholder Engagement
1.7.5 Closing Process Group

The Closing Process Group consists of all the processes that are required
to finalize all activities across all process groups to formally close the project
or phase.
During a project or phase closure, the following activities may occur:

• Obtain acceptance by the customer or sponsor
• Conduct post project or post phase review
• Record impact of tailoring to any process
• Document lessons learnt
• Apply appropriate updates to Organizational Process Assets (OPA)
• Archive all relevant project documents in the Project Management
Information Systems (PMIS)
• Close out procurements
Following are the processes which are grouped in Closing Process Group:
1. Close Project or Phase
2. Close Procurements
These Processes are discussed in detail in subsequent chapters
1.8 Project Management Knowledge Areas

All the project management processes discussed so far shall be grouped
according to the relevant knowledge area to which each process is related.
The Ten knowledge areas under which these processes are grouped are:
1. Project Integration Management (Chapter 4 in PMBOK®)
2. Project Scope Management (Chapter 5 in PMBOK®)
3. Project Time Management (Chapter 6 in PMBOK®)
4. Project Cost Management (Chapter 7 in PMBOK®)
5. Project Quality Management (Chapter 8 in PMBOK®)
6. Project Human Resource Management (Chapter 9 in PMBOK®)
Chapter – 1 15
7. Project Communication Management (Chapter 10 in PMBOK®)
8. Project Risk Management (Chapter 11 in PMBOK®)
9. Project Procurement Management (Chapter 12 in PMBOK®)
10. Project Stakeholder Management (Chapter 13 in PMBOK®)
These Knowledge areas are discussed in detail in the subsequent chapters.
1.9 Project Management Process Interactions

The Project Management processes are presented as discrete elements with
well–defined interfaces. In practice they overlap and interact in ways that
are not completely detailed here.
The following illustrates how the process groups interact and shows the
level of overlap at various stages. If the project is divided into phases, the
process groups interact within each phase.
Fig. 1.3: Process Interaction
1.10 Project Management Process Mapping

The table below shows the mapping of each process against the respective
Process Group and the Knowledge Area to which it belongs:
16 ROAD TO SUCCESS
The numbering of processes is as per the PMBOK® Guide, 5th Edition
Chapter – 1 17
Fig. 1.4: Project Management Process Mapping
1.11 Project Team

The project team includes the project manager and the group of individuals
who act together in performing the work of the project to achieve its
objectives.
Project team includes:

• Project Management staff
• Project staff
• Supporting experts
• User or customer representatives
• Sellers
• Business partner members
• Business partners
1.12 Project Life Cycle

The life cycle of the project is from the initiation to its closing. It is the
collection of generally sequential phases. Sometimes the phases may overlap.
The number of phases and the names of the phases are determined by the
management of the performing organization or by the nature of the project
itself.
The life cycle provides the basic framework for managing the project.
Irrespective of the project size and complexity, all the projects can be
mapped to the following life cycle structure. They are:
• Starting the project
• Organizing and preparing
• Carrying out the project work and
• Closing the project
18 ROAD TO SUCCESS
The life cycle structure referred to, is used in communication with the
management or other entities not familiar with the details of the project.
In the project life cycle

• The cost and resource level will be low at the start and will be at
peak when the work is carried out and drop as the project draws to a
close.
• The influences, risks and uncertainties are high at the start of the
project and will decrease as the project progresses.
• The cost of changes to the project is less at the start and will increase
substantially as the project progresses.
Fig. 1.5: Project Life Cycle – 1
Fig. 1.6: Project Life Cycle – 2
Chapter – 1 19
1.12.1 Project Governance Across the Life Cycle
Project governance provides a broad and consistent approach of controlling
the project and achieving success. It is the responsibility of the project
manager and the project management team to choose an appropriate method
that suits the context of the performing organization.
The governance method chosen has to be clearly documented in the Project

Management Plan. This method provides a basis to the project management
team and the performing organization, for exercising control. Each phase
can be formally initiated with the deliverable clearly specified. In the
beginning of each phase, the earlier assumptions relevent to the correct
phase should be reviewed.
1.12.2 Project Phase

A phase is generally closed when formal acceptance of the deliverable is
achieved. The phase closure review can be combined to review the acceptance
of the deliverable of that phase and to authorize the start of the next phase.
1.12.3 Phase to Phase Relationship

In multi–phased projects, generally, the phases are sequentially related to
each other. However, in some projects there may be overlap between phases.
There are two types of relationships between phases. They are:
Sequential Relationship
Where the next phase can start only after the completion of the earlier
phase.
Overlapping Relationship
Where the next phase can start prior to the completion of the earlier phase.
This relationship is applied as an example of schedule compression
techniques (e.g. Fast Tracking).
1.12.4 Predictive Life Cycle

Predictive Life cycle is also known as fully plan driven or one in which all
project parameters are determined early in the project life cycle as early as
possible.
When a project is initiated, the team focuses on overall project deliverables,

then proceeds through the respective phases. Even project life cycle may
use the concept of rolling wave planning.
20 ROAD TO SUCCESS
1.12.5 Iteration and Incremental Life Cycle
In the Iteration and Incremental life cycle, certain activities are repeated
intentionally as the project teams understanding of the product increases.
In Iteration, the products is done through repeated cycles where as in
increment additional functionality is achieved. This life cycle is used
normally in product development. At the end of each project iteration, all
deliverables are completed. Incremental Life Cycle is normally deployed
to manage change in objective and scope, where as incremental delivery
gets aligned to business value of the product or project.
1.12.6 Adaptive Life Cycle

It is also known as change driven or Agile methods. This method is also
iteration and incremental, but iterations are very rapid. The scope of the
project are split into certain requirements known as project backlog. The
Agile team shall take up the role, based on higher priority of product backlog
and deliver them within iteration. At the end of every iteration, the product
is usable by the customer, if not, unfinished features will get into product
backlog. Here, customer and all the team members are continuously engaged
with the project to provide feedback. This method is used in rapidly changing
environments.
1.13 Stakeholders
Stakeholders are the ones who are actively involved in the project or the
ones whose interest may be affected either positively or negatively by the
performance of the project or its completion. Stakeholders can be individuals
like, customers, sponsors or organizations like performing organization etc…
The project team must identify both internal and external stakeholders
and understand their requirements with expectations and manage their
influences effectively in order to make the project achieve its objective.
Stakeholders may have varying levels of responsibilities and authority in a

project. This can change over the project life cycle. A very important role of
the project manager is to manage stakeholder expectations effectively. This
can be difficult as the stakeholders often have different or conflicting
objectives. The project manager’s responsibility is to balance these interests
and ensure that the project meets its objective.
Chapter – 1 21
Some of the examples of stakeholders include:
• Sponsor
• Customers / users
• Seller
• Business partners
• Organizational groups
• Functional Managers
• Other Stakeholders
1.14 Organizational Influences on Project Management

The performing organization’s culture, style and structure have influence
on the projects and the way they are performed. The projects are influenced
by more than one organization when performed as part of a joint venture or
under partnership with external organization.
1.14.1 Organizational Culture and Styles

An organization’s culture and style has great influence on a project’s ability
to meet its objective. The culture and styles are known as cultural norms.
Norms include established approaches to initiating & planning projects,
the means considered acceptable for getting the work done and recognized
authorities who make or influence decision.
The organization’s culture includes:

• Shared visions, values, norms, beliefs and expectations
• Policies, methods and procedures
• View of authority relationship and
• Work ethics and work hours
The organization’s culture is an enterprise environmental factor that

influences the project. The project manager and the team have to understand
and consider the enterprise environmental factor when planning a project.
22 ROAD TO SUCCESS
1.15 Organizational Structure
Organizational structure is an enterprise environmental factor that can
affect the availability of the resources to the project as well as how the
projects are managed. Organizational structure varies from functional to
projectized structure and a variety of matrix organizations in between. The
following sections discuss the various organizational structures and their
influence on the project.
1.15.1 Functional Organization

In a functional organization, the employees/staff members are grouped by
their speciality or function such as engineering, production, finance and
marketing etc… each function headed by a functional head. Each department
in the functional organization will function independently from other
departments.
In a functional organization, the project managers may have little or no

authority. The functional manager will have control over resources and
budget. The project manager’s role will be part–time.
The following is the typical functional organization structure:
Grey boxes represents staffs engaged in project activities
Fig. 1.7: Functional Organization
Chapter – 1 23
1.15.2 Weak Matrix Organization
Matrix organizations are those which are a blend of functional and

projectized organizational structures. Weak matrix organization contains
many characteristics of a functional organization and the project manager
role is more of a coordinator or an expeditor.
In a weak matrix organization, the project manager has limited authority

and limited control over resources. The budget is controlled by the functional
manager.
The following is a typical weak matrix organization structure:
Fig. 1.8: Weak Matrix Organization
24 ROAD TO SUCCESS
1.15.3 Balanced Matrix Organization
A balanced matrix organization recognizes the need of a project manager

but does not provide the project manager with full authority to control the
project and the project budget.
The following is a typical balanced matrix organization structure:
Fig. 1.9: Balanced Matrix Organization
Chapter – 1 25
1.15.4 Strong Matrix Organization
Contrary to the weak and balanced matrix organizations, the strong matrix
organization has many characteristics of a projectized organization. Strong
matrix organizations will have a full–time project manager with considerable
authority and full–time project administrative staff members.
The project manager will have moderate to high authority over the project,
resources and budget.
The following is a typical strong matrix organization structure:
Fig. 1.10: Strong Matrix Organization
26 ROAD TO SUCCESS
1.15.5 Projectized Organization
Projectized organizations are the opposite of functional organizations and

are based on the project. The project team members will be co–located and
most of the organization’s resources will be working on projects. The project
manager will have a great deal of independence and authority.
The following is a typical projectized organization structure:
Fig. 1.11: Projectized Organization
Chapter – 1 27
1.15.6 Composite Organization
Composite Organizations are a mix of both functional and projectized

structure at various levels. Even a functional organization can create a
separate project headed by a project manager to handle a critical project.
The team member can be from a different function and will work under the
project manager till the project is completed. The project managers will
have full authority as in a projectized organization.
The following is a typical composite organization structure:
Fig. 1.12: Composite Organization
1.16 Organizational Process Assets

Organizational process assets will greatly influence the project management
methods and the project success. The organizational process assets include
all process related assets such as formal and informal plans, policies,
procedures and guidelines. The organizational process assets also include
the organization’s knowledge base such as lessons learnt and historical
information. The organizational process assets may include completed
schedules, risk data and earned value data. The organizational process
28 ROAD TO SUCCESS
assets are to be updated as necessary by the project management team
throughout the project.
The organizational process assets can be grouped into two categories. They
are Processes & Procedures and Corporate Knowledge Base.
1.16.1 Processes & Procedures

Some of the organization’s processes & procedures are:
• Organizational standard processes such as standards, policies,
standard project and product life cycle, quality policies, and
procedures.
• Templates
• Standardized guidelines, work instructions, proposal evaluation
criteria and performance measurement criteria
• Guidelines and criteria for tailoring the organization’s standard
processes to satisfy specific needs
• Organization communication requirements
• Project closing guidelines and requirements
• Financial control procedures
• Issue and defect management procedures
• Change control procedures
• Risk control procedures
• Procedure for prioritizing, approving and issuing work authorisations
1.16.2 Corporate Knowledge Base

Some of the organization’s corporate knowledge base used for storing and
retrieval of information are:
• Process measurement database used to collect and make available
measurements on processes & products
• Project files from past projects
• Historical information and lessons learnt knowledge base
• Issue and defect management database
• Configuration management database
• Financial database
29
1.17 Enterprise Environmental Factors
Enterprise Environmental Factors (EEFs), refer to both the internal and
external environments that surround or influence the project’s success.
Enterprise Environmental Factors include:

• Organizational culture, structure and processes
• Government or industry standards
• Infrastructure
• Existing human resources
• Personnel administration
• Company work authorization systems
• Market place conditions
• Stakeholders risk tolerance
• Political climate
• Organization’s established communications channels
• Commercial databases
• Project management information systems
1.18 Summary
In this chapter we discussed several key terms with respect to project
management, understood the difference between project and operation
management and learnt about the relationship between project, program
and portfolio management. The project lifecycle and product life cycle were
also discussed.
We examined the roles and responsibilities of a project manager. We also

learnt about the organizational influence on project management, various
types of organizational structure and its influence on a project manager’s
authority.
We learnt the Project Management Process Groups and Knowledge Areas

as laid out in the PMBOK® and the interactions among the processes.
30 ROAD TO SUCCESS
Chapter – 1 : PRACTICE QUESTIONS
1. During project planning in matrix organization, the project manager

determines that additional Human resources are needed. From whom would
he request these resources?
A. Project Manager
B. Functional Manager
C. Team
D. Project Sponsor
2. An activity needs more time and the project manager determines that there
is enough reserve to accommodate the change. Who needs to approve the
change?
A. Management
B. Project Manager
C. Team member
D. Functional Manager
3. Which of the following best describes the performance of the monitor and
Control Project Work process?
A. Continuously throughout the project
B. As soon as every deliverable is completed
C. At scheduled milestones or intervals during the project
D. At the end of every project phase
4. Which of the following statements best describes project management ?

A. Project management is the application of knowledge, skills, tools, and
techniques to project team members to meet project requirements.
B. Project management is the application of knowledge, skills, tools, and
techniques to project activities to meet project requirements.
C. Project management is the collection of the project management process
used on every project.
D. Project management is the application of the project management process
that are used on every project.
Chapter – 1 31
5. The requirements to complete the project in three months using only four
resources is an example of:
A. Constraints
B. Earned value analysis components
C. Benefit cost ratios
D. Law of diminishing returns
6. Which process group can provide feedback between project phases?

A. Planning
B. Executing
C. Monitoring & Controlling
D. Closing
7. When should you schedule project kickoff meetings?

A. At the need of the project
B. When each deliverable is shipped
C. At the start of each phase/project
D. When the Communications Management plan is approved
8. Mary is a project manager at consulting company. The company regularly

builds teams to create products for clients. When the product is delivered,
the team is dissolved and assigned to other projects. What kind of organization
is she working for?
A. Weak Matrix
B. Projectized
C. Functional
D. Strong Matrix
9. You have reached the end of the first phase of your project. Upon review,
management elects to end the project. The end of the first phase is also known
as what?
A. Kill point
B. Progressive
C. Murder board
D. Phased estimating
10. A form of progressive planning is called:

A. Scheduling
B. Charting
C. Expanded trail
D. Rolling wave
32 ROAD TO SUCCESS
11. Which of the following statements best describe the relationship between
projects and programs?
A. There is no difference between the two; they are just different terms for
the same thing.
B. A project is composed of one or more related projects.
C. A program is composed of group of related projects.
D. A project is a temporary endeavor, whereas a program is permanent.
12. A market demand, a technological advance, or a legal requirements are all

examples of:
A. Incredible amounts of hard work
B. Reasons for authorizing a project
C. Management concerns in terms of corporate strategy
D. Reasons to become a project manager
13. Example of constraint is:

A. There is a 10 percent allowance of time for travel delays.
B. The weather will be acceptable for construction during the summer
months.
C. The project team will work on the project Monday through Friday only.
D. The project must be completed by December 31.
14. You are a project manager for Jakson keyboards Inc. Your organization has
adopted the PMBOK as a standard for how projects should operate and you
are involved in shaping the standardization for all future projects. In light of
this information, what is recommended course of action for the processes
and procedures in the PMBOK?
A. Not all processes and procedures in the PMBOK are actually required on
all projects.
B. All processes and procedures are to be followed as defined in the PMBOK.
C. Not all processes and procedures are needed unless the PMBOK states
the process or procedure is a requirement for the projects type.
D. All processes and procedures are to be followed as identified in the
PMBOK; otherwise the PMP is in violation of the PMP code of Professional
Conduct.
Chapter – 1 33
15. Raj Construction has won a contract to build a 77–story condominium building
in downtown Mumbai. The building will have 650 condos, a parking garage,
an indoor and outdoor pool, two floors for retail, two floors of offices, and
several shared community rooms. Mary has elected a program for the creation
of the building. Which one of the following best describes a program?
A. A standardized approach to project management within an organization
B. A standardized approach to project management with multiple projects
coordinated together
C. A collection of related projects managed in coordination to gain control
that would not necessarily be available if the projects were managed
independently
D. A collection of related projects all contributing to one deliverable.
16. You and your project team are located in New York, but your project
execution will take place in Mexico. You have valid concerns about the
interactions with the stakeholders, time zone differences, languages barriers,
the different laws that could affect your project, and the logistics of travel,
face–to–face meetings, and even teleconferencing. Which of the following
project environments are you concerned with most?
A. Cultural and social
B. International and political
C. Physics
D. Organizational structure
17. Project managers are not responsible for which one of the following in most
organizations?
A. Identifying the project requirements
B. Selecting the projects to be initiated
C. Balancing demands for time, cost, scope, and quality
D. Establishing clear and achievable project objective
18. Where can a project manager expect software, templates and standardized
policies?
A. Project Management Office
B. With the stakeholders
C. Human Resources
D. The project budget
34 ROAD TO SUCCESS
19. The process group in which you define the final deliverable is:
A. Planning
B. Executing
C. Closing
D. Monitoring and Controlling
20. You are the project manager for your company, Mark Manufacturers. Your
company has a large client that has requested a special component be created
for one of their test engines. Your organization agrees, creates a standard
contract with the customer, and your manager assigns you to manage this
project. The project was launched because of which one of the following?
A. A customer request
B. A change in the technology your customer is creating
C. A legal requirement (contractual)
D. An organizational need
21. Estimates should:

A. Never be changed after you write them
B. Be as close to the correct figure as possible
C. Be forgotten as you get into the project
D. Be changed immediately when a contract is signed
22. Which phase of a project has the least risk?

A. Closing
B. Controlling
C. Product focused
D. Execution
23. Which of these types of matrix structure gives the project manager the most
control?
A. Strong
B. Weak
C. Product focused
D. Balanced
24. Communication in matrix environment is usually classified as:

A. Simple
B. Direct
C. Complex
D. Relational
Chapter – 1 35
25. Who is usually responsible for portfolio management within an organization?
A. Project managers
B. Project sponsors
C. Stakeholders
D. Senior management
36 ROAD TO SUCCESS
37
In this chapter, we will look at some of the definitions of management, the
various functions of management and the skills required by a manager to
effectively manage these functions.
2.1 Definitions of Management

Harold Koontz and Heinz Weihrich define management as “the process of
designing and maintaining an environment in which individuals, working
together in groups, efficiently accomplish selected aims.” Louis E.Boone
and David L.Kurtz define management as “the use of people and other
resources to accomplish objectives”. Mary Parker Follet termed management
as “the act of getting things done through people”.
Henry Fayol was the first management thinker to propose the five basic
functions carried out by managers. These are planning, organizing, staffing,
leading and controlling. Management is essential for any kind of organization
where people are working together in a group. Management is required at
all levels of an organization. The type of skills required varies at each of
these levels. In general, managers require technical, human, conceptual
and design skills.
The functions of a manager provide a useful framework for organizing

management roles. The functions of a manager are planning, organizing,
staffing, leading and controlling.
Each of these functions is explained below.
2.2 Planning
Planning is deciding what action to take, how and when to take a particular
action, and who the people responsible for these actions are. It involves
anticipating the future and consciously making choices for the future course
of action. Several management scientists have defined planning.
According to Peter Drucker,
“Planning is a continuous process of making present entrepreneurial

decisions (risk taking) systematically and with best possible knowledge of
futurity, organizing systematically the efforts needed to carry out these
38 ROAD TO SUCCESS
decisions and measuring the result of those decisions against the
expectations through an organized systematic feedback.”
Planning is important in all types of organizations. Organizations that plan

in advance are more likely to succeed than those who fail to plan for their
future. Planning makes organizations focus on their objectives, offsets risks
and provides guidelines for decision–making. Planning also provides better
coordination and facilitates control.
2.2.1 Types of Plans

Plans can be established at different levels. They can be strategic, tactical
or operational. Plans can also be long–term, mid–term or short–term.
Fig. 2.1: Types of Planning based on levels
The Strategic Plans are designed to achieve strategic goals and are applicable
for the entire organization. They are created by the top management and
they cover an extended period of time. Tactical plans are designed to achieve
short term goals and they support the strategic plans. They normally
indicate the actions the sub–units need to take to implement the strategic
plan. Operational plans support the implementation of the tactical plans.
They are normally developed in quantitative terms and help the department
manager run day–to–day operations.
2.2.2 Objectives
Steering an organization towards success requires formulation of clear
objectives. Objectives serve as guidelines or road maps for planning and
organizing managerial effort and actions.
Chapter – 2 39
GENERAL MANAGEMENT
Organizations usually have many objectives at various levels of the hierarchy.
A manager can effectively pursue only a few goals. If there are too many
goals to pursue, none of them will receive adequate attention, thereby
making planning ineffective.
2.2.3 Management by Objectives

MBO was first introduced by Peter F. Drucker, who considered objectives
a necessity in every area where performance and results directly affect the
survival and growth of a business. He emphasized the importance of
participative goal–setting, self–control and self–evaluation.
There are three philosophical perspectives and three general process steps.
The management philosophy emphasizes that:
• Since MBO uses goal setting and periodic reviews, it is a natural fit
for managing projects
• A project must be consistent with corporate objectives
• Due to its top–down nature, MBO will only work if management
supports it
And here are the MBO process steps:

• Establish clear and achievable objectives
• Periodically check whether objectives are being met
• Take corrective actions on any discrepancies
The systems approach to MBO suggests that the organization exists in a

vacuum but receives inputs from its environment, such as, human, capital,
managerial, technical, etc. According to the systems approach, MBO is
viewed as a comprehensive system in which many key managerial activities
are integrated.
2.2.4 Strategic Planning

Strategic planning is the long–range formalized planning process to define
and achieve organizational goals. Strategic planning involves understanding
present and future trends, determining the direction in which the firm is
headed and developing the means to achieve the organization’s goals.
Strategic planning is a complex process that needs to take into account
several external factors which will impact the firm’s functioning.
Policies are general concepts or statements that guide managers’ thought

processes and behaviors when they make decisions. Policies are framed to
40 ROAD TO SUCCESS
ensure that managerial decisions are made within defined parameters.
Strategy and policy are closely related terms. For example, while growth
through acquisitions may be one organization’s policy, expanding the current
product market may be the policy of another organization. Although these
are considered policies, they are also part of the organizations’ strategies.
2.2.5 Three Generic Strategies by Porter

Professor, Michael Porter of Harvard University, has identified three generic
strategies a firm may adopt:
Overall Cost Leadership Strategy: This strategic approach aims at

reduction of cost. Here, the objective of the organization is to have a low
cost structure compared to that of its competitors.
Differentiation Strategy: A company following this strategy attempts to

offer something unique compared to its competitor with respect to its
products or services.
Focused Strategy: A company adopting focused strategy concentrates on

a special group of customers, or product lines or a specific geographic region.
2.2.6 Tactical Planning

Tactical Planning is the process of taking the strategic plan and breaking it
down into specific, short term actions and plans. The relative length of the
planning horizon will vary from one market to another but typically the
strategic plan will cover a period greater than three years while the tactical
plan will cover the period from the current day through to the end of the
third year.
The content of any business plan will depend on why the plan is being
produced. Some plans are for internal use only and act as a common
reference during the preparation of budgets and appraisals. Some plans
are basically sales documents aimed at persuading banks to provide loans
and investors to provide equity.
The process of producing a useable tactical plan is not easy, as some

flexibility is required to allow a response to unplanned events. There are a
large variety of strategic planning models and organizations that provide
strategic planning consulting. Some of these are useful and can be used as a
check–list to ensure completeness, as well as to ask the pertinent questions
which people may prefer to leave unanswered.
Chapter – 2 41
GENERAL MANAGEMENT
It is important that the tactical plan should be checked to ensure it is aligned
with the strategic plan and that all activities are aimed at moving closer to
the goals defined in the strategic plan. It is very easy for the tactical plan to
diverge on a tangent because of someone’s interests or disagreement with
the strategic plan.
2.2.7 Operational Planning

Operational planning is a subset of a strategic work plan. It describes short–
term ways of achieving milestones and explains how, or what portion of, a
strategic plan will be put into operation during a given operational period
or, in the case of commercial application, a fiscal year or another given
budgetary term. An operational plan is the basis for, and justification of an
annual operating budget request. Therefore, a five–year strategic plan would
need five operational plans funded by five operating budgets.
An operational plan draws directly from agency and program strategic plans
to describe agency and program missions and goals, program objectives,
and program activities.
Like a strategic plan, an operational plan addresses four questions:

• Where are we now?
• Where do we want to be?
• How do we get there?
• How do we measure our progress?
Operational plans should be prepared by the people who will be involved

in implementation. There is often a need for significant cross–departmental
dialogue as plans created by one part of the organization inevitably will
have implications on other parts.
Operational plans should contain:

• Clear objectives
• Activities to be delivered
• Quality standards
• Desired outcomes
• Staffing and resource requirements
• Implementation timetables
• A process for monitoring progress
42 ROAD TO SUCCESS
2.3 Organizing
Organizing is the identification and classification of required activities,
grouping of activities to attain objectives, assignment of activities to a
manager with authority and provision for coordination vertically and
horizontally. An organization structure should be designed to clarify roles
and responsibilities, to remove obstacles to performance caused by confusion
and uncertainty, and to furnish decision–making and communicating
networks reflecting and supporting enterprise objectives.
Organizations can be classified as formal and informal. A formal organization

means an intentional structure of roles in a formally organized enterprise.
However, a formal organization should be flexible. Chester Barnard, the
author of the Functions of the Executive described informal organizations
as any joint personal activity without conscious joint purpose, even though
contributing to joint results.
2.3.1 Authority and Power

Power is the ability of individuals or groups to induce or influence the beliefs
or actions of other persons or groups. Authority in an organization is the
right in a position to exercise discretion in making decisions affecting
others. It is one type of power, but power in an organization setting.
2.3.2 Types of Power

There are different types of power:
Legitimate or Formal Power: This power arises from the position and is
derived from our cultural system of rights, obligations and duties whereby
a “position” is accepted by people as being “legitimate”.
Expert Power: This power comes from the expertise held by a person or a
group. This is the power of knowledge. Physicians, lawyers and university
professors may have considerable influence on others because they are
respected for their special knowledge.
Referent Power: This is the power whereby people influence others because
people believe in them and their ideas. For example, Mahatma Gandhi held
no legitimate power, but, by virtue of his personality and ideals, he was
able to mobilize the masses towards political freedom.
Chapter – 2 43
GENERAL MANAGEMENT
Reward Power: This power arises from the ability of some people to grant
awards. For example, university professors have considerable reward
power; they grant or withhold high grades.
Coercive Power: This is the power to punish, whether by firing a

subordinate or withholding a merit increase.
2.3.3 Delegation of Authority

Studies have shown that many managers fail because of poor delegation. It
is impossible, as an enterprise grows, for one person to exercise all the
authority for making decisions. There is a limit to the number of persons a
manager can effectively supervise and make decisions for. Once this limit
has passed, authority must be delegated to subordinates, who will make
decisions within the area of their assigned duties.
2.3.4 Personal Attitudes Toward Delegation

Although charting an organization and outlining managerial goals and duties
will help in making delegations, certain personal attitudes underlie
delegation.
Receptiveness: An underlying attribute of managers who are willing to

delegate authority is a willingness to listen to other people’s ideas. A
subordinate’s decision is not likely to be exactly the one the supervisor
would make. The manager who knows how to delegate will welcome the
ideas of others and compliment them for their ingenuity.
Willingness to Let Go: A manager who delegates must be willing to let go

of the right to make decisions to the subordinates. If the size or complexity
of the organization forces delegation of authority, managers should realize
that there is a “law of comparative managerial advantage”. Managers can
enhance their contributions to the organization if they concentrate on tasks
that contribute most to the organization’s objectives and assign other tasks
to subordinates.
Willingness to Trust Subordinates: Delegation needs a trustful attitude

between a superior and subordinates. A superior may not want to delegate
if they feel that subordinates are not yet experienced enough to handle
people or situations, or that they have not yet developed effective judgment.
Though sometimes these considerations are true, they must either train
their subordinates or select others who are prepared to assume the
responsibility.
44 ROAD TO SUCCESS
2.4 Staffing
The staffing function includes identifying work–force requirements,
maintaining an inventory of people available, recruiting, selecting, placing,
promoting, appraising, career planning, compensation and training of the
personnel employed in an organization.
2.4.1 Selection
Selection is the process of choosing from among candidates, within the
organization or outside, the most suitable person for the current position
or for further positions. It is the process of ascertaining the qualifications,
experience, skill, knowledge, etc. of an applicant with the purpose of
determining his orher suitability for a job.
2.4.2 Employee Training and Management Development

Training is the systematic development of the knowledge, skills and
attitudes required by an individual to perform adequately a given task or
job. Training is an integral part of the orientation program for new recruits
in many organizations. The main objectives of training are improving
employees’ performance on the job, updating employee skills, preparing
for promotion and managerial succession, retaining and motivating
employees and creating an efficient and effective organization.
There are several methods of training employees in an organization. They
are:
On–the–job Training
On–the–job training happens in a real work environment where the trainee
is exposed to a real job situation. The advantage of this method is that the
employee gets hands–on experience. This will help in better application of
the knowledge and skills gained during training. The disadvantage in this
method is, since the employee is still going through the learning process,
he or she may commit mistakes which can cause damage to the work being
done and thereby to the organization.
Off–the–job Training
Off–the–job training involves classroom lectures and simulation exercises.
The advantage in this method is that the employee is free from distractions
of the actual work environment and would be able to concentrate better on
the learning.
Chapter – 2 45
GENERAL MANAGEMENT
Management Development relates to the development and growth of
employees through a systematic process. Management development
activities focus on a broad range of skills, while training programs focus on
a limited number of technical skills. This development is future–oriented
and prepares managers for a career of valuable contribution to the
organization. It helps in the development of the intellectual, managerial
and people management skills of managers.
The primary objectives of a management development program are:

• Improving the performance of managers
• Enabling the senior managers to have an overall perspective of the
organization and also equipping them with the necessary skills to
coordinate the various units of the organization.
• Identifying employees with executive talent and developing them so
that they occupy managerial positions in the future.
• Motivating employees to perform more effectively in accordance with
the organizational goals.
Job Enrichment
Research and analysis of motivation point to the importance of making jobs
challenging and meaningful. Job enrichment is related to Herzberg’s theory
of motivation, in which factors such as challenge, achievement, and
recognition are seen as real motivators. While job enlargement attempts to
make a job more varied by removing the dullness associated with performing
repetitive tasks, job enrichment attempts to build a high sense of challenge
and achievement.
A job may be enriched by:

1. Giving more freedom to workers in decision–making
2. Encouraging participation
3. Giving workers a feeling of personal responsibility for their tasks
4. Giving feedback on workers’ performance
2.4.3 Performance Appraisal and Career Planning

Performance appraisal can be defined as the process of evaluating the
performance of an employee and communicating the results of the evaluation
to him for the purpose of rewarding and/or developing the employee. The
commitment of the management and acceptance by the employees determine
the success of the appraisal system in any organization. It is also important
that the appraisal system matches the organizational culture.
46 ROAD TO SUCCESS
A career can be defined as a sequence of positions, roles or jobs held by one
person over a relatively long span of time. It can also be defined as a sequence
of separate but connected work/life activities that provides continuity, order
and meaning in a person’s life. Career planning is the process in which the
employee’s goals are set by the employee and the organisation in alignment
with organisation’s objectives. There are several benefits to career planning.
It helps the employee to understand his or her own strengths and
weaknesses. It also helps the employee to have a better knowledge of the
opportunities available to him or her. It enables him orher to choose a career
that suits his orher lifestyle, preferences, family environment, etc.
2.5 Leading
Management and leadership are considered the same by several experts.
But there is more to leading than simply managing. Leadership is defined
as the process of influencing people so that they will contribute to
organization and group goals.
2.5.1 Human Factors in Managing

Managers have to be aware of the different human factors that influence
the way individuals behave in organizations in order to help people satisfy
their own needs as well as the organization’s.
Multiplicity of Roles: Managers and the people they lead are interacting
members of a broad social system. They are consumers of goods and services
and they are members of churches, families, schools and political parties.
No Average Person: There is no average person. People act in different

roles, but they are also different themselves. Yet, firms develop rules,
policies and procedures with the implicit assumption that people are all
alike. Though this assumption is necessary in organized efforts, managers
should understand the complexity and individuality of people so that they
do not misinterpret the generalizations of motivation, leadership and
communication.
Considering the Whole Person: The human being is a total person

influenced by several external factors. We cannot talk about the nature of
people unless we consider the whole person, not just separate and distinct
characteristics such as knowledge, skills, attitude and personality traits.
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GENERAL MANAGEMENT
2.5.2 Leadership
The terms “managing” and “leading” should be distinguished. Leadership
is an important aspect of managing. The ability to lead effectively is one of
the keys to being an effective manager. One of the definitions of leadership
is “the art of influencing people so that they will strive willingly and
enthusiastically towards the achievement of group goals”. Good leaders act
to help a group attain objectives through the maximum application of its
capabilities.
2.5.3 Managerial Grid

A well–known approach to defining leadership styles is the managerial grid,
developed some years ago by Robert Blake and Jane Moutan. This grid is
used as a means of training managers and for identifying various
combinations of leadership styles.
Fig. 2.2: The Managerial Grid
The grid has two dimensions – concern for people and concern for
production. As Blake and Mouton have emphasized, the phrase “concern”
is meant to convey “how” managers are concerned about production or “how”
they are concerned about people, and not such things as “how much”
production they are concerned about getting out of a group.
48 ROAD TO SUCCESS
There are four extreme styles in the grid. Under the 1.1 style (“impoverished
management”), managers concern themselves very little with either people
or production and have minimum involvement in their jobs; for all intents
and purposes, they have abandoned their jobs and only mark time as
messengers communicating information between superiors and
subordinates. At the other extreme it is the 9.9 managers “(team managers”),
who are dedicated to people and tasks.
The 1.9 management (“country–club management”) has little concern for

production and is predominantly concerned with people. They promote an
environment where everyone is friendly and happy, but no one is concerned
about accomplishing group objectives. At another extreme are the 9.1
managers (“autocratic task managers”), who are concerned only with
developing an efficient operation, but have no concern for people. Clearly,
the 5.5 managers have medium concern for production and people. They do
not set high goals, and they are likely to have a rather benevolently
autocratic style towards people.
2.5.4 Behavioral Models

In order to understand the complexity of human behavior, several models
have been proposed by management scientists. Here we will see the model
proposed by Douglas McGregor, called Theory X and Theory Y.
Theory X and Theory Y

McGregor suggested that managing must start with the basic question of
how managers see themselves in relation to others. Theory X and Theory Y
are sets of assumptions about the nature of people. McGregor chose these
names because he wanted neutral terminology without any connotation of
being “good” or “bad”.
Theory X
Theory X has a pessimistic and rigid view of human nature.
The assumptions are:

• Individuals inherently dislike work and will avoid work if they can
• Due to the above, managers have to control, coerce, direct and
threaten employees in order to make them work towards their goals
• People prefer to be directed, wish to avoid responsibility, have little
ambition, and above all, want security
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GENERAL MANAGEMENT
Theory Y
Theory Y has an optimistic, flexible and positive view of human nature.
The assumptions are:
• People do not have a natural dislike for work. They put in physical
and mental effort as naturally as they play or rest
• People are internally motivated to achieve the goals and objectives
to which they are committed
• The degree of commitment is proportionate to the size of the rewards
associated with their achievements
• Most people are capable of being innovative in solving organizational
problems
With regard to the theories of McGregor, critics were concerned that the
theories might be misinterpreted. The following clarifications would help
keep the assumptions in proper perspective. First, Theory X and Theory Y
are assumptions only. They are not prescriptions for managerial practices.
They are based on intuitive deductions and not on research. Second, these
theories do not imply “hard” or “soft” management. The effective manager
recognizes the dignity and capabilities, as well as the limitations and adjusts
behavior as demanded by the situation. Third, Theory X and Theory Y are
not to be viewed as being on a continuous scale, with X and Y on opposite
extremes. They are not a matter of degree; rather they are completely
different views of people.
2.6 Motivation
Managing people requires the creation and maintenance of an environment
in which people work together in groups to accomplish certain objectives.
In order to do this, the manager should understand what motivates people.
2.6.1 What is Motivation?

Motivation is a general term applied to the entire class of desires, drives,
needs, wishes and similar forces. An individual’s motives are quite complex
and often conflicting. Motivators induce an individual to perform.
While motivation reflects wants, motivators are the identified rewards or

incentives that drive the person to satisfy these wants. Motivators influence
an individual’s behavior and make a difference in what a person will do.
What a manager must do then, is use the motivators which will lead the
people to perform effectively for the enterprise that employs them.
50 ROAD TO SUCCESS
2.6.2 Maslow’s Hierarchy of needs
Fig. 2.3: Maslow’s hierarchy of needs
This is one of the most popular explanations for human motivation, proposed
by the psychologist, Abraham Maslow. Maslow classified human needs into
five levels: physiological needs, security needs, social needs (love and
belongingness), self–esteem needs and self–actualization needs.
Physiological Needs: These are the basic needs for sustaining human life
such as food, water, shelter and sleep. Until these needs are satisfied to the
degree necessary to maintain life, other needs will not motivate people.
Security or Safety Needs: These are the needs to be free of physical danger
and of the fear of losing a job, property, food or shelter.
Affiliation or Acceptance Needs: Since people are social beings, they need
to belong and to be accepted by others.
Esteem needs: According to Maslow, once people begin to satisfy their

need to belong, they tend to want to be held in esteem both by themselves
and by others. This satisfies the need for power, prestige, status and
self–confidence.
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GENERAL MANAGEMENT
Need for self–actualization: Maslow regards this as the highest need in
his hierarchy. It is the desire to become what one is capable of becoming –
to maximize one’s potential to accomplish something
2.6.3 Herzberg’s Two Factor Theory

In the late 1950s Herzberg and his associates conducted an experiment to
find out the primary factors of dissatisfaction and motivation. The study
concluded that the motivators for the workers were directly related to job
contentedness, namely, opportunities for achievement and growth,
recognition from others, sense of achievement, etc.
As for the elements of dissatisfaction in the job, they were related to the job
context or factors that affect the immediate work environment. These were
found to be poor supervision, low pay and benefits, unsafe working
conditions, etc. Herzberg called these as ‘hygiene factors” meaning the
presence of these factors did not necessarily lead to satisfaction, but the
absence caused dissatisfaction for the workers.
2.7 Controlling
The managerial function of controlling is the measurement and correction
of performance in order to ensure that enterprise objectives and the plans
devised to attain them are accomplished. Planning and controlling are
closely related. Without objectives, controlling is not possible, because
performance must be compared against established criteria. Controlling is
important to managers at all levels, although the scope may vary.
2.7.1 Basic Control Process

The basic control process, wherever it is applied and whatever is being
controlled, involves three steps: (1) establishing standards, (2) measuring
performance against these standards and (3) correcting variations from
standards and plans.
2.7.2 Establishment of Standards

Standards are criteria for performance. They are the selected points in an
entire planning program at which measures of performance are made so
that managers can receive signals about how things are going and thus do
not have to watch every step in the execution of plans. There are many
kinds of standards. The best are verifiable goals as discussed in the section
“Management by Objectives” in this chapter.
52 ROAD TO SUCCESS
2.7.3 Measurement of Performance
Although such measurement is not always practicable, the measurement of
performance against standards should be done on a forward–looking basis
so that deviations can be detected in advance of their occurrence. If
standards are appropriately drawn and if means are available for
determining exactly what subordinates are doing, appraisal of actual or
expected performance is fairly easy. But there are many activities for which
it is difficult to develop accurate standards or to measure performance. In
the less technical kind of work, not only may standards be hard to develop
but there may also be difficulty with appraisal. For example, controlling
the work of the vice–president of finance is not easy because definite
standards are not easily developed. The point is that as jobs move away
from the assembly line, the shop or the accounting machine, controlling
them becomes more complex and often more important.
2.7.4 Correction of Deviations

Standards should reflect the various positions in an organization structure.
If performance is measured accordingly, it is easier to correct deviations.
Managers can correct deviations by redrawing their plans or by modifying
their goals. They may make corrections by additional staffing, better
selection and training of subordinates, or through better leadership.
2.7.5 The Budget

A widely used device for managerial control technique is the budget. Budgets
are statements of anticipated results, either in financial terms (as in revenue,
expense and capital budgets) or in non–financial terms (as in labor hours,
sales volume or units of production). By stating plans in numbers, budgets
correlate planning and allow authority to be delegated without loss of
control.
There are several types of budgets. They are:

1 Revenue and expense budgets
2 Time, space, material and product budgets
3 Capital expenditure budgets and
4 Cash budgets.
If budgetary controls are to work well, managers must remember that

budgets are designed only as tools and not as replacements for managing,
that they have limitations, and they must be tailored to each job. Moreover
they are the tools of all managers, and not only of the budget administrator
Chapter – 2 53
GENERAL MANAGEMENT
or controller. To be most effective, budget making and administration must
receive the wholehearted support of top management.
2.7.6 Non–budgetary Control Techniques
PERT (Program Evaluation and Review Technique): is a time–event

network analysis system in which the various events in a program or project
are identified, with a planned time established for each.
Refer to chapter–6.9 – Project Time Management and Operation Research
Inventory Control: is another important control system adopted by

organizations. It involves decisions regarding the amount of assets that
should be held in inventory. Inventory is a stock of materials that are used
to facilitate production or to satisfy customer demand.
Productivity and Operations Management: Productivity is one of the

major concerns of managers as it helps organizations survive in a competitive
environment. As productivity measures the efficiency and competitiveness
of employees or departments or organizations, it is considered an essential
element in the control process.
Operations management is the application of concepts, procedures and

technologies by managers to improve the process of transformation of
resource inputs into outputs. Operations management requires managers
to plan, organize, control and coordinate all the activities of the production
system that convert the inputs into products or services.
Operations Research (OR): is an experimental and applied science

devoted to observing, understanding and predicting the behavior of
purposeful man–machine systems. Operations research has also been
defined as the application of scientific methods to find alternatives to a
problem situation.
Refer to chapter–6.9 – Project Time Management and Operation Research
Management Information: Information is an important resource for

managers. Management Information is a key element in both planning and
controlling. In most situations, problems arise due to a gap between the
actual and desired state. Information helps decision makers identify and
describe this gap and find ways to solve the problems.
54 ROAD TO SUCCESS
Management Information System (MIS): allows organizations to
communicate information efficiently and thus helps managers carry out
their responsibilities effectively. MIS may be defined as a complex
interaction among people, computer and communication technologies
and procedures designed to quickly provide relevant data or information
for organizational use.
2.8 Summary
In this chapter, we looked at the various managerial functions that are part
of any organization. These are planning, organizing, staffing, leading and
controlling. In order to achieve the organizational goals, a manager must
be skilled in all of these functions. We also looked at the various tools and
techniques that are relevant in the execution of these functions.
55
57
The objective of this lesson is to provide a basic understanding of cost
management to enable project managers to apply the costing principles
effectively in their projects.
Key Terms
Cost
Cost is defined as the amount of expenditure incurred on a specific need or
an activity.
Profit / Loss
Profit is the difference between the sales price and cost price (the total
cost of manufacturing) of a product or delivering a service. Profit is achieved
if sales are more than the total cost and loss if it is the reverse situation.
3.1 Fundamentals of Cost Accounting

In today’s world, all projects are performed in a highly competitive global
environment where there is a high degree of risk and uncertainty. As a
result, organizations have to function more efficiently and offer their
products and services at a competitive price. To ensure the sustenance of
business, organizations are looking for ways to cut down its expenditure
and increase their revenue. Hence, there is a need for a system to cut down
costs whenever required. Cost accounting will help project managers to
evaluate comprehensively on each cost associated with their project activity
and find ways to eliminate the non–value added expenditures.
Cost accounting is concerned with the ascertainment of costs for providing

a service or delivering a product.
3.1.1 What is Cost?

Cost is generally defined as the amount of expenditure incurred on a specific
work or an activity.
Cost has many meaning depending on the context. From a manufacturing

or service point of view, costing means the total cost of manufacturing or a
service. From a selling point of view, the term cost means the cost of selling
58 ROAD TO SUCCESS
or distributing goods or service. From a buyer’s perspective, the term cost
means the cost of acquiring a product or service.
3.1.2 Cost Concepts

Cost must be studied in relation to its purpose and conditions. The concepts
of cost are not definite and care must be taken to qualify it. Some of the
concepts used in cost management are:
Total Cost
It is the sum of cost of all items, which have been incurred in production,
sales or distribution, or providing of a service to a customer.
Overheads
Overheads are the aggregate of indirect materials, indirect wages and any
other indirect expenses involved in producing the product or delivering a
service.
The aggregate of prime cost and overheads gives the total cost.
Total cost = Prime cost + Overhead cost
3.1.3 Components of Cost

The cost of a product or service can be classified into three broad categories.
They are:
1. Material cost
2. Labor cost
3. Other cost
Material cost
Material cost is the cost associated with the raw materials used in the
process of manufacturing a product or delivering a service.
Labor cost
The cost of wages associated with the manufacturing of a product or
delivering services.
Other costs
Other costs are those that do not fall under any of the above two categories
such as administrative costs, cost of rent, cost of power etc…
Chapter – 3 59
FUNDAMENTALS OF COSTING &
PROJECT SELEC TION METHODOLOGIES
3.2 Types of Cost
Cost can be further classified as:
1. Direct costs
2. Indirect costs
In any project, the project management team has to consider both the direct
and indirect cost while doing cost estimation for all activities. The following
definitions will help in understanding what contributes to direct costs and
what contributes to indirect costs.
3.2.1 Direct Cost

Direct costs are the ones which can be directly attributed to the project or
producing specific goods or performing a specific service. For example, the
cost of raw material and wages paid for personnel directly involved in
transforming the raw material for producing a product or service are direct
costs. The components of direct costs are explained below:
Direct Material
Direct material cost is the cost of the materials used to produce the product
or service that becomes part of the product or service.
The following are the examples of direct material:

• Cost of materials, including component parts, specially purchased
or requisitioned for a particular job, process or service
• Cost of materials passing from one operation to the another
• Primary packing materials such as cartons, cardboard boxes etc...
In a construction project, the raw materials used such as steel, brick, cement
etc… which form part of the final structure is direct material cost.
Direct Wages
Direct wages are the cost expended towards human resources, directly
involved in producing the product or delivering the service, by altering or
processing the material towards producing the finished product in part or
in full.
The following are the examples of direct wages:

• Wages given to laborers engaged in altering the condition,
conformation and composition of the product.
• Inspectors, analysts etc., specifically required for such production
60 ROAD TO SUCCESS
Direct Expenses
Direct expenses are the costs involved as material and labor, but that can
be linked directly to manufacturing a product or delivering a service.
Some examples of direct expenses are:

• Cost of Special design, drawings etc...
• Hire or lease charges for tools and equipment
• Maintenance costs of such tools and equipment
3.2.2 Indirect Cost

Indirect costs, known as overheads, are the expenditures, which cannot be
related to manufacturing of a product or delivering a service, such as
expenditure incurred on rent, consumables, stationary etc…
Indirect costs can be further classified as below:
Indirect Material
Indirect material is the material that cannot be traced to the finished
products or service. For example, the cost of lubricants, small tools,
fasteners, stationery, etc.
Indirect Wages
Indirect wages are wages paid to personnel not directly involved in
producing the product or delivering the services. For example, the wages
paid to Managers, Supervisors, Foremen, Team Leaders, Clerical Staff,
Maintenance Workers and Conservancy Workers etc. are indirect wages.
The ideal time wages of direct labors, overtime premiums, shift allowances
and other fringe benefits are also considered as indirect wages.
Indirect Expenses
Indirect expenses are the ones that cannot be charged directly to production
or performing an activity. For example, the cost paid towards rent, interests,
insurance, power and fuel, maintenance of equipment etc…, comes under
the indirect expenses category.
The project manager has to calculate both direct and indirect expenses for
each work package or work activity, while preparing the cost estimation in
their projects.
Chapter – 3 61
3.3 Methods of Costing
Different methods of costing are used which are relevant to the type of
business or services an organization performs. Following are the different
methods of costing used according to the nature of business or service:
3.3.1 Job Costing

This method of costing is used when jobs are unique and executed as per
specific requirements of the customer. Under this method, the costs are
collected, analyzed and ascertained for each job separately, as each job
normally differs from the other. This costing method is suitable for
industries like printing, machine tools, ship building, locomotives, foundries
etc. Job costing is further classified into batch costing and process costing.
Batch costing
In batch costing, the costs are collected, analyzed and ascertained for each
batch separately. The total cost of the batch is divided by the number of
units produced in that particular batch to arrive at the unit cost. This
method is applicable to industries where products are produced in batches
like biscuits, drugs etc.
Process Costing
This method of costing is suitable for manufacturing industries where
production is done on a mass scale, where the raw materials pass through
two or more processes before being converted as a finished product.
Under this costing method, cost data are collected, analyzed and ascertained
for each process or department. To arrive at the cost per unit, the total
process cost is divided by total number of units. This method of costing is
suitable for industries like sugar, chemical, paper and cement.
3.4 Techniques Used in Costing

There are a few costing techniques, which can be used for estimating, control
and management of costs. They are:
1. Marginal costing
2. Standard costing
3. Activity Based Costing (ABC)
62 ROAD TO SUCCESS
3.4.1 Marginal Costing
Marginal cost is the amount by which the total cost varies when the volume
of production or other activity is increased or decreased by one unit. In this
costing method, the total costs are classified into two broad categories
known as variable cost and fixed cost.
The theory of marginal costing as set out in “A report on Marginal Costing”

published by CIMA, London is as follows:
“In relation to a given volume of output, additional output can normally be

obtained at less than proportionate cost because within limits, the aggregate
of certain items of cost will tend to remain fixed and only the aggregate of
the remainder will tend to rise proportionately with an increase in output.
Conversely, a decrease in the volume of output will normally be accompanied
by less than proportionate fall in the aggregate cost.“
Fixed Cost
Fixed costs are business expenses that are not dependent on the activities
of the business. They tend to be time–related, such as salaries, rents, and
insurance and utility bills, which are paid every month. Fixed costs do not
change in proportion to the volume of production or service. For example,
an industry has to pay the wages for its employees irrespective of the
production or sales.
Variable Cost
Variable costs are the business expenses that depend on the activities of
the business. They tend to be volume related, such as the cost of raw
materials, consumables etc.
For example, a manufacturing firm pays for raw materials. When there is
reduction in activity or the amount of raw materials used, then there will
be a decrease in the spending for raw materials.
sContribution
Contribution is the difference between the sales price and variable cost
associated with a product or service.
Contribution = Sales Price – Variable Cost
Chapter – 3 63
For example, assume that a firm is selling a product for $100/each.
Let us take the variable cost associated with producing and selling the
product is $60. The contribution from the product is
100 – 60 = $40
Contribution cost will be useful for an organisation when it decides to take

orders at prices lower than the regular selling price to utilize the free
capacity without increasing the fixed cost.
Break–even Point Analysis

Break–even point is where an organization makes no profit or loss and it is
the point where total revenue received equals the total costs associated
with production and sale of the product or service.
A break–even point is typically calculated in order for businesses to

determine if it would be profitable to sell a proposed product, as opposed
to attempting to modify an existing product in order to make it lucrative.
Break–even analysis can also be used to determine the potential profitability
of an expenditure in a sales–based business.
Break–even point = fixed cost / contribution per unit
For example, assume that a firm is selling a product for $100/each.
Let us take a variable cost associated with producing and selling the product
of $60 and the fixed cost related to the product (the basic costs that are
incurred in operating the business even if no product is produced) of $10,000.
In this example, to break even, the firm has to sell
10000 / (100 – 60) = 250 units to break even, meaning to achieve no profit
or loss.
Break–even = FC / (SP – VC)
Where FC is Fixed Cost, SP is Selling Price and VC is Variable Cost
64 ROAD TO SUCCESS
Fig. 3.1: Break–even Point Analysis
3.4.2 Standard Costing

Standard costs are calculated using engineering estimates of standard
quantities of inputs, and budgeted prices of those inputs. A standard cost
for one unit of output is the budgeted production cost for that unit.
For example, for an apparel manufacturer, standard quantities of inputs
are required such as yards of fabric per jean and required hours of sewing
operator labor per jean. Budgeted prices for those inputs are the budgeted
cost per yard of fabric and the budgeted labor wage rate. Standard quantities
of inputs can be established based on ideal performance, or on expected
performance, but are usually based on efficient and attainable performance.
3.4.3 Activity Based Costing

Activity Based Costing (ABC) is more useful in projects where the project
can be subdivided into discrete, quantifiable activities or a work unit. The
activity must be definable where productivity can be measured in units
(e.g., number of samples versus man–hours). After the project is broken
into activities, a cost estimate is prepared for each activity. These individual
cost estimates will contain all labor, materials, equipment, and
subcontracting costs, including overhead, for each activity. Each complete
individual estimate is added to the others to obtain an overall estimate.
Chapter – 3 65
ABC can be defined as below:
Cost of the Activity = LH*W + MC + EC + SC
LH= Number of labor hours required to perform the activity once
W= Cost of wages per labor hour
MC = Cost of material which is required to perform the activity
EC = Cost of equipment which is required to perform the activity
SC = Subcontracting costs to perform the activity
The total cost for performing an activity will be based on the number of
times the activity is performed during a specific time frame.
3.5 Elements of Costing
3.5.1 Sunk cost

Sunk cost is a cost which has already been incurred or sunk in the past. For
example, the written down value of an old plant less its salvage cost is a
sunk cost. Sunk cost is the past cost and not relevant for decision–making.
3.5.2 Allocated Cost

The overhead cost can be related to a particular cost centre directly.
Allocated cost is the allotment of actual overhead expenditure to a
department or function, for which it was expended. This is possible only
when the exact amount of overhead expenses incurred for that department
or function is known.
For example, a maintenance or service cost of a machine can be charged to

the department to which the machine belongs.
3.5.3 Apportioned Cost

The overhead costs that cannot be identified to any cost center directly are
called common costs. The common costs are those which are expended for
the operation of more than one department or function. These common costs
are distributed to all the departments or functions for which they are
66 ROAD TO SUCCESS
incurred. This practice is known as apportionment of overhead expenses
and the particular cost component is called an apportioned cost.
For example, the salary of a manager, who is in charge of more than one
department or function is distributed to those departments/functions on
the basis of his time devoted for each function.
3.5.4 Value–Added Cost

Value–added cost is the difference between the sales value of a product
and the purchase value of the raw material for making that product.
Value added cost = Sales Price – Raw material cost
For example if a manufacturer sells the product at $100 and the cost of the
raw material he buys is $25, then $75 is the value addition he makes by his
process.
3.5.5 Transfer Pricing

Transfer pricing refers to the pricing of contributions (assets, tangible and
intangible, services, and funds) transferred within an organization. For
example, goods from the production division may be sold to the marketing
division, or goods from a parent company may be sold to a foreign subsidiary.
Since the prices are set within an organization (i.e. controlled), the typical
market mechanisms that establish prices for such transactions between
third parties may not apply. The choice of the transfer price will affect the
allocation of the total profit among the parts of the company.
3.6 Types of Expenditure
1. Capital Expenditure: Capital expenditures or CAPEX are

expenditures creating future benefits. A capital expenditure is
incurred when a project spends money either to buy fixed assets or
to add to the value of an existing fixed asset that can extend beyond
the taxable year. CAPEX are used by a company to acquire or upgrade
physical assets such as equipment, property, or industrial buildings.
Examples of CAPEX includes: construction of a building, setting up

of a server room, acquiring fixed assets, fixing problems with an asset
that existed prior to acquisition, starting a new business/project, etc.
Chapter – 3 67
2. Operating Expenditure (Revenue Expenditure): Operating
expenditure or OPEX is an on–going cost for running a project. OPEX
may also include the cost of workers and facility expenses such as
rent and utilities.
In business, an operating expense is a day–to–day expense such as

sales and administration, or research & development, as opposed to
production, costs, and pricing. In short, this is the money the business
spends in order to turn inventory into output. Operating expenses
also include depreciation of plants and machinery, which are used in
the production process.
Examples of OPEX include: salary, rent, electricity, security charges,

cab expenses, telephone expenses, license fees, maintenance and
repairs, such as snow removal, trash removal, janitorial service, pest
control, and lawn care, advertising, etc.
3.7 Working Capital

Working capital, also known as networking capital, is a financial metric,
which represents operating liquidity available to a business. Along with
fixed assets such as plant and equipment, working capital is considered as
a part of operating capital. It is calculated as current assets minus current
liabilities. If current assets are less than current liabilities, an entity has a
working capital deficiency, also called a working capital deficit.
1. Current Assets: Current asset is an asset on the balance sheet, which

is expected to be sold or otherwise used up in the near future, usually
within one year, or one business cycle – whichever is longer. Typical
current assets include cash, cash equivalents, accounts receivable,
inventory, the portion of prepaid accounts, which will be used within
a year, and short–term investments.
2. Current Liabilities: Current liabilities are considered liabilities of

the business that are to be settled in cash within the fiscal year or
the operating cycle, whichever period is longer. For example, accounts
payable for goods, services or supplies that were purchased for use
in the operation of the business and payable within a normal period
of time would be current liabilities. Bonds, mortgages, and loans that
are payable in less than one year, are also current liabilities.
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3.8 Profit Calculation Method
1. Matching Concept: All costs pertaining to revenue earned in a

particular period should be shown in the Profit and Loss statement
in the same period.
2. Accrual Concept: When an event takes place or a transaction is

entered into, consequences are bound to follow. E.g., if one borrows
$100,000 at 15% p.a., $15,000 will become due at the end of the year
as interest. If the amount is paid, the record will certainly show it. If,
however, the amount is not yet paid, there is a liability to pay the
amount and since there is no corresponding increase in the total
assets, the capital will stand reduced. This must be brought into
accounting; otherwise the accounts will not reflect the true picture.
The accrual concept or principle requires that all transactions or
events, not yet settled in cash, must be taken into account.
Net Profit (Book Profit) – Accruals = Cash Profit
3.9 Project Selection Methodologies
Overview
Project selection methodology is an important element used during the
initiating process of a project. Project cost management may address the
methodologies used for project selection. As a project manager, you are
expected to understand and interpret information such as project
justification. Senior management may use one of the selection methods to
select a project.
3.9.1 Methodologies
Project selection methodologies:
1. Return on Investment (ROI)
2. Net Present Value (NPV)
3. Internal Rate of Return (IRR)
4. Pay Back Period (PBP)
5. Benefit Cost Ratio (BCR)
Chapter – 3 69
3.9.2 Return on Investment (ROI)
ROI is the ratio of money gained or lost (realized or unrealized) on an
investment in relation to the amount of money invested. The amount of
money gained or lost may be referred to as interest, profit/loss, gain/loss,
or net income/loss. The money invested may be referred to as the asset,
capital, principal, or the cost basis of the investment. ROI is usually
expressed as a percentage rather than a fraction.
A project is selected based on maximum / high returns. From the list of

available projects, the senior management would select the highest earning
project (highest return on investment).
3.9.3 Net Present Value (NPV)

NPV is the difference between present value of cash inflows and the present
value of future cash inflows. In other words, NPV is an indicator of how
much value an investment or project adds to the value of the firm.
With a particular project, if NPV is a positive value, the project is in the

status of discounted cash inflow in the time of t. If NPV is a negative value,
the project is in the status of discounted cash outflow in the time of t.
Appropriately, risked projects with a positive NPV could be accepted. This
does not necessarily mean that they should be undertaken since NPV at
the cost of capital may not account for opportunity cost, i.e. comparison
with other available investments.
In financial theory, if there is a choice between two mutually exclusive

alternatives, the one yielding the higher NPV should be selected.
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The following sums up the NPVs in various situations.
If… It means…– Then…

NPV >0 The investment would The project may be accepted
add value to the firm
NPV <0 The investment would The project should be rejected.
subtract value from
the firm
NPV =0 The investment would We should be indifferent
neither gain nor lose value in the decision whether to accept
for the firm. or reject the project. This project
adds no monetary value. Decision
should be based on other criteria,
e.g. strategic positioning or other
actors not explicitly included in
the calculation.
Fig. 3.2: Net Present Value (NPV)
Present Value (PV) = FV / [1+r] ^n
Where PV – Present value
FV – Future value
r – Rate of return / interest
n – No. of years
3.9.4 Internal Rate of Return (IRR)

The IRR is the annualized effective compounded return rate, which can
be earned on the invested capital, i.e., the yield on the investment.
A project is a good investment proposition if its IRR is greater than
the rate of return that could be earned by alternative investments
(investing in other projects, buying bonds, even putting the money
into a bank account). Thus, the IRR should be compared to any
alternate costs of capital including an appropriate risk premium.
Chapter – 3 71
Mathematically the IRR is defined as any discount rate that results in a net
present value of zero of a series of cash flows.
The rate at which NPV is 0, that is Net Present Value of cash inflows is
equal to the Present Value of outflows is called Internal Rate of Return.
Probability Index
(PV of future cash flows) / (PV Initial investment) = Profitability Index

So, if PV > 1, Accept the Project and vice versa.
3.9.5 Pay Back Period (PBP)

Payback Period in business and economics refers to the period of time
required for the return on an investment to “repay” the sum of the original
investment.
In this example, the payback period is 5 years and the investment is $10
million.We get $ 2 million every year. In the 5th year, we reach $10 million,
which is equal to the investment. Therefore, the payback period is 5 years.
If it was $3 million every year instead of $2 million, the Payback Period

would have been 3.33 years or 3 years 4 months.
In the case of unequal cash flows, we calculate the time on the basis of
amount again. Let us suppose we get $4 million inYear 1, $3 million in Year
2 and $4 million in Year 3, t hen the Payback Period is 3 years. This ignores
the concept of Time Value of Money, so it is not a reliable source.
3.9.6 Benefit Cost Ratio (BCR)

A benefit–cost ratio (BCR) is an indicator, used in the formal discipline of
cost–benefit analysis that attempts to summarize the overall value for money
of a project or proposal. A BCR is the ratio of the benefits of a project or
proposal, expressed in monetary terms, relative to its costs, also expressed
in monetary terms. All benefits and costs should be expressed in discounted
present values.
Projects with higher benefits compared to cost are generally selected.
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3.10 Summary
The chapter discussed the basic concepts of costing, the terminologies used
in costing and finance and the various methods used in ascertaining the
cost. Project selection methodology discussed various processes that are
essential for project justification. Eventhough the project manager may be
very good techincally, if he lacks a clear understanding of finance and cost
management, he will not be able to perform effectively as a project manager.
Cost accounting plays an important role in imporving the overall efficiency

of a business and its profitability. So it is recommended that the project
manager has a basic knowledge of costing principles.
Chapter – 3 73
75
The objective of this lesson is to make the participants understand the project
manager’s role in the integration phase of a project and to learn how to
integrate project plan development process with the project execution
process, and the overall change control process. We are here to address the
integration of other process, initiation and close, related to the project work.
Key Terms
Project Charter
A Project Charter is the document issued by the project initiator or sponsor
who formally authorizes the project and provides the project manager with
authority to apply organizational resources to the project activities.
Project Management Plan

Is a formal and approved document that defines how the project is to be
executed, monitored and controlled. It may be a summary or a detailed
plan and may consist of one or more subsidiary management plans.
PMIS
Is an information system consisting of the tools and techniques used to
gather, integrate and disseminate the output of the project management
processes. It is used to support all aspects of the project from initiation to
closing.
Change Control
Is the process of identifying, documenting, approving or rejecting and
controlling changes to the project baselines.
Change Control Board

Is a formally constituted group of stakeholders responsible for reviewing,
evaluating, approving, delaying or rejecting changes to the project.
Corrective Actions
Proposed actions to correct the variance and bring the future project results
in line with the planned results.
Preventive Actions
Proposed actions that can reduce the probability of negative consequences
associated with project risk.
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Defect Repair
Proposed actions to set right the identified defect in the project component;
can be a recommendation to either repair the defect or replace the defective
component.
Close Project
Is the process of finalizing all activities across all the project process groups
to formally close the project.
4.0 Project Integration Management Processes

The Project Integration Management process includes the following key
process:
Fig. 4.0: Project Integration Management Processes
4.1 Develop Project Charter

Develop Project Charter is the process of developing a formal document,
authorizing a project or a phase. The project charter documents the initial
requirement of the stakeholder or the customer. The project charter is the
document which establishes the relation between the performing
organization and the customer (Requesting organization).
The performing organization has to identify the project manager as early

as possible and it is advisable that the project manager takes part in the
preparation of the project charter. The project charter gives the authority
to the project manager to assign resources to the project.
Chapter – 4 77
PROJECT INTEGRATION MANAGEMENT
The project charter is usually authorized by someone who is external to the
project, such as project sponsor, PMO or portfolio steering committee. The
initiator of the project charter should be placed in a level to allocate funds
to the project. The initiator creates the project charter or allocates the
responsibility to the project manager, but their approval of the charter
authorizes the project.
Projects are normally authorized as a result of internal business needs or
external influences.
Fig. 4.1: Develop Project Charter– ITTO
4.1.1 Develop Project Charter – Inputs
Project Statement of Work

The Project Statement of Work (PSOW) is the description of the products
and services to be delivered by the project. For internal projects, the project
sponsor or the initiator provides the PSOW based on business needs,
product or service requirements. For external projects, the PSOW is
provided by the customer as part of a bid document like Request For
Proposal (RFP), Request For Information (RFI) or Request For Bid (RFB)
or as part of the contract. The PSOW consists of:
• Business needs of the organization

• Product scope description, giving details about the characteristic of
the product or the service that is to be created by the project.
• Strategic plan
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Business Case
The business case document provides the required information on the
rationale behind initiating the project and the justification from a business
point of view in initiating the project. It may provide information on the
business need of the project and the cost benefit analysis. In the case of an
external project, the business case document will be prepared by the
customer or the requesting organization.
The business case may arise due to any one or more of the following reasons:
• Market demand– Project may be initiated due to some demand in
the market. For example, an automobile manufacturer may initiate a
project for designing a fuel efficient car due to increases in gasoline
prices.
• Organizational need – This can be the business case in initiating a
project on some occasions. For example, a manufacturing company
may initiate a project to automate some process to increase their
productivity or to reduce cost.
• Customer request – A software organization, developing a specific
application for a customer based on their request.
• Technological advance– Advancement in technology will also lead
to project initiation. An organization initiating a project to upgrade
their information system infrastructure, due to advancement in web
technology.
• Legal requirement– In some cases, the legal requirement to meet
government statutory regulation can also be the business case behind
project initiation. For example, an automobile manufacturer initiating
a project to design a new engine to meet the emission norms, or an
air–conditioning equipment manufacturer initiating a project to do
away with the use of chlorofluorocarbons (CFC) to reduce greenhouse
gases.
• Ecological Impact – An example for this is a power plant initiating
a project to reduce the CO2 discharge to the atmosphere.
• Social need– An example of social need as a business case is any
Government or NGO initiating a drinking water or sanitation or
education project to meet the community demand.
The business case has to be reviewed periodically to assess its relevance

and make sure that the project requirement still exists.
Chapter – 4 79
Agreements
Agreements are essential for initial intention for a project. When the project
is performed for external customers, may include contracts, memorandum
of understanding (MOU), service level agreements (SLA), letter of intent,
email etc.
Enterprise Environmental Factor

Enterprise environmental factors can greatly influence the Develop Project
Charter process. Some of the EEF that can influence this process are:
• Governmental or industry standards

• Organizational structure and culture
• Organizational infrastructure such as facilities and equipment
• Market conditions
Refer to chapter–1 – EEF page 30
Organizational process assets

Organization’s infrastructure and government or industry standards,
templates, lessons learned, historical information are some of the
Organization Process Assets that influence the Develop Project Charter
process.
Refer to chapter–1 – OPA page 28
4.1.2 Develop Project Charter – Tools & Techniques
Expert Judgment
Expert opinion in technical and managerial issues will help assess the input
used to develop the project charter. Experts can be individuals or groups,
who possess specialized knowledge or skills in the area of interest.
Experts can be:

• From within the organization
• A stakeholder, including customers or sponsors
• Professional and technical associations
• Industry groups
• Subject Matter Experts (SME)
• Project Management Office (PMO)
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Facilitation Techniques
Facilitation techniques are used to guide the project management activities.
Brainstorming, conflict solution and problem solving are key techniques
used by facilitators, thereby, bringing in collaboration among the project
team while accomplishing project activities.
4.1.3 Develop Project Charter – Outputs
Project Charter
The project charter is a document which formally authorizes the initiation
of a project and gives the authority to the project manager to assign
resources to the project.
The project charter document shall contain the business need for the project,
customer’s needs and a high level description about the product, service, or
results that the project is to produce.
The project charter shall contain:

• The purpose of the project
• Project objectives and success criteria
• High level description of the project
• High level requirement
• High level risks
• Summary milestones
• Summary budget
• Approval requirements
• Name of the project manager, his responsibility and authority
• Name and authority of the sponsor or the authorizing person
Chapter – 4 81
Develop Project Charter – Best Practices
The following are the guidelines to develop a good project charter:
Use an organization template, if one is in existence at your company.
Include the project and authority identification information:

• Title of the project and the date of authorization
• Name and contact information of the project manager
• Name, title, and contact information of the initiating authority
Include a clear and a concise description of the business need,

opportunity, or threat that the project is intended to address:
• What are the circumstances that generated the need for the
project?
• What is the market demand for the product or service?
• What are the legal requirements associated with the project?
Include a summary of the products or services of the project:

• What is the expected outcome of the project?
• What are the critical characteristics of the product or service?
Include a description of the project’s relationship to the business

need it is intended to address:
• Why is it important to do the project now?
• How will this project address the business need, opportunity,
or threat for which it is intended?
Consider any known assumptions and constraints:

• Are there any factors or issues that you and your project team
will presume to be true, real, or certain in order to begin
planning your project?
• Is there any known time, cost, scope, quality, or resource issues
or factors that will limit the way you and your project team
can approach the project?
• Ensure that the person with the required knowledge and
authority signs the project charter
Distribute the signed charter to the appropriate project stakeholders:
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4.2 Develop Project Management Plan
Develop Project Management Plan is the process of documenting all planning
activities for the project to define, prepare, integrate and coordinate
subsidiary plans such as Scope, Cost, Time, Quality, Communication, Human
Resources, Risk, Procurement and Stakeholder management plans for the
project. The Project Management Plan describes how the project will be
executed, monitored, controlled and closed.
High level decisions regarding other project processes are also made during
planning. For example, the project team may determine the relevance and
scope of quality management and organizational change management
activities during initial planning. They may also decide how these processes
will be executed for the project and to what extent.
The project team documents the decisions made during the initiating and
planning processes in the Project Management Plan. The content for the
Project Management Plan evolves over the initiating planning and into the
execution phase. The Project Management Plan is a living document and
should be updated continually to reflect changes to the project.
Fig. 4.2: Develop Project Management Plan – ITTO
4.2.1 Develop Project Management Plan – Inputs
Project Charter
Refer to section 4.1.3 – Develop Project Charter – Outputs
Chapter – 4 83
Outputs from other Processes
There is a high degree of integration across all the project management
processes and the Develop Project Management Plan process. The outputs
from all project processes often feed into the Develop Project Management
Plan process as inputs. Updates to these documents result in updates to
the “Project Management Plan”.

Enterprise environmental factors can greatly influence the Develop Project
Management Plan process. Some of the EEF that can influence this process
are:
• Governmental or Industry standards
• Organizational structure and culture
• Organizational infrastructure such as facilities and equipment
Organizational Process Assets

Some of the Organizational process assets that can influence the Develop
Project Management Plan process are listed below:
• Organizational Process, Procedure, Guidelines, Work Instructions,
Proposal evaluation criteria and Measurement criteria etc..
• Project Management Plan templates
• Project files and data from past projects
• Configuration management knowledge base
4.2.2 Develop Project Management Plan – Tools & Techniques
Expert Judgment
The project management team can approach experts, an individual or group
with special knowledge or skills, to obtain their inputs in preparing the
Project Management Plan. These inputs can be utilized to have an
understanding of:
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• The level of tailoring that is required to project process
• To develop and include technical and management details in the
project management plan
• To decide on the resource and skill level required to perform a project
task
• To decide the level of configuration management required for a
project
• To decide on the change control process and the documents which
must follow this process
Refer to section 4.1.2 – Develop Project Charter – T & T
Facilitation Techniques
Facilitation techniques are used to guide the project management activities.
Brainstorming, conflict solution and problem solving are key techniques
used by facilitators, thereby, bringing in collaboration among the project
team while accomplishing project activities.
4.2.3 Develop Project Management Plan – Outputs

The project management team documents how each step of the project is
executed, monitored, controlled, and closed.
The Project Management Plan incorporates and consolidates all the

subsidiary plans and baselines.
The Project Management Plan shall address and describe:

• The life cycle chosen by the project management team
• The selected process and its level of application
• The method by which the selected process will be used to manage
the project and the interactions among them
• The tools and techniques that will be used for performing and
monitoring the processes and projects
• The way work will be authorized, implemented, monitored and
controlled
• A change management plan detailing how the changes will be
initiated, approved, implemented, monitored and controlled
• A configuration management plan giving details on how project
configuration management will be performed
Chapter – 4 85
• A plan and process for conducting performance reviews
• Project baseline such as:
• Scope baseline
• Schedule baseline
• Cost performance baseline and
The subsidiary plans are:

1. Scope management plan
2. Requirements management plan
3. Schedule management plan
4. Cost management plan
5. Quality management plan
6. Process improvement plan
7. Human resources plan
8. Communication management plan
9. Risk management plan
10. Procurement management plan
11. Stakeholder management plan
(Refer to the specific knowledge area for better understanding of each

subsidiary plan)
4.3 Direct and Manage Project Work

In Direct and Manage Project Work, the project management team performs
all the planned project activities.
Direct and Manage Project Work also requires implementation of approved

changes covering corrective actions, preventive actions and defect repair.
The project manager and his team put the plan into action to achieve the
project objectives.
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Fig. 4.3: Direct and Manage Project Work – ITTO
4.3.1 Direct and Manage Project Work – Inputs

Refer to section 4.2.3 – Develop Project Management Plan – Outputs
Approved Change Requests

Only the change requests approved by the project’s integrated change control
system will require implementation. The approved change request may
result in modification to the project scope or result in changes to the policies,
procedure, cost, budget, schedule and project management plan etc…
Approved change requests will influence the way the project is being
executed and is one of the inputs for the Direct and Manage Work process.

Project Management Information System (PMIS), organizational
infrastructure, company structure, company culture, customers and
stakeholder’s preferences and risk tolerances are some of the enterprise
environmental factors that will influence the Direct and Manage Project
Execution process.

Chapter – 4 87
4.3.2 Direct and Manage Project Work – Tools & Techniques
Expert Judgment
Refer to section 4.2.2 – Develop Project Management Plan – T & T
Project Management Information System

PMIS refers to automated project management software such as scheduling
tool, configuration management systems, information collection, distribution
systems and any other system used in Direct and Manage Project Execution.
Meetings
Meetings are for the purpose of discussion on the project during execution.
The attendees could include the project manager and involved stakeholders
who need to sort out differences among them. Meetings should have a defined
agenda, time frame and end with a minutes of meeting along with an action
plan.
The nature of these meetings could be:

• Information Exchange
• Brainstorming
• Decision Making
Co–location meetings are very effective.
4.3.3 Direct and Manage Project Work – Outputs
Deliverables
A unique and verifiable product, service or result produced as a result of
the process or phase or project.
Work Performance Data

Work performance data is the data about the project progress and the status
of the deliverables collected by the project team at regular intervals as per
the project management plan, to monitor and control and report the project
progress.
Change Requests
While executing project activities, the project team may request corrective
actions through change requests. The change request may be to modify the
project policies, procedures, scope, cost, schedule or quality etc. Sometimes
a change request may be due to a recommended corrective action or
preventive action to forestall a negative impact on the project in the near
88 ROAD TO SUCCESS
future. All change requests have to be processed through the project’s
integrated change control process.
The request for changes can be either internal or external to the project
team, or can be due to optional requirements or can be mandated by legal
or contractual requirements.
Project Management Plan Updates

The change requests as well as other approved changes may result in
updates to some elements of the project management plan including the
subsidiary plans.
Project Document Updates

The requirement documents, project logs, risk register and stakeholder
register are some of the documents that may get updated as a result of the
Direct and Manage Project Work process.
4.4 Monitor and Control Project Work

Monitor and Control Project Work is the process of tracking, reviewing
and regulating the project’s progress in order to meet the project
performance objectives. Monitoring and controlling includes status
reporting, progress measurements and forecasting. These reports provide
information on the project’s performance with regard to scope, schedule,
cost, resources, quality and risk etc…
Fig. 4.4: Monitor and Control Project Work – ITTO
Chapter – 4 89
4.4.1 Monitor and Control Project Work – Inputs

Schedule Forecasts
We need to have better traction on schedule. Any deviation will have
multiple effects on projects. So while executing projects, the time lines are
very important. The understanding of schedule forecasts and tracking them
will help us have better control. The schedule forecast is derived from
progress against schedule baselines and computed time estimate to complete
(ETC). This is measured in terms of Schedule Variance (SV) and Schedule
Performance Index (SPI). We will be discussing this Project cost
Management under Earned Value Management (EVM). If a project does
not follow EVM then the variance will be measured against planned and
finish dates. We can apply the Change Request process on understanding
the tolerance limit.
Cost forecasts:
The cost forecast is essential to measure the variation at cost and necessary
steps can be applied through Change Request to bring the cost under control.
The Planned Value (PV) and Actual Cost (AC) are the parameters which
will help us to calculate Cost Variance (CA) and Cost Performance Index
(CPI). An Estimate At Completion (EAC) can be compared to the Budget At
Completion (BAC) to measure the tolerance limit and correction can be
made through Change Request. We will be discussing these aspects in
Project Cost Management, under Earned Value Management (EVM)
Validated Changes
All changes are inspected and are either accepted or rejected. The
stakeholders are intimated after inspection. A proper validation is to be
performed to ensure acceptance or rejection.
Work Performance Information:

Work Performance Data is collected with cent percent purity, analyzed,
textualized and integrated based on the relationship in the projects. Thus,
work performance data is converted to Work Performance Information
which can be used for the decision making process. This information can be
correlated and conceptualized to provide sound decisions to ensure the
project success. Work Performance Information is communicated to all
stakeholders appropriately based on the stakeholder’s analysis. Examples
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are, status report, implementation report, change request report and various
forecasts reports.


4.4.2 Monitor and Control Project Work – Tools & Techniques
Expert judgment
The project management team can utilize the knowledge and skills of an
expert by getting their opinions and interpretation of the information
provided by the Monitoring and Control process.
Refer to 4.2.2 – Develop Project Management plan – T & T
Analytical techniques:
Analytical techniques are used to analyze the outcome of the various
variations and also the effect of these outcomes.
Some examples of analytical techniques are:

• Regression analysis
• Causal analysis
• Fish bone diagram or Root cause analysis
• Forecasting methods
• Failure mode and effect analysis (FMEA)
• Fault Tree Analysis (FTA)
• Reserve analysis
• Trend analysis
• EVM
Project Management Information System

Refer to section 4.3.2 – Direct and Manage Project work – T & T
Meetings
Refer to section 4.3.2 – Direct and Manage Project work – T & T
Chapter – 4 91
4.4.3 Monitor and Control Project Work – Outputs
Change Requests
If there is variance while comparing the actual project results to the planned
results, the project team may request corrective actions through change
requests. The change requests may be requests to modify the project policies,
procedures, scope, cost, schedule or quality etc.
The requested changes may include:

• Corrective actions– Proposed actions to correct the variance and
bring the future project results in line with the planned results.
• Preventive actions– Proposed actions that can reduce the
probability of negative consequences associated with project risk.
• Defect repair– Proposed actions to set right the identified defect in
the project component; can be a recommendation to either repair the
defect or replace the defective component.
Work Performance Report:

Work Performance Information is communicated to all project stakeholders
through a work performance report. It can be in a physical format or
electronic format. The intended use of this is to help everyone in their
decision making or actions or awareness. These formats can be stored or
collated for future use in the decision making process. Work Performance
Report is a subset of Project Documents. Specific work performance reports
and metrics can be generated based on user needs. A few examples for the
reports are status report, memos, justification, information notes,
recommendation and updates.

The Monitor and Control Project Work process may result in updates to
the Project Management Plan and its subsidiary plans.
Some of the plans that may get updated include:

• Schedule management plan
• Cost management plan
• Quality management plan
• Updates to baseline such as:
• Scope baseline
• Schedule baseline and
• Cost performance baseline
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Some of the project documents that may be updated are:
• Forecasts
• Performance reports
• Issue logs
4.5 Perform Integrated Change Control

Perform Integrated Change Control is the process of reviewing all change
requests, approving the change requests and managing changes to
deliverables, project documents, organizational process assets and to the
project management plan.
Fig. 4.5: Perform Integrated Change control – ITTO
4.5.1 Perform Integrated Change Control – Inputs

Work Performance Report

Refer to section – 4.4.3 – Monitor and Control Project Work – Outputs
Change Requests
Refer to section 4.4.3 – Monitor and Control project Work – Outputs
Chapter – 4 93
The Project management information systems, configuration systems,
information collection and distribution systems are some of the enterprise
environmental factors that may influence the Perform Integrated Change
Control process.

Organizational Process Assets include the organizational change control
procedures, standards, policies, plans with respect to how changes will be
initiated, reviewed, approved, validated and implemented. This will
influence the Perform Integrated Change Control process.
The list also includes but is not limited to:
• The process measurement database used to collect and make available
measurement data on processes and products
• Project files
4.5.2 Perform Integrated Change Control – Tools & Techniques
Expert Judgment
Experts may be selected as part of the change control board. In addition
the project team may be asked to provide their expertise. Experts opinion
may be used to review, approve and disapprove change with respect to
technical and management related issues.
Meetings
Refer to section – 4.3.2 – Direct and Manage Project Work – T & T
Change Control Meetings

Change control meetings are conducted by the ‘Change Control Board’ to
review, approve or disapprove the change requests that are received. The
roles and responsibilities of the (CCB) will be clearly defined and will be
agreed upon by the appropriate stakeholders. The change control meetings
and their decisions will be documented and communicated to the relevant
stakeholders for information and follow up.
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4.5.3 Perform Integrated Change Control – Outputs

Change requests are processed according to the change control system by
the project manager, CCB, or by an assigned team member. Approved change
requests will be implemented through the Direct and Manage Project Work
process. The disposition of all change requests, approved or not, will be
updated in the change log as part of updates to the project documents.
Change Log
A change log is used to document changes that occur during a project. These
changes and their impact to the project in terms of time, cost, and risk, are
communicated to the appropriate stakeholders. Rejected change requests
are also captured in the change log.

The Perform Integrated Change control process may result in updates to
some subsidiary plans and also to baselines, subject to the approval by the
change control process.

Project documents that may get updated as a result of the Perform
Integrated Change Control process include change request logs and any
other documents that are subjected to a formal change control process.
4.6 Close Project or Phase

Close Project or Phase is the formal closing of all the project activities. The
Project manager will review whether the project work is complete and if
the project has met its objectives. The project manager will also review all
the project documents to ensure completion. In case a project is terminated
before meeting the objective, the project manager and the team will
investigate and document the actions taken. The Close Project or Phase
includes all the activities that are necessary for the administrative closure
of the project.
The project manager should include all activities required to close the project
formally in the Project Management Plan. These include:
• Process to ensure that the project satisfactorily met its exit criteria
for the project or a phase
Chapter – 4 95
• Process to transfer the project service, results or products to the
next phase or to production or operations
• Process to ensure collection of all project records, lessons learned
documents and archive them for organization’s future use
Fig. 4.6: Close Project or Phase – ITTO
4.6.1 Close Project or Phase – Inputs

Accepted Deliverables
Accepted deliverables are deliverables of the project or phase which are
accepted through the Validate Scope process.

Some of the organizational process assets that may get updated include:
• Project or phase closure guidelines
• Lessons learned documents
4.6.2 Close Project or Phase – Tools & Techniques
Expert Judgment
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Analytical techniques:
Refer to section 4.4.2 – Monitor and Control Project Work – T & T
Meetings
Refer to section 4.3.2 – Direct and Manage Project Work – T & T
4.6.3 Close Project or Phase – Outputs
Final Product, Service, or Result Transition

In Close Project or Phase, the transfer of the final product, service or result
in case of project closure and the intermediate product or service or results,
in case of phase closure.
Organizational Process Assets Updates

The Close Project or Phase process will result in updates to the
organizational process assets. Some of them are:
1. Project files– Documents created as a result of project activities.

These documents are:
• Project management plan
• Documents related to project cost, schedule and scope
• Documents related to risk management and other processes
2. Project or Phase closure documents– Project or Phase closure

documents indicates the formal completion of the project or phase
and transfer of the project or phase deliverables.
3. Historical information– The lessons learnt documents that are

transferred to the organization lessons learnt knowledge base
4.7 Summary
Project Integration Management is one of the key processes in project
management which coordinates all elements of a project. Project integration,
when performed properly, ensures that all processes in a project run
smoothly and interact with each other to achieve project success.
Chapter – 4 97
1. The purpose of the Initiation process is to:

A. Define a new project or a new phase of existing project by obtaining
authorization to start
B. Formally recognize the need that brought about the project is marketing
demand or customer requests or business need or technological advances,
or legal requirements
C. Formally recognize the stakeholders of the project and identify them in
the project charter
D. Formally recognize the project sponsor and document his or her project
goals
2. Your project selection committee is considering four projects. Project A’s

NPV is positive, it has an IRR of 14 percent, and the payback period is 18
months. Project B’s NPV is negative, it has an IRR of 9 percent, and the
payback period is 16 months. Project C’s NPV is positive, it has an IRR of 16
percent, and the payback period is 21 months. Project D’s NPV is negative,
it has an IRR of 16 percent, and the payback period is 13 months. Which
project should you choose?
A. Project A
B. Project B
C. Project C
D. Project D
3. The business description, product description and strategic plan, all describe
elements of which of the following:
A. Organizational process assets
B. Tools and techniques of initiating processes
C. Project statement of work
D. Project Charter
4. Which of the following activities is done during planning phase of the project?
A. Determine project team
B. Develop high–level product description
C. Determine high level estimates
D. Determine high level constraints and assumptions
Chapter – 4 99
5. Inputs for Develop Project Charter includes all of the following Except:
A. Business case
B. Agreements
C. Project charter
D. Project Statement of Work
6. Who is responsible for issuing the project charter?

A. The project manager
B. The project sponsor
C. The project team
D. The project management office (PMO)
7. What is the purpose of the project management plan?

A. It defines the project manager and level of authority on the project
B. It authorizes the project manager to assign resources to the project work
C. It defines how the project will be planned and executed
D. It defines how the project will be executed, monitored and controlled,
and then closed
8. Which of the following is one of the tools and techniques for Develop Project
Management Plan?
A. Decomposition
B. Change control meeting
C. Project management information system
D. Expert judgment
9. During planning, you estimate the time needed for each activity and then
add the estimates to create the project estimate. You commit to completing
the project by this date. What is wrong with this scenario?
A. The team did not create the estimate and estimating takes too long using
that method
B. The team did not find the dependency and a network diagram was not
used
C. The estimate is too long and should be created by management
D. The estimate should be the same as the customer’s required completion
date
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10. The primary purpose of your project management plan is:
A. To define the work to be completed to reach the project end date
B. To define the work needed in each phase of the project life cycle
C. To prevent any changes to the scope
D. To provide accurate communication for the project team, project sponsor,
and stakeholders regarding how the project will be executed, monitored
and controlled, and closed
11. Approved changes are implemented in which process?

A. Direct and Manage Project Work
B. Monitor and Control Project Work
C. Perform Integrated Change Control
D. Develop Project Management Plan
12. Deliverables can be described as:

A. The purpose for undertaking the project
B. The verifiable results of products or services that must be produced to
consider the project as complete
C. The specifications regarding the goals of the project that must be produced
to consider the project complete
D. The measurable outcomes of the project goals
13. During the course of your project, you notice that most of the changes
occurring on the project come from the research department. What should
the project manager do?
A. Assign a team member to work solely with the research department
B. Change your communication plan, so only you are assigned to interact
with the research department
C. Ask the research department to assign one person to be your liaison
D. Talk to the research department to understand the reasons for the
changes
14. Changes to the project are common in certain types of projects, especially
when they involve new technology, Project modifications should be reflected
in the
A. Project management plan
B. Quality control document
C. Lessons learnt document
D. Quality control audit
Chapter – 4 101
15. Which of the following is updated as an output of the “Close Project” process?
A. Administrative Closure Procedure
B. Contract Closure Procedure
C. Final product
D. Organizational Process Assets
16. Inputs to perform Integrated Change Control include:

A. Project Management plan, performance measurements, Enterprise
Environmental factors, Organizational Process Assets and change
requests
B. Project Management plan, project reports, Enterprise Environmental
factors, Organizational Process Assets and change requests
C. Product Management plan, performance reports, Enterprise
requests
D. Project Management plan, Work performance report, Enterprise
requests
17. The Vice President of your company has requested that you attend the
upcoming change control board meeting that is scheduled this week. Why is
a change control board necessary?
A. To approve or reject changes to the project plan
B. To approve or reject change requests when required
C. To approve or reject changes to the WBS
D. To approve or reject the selection of project team resources
18. You are a project manager for a software development project. Your team
buys a component for a web page but they run into defects when they use it.
Those defects slow your progress down considerably. Fixing the bugs in the
component will double your development schedule and building your own
component will take even longer. You work with your team to evaluate the
cost and impact of all of your options and recommend hiring developers from
the company that built the component to help you address problems in it.
That will cost more but it will reduce your delay by a month. What is your
next step?
A. Fix the component
B. Write up the change request and take it to the change control board
C. Start procurement planning so you can get the contract ready for the
vendor
D. Change the scope baseline to include your recommendation
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19. You are working on a project with multiple key stakeholders with some
conflict with regard to the proper scope of the project. You therefore realize
that you must give careful attention to Perform integrated change control.
Stated in a different way, this means you are concerned with:
A.Creating an effective change control board with well–defined procedures
B. Influencing the factors that create changes, determining if a change has
occurred, and managing the actual changes that do occur
C. Identifying the precise nature of the stakeholder conflicts and developing
an appropriately detailed documentation of acceptable compromises
D. Carefully managing the primary baselines of scope, time and cost
throughout project execution
20. All of the following are outputs of the Perform Integrated Change Control
process except for which one?
A. Approve change request
B. Project management Plan updates
C. Change requests
D. Project document updates
21. Your project is moving forward. The director of sales, however, comes to you
and demands changes to the scope statement. She insists that these changes
will improve the finished product. What should you do?
A. Tell her that the scope cannot be improved unless she has hard metrics on
why the change is needed
B. Tell her that the scope cannot be improved without her creating a change
request form and then the changes will need to be approved
C. Tell her that the scope cannot be improved unless she wants to pay for
the product changes
D. Tell her that the scope cannot be changed, as the project is already being
executed
22. Which of the following is not an input to the “Close Project or Phase” process?
A. Project Management plan
B. Accepted deliverables
C. Final Product
D. Organizational Process Assets
Chapter – 4 103
23. Your project was just completed, accepted, and closed. As is customary for
your organization, you conduct a post–implementation audit. The purpose
of this audit includes all of the following except for which one?
A. Evaluating project goals and comparing them to the project’s product
B. Reviewing successes and failures
C. Performed to finalize all activities across all Project Management Process
Groups to formally complete the project, Phase or Contractual Obligations.
D. Performs post–implementation audits to document project successes and
failures
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105
Here we will learn how to achieve project success by mastering Project
Scope Management.
Project Scope Management includes the processes required to ensure that

the project includes all the work required, and only the work required, to
complete the project successfully.
Project Scope Management is primarily concerned with defining and

controlling what is included and what is not included in the project.
Key Terms
Scope
The sum of the products, services and results to be provided as a project.
Product Scope
The features and functions that characterize a product, service, or result.
Project Scope
The work that needs to be accomplished to deliver a product, service, or
result with the specified features and functions.
In Scope
What is included in the project.
Out of Scope
What is not included in the project.
Scope Creep
Uncontrolled changes to the Project Scope without an approval from the
customer or without addressing the effect on time, cost and resources.
Deliverables
A unique and verifiable product, result or service that must be produced to
complete a Process, Phase or Project.
WBS
A deliverable oriented hierarchical decomposition of the work to be
executed by the project team to achieve the project objective.
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WBS Dictionary
A document which describes each component in the WBS in detail.
Work package
A deliverable or work component at the lowest level of each branch of the
WBS.
Control Account
A management point where scope, budget, actual cost and schedule are
integrated and compared to earned value for performance measurement.
Code of Account Identifier

Any numbering system used to identify each component of the WBS.
5.0 Project Scope Management Processes

Project Scope management is an art of meticulous Planning, Monitoring
and Controlling of the work that is necessary for completing the project.
The project scope will cover all the work and only the work required to
complete the project successfully.
The Project Scope Management process includes the following key processes;
Fig. 5.0: Project Scope Management Processes
Chapter – 5 107
PROJECT SCOPE MANAGEMENT
5.1 Plan Scope Management
The purpose of plan scope management is to define, validate and control
project scope. It provides an approach for managing scope throughout the
project life cycle and avoid project scope creep and gold plating.
Fig. 5.1: Plan Scope Management – ITTO
5.1.1 Plan Scope Management – Inputs

The project management team documents how each step of the project is
executed, monitored, controlled, and closed.
The Project Management Plan incorporates and consolidates all the

subsidiary plans and baselines.
The Project Management Plan shall address and describe:

• The life cycle chosen by the project management team
• The selected process and its level of application
• How the selected process will be used to manage the project and the
interactions among them
• The tools and techniques that will be used for performing and
monitoring the processes and projects
• How work will be authorized, implemented, monitored and controlled
• A change management plan detailing how the changes will be
initiated, approved, implemented, monitored and controlled
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• How project configuration management will be performed
• Specify plan and process for doing the performance reviews
• The baseline such as:
• Scope baseline
Project Charter
A project charter is the formal document authorizing the initiation of any
project. It will have the high level project requirements and product
requirements mentioned in it. The project management team will refer to
the charter as a first step in collecting the requirements.
Enterprise Environmental Factors

Project Management Information System (PMIS), organizational
infrastructure, company structure, company culture, customers and
stakeholders preferences and risk tolerances are some of the enterprise
environmental factors that will influence the Direct and Manage Project
Execution process.

Organization’s infrastructure and government or industry standards,
templates, lessons learnt, historical information are some of the Organization
Process Assets that influence the Develop Project Charter process.
5.1.2 Plan Scope Management – Tools & Techniques
Expert Judgment
Expert opinion in technical and managerial issues will help assess the input
used to develop the project charter. Experts can be individuals or groups,
who possess specialized knowledge or skills in the area of interest.
Chapter – 5 109
Experts can be:
• From within the organization
• A stakeholder, including customers or sponsors
• Professional and technical associations
• Industry groups
• Subject Matter Experts (SME)
• Project Management Office (PMO)
Meetings
Project Team and the relevant stakeholders of the project meet to Define,
Review and Approve the Scope Management Plan and the Requirements
Management Plan.
5.1.3 Plan Scope Management – Outputs
Scope Management Plan

Scope management plan is a part of the project management plan that
describes how the scope will be defined, developed, monitored, controlled
and verified.
The components of scope management plan include:

• Process for preparing a detailed project scope statement
• Process for the creation of WBS from the Project Scope Statement
• Process for the maintenance and approval of WBS
• Process for obtaining the formal acceptance of the project deliverables
• Process to control the changes to the detailed project scope statement
Requirement Management Plan

The Requirement Management Plan details how the project requirement
will be collected, analyzed, documented and managed throughout the project.
The project manager develops a requirement management process for the
project and documents it clearly.
Some of the key components of the Requirements Management Plan will

include:
• How the requirement–related activities will be planned, tracked &
reported
• How the changes to the project requirement/product requirement/
service requirement will be initiated
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• How the impact, due to potential changes, will be analyzed
• The approving authority for changes
• How the changes to requirements will be tracked
• How priority to requirement will be assigned
• All the product metrics and rationale for those metrics
• How requirement attributes are captured and traced to various other
project documents
5.2 Collect Requirements

Collect Requirements is the process of elicitation of the stated and implied
needs of the project stakeholders. The project team should define, analyze
and document those requirements in clear and concise terms. The
requirements collected should include both project and product
requirements. Project requirements include business requirements, project
management requirements and delivery requirements etc.
The product requirements are the product features requirements, technical

requirements, performance requirements, security requirements etc.
The requirement development starts from analyzing the project charter
and the stakeholder registers. The success of the project lies in its successful
requirement gathering without any ambiguity.
Project scope management needs to be well integrated with the other

Knowledge Area processes, so that the work of the project will result in the
delivery of the specified product scope.
Chapter – 5 111
Fig. 5.2: Collect Requirements – ITTO
5.2.1 Collect Requirements – Inputs

Refer to section 5.1.3 – Plan Scope Managements – Outputs
Requirement Management Plan

Stakeholder Management Plan

Stakeholder management plan is used to understand stakeholder
communication requirements and the level of stakeholder engagement
Refer to section 13.2.3 – Plan Stakesholder Managements – Outputs
Project Charter
Stakeholder Register
The stakeholder register will contain all the information about the project
stakeholders. The project team can identify the stakeholders, who will give
appropriate inputs to the project and product requirements.
Refer to section 13.1.3 – Identity Stakeholders – Outputs
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5.2.2 Collect Requirements – Tools & Techniques
Interviews
Interviewing is one of the tools which will help the project team in collecting
the project and product requirement from the project stakeholders.
Interviewing is a formal or informal meeting between the project team

member(s) and the project stakeholder(s), project participant(s) or subject
matter expert(s) for the purpose of obtaining information about the
requirements about the project. Generally, interviews are conducted “one
to one” using any predefined questionnaire or spontaneous questions.
Interviewing will help to identify and define the required features and the
functionalists of the project deliverables.
Focus Groups
A focus group is a form of qualitative research for identifying the
requirements of the project. Here the groups of people who are involved in
the project, project stakeholders or SMEs are free to express their
expectations and attitude towards the proposed project’s product, service,
or results. Different types of suggestions and views are exchanged within
an interactive group.
The focus group discussions are typically controlled by a moderator, who

guides the discussions in order to obtain the group’s opinion on the topic.
Facilitated Workshop
Workshops can be conducted with key cross functional stakeholders to define
product requirements. Facilitated workshops are primary tools for defining
cross functional requirements which will settle stakeholder differences.
Well–facilitated workshops will build trust, foster relationships and
improve communication among the participants which can lead to consensus
among stakeholders.
In software development projects, use of the Joint Application Development

(JAD) workshop with Users and the Development team is an example of a
facilitated workshop. Similarly Quality Function Deployment (QFD) is
another example, which is used in the manufacturing industry.
Chapter – 5 113
Group Creativity Techniques
There are group creativity techniques which a project team can use for
collecting project and product requirements.
Some of these techniques are:

• Brainstorming
• Nominal group techniques
• Delphi technique
• Idea Mind Mapping
• Affinity Diagram
Refer to section 8.0.4 – Project Quality Management
Group Decision Making Technique

The group decision making technique will help the project team generate,
classify and prioritize product requirements. The requirements/ features
will be discussed in a group and decisions can be taken based on:
• Unanimity
• Majority
• Plurality
• Dictatorship
Questionnaires and Surveys

The project team can prepare a predefined set of questionnaires and conduct
a survey to collect information from a broad audience base. Surveys will be
helpful when statistical decision making is required.
Observations
Observation is directly watching the process being performed, by any
individual, in its environment or product being used in its intended
environment. This tool will be helpful when the user or the process owner
cannot articulate the requirements. This is also known as Job Shadowing.
The project team member can feel the process or product by performing the
process or using the product by himself. In this case, he is a “Participant
Observer.”
Prototypes
Prototyping is a modeling method in which a full model or scale model of an
existing or a new product is created to understand the design challenges
and user related issues. Prototyping provides early feedback on the
requirements by making a working model of the product.
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Prototyping enables the project team to experiment with the model of the
final product rather than discussing the requirements with the stakeholders.
Prototyping is a kind of progressive elaboration used in an iterative cycle
of model creation, experimenting with the model, getting feedback from
the user/stakeholder and making revisions to the model based on the
feedback. This cycle is repeated until all the requirements are completely
understood.
Benchmarking
The project planned or actual project quality practices can be compared
with those of other projects, either of a similar nature or a different nature
and either from within the performing organization or from outside the
organization to identify best practices. Those best practices can be
considered for quality planning.
Context Diagrams
It is an example of a scope model. It visually depicts the product scope and
the relationship between people and systems that interact with it. Context
diagram shows inputs to the business system, the actor(s) providing input,
the outputs from the business system and actor(s) receiving the output.
Document Analysis
Elicit requirement by analyzing all existing documents and identify
information relevant to the requirements. It includes business plan,
marketing literature, agreement, RFP, process flows, business rules,
business process, interfaces, use cases, logs, policies, procedures, regulatory
compliances etc.,
5.2.3 Collect Requirements – Outputs
Requirements Documentation
The requirements collected during the requirement collection phase should
be articulated in such a way that requirements are unambiguous, testable,
measurable, traceable, complete, consistent and the acceptance criteria for
each of the requirements are documented for validation by the sponsor/and
or customer. This can be a simple document listing of all the requirements
or a detailed one containing all the descriptions and attachments. In some
complex projects, the requirement document may contain very high level
information about the project or product requirements and will be detailed
in the course of the project progress, called progressive elaboration. The
documented requirements must be quantifiable, testable and acceptable to
all stakeholders.
Chapter – 5 115
Some of the key components of the requirement documents are:
• Business requirements including, business/project objectives,
business rules and guiding principles (policies)
• Stakeholder’s requirements (internal and external) and the
appropriate communication/reporting requirements
• Functional requirements
• Non–functional requirements
• Quality requirements and acceptance criteria
• Support and training requirements
• Requirements assumptions, dependencies and constraints
• Project requirements like Service Levels, Volumetric requirements
(like performance, response times) and well defined acceptance and
exit criteria
• Transition requirements (like data migration, managing
organizational changes)
Requirement Traceability Matrix

A Requirements Traceability Matrix helps to trace a requirement throughout
the life cycle. It provides visibility into the completeness of the quantitative
definition and testability of each requirement. Traceability is the tracking
of a requirement from its inception in the gathering activity to its
corresponding design, development, verification and delivery, throughout
the project. Traceability shows that user needs are met and assures that
the product or system will not work in unintended ways.
The Requirements Traceability Matrix helps the project team in tracing

requirements with respect to business needs, project scope, project
objectives, WBS, deliverables, product design, product development and
product testing.
The Requirement Traceability Matrix will have the following attributes:

• A unique identifier for each requirement
• A description of the requirement
• Rationale behind inclusion
• Requirement owner
• Source of origination
• Priority
• Version number
• Current status
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5.3 Define Scope
Developing a detailed description of the project and its product is very
critical in the success of any project. In the Define Scope Process, the project
scope and the product scope are clearly defined and documented. The project
deliverables, assumptions and constraints understood during project
initiation are further defined in the define scope process, as detailed
information known about project and its products. The initial assumptions
and constraints are validated for their completeness and inclusions or
exclusions of any assumptions, constraints and risks as necessary are made.
Fig. 5.3: Define Scope – ITTO
5.3.1 Define Scope – Inputs

Refer to section 5.1.3 – Plan Scope Management – Outputs
Project Charter
Refer to section 5.2.3 – Collect Requirements – Outputs

Chapter – 5 117
5.3.2 Define Scope – Tools & Techniques
Expert Judgment
Refer to section 5.1.2 – Plan Scope Management – T & T
Product Analysis
The Product Analysis tool will help the project team to define the scope of
a project which has a product as its deliverable and not a service or result.
The product analysis is done using techniques like product breakdown
analysis, systems analysis, systems engineering, value engineering, value
analysis, and functional analysis.
Alternative Identification
Alternate identification is yet another tool for defining the scope of the
project, in which the different approaches or methods available to perform
and execute a project work are considered by the project team. To find the
alternatives, the project team can use any of the general management tools
such as brainstorming, lateral thinking etc.
Facilitated Workshop
Refer to section 5.2.2 – Collect Requirements – T & T
5.3.3 Define Scope – Outputs
Project Scope Statement

A project scope statement is a document that defines the project and product
scope besides defining what is included and what is excluded. A scope
statement should be very clear and concise. The scope statement must be
as detailed as possible since this forms the basis for detailed planning and
serves as the single source of truth. This helps the project team to create a
scope baseline which helps in managing project scope.
The Scope Statement must include the following, either directly or as a

reference to other documents:
• Product Scope Description
• Product Acceptance Criteria
• Project Deliverables
• Project Exclusions
• Project Constraints
• Project Assumptions
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Some of the project documents that may get updated as part of the Define
Scope Process are:
• Stakeholder register
• Requirements documentation
• Requirement Traceability Matrix
Guidelines for preparing a Project Scope Statement
To create an effective and detailed scope statement, follow these

guidelines:
• Refine the project objectives, deliverables, and product scope

description from the project charter
• Re–examine the project requirements. Do they need to be re–
prioritized with respect to the results of the stakeholder analysis?
• Review the project boundaries. If the stakeholder analysis revealed
expectations that are out of alignment with the project objectives, it
may be necessary to add these expectations to the list of excluded
items
• Update the preliminary project constraints, risks, and assumptions.
As the project scope comes more into focus, the constraints, risks, and
assumptions will (most likely need to) be reconsidered
• Create schedule milestones so that the client and project team have
dates for setting goals and measuring progress
• Include a revised overall cost estimate and define any cost limitations.
• Identify and document known risks
• Map out the internal organization with regard to personnel, including
management, project teams, and stakeholders. Be sure to include the
management requirements, which will define how the project scope
and changes therein are managed
• Document project specifications and approval requirements
• Finalize the procedure for accepting completed products
Chapter – 5 119
5.4 Create WBS
Create WBS (Work Breakdown Structure) is the process of subdividing the
deliverables and project work into smaller and more manageable
components. The most common way of doing this is by using a hierarchical
tree structure. Each level of this structure breaks the project deliverables
or objectives down to more specific and measurable components.
The WBS is a hierarchical decomposition of the project scope. It aims to
accomplish the project objectives and create deliverables on the basis of
the work specified in the current approved project scope statement.
The planned work contains the lowest level of WBS components, which are
called work packages. A work package is used to group activities where
work is scheduled and estimated, monitored, and controlled. The term work
refers to work products or deliverables that are the result of activity and
not to the activity itself.
WBS helps the project management team to define deliverables in more

precise and concrete terms so that the project team knows exactly what
has to be accomplished within each deliverable.
The benefits of creating WBS is:

• To allow the project team to ensure that all the deliverables specified
by the stakeholders are included and there is no omission or
overlapping (Rule of 100%)
Fig. 5.4: Create WBS – ITTO
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5.4.1 Create WBS –Inputs


Refer to section 5.3.3 – Define Scope – Outputs
Refer to section 5.2.3 – Define Scope– Outputs


The performing organization’s policies, procedures, guidelines and
templates with respect to creation of WBS, previous project documents and
lessons learned from the past project are some of the OPA inputs that can
be used in creating the WBS.
5.4.2 Create WBS – Tools & Techniques
Decomposition
Decomposition is a technique used to break down the project deliverable
into smaller and more manageable components. Decomposition takes a top–
down approach and is the act of breaking down deliverables into successively
smaller portions of work to be completed in order to achieve a level of work
that can be both realistically estimated and managed by the project manager.
The lowest level components of WBS are work packages. The work packages
are useful in specific assignment of that piece of work to a person or to a
team. The level of detail in work packages depends on the size and
complexity of the project.
Decomposition of project deliverables into work packages generally

involves:
• Identifying and analyzing project deliverables and related work
• Structure and organization of WBS
• Decomposing the higher level deliverables in WBS to lower level
components
Chapter – 5 121
• Developing and assigning Identification Codes to WBS components
• Verifying the degree of decomposition of the work that is necessary
and sufficient
There are a number of ways to create the Work Breakdown Structure (WBS).
Here are some examples of how the WBS can be structured:
• WBS by project phase or stage
• WBS by time line
• WBS by deliverable
In some projects, at a particular point of time, the precise level of

decomposition may not be possible for a future deliverable, as the deliverable
may not be clearly identifiable or definable. The exact deliverables may
become clearer as the project progresses. The project management team
waits until it gets a clear understanding of the deliverables and decomposes
them to create a more detailed WBS. This concept is called Rolling Wave
Planning.
Expert Judgment
Refer to section 5.1.2 – Plan Scope Management – Tools & Techniques
Guidelines for the decomposition of project deliverables into the work

package are:
• The status of the work package is measurable. The task is adequately

defined, so that their exact status can be given at that point of time.
• Events involving the start and end of action items are defined in a
clear manner.
• All activities include deliverables. Action items should be clearly
linked to a product that will be completed once the activity is
completed.
• Duration and cost are easily estimated.
• The duration of an activity follows the 8/80 rule. Under Industry this
practises the work package is in the range of 8 to 80 hrs. (1 day to 10
days).
• Work packages are independent of one another. Once work has begun,
it can continue until its completion. Dependencies are noted, and a
task that has begun should not stall because it has everything it
requires contained within it.
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5.4.3 Create WBS – Outputs
Scope Baseline
Scope Baseline is a component of Project Management Plan, which includes:
• Project scope statement
• WBS
• WBS dictionary

5.5 Validate Scope

In validate scope process, the project management team reviews the project
deliverables with the project sponsor or the customer and gets their formal
acceptance.
Validate scope and quality control are different. In quality control the
process is concerned with the deliverables meeting their specified quality
requirements. Validate scope is concerned with getting the acceptance of
the deliverables from the project sponsor or customer. Generally, quality
control is performed before scope validation, but, in the case of small
projects, they can be performed simultaneously.
Fig. 5.5: Validate Scope – ITTO
Chapter – 5 123
5.5.1 Validate Scope – Inputs

Project Management plan contains, Scope Management plan and Scope base
line as sub components which specifies how the formal acceptance of
completed project deliverable shall be obtained. Scope base line includes
approved project / product scope, WBS, WBS dictionary and associated
deliverable.
Refer to section 4.2.3 Develop Project Plan – Outputs
Requirements Traceability Matrix

Validated Deliverables
The deliverables which are completed and checked for their correctness.
Refer to section 8.3.3 – Control Quality – Outputs
Work performance data

Degree of compliance with requirements, number of nonconformities,
severity of the nonconformities or number of reviews performed during the
reporting period.
5.5.2 Validate Scope – Tools & Techniques
Inspection
Inspection is an activity for measuring, examining and verifying the work
done towards the deliverables. It will establish that the products meet the
requirements. It can also be referred to as a review, product review, audit,
or walk through occasionally. The inspection may be conducted by an internal
or external team.
Group Decision–Making Techniques

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5.5.3 Validate Scope – Outputs
Accepted Deliverables
Once the deliverables meet the acceptance criteria, requirements are
accepted and formally signed off by the customer or the sponsor. The formal
acceptance document, acknowledging the acceptance of the deliverables
from the sponsor or the customer, is required for closing the project or
project phase.
Change Requests
The deliverables that are not accepted by the sponsor or by the customer
are documented along with the respective reasons for non–acceptance. These
deliverables may require a defect repair or work around, which will be
initiated through change requests. These change requests should be
processed through the Perform Integrated Change Control Process of the
project.
Work Performance Information

Work Performance Information will provide the necessary details about
the project progress and status of the deliverables to perform scope control.

5.6 Control Scope

Changes are inevitable. Changes to project scope can occur due to business
requirements, technological advancements, legal requirements or some
other factors. Control Scope is the process of monitoring the project and
product scope and managing the changes to the scope baseline. It ensures
that all the requested changes to the scope are processed through the
Integrated Change control process. Uncontrolled changes can result in scope
creep, jeopardizing the project.
Chapter – 5 125
Fig. 5.6: Control Scope – ITTO
5.6.1 Control Scope – Inputs

Aspects relating to how a scope baseline is to be managed in terms of
variance. (Planning vs Actuals) and associated corrective / preventive action
to be taken to ensure variances or addressed. The section relative to change
management and configuration management of the PM plan provides project
level guidelines, how to manage changes in the project scope resulting from
required changes.
Refer to section 1.2.3 – Develop PM Plan – Outputs
Requirements Traceability Matrix


Refer to section 5.5.1 – Validate Scope – Inputs

The causes for variations, the chosen corrective action and its justifications
for selection and lessons learnt from the project scope control are some of
126 ROAD TO SUCCESS

the Organizational Process Assets that may get updated as a result of the
Control Scope process.
Refer to chapter–1 OPA page 28
5.6.2 Control Scope – Tools & Techniques
Variance Analysis
It is a technique to identify, assess and address the difference between
planned and actual results.
Project performance measurements are used to analyze the variation from

the original scope baseline or to quantify the deviation from the original
scope baseline. Scope control refers to the method of determining the causes
of variation in relation to the baseline and deciding whether any corrective
or preventive action is necessary.
5.6.3 Control Scope – Outputs

The work performance information are measurements with respect to
planned vs. actual. They can include both technical and other scope
performance informations. These results are documented and communicated
to the stakeholders.
Change Requests
Refer to section 5.5.3 – Validate Scope – Outputs

The approved change requests as part of the scope control process may
result in updates to some of the Project Management Plan components.
This may include updates to Scope and Other Baselines.
Scope Baseline Updates– the Scope Statement, WBS and WBS Dictionary
may be revised to reflect the approved changes.
Other Baseline Updates– The updates to the project scope baseline may
affect the project cost and schedule. The corresponding cost baseline and
schedule baseline will be revised to reflect the changes.
Chapter – 5 127
Project Documents Updates
Requirements document and Requirement Traceability Matrix are some of
the documents that may get updated as a result of Control Scope process.

Organizational process assets that may be updated, but not limited to:
• Cost of Variance
• Corrective/preventive action chossen with reasons
• Lessons learnt
Controlling Scope – Best Practices
To effectively control project scope, follow these guidelines:
• Develop and implement a scope change control process through the

integrated change control process
• Comply with any relevant contractual provisions when the project is
done under contract
• Evaluate effect of change requests
• What is the scale of the change when compared to the scope
baseline?
• What is the impact of the change on project cost, schedule, and
quality objectives?
• What are the potential risks and benefits of the change?
• Identify and document corrective action to bring expected future
project performance in line with plans
• Make sure that formal agreements are reached and the new scope
baseline is detailed
• Revise the cost, schedule, or quality performance baselines to reflect
the changes and to form a new baseline
• Communicate to project stakeholders any changes made to the project
baselines
• Measure future performance against the revised baseline
• Use performance measurement techniques to monitor the changes
• Document lessons learnt during scope change control for use on future
projects
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5.7 Summary
Understanding the project stakeholders’ requirements and agreeing upon
the project deliverables are crucial processes in a project which greatly
influence the success of any project. As a result, the project management
team must ensure that the right processes are in place to collect customer
requirements, to define and agree on the project deliverables and to decide
how changes, if any, will be processed and disposed of appropriately.
In this chapter we learnt the processes required to collect requirements

from the project stakeholders, define the scope of the project and its product,
how to create a WBS, how to verify whether the scope is met or not and
how to handle any changes to the project or product scope.
❑
Chapter – 5 129
1. In which of the following scope management processes is the requirement

management plan prepared?
A. Create WBS
B. Collect requirements
C. Define Scope
D. Plan scope management
2. Which component of the project management plan guides the creation of

the detailed project scope statement? Manager.
A. Develop Project Charter
B. Project management plan
C. Requirements traceability matrix
D. Requirements management plan
3. Which of the following is not part of Tool & Technique of collect requirements?
A. Interviews
B. Group creativity techniques
C. Focus group
D. Inspection
4. Which one of the following is an output of the Define Scope process?

A. Project charter, Requirements documentation
B. Project scope statement and Project document updates
C. Project charter, Stakeholder register
D. Project statement of work, Stakeholder register
5. A new project manager has asked you for advice on creating a work breakdown
structure. After you explain the process to him, he asks you what software
he should use to create the WBS and what he should do with it when he has
finishing creating it. You might respond that it is not the picture that is the
most valuable result of creating a WBS. It is:
A. A bar chart
B. Team buy–in
C. Activities
D. A list of risks
Chapter – 5 131
6. All of following are needed to create the WBS Except?
A. Organizational Process Assets
B. Project Charter
C. Requirement Documentation
D. Project Scope Statement
7. All of the following are part of the scope baseline Except the:
A. Requirement management plan
B. Project scope statement
C. Work breakdown structure
D. Work breakdown structure dictionary
8. Which is not an input to the Create WBS process?

A. Requirements documentation
B. Organizational Process Assets
C. Project Scope statement
D. WBS Dictionary
9. To manage a project effectively, work should be broken down into small

pieces. Which of the following does not describes how far to decompose the
work?
A. Until it has meaningful conclusion
B. Until it cannot be logically subdivided further
C. Until it can be done by one person
D. Until it can be realistically estimated
10. What is the lowest in a work breakdown structure?

A. Project task
B. Work package
C. Responsibility assignments matrix
D. Contract negotiations
11. You are the project manager for a construction project. As you’re planning
out the work your team will do, you divide up all of the work into work
packages and create a WBS that shows how they fit into categories. For each
one of the work packages, you write down details such as initial estimates
and information about what account it should be billed against. Where do
you store all of that information?
A. Requirement Management Plan
B. WBS
C. WBS Dictionary
D. Project Scope Statement
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12. Which of the following are outputs of the Create WBS process?
A. WBS, WBS templates, WBS Dictionary, and updates to the project scope
statement and project management plan
B. Scope baseline and Project document update
C. WBS, WBS templates, WBS dictionary, and scope baseline
D. WBS, WBS dictionary, and scope baseline
13. You have just completed the plan scope management, collect requirements,
What should you do next?
A. Validate scope
B. Define activities
C. Create WBS
D. Control scope
14. Ralph is a quality control reviewer for all projects at a large clothing
manufacturer. He was reviewed Sally’s project and feels that the cost accuracy
and duration estimates need to be improved and that the project’s projected
end date is too far into the year. What should Sally do first?
A. Interview the subject matter experts (SMEs) again and ask for better
estimates
B. Re–examine the WBS to see if it can be further decomposed, to allow for
better estimating on cost and duration
C. Tell Ralph the estimates are sufficient. He is just a quality control guy
and has no real understanding of her project
D. Reduce all cost and time estimates by 10% based on Ralph’s feedback
15. The preparation of the scope baseline involves the:

A. Functional managers
B. Project team
C. Stakeholders
D. Project expediter
16. What is created as a result of scope decomposition?

A. Bill of materials
B. Work breakdown structure (WBS)
C. Organizational breakdown structure
D. Activity list
Chapter – 5 133
17. You are launching the Jhons Office Complex Project, which is similar to the
Royal Office Complex you managed last year. Which one of the following can
best help you to streamline the planning for the Jhons Office Complex Project?
A. Visiting the Royal Office Complex Project and inspecting the final
deliverable of the project
B. Relying on the Royal Office Complex Project’s risk matrix
C. Using the Royal office complex project’s accounting system for your
current project
D. Using the Royal Office Complex Project’s work breakdown structure
(WBS) as a template for the Jhons Office Complex Project
18. Your company has asked you to be the project manager for the product
introduction of their new Desktop Rock media system. You recently published
the scope statement and the supporting detail. The supporting detail contains
all of the following except:
A. Constraints
B. Other project information not noted in the scope statement
C. Code of control accounts
D. Assumptions
19. Which of the following statement is not true about WBS?

A. It is created by the project team
B. It should not change
C. It ensures that all work on the project is covered
D. It organizes and defines the total scope of work
20. Which of the following is True for a Work Breakdown Structure (WBS)?
A. Each descending level represents an increase in detail of work
B. Each ascending level represents an increase in detail of work
C. Level of detail does not change with position of work on the WBS
D. Each descending level represents a decrease in detail of work
21. All of the following are True about decomposition except:

A. It’s an output of the Define Scope process
B. It’s a tool and technique of the Create WBS process
C. It is used to create a WBS
D. It subdivides the major deliverables into smaller components
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22. Inputs to Validate Scope include the following
A. Project management plan, Requirement documentation, Requirement
traceability matrix, Change request and work performance report
B. Project management plan, Requirement documentation, Requirement
traceability matrix, validated deliverables and work performance data
C. Requirements Management Plan, Requirement documentation,
Requirement traceability matrix, Project Management Plan
D. Requirements Managements Plan, Requirements documentation,
Requirement traceability matrix, validated deliverables
23. What is difference between Control Quality and Validate Scope?

A. Quality control is done by the customer
B. Scope verification is done by the project team
C. Both are inspection–driven, but the project manager facilities quality
control and the project team does Verify scope
D. Both are inspection–driven, but the project manager facilities quality
control without the customer and then validate scope with the customer
24. Inspections are also called each of the following Except for which one?
A. Reviews
B. Assessment
C. Walkthrough
D. Audits
25. As project manager you should dedicate a primary focus to:

A. Managing changes immediately as they surface
B. Formally documenting all changes
C. Communicating authorized changes to senior management and key
stakeholders
D. Preventing unnecessary changes
135
137
139
6.0 What is Project Time Management?
Project Time Management is the process of ensuring timely completion of
the project. It includes processes that are required to deal with defining
project activities, sequencing project activities using the Precedence
Diagramming Method, and estimating the resources needed to complete
these activities.
Key Terms
Activity
Activity is the component of work performed during the course of the project.
Buffer
A provision in the project management plan to mitigate schedule risk.
A buffer is additional time allotted to complete a task to take care of risk.
Critical Path Method (CPM)

A schedule network analysis technique used to determine the amount of
scheduling flexibility (the amount of float) on various logical network paths
in the project schedule network, and to determine the minimum project
duration.
Early Start Date (ES)

In the critical path method, the earliest possible date that a schedule activity
may begin based upon the schedule network logic.
Early Finish Date (EF)

In the critical path method, the earliest possible date that a schedule activity
may finish based upon the schedule network logic.
Float
The amount of time that an activity may be delayed from its early start
without delaying the project finish date.
Lead
A modification of a logical relationship that allows an acceleration of the
successor activity.
140 ROAD TO SUCCESS

Lag
A modification of logical relationship that directs a delay in the successor
activity.
Late Start Date (LS)

In the critical path method, the latest possible date that a schedule activity
may begin based upon the schedule network logic.
Late Finish Date (LF)

In the critical path method, the latest possible date that a schedule activity
may be completed based upon the schedule network logic.
Milestone
A significant point or event in the project.
Rolling Wave Planning

A form of progressive elaboration planning where the work to be
accomplished in the near term is planned in detail at a lower level of the
work breakdown structure, while the work far in the future is planned at a
relatively high level of the work break down structure.
Schedule Variance (SV)

A measure of schedule performance on a project. It is the difference between
the earned value (EV) to planned value (PV). SV = EV– PV
Schedule
The planned dates for performing schedule activities and the planned dates
for meeting schedule milestones.
Variance
A quantifiable deviation, departure or divergence away from the known
baseline or expected value.
Chapter – 6 141
PROJECT TIME MANAGEMENT
Project Time Management Processes
The Project Time Management process includes the following key processes:
Figure 6.0: Project time Management Processes
6.1 Plan Schedule Management

The objective of establishing Schedule Management Plan is to provide a
consistent approach/guideline at the organizational level for planning,
creation, baselining, and managing the schedule throughout the project
lifecycle. It includes (but not limited to) policies, procedures, guidelines,
templates, thresholds and contingencies. The plan provides (a high level or
detailed) approach for defining and managing the schedule. This may depend
on the type and size of the project and will largely be driven by
organizational scheduling guidelines.
142 ROAD TO SUCCESS

Figure 6.1: Plan Schedule Management – ITTO
6.1.1 Plan Schedule Management – Inputs

• Assumptions
• Risks
• Scope baseline
• WBS
• WBS dictionary
• High level duration estimates
Project Charter
• High–level milestones
Chapter – 6 143
The Project Management information system (PMIS) and work authorization
systems used in an organization
• Published benchmark data such as throughput factors,
• Resource and skill availability

Organizational planning related policies, procedures, standards, templates,
guidelines for schedule management, project historical information and
lessons learnt
6.1.2 Plan Schedule Management – Tools & Techniques
Expert Judgment
Subject matter experts on schedule management from within the project or
external to the project who can validate the approach vis–à–vis the Project
to assess adequacy of controls and accuracy of data available from Project
Scope, WBS and Work Packages
Analytical Techniques
Scheduling methods, schedule management tool, parameters setting,
approach for crashing and fast tracking and associated risks and project
contingencies
Meetings
Formal review of the scheduling approach by relevant stakeholders to obtain
commitment on the thresholds and reporting requirements
Refer to section 4.3.2 – Direct & Manage Project Work – T & T
144 ROAD TO SUCCESS

6.1.3 Plan Schedule Management – Output
Schedule Management Plan

• Project Schedule Model
The scheduling tool and applicable standards to be used for arriving
at the project schedule
• Level of Accuracy
Standards in terms of manageable units of work and control
specifications including contingencies
• Units of Measure
Organizations stand on units of measure for various types of
parameters like resources, effort and duration (days or hours, date
formats etc.)
• Organizational Procedures
Procedures to adopted while translating estimates into schedule
including schedule optimization
• Control Thresholds
Project level threshold for managing variations and triggers for
updating the schedule baseline
• Rules for Performance Measurements
Methods for measuring schedule performance (SPI, SV), such as EVM
based metrics. Defining the applicable ways of measuring work
completion, including in–flight project activities, and reporting
progress vis–à–vis the budget (effort, cost, duration etc.)
• Reporting Formats
Organizational standard reporting formats that are applicable for
the project, including the frequency and stakeholders to whom the
reports should be provided
• Process Description
Description of schedule management processes, as applicable to the
project (Project Defined Process), including approved tailoring
options provided to the project.
6.2 Define Activities

Defining the activity is the first step in project time management. This is
the process of identifying and documenting specific activities that have to
be performed for completing the project and its deliverables. The activities
Chapter – 6 145
are usually defined at the “work package” level. Defining specific activities
at this level helps the project management team to estimate, schedule,
execute and monitor and control the project effectively. In this process, the
project team creates a comprehensive list called the activity list that details
all the activities to be performed for the project as a whole.
Fig. 6.2: Define Activities – ITTO
6.2.1 Define Activities – Inputs

Refer to section 6.1.3 – Plan Schedule Management – Outputs
Scope Baseline
Scope Baseline is a component of Project Management Plan, which include

• WBS
• WBS dictionary
Refer to section 5.4.3 – Create WBS – Outputs
146 ROAD TO SUCCESS

The Project Management Information System (PMIS) used in an organization
is an example of the enterprise environmental factor that can have an
influence on the define activity process.

Organizational planning related policies, procedures, or guidelines for
defining activities and lessons learnt from past projects that will influence
the defined activity process.
6.2.2 Define Activities – Tools & Techniques
Decomposition
Decomposition is a technique used to break down the work packages in a
WBS into smaller, more manageable components called activities. Activities
are the work or effort required to complete a work package that can be
realistically estimated, scheduled, executed and managed by the project
manager.
Decomposition takes a top–down approach in breaking the work packages

into activities or efforts that are required to complete the work package.
Involving the project team helps in defining a better and accurate list of
activities.
Refer to section 5.4.2 – Create WBS – T & T
Rolling Wave Planning

Rolling wave planning is a form of progressive elaboration planning where
the work to be accomplished in the near term is planned in detail at a low
level of the WBS. Future work is planned for WBS components that are at
a relatively high level of the WBS. In rolling wave planning, WBS
components may exist in different level of detail in the structure.
In some cases, decomposition may not be possible for a deliverable now, as

they will be furnished in future. Hence, the project manager and his/her
team will delay detailing other WBS components which depend on such
details of the deliverable.
Chapter – 6 147
Expert Judgment
The skills and knowledge of subject matter experts, from within the project
or external to the project, who have experience on creating the Project Scope
Statement can be utilized in defining the activities.
6.2.3 Define Activities – Outputs
Activity List
A list of activities encompassing all the work that is to be performed in
order to produce the project deliverables. The activities in the list will have
an activity identifier and sufficient information so that the project team
member knows what work is to be performed to complete that activity.
Activity Attributes
Activity attributes provide the additional information related to each
activity like name of the activity, Activity ID, WBS ID at the start of the
project and may expand to include:
• Activity codes
• Predecessor activity
• Successor activity
• Its logical relationship
• Activity leads and lags
• Resource requirements
• Imposed dates
• Assumptions
• Constraints
• Activity owner
• Geographic area where the activity is to be executed
• Level of effort required (LOE)
• Discrete or apportioned effort etc…
Activity attributes help the project team in schedule development. The

number of activity attributes used by the project management team varies
with the project.
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Milestone List
Milestones are the major events or significant points in the project lifecycle.
The milestone list details all the milestones in the project and specifies
whether they are mandatory as per the contract or optional as decided by
the project team.
6.3 Sequence Activities

Sequence activities is the process of identifying the logical relationship
among the activities and the order in which those are to be executed in the
project. Leads and lags are applied for each activity to achieve realistic
project schedule. The activity sequencing may be done by using a project
management software.
Fig. 6.3: Sequence Activities – ITTO
6.3.1 Sequence Activities– Inputs

Activity List
Refer to section 6.2.3 – Define Activities. – Outputs
Activity Attributes
Refer to section 6.2.3 – Define Activities – Outputs
Chapter – 6 149
Milestone list

A project scope statement is a document that defines the project and product
scope that may influence the activity sequencing.

Refer to chapter–1 EEF page 30

Organizational process assets, with respect to scheduling methodology, is
one example of OPA that has influence on activity sequencing.
Refer to chapter–1 OPA page 28
6.3.2 Sequence Activities– Tools & Techniques
Precedence Diagramming Method (PDM)

A method of constructing a logical network using boxes or rectangles to
represent the activities and connecting them by lines that show
dependencies. The precedence diagramming method represents activities
by boxes in which descriptions like activity identification, duration, and
other relevant details are shown. The arrows between the boxes represent
the logical relationship between the activities.
The PDM is also called the Activity On Node (AON) diagramming method.
In PDM, it is also necessary to define the relationship between the
predecessor activity and the successor activity.
There are 4 types of relationships, namely:

• Finish to Start (FS)
• Finish to Finish (FF)
• Start to Start (SS)
• Start to Finish (SF)
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These relationships are explained in detail below:
Finish to Start (FS) – which means the successor activity cannot start
until its predecessor has been completed.
Activity A Activity B
Start Finish Start Finish
FS
In the activity relationship shown above, Activity B can start only after
Activity A is finished.
Finish to Finish (FF) – which means the successor activity cannot be

completed before its predecessor has been completed.
FF
In the activity relationship shown above, Activity B can finish only after
Activity A is finished.
Start to Start (SS) – which means that the successor activity cannot start
until its predecessor has started.
SS
In the activity relationship shown above, Activity B can start only after
activity A starts.
Start to Finish (SF) – which means the successor activity cannot be finished
before its predecessor starts.
SF
In the activity relationship shown above, Activity B can be finished only

after Activity A starts.
Chapter – 6 151
These relationships can also have time durations associated with them.
In PDM, the finish to start relationship is more commonly used and start
to finish is rarely used.
Dependency Determination
Dependency determination is a method to determine how each activity in a
project depends on its predecessor or successor activity. There can be three
types of dependencies between the activities. They are:
• Mandatory dependencies
• Discretionary dependencies
• External dependencies
Mandatory Dependencies
Mandatory dependencies are those that are inherent in the activity being
done or required by the contract. They often involve physical limitations.
On a construction project, it is impossible to erect the superstructure until
the foundation has been laid. In an electronics project, a prototype must be
built before it can be tested. Mandatory dependencies are also called hard
logic.
Discretionary Dependencies
Discretionary dependencies are those that are defined by the project
management team. Discretionary dependencies are also called as preferred
logic, preferential logic, or soft logic.
They should be used with care (and fully documented), since they can limit
scheduling options later. Discretionary dependencies are usually based on:
• “Best practices” within a particular application area
• Some unusual aspect of the project, where a specific sequence is
desired, even though there are other acceptable sequences
External Dependencies
External dependencies are those that involve a relationship between project
activities and non–project activities. For example, the testing activity in a
software project may be dependent on delivery of hardware from an external
source, or environmental hearings may need to be held before site
preparation can begin on a construction project.
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Leads and Lags
Lag time represents the time duration by which the succeeding activity
can start before the completion of the preceding activity. For example,
an activity in a finish–to–start dependency with a 10–day lag, the successor
activity cannot start until 10 days after the predecessor has finished.
Lead time represents the time delay between the preceding activity and
the commencement of the succeeding activity. For example, in an activity
in a finish–to–start dependency with a 10–day lead, the successor activity
can start 10 days before the predecessor has finished.
Lead and lag time is presumed to be zero if not indicated. Lead and lag time
between events can be expressed either in days or percentage of duration.
The project management team determines the dependencies that may
require lead or lag to define the logical relationship accurately between
the activities.
6.3.3 Sequence Activities– Outputs
Project Schedule Network Diagram

Project network diagrams are generated on performing the Sequence
Activity process. Project network diagrams are the graphical representation
of the project schedule activities, showing their logical relationships. The
project management team can develop the schedule network diagram either
manually or by using a Project Management Software (PMS).

Activity lists, activity attributes, and the risk register are some of the
documents that may get updated while performing the sequence activity
process.
Chapter – 6 153
Steps to Create Project Schedule Network Diagram
To create a PDM project schedule network diagram, with all the

activities having the most common precedence relationship, finish–to–
start (FS):
• Determine the dependencies among project activities using your
activity list, activity attributes and customer contract
• Identify predecessor and successor activities
• Create a table with two columns
• In the first column, list each activity to be sequenced. Identify
each with a letter or code
• In the second column, write the letter/code of the predecessor
activities for each activity
• Create nodes for all activities with no predecessor activities or
dependencies
• Create nodes for all activities that are successor activities to the
nodes already created
• Draw arrows from the predecessor activities to the successor
activities
Continue drawing the network diagram, working from left to right until
all activities are included on the diagram and their precedence
relationships are indicated by arrows. Include any known lags or leads.
Verify the accuracy of your diagram. Check to ensure that:

• All activities on the activity list are included in the diagram
• All precedence relationships are correctly indicated by arrows
going from the predecessor activities to the successor activities
• Any known lags or leads are indicated on the diagram
6.4 Estimate Activity Resources

Having identified the activities and the sequence in which they have to be
performed, the next step in project time management is the estimation of
the resources required to perform each activity. The resources include
human resources, materials, machine equipment or suppliers who will
perform these activities. The Estimate Activity Resource process is closely
coordinated with the Estimate Cost process.
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Fig. 6.4: Estimate Activity Resources – ITTO
6.4.1 Estimate Activity Resources – Inputs

Activity List
Activity Attributes
Resource Calendars
The project management team can refer to the information on the human
resources, equipment and material availability with the performing
organization, during the period when identified activities are planned in
the project. The resource calendar should have the information such as the
experience and skill set of the resources, their availability and the
geographical location where the resource is from.
Risk Register
Refer to section 11.2.3 – Identify Risk – Outputs
Activity Cost Estimate

Refer to section 7.2.3– Estimate Cost – Outputs
Chapter – 6 155
The resource availability and the skill availability in the performing
organization can influence the Estimate Activity Resource process.

The organizational policies, procedures with respect to staffing, outsourcing,
purchase of equipment and services, and the lessons learnt from previous
projects will provide vital inputs to the project management team in
estimating the resources required for an activity.
6.4.2 Estimate Activity Resources – Tools & Techniques
Expert Judgment
The skills and knowledge of subject matter experts, from within the project
or external to the project, who have specialized knowledge in resource
planning and resource estimation can be utilized in estimating the activity
resources.
Alternative Analysis
Alternate analysis is a tool, which helps the project team in considering
different approaches or methods available to them to perform/execute an
activity of a project such as:
• Different levels of resource capability or skills
• Different size or type of machines
• Different type of tools, automated or manual
• Make or buy decisions
Published Estimating Data

Many organizations regularly publish the production rate for various tasks,
the costs of various trade–offs, human resources, machines and material
for various countries for different locations within the same country or
outside the country. The project management team can use this information
in estimating the resources required for performing the activities of the
project.
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Bottom–up Estimating
Whenever there is difficulty in estimating the resource requirement to
perform an activity as a whole, the activity can be further decomposed to
include more detailed tasks. Then the project team can estimate the resource
requirement to perform each task and aggregate them to estimate the total
duration at the activity level. If there is any dependency between the
activities that may affect the use of resources, those details are to be
documented.
Project Management Software

Project Management Software has the capability to help plan, organize,
manage resource pools, and develop resource estimates. The PMS, depending
upon its available features, can help in defining the resource breakdown
structure, resource rates, resource calendars which optimize the resource
utilization in a project.
6.4.3 Estimate Activity Resources – Outputs
Activity Resource Requirements

The project management team will determine the types and quantity of
resource required for each activity in a work package. The required
resources for performing each activity are aggregated to arrive at the total
resource requirement for the work package. The team documents the basis
on which the resource requirements are estimated, any assumptions
considered during the estimation process, the resource availability and
quantum of resource used.
The extent of detail in which an activity resource estimate can be made and
the description will vary depending upon the nature/size of the project.
Resource Breakdown Structure (RBS)

The resources identified for the project are arranged in a hierarchical
structure by resource category (labor, material, equipment, resource type)
along with the timelines for which these resources are required. This may
also include the cost of resources and the number of units.

Activity list, activity attributes and resource calendars are some of the
project documents that may get updated as a result of the Estimate Activity
Resource process.
Chapter – 6 157
6.5 Estimate Activity Durations
Estimating activity duration is the process of determining the duration
required for the work (effort) that is required to be completed for an activity.
The resulting activity duration estimates will form the basis of creating a
preliminary project schedule. Estimating activity duration accurately is
important for the success of any project. In this process, the project
management team estimates the time it takes to complete an activity.
Estimating Activity Duration is dependent on the scope of the activity,
resource estimates, resource availability, resource calendars etc. and goes
through progressive elaboration.
The inputs to the Estimate Activity Duration process are provided by

persons or the groups in the project team who are familiar with the nature
of work to be performed.
The assumptions and constraints used for estimating the activity duration
will be documented by the project team to be used during the schedule
development.
A structured and disciplined approach of estimating the project duration

helps in arriving at comprehensive project estimates which is used for
creating a detailed Project Schedule. This approach removes uncertainty
and will help in performing what–if analysis for arriving at the optimal
project duration (critical path).
Fig. 6.5: Estimate Activity Durations – ITTO
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6.5.1 Estimate Activity Durations– Inputs

Activity List
Activity Attributes

The activity resource requirements identified in the Estimate Activity
Resources process will influence the Estimate Activity Duration process.
In case of any changes to the resource assignment, i.e., with lower skill
level or experience will increase the activity duration due to the reduction
in efficiency and additional time spent on training and communications.
Refer to section 6.4.3 – Estimate Activity Resource – Outputs
Resource Calendars
The resource availability, its type, quantity, capability of both human
resources and equipment & material resources will influence the Estimate
Activity Duration. The project management team can refer to this
information in the resource calendar.
Refer to section 6.4.1 – Estimate Activity Resources – Inputs

The project assumptions/constraints which are assumed to be true at the
start of the project, greatly influence the Estimate Activity Duration process.
The project management team can refer to the project scope statement which
contains the project constraints and assumptions, when estimating the
activity duration.
Some valid assumptions are:

• Sponsor commitment and support throughout project execution
• Availability of “Right Resources” at the “Right Time” at the “Right
Cost”
Chapter – 6 159
Some valid constraints are:
• Project budget
• Contract terms and requirements
Risk Register
Refer to section 11.2.3 – Identify Risks – Outputs
Resource Break–down Structure

Refer to section 6.4.3 – Estimate Activity Resource – Outputs

The performing organization’s durations estimating data base, productivity
metrics and published commercial information and any other reference data
are enterprise environmental factors that can influence the Estimate Activity
Durations process.

Historical information with respect to activity duration, project calendars,
and scheduling methodologies followed in the performing organization and
lessons learnt are examples of Organizational Process Assets that can
influence the Estimate Activity Durations process.
6.5.2 Estimate Activity Duration – Tools & Techniques
Expert Judgment
The project team can use the opinion of an expert, who has wide experience
and knowledge in duration estimation, guided by the historical information
from similar projects in the past. Expert judgment can be used to decide
whether to combine methods of estimating and how to resolve the differences
between them.
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Analogous Estimation
In Analogous Estimating, also known as top–down estimating, a previous
similar activity is used as a model for estimating future activity duration.
It is one form of expert judgment that requires data from similar projects
executed. The parameters that are typically used include (but not limited
to), are duration, budget, size, weight and complexity factors from previous
similar projects.
Analogous estimating is used in the early phase of the project when there
is only limited information available about the project. Analogous estimating
is less expensive and less time consuming when compared to other
estimating techniques.
Analogous estimating is generally less accurate and unreliable. It can be

most reliable and accurate only when the activity in question is similar in
nature and the project team members have the required expertise.
Parametric Estimation
Parametric estimation generally uses either an empirical formula or
established algorithms using standard parameters to estimate cost and
duration for projects. Parametric estimation uses historical information
coupled with statistical relationship between the variables to calculate the
estimated parameters such as cost, duration and budget. In parametric
estimation, activity duration can be estimated by multiplying a throughput
rate from the historical data by the quantities to be performed for specific
work.
For example, if you are estimating the duration required for plastering a
wall of 100 square feet and you know the throughput of the available resource,
the duration required to complete the work can be calculated by dividing
the total area to plaster by the throughput rate. In this example, suppose
the through rate of the resource is 1 square feet/hour, then the duration
required to complete the plastering of 100 square feet is:
100 ÷1 = 100 hours.
Parametric estimating can produce more accurate results than analogous

estimates. However, the level of accuracy of estimation will depend on the
quality of underlying data available for the project team. Parametric
estimation can be used to calculate the duration of the total project or
segment of the project in conjunction with other estimating methods.
Chapter – 6 161
Three–Point Estimation
Three–point estimates are based on determining three types of estimates,
namely optimistic estimates, most likely estimates and pessimistic estimates
for an activity and arriving at a range within which the activity can be
completed.
Three–point estimation takes into account the uncertainty/ risk involved

while estimating the duration. This technique improves the accuracy of the
estimate as it provides a range estimate which can be validated through
advanced simulation techniques. This estimating technique originated from
the Program Evaluation & Review Technique (PERT), which uses a three–
point estimate to define an approximate range for activity duration.
The Three Point Estimate considers the following while performing

estimation:
Most likely (tm): The duration of the schedule activity, given the resources
likely to be assigned, their productivity, realistic expectations of availability
for the schedule activity, dependencies on other participants, and
interruptions is the most likely one.
Optimistic (to): The activity duration is based on a best–case scenario for

the activity.
Pessimistic (tp): The activity duration is based on a worst–case scenario

for the activity.
PERT analysis calculates the Expected (t E) activity duration using a

weighted average of these estimates. The formula given below is used to
estimate the expected (tE) duration to complete the activity.
tE= (tO+4tM+tP)/ 6 – for Beta Distribution
tE= (tO+tM+tP)/ 3 – for Triangular Distribution
Estimates based on the above equation are considered more accurate as it

takes into account the range covering the lower and upper limits.
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Standard deviation for an activity is computed using the following formula:
SD = (tP– tO) / 6
To calculate the variance within which the activity can be completed the
following formula is used:
Variance = SD2 = ( (tP– tO)/6 ) 2
Group Decision Making Techniques

Reserve Analysis
To take care of schedule uncertainties, buffer time (also known as time
reserves or contingency reserve) are added in the project schedule as feeding
buffers or project buffer. The contingency reserve can be calculated as a
percentage of the activity duration or a fixed work period, or can be
calculated using quantitative techniques. As the project progresses and more
information becomes available, the contingency reserve used is reduced or
eliminated. The contingency should be clearly identified in the project
schedule documents.
6.5.3 Estimate Activity Duration – Outputs
Activity Duration Estimates

Activity Duration Estimates are the outputs of the Estimate Activity
Duration process. These estimates contain information about the number
of work periods that are required to complete each activity. The information
may also include the possible range within which the activity can be
completed and also the probability of completing the activity within the
range.
For example
• 2 weeks ±2 days to indicate that the activity can take at least eight
days and no more than 12 days to complete (calculated @ 5 working
days/week).
• 15% probability that the activity may take more than three weeks.
Chapter – 6 163
Some of the project documents that may get updated include:
• Activity attributes
Assumptions made in developing the duration estimates such as skill levels

and availability.
6.6 Develop Schedule
Fig. 6.6: Develop Schedule – ITTO
6.6.1 Develop Schedule – Inputs

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Activity list
Activity attributes
Project Schedule Network Diagrams

Refer to section 6.3.3 – Sequence Activities – Outputs

Refer to section 6.4.3 – Estimate Activity Resources – Outputs
Resource Calendars
Refer to section 6.4.1 – Estimate Activity Resources – Inputs

Refer to section 6.5.3 – Estimate Activity Duration – Outputs

The assumptions and constraints mentioned in the scope statement can
influence the Develop Schedule process.
Risk Register
Project Staff Assignment

Refer to section 9.2.3 – Acquire Project Teams – Outputs
Resource Breakdown Structure


Many organizations may have automated the scheduling process by using
some scheduling tool. This will influence the Develop Schedule process.
Chapter – 6 165
Many organizational process assets of the performing organization will
influence the Develop Schedule process.
Some examples are:

• Scheduling methodology
• Project calendar
6.6.2 Develop Schedule – Tools & Techniques
Schedule Network Analysis

Schedule network analysis is a technique in which the project management
team uses various analytical techniques such as critical path method, critical
chain method, what–if analysis and resource leveling techniques. Schedule
network analysis helps in generating the project management schedule.
Critical Path Method

A critical path is the sequence of project network activities, which, when
added up, contributes to the longest overall duration for the project. This
determines the shortest time possible to complete the project. Any delay of
an activity on the critical path directly impacts the planned project
completion date.
The essential technique for using CPM is to construct a model of the project
that includes the following:
1. A list of all activities required to complete the project (also known as
Work Breakdown Structure (WBS).
2. The time duration that each activity will take for completion, and
3. The dependencies between the activities.
Using these values, CPM calculates the longest path of planned activities
to the end of the project, by doing a forward pass and a backward pass
analysis. The early start date, late start date, early finish date and late
finish dates are calculated to identify the critical path that each activity
can start and finish without causing a delay in the project. This process
determines the activities which are “critical” (i.e., on the longest path) and
which have “total float” (i.e., can be delayed without making the project
longer).
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Figure 6.7: Develop Schedule – T & T
In the above network diagram, Early Start and Early Finish dates are
calculated by means of Forward Pass and Late Start and Late Finish dates
are calculated by means of Backward Pass. The Critical path has zero or
negative Total Float. A project can have several critical paths.
Critical Chain Method

Critical Chain method is a network analysis tool, in which the resource
limitations are taken into account while developing the project schedule.
To do a critical chain network analysis, initially the schedule network

diagram is drawn using duration estimates with required dependencies
and defined constraints as inputs. Then the critical path is identified. Next
the resource availability is applied to the network; this will generally result
in an altered critical path. The resource constrained critical path is called
critical chain. The critical path where there is a resource constraint is called
a critical chain.
In the critical chain method the deterministic and probabilistic approaches

are used to schedule network analysis and add buffers to account for resource
constrained situations and ensure optimum use of buffers, both project
buffers and feeding buffers.
• Project buffers
Project buffers are the non–work schedule activities added to the
end of the critical chain to manage uncertainties
Chapter – 6 167
• Feeding buffers
Feeding buffers are the non–work schedule activities added to the
feeding point of the non–dependent activities that are not on the
critical path but feeds into the critical path, to protect the critical
chain from slippage along the feeding chains. The size of the feeding
buffer shall account for uncertainty in the duration of the chain of
dependent tasks leading up to that buffer
Once buffer schedule activities are determined, the planned activities

are scheduled to their latest start date and finish dates. In the critical
chain method, the project management team focuses on managing
the remaining buffer durations against the remaining task duration
chain
Resource Optimization Techniques

Resources allocated to tools should be optimized for loading of works and
efficient planning for ramp–up and ramp–down.
Two such techniques includes (but not limited to:

• Resource Levelling
• Resource Smooting
Resource Leveling
Resource leveling is one of a schedule network technique. This can be used
in the following situations:
• When shared or critical resources required are available only at a
Certain time or In limited quantity
• When you want to keep the resource usage at a constant level
• When resources have been over–allocated
Resource leveling will be applied to a schedule that is already analyzed by

the critical path method. Resource leveling often causes the original critical
path to change.
Resource Smoothing
Resource smoothing is the process of adjusting activities within a schedule
using the free and total float to ensure the project does not exceed the
resource thresholds. Resource smoothing does not alter the critical path.
Resource smoothing may not be able to optimize all resources (utilization)
since it is applicable only for activities where there is a free float.
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Modeling Techniques
• What–if Scenario Analysis
• Simulation
What–if Scenario Analysis

This is another schedule analysis technique, in which schedule analysis is
performed using different scenarios such as what will happen to the project
schedule;
• If there is a delay in delivery of a major component
• If there is a labor strike
• If there is an unexpected delay in an activity
• If there is an influence of external factors
This analysis helps to assess the feasibility of the project schedule under
adverse conditions and preparing for the contingency response plans.
Simulation
The simulation will be done under various assumptions. Monte Carlo
analysis is the most common simulation technique used to do what–if
scenario analysis.
Refer to chapter–6.12 – Stimulations
Leads and Lags

Applying leads and lags during network analysis are to develop a viable
schedule.
Refer to section 6.3.2 – Sequence Activities – T & T
Schedule Compression
Schedule Compression is a technique which will help the project team to
shorten the project duration without any changes to the project scope.
Schedule compression can be done in two ways:

• Crashing
• Fast tracking
Crashing
Crashing is one of the techniques used for reducing the project
Chapter – 6 169
duration. Crashing the schedule means deploying additional
resources to the critical path activities to reduce the schedule
duration. Adding resources can include approving overtime, bringing
additional resources or paying extra to expedite the delivery of
activities in the critical path.
Crashing will work only for activities, where adding extra resources
will shorten the duration. The project management team has to be
cautious when using the crashing technique, as crashing does not
always produce the expected results and will increase the cost / risk.
For instance, let’s say one person was working on a ten–day activity
on the critical path. If you were really desperate to shorten this time
frame, you might add a second resource to this activity. In fact, the
resource may not have all the right skills and he might work five
days just to reduce the overall time by two days.
Crashing generally results in increased costs. The cost and schedule

trade–offs have to be analyzed to obtain greatest amount of
compression for the least amount of incremental cost.
Fast tracking
Fast tracking is another schedule compression technique, in which
the project team analyses the activities that are initially scheduled
in sequence, but which can be done parallelly to reduce the overall
project duration. Fast tracking will work only for activities that can
be overlapped.
For instance, normally the development will begin only when the
design is completed. However, when doing fast tracking, the
construction would start in areas where the design was complete
without waiting for the entire design to be completed.
Fast tracking always involves risk that could lead to increased cost
and some rework later.
For instance, in the example of designing and constructing an

application, it is possible that the design might change before it is
finalized, and those final changes may result in rework of some of
the work already in progress.
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Scheduling Tool
A scheduling tool helps the project management team to expedite the
scheduling process by generating start and finish dates based on the inputs
of activities, network diagrams, resources and activity durations. This can
be used in conjunction with other project management software applications
as well as manual methods.
6.6.3 Develop Schedule – Outputs
Schedule Baseline
A schedule baseline is a specific version of the project schedule developed
from the schedule network analysis, which is accepted and approved by the
project management team as the schedule baseline. This will have the start
and finish dates of activities, milestones and projects. The schedule baseline
is a component of the Project Management plan.
Project Schedule
In project schedule, the project activities are shown in a logical sequence
with the start date, finish date and the duration for each activity. The
duration of all the activities adds up to the project duration. The project
schedule may be represented in a summary form, called the master schedule
or by milestones or can be presented in detail.
The project schedule can be presented in a tabular form or in graphical

form using any of the following formats:
• Milestone charts
• Bar charts
• Project schedule network diagram
Milestone charts
Milestone charts are a form of bar chart in which only the scheduled
start and end dates of major deliverables will be indicated
Bar charts
Bar charts are the one in which each bar will represent an activity
indicating their start and end dates. Bar charts are relatively easy to
read and frequently used in schedule diagrams. For better control
and management communication, more comprehensive summary
activity, also referred to as Hammock Activity is used between
milestones or across multiple interdependent work packages. This
will be displayed in bar chart reports
Chapter – 6 171
Project schedule network diagram
The project schedule network diagram will have information such as
the activity start and finish dates, the network logic and the critical
path schedule activities. The network diagram will be represented
by using an activity on node (AON) diagramming format. The project
schedule network diagram is also known as a logical bar chart.
Following figure shows a Project Schedule :
Figure 6.8: Project Schedule
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Schedule Data
The schedule data for the project include the schedule milestones, schedule
activities, activity attributes and all the documented assumptions and
constraints. There may be some additional data depending upon the
application area.
The information frequently supplied as supporting details to the schedule

are:
• Resource requirements by time period
• Alternative schedules, such as schedules based on best case scenario
or worst case scenario, schedules with or without resource leveling
and schedules with or without imposed dates.
• Scheduling contingency reserves
Schedule data can include items such as resource histogram, cash
flow projections and order and delivery schedules
Project Calendars
The calendar for each project may use different calendar units as the basis
for scheduling the project.
The project calendar includes, working hours, holiday lists etc., for the
project.

The project documents that may get updated while performing the Develop
Schedule process may include:

The resource leveling technique could result in a significant impact on the
originally estimated types and quantity of resources. If the resource leveling
analysis changes the project resource requirements, then the project
resource requirements will get updated.
Activity Attributes
The activity attributes may get updated due to changes in resource
requirements or due to any changes to the schedule.
Risk Register
The risk register may get updated to reflect any changes to the opportunities
and threats because of the Develop Schedule Process.
Chapter – 6 173
6.7 Control Schedule
Control schedule is the process of monitoring the project’s progress;
comparing it with the schedule baseline and managing the schedule delays
to ensure that the project gets completed in time. Control schedule is a
component of the Perform Integrated Change Control process.
The focus of the Control Schedule process is:

• Determining the current status of the project schedule
• Influencing the factors that create schedule changes
• Determining if the project schedule has changed
• Managing actual changes as they occur
For agile methodology based projects, following aspects should be

considered:
• Current status based on delivered work and accepted work vis–a–
vis plan
• Conduct retrospective reviews for capturing lessons learnt
• Asses remaining work and revisit burndown chart
• Verify and update team velocity based on current project status
• Asses the need for revising schedule
• Manage changes to schedule (if any)
Fig. 6.9: Control Schedule – ITTO
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6.7.1 Control Schedule – Inputs

The schedule management plan and the schedule baseline is part of the
Project Management Plan, which is required to monitor and control the
project schedule. The schedule management plan will contain the process
based on which the project schedule will be controlled and managed. The
schedule baseline is used to compare the actual performance and to
determine if any corrective/preventive actions are necessary.
Project Schedule
The project management team requires the recent version of the schedule
with notations to indicate updates, completed activities and commenced
activities as on date, to monitor and control the project schedule.

To perform the control schedule process, information about project
performance with respect to project schedule, in terms of activities which
have started, their progress and activities which have been completed, are
required.
Project Calendar
Refer to section 6.6.3 – Develop Schedule – Outputs

Some of the organizational process assets that can influence the Control
Schedule process are:
• The organization’s existing schedule control policies, procedures and
guidelines
• The schedule control tools available in the organization
• The monitoring and reporting methods that must be used
Refer to chapter–1 OPA page no. 26
6.7.2 Control Schedule – Tools & Techniques
Performance Review
Performance review is about measuring, comparing, and analyzing the
project’s schedule performance such as start dates, finish dates, percentage
of completion and remaining duration for the work in progress.
Chapter – 6 175
When Earned Value Management (EVM) technique is employed, the
performance review focuses on schedule variance and schedule performance
index to assess the magnitude of schedule variation. The important part of
Control Schedule is to decide if the extent of schedule variation requires
any corrective measures or not.
For instance, a major delay in an activity lying in a non–critical path may

not require any correction as long as it is within its float time; whereas a
minor delay in a critical path activity may require immediate corrective
action to keep the project on schedule.
If the project management team has employed the critical chain method for
schedule development, then the amount of remaining buffer to the amount
of buffer required to protect the delivery date can determine whether
corrective action is required or not.
Variance Analysis
Variance Analysis is useful for assessing the project performance variance
with respect to the schedule baseline by using the schedule variance (SV)
and schedule performance index (SPI). The total float variance is an essential
planning component to evaluate the project time performance. An important
aspect of schedule control includes determining the cause and degree of
the variation with respect to the schedule baseline and deciding whether
any corrective or preventive actions are required.

Project Management Software will help the project management team to
track the planned dates of the activities versus the actual dates.
Resource Optimization Techniques

Refer to section 6.6.2 – Develop Schedule – T & T
Modeling Techniques
Leads and Lags

Refer to section 6.3.2 – Sequence Activities – T & T
Schedule Compression
Schedule compression is the tool available to the project management team
when projects are running behind schedule, to bring it back on track with
respect to the plan.
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Scheduling Tool
The scheduling tool helps the project management team in controlling the
project schedule. The schedule is periodically updated to reflect the actual
progress of the project and the remaining work to be completed. The
scheduling tool can be used in conjunction with manual methods or other
project management software to perform a schedule network analysis to
generate an updated project schedule.
6.7.3 Control Schedule – Outputs
Work Performance Informations

The SV and SPI are calculated from the project work performance for the
WBS components, in particular work packages & control accounts and these
data are documented and communicated to the project stakeholders.

Some of the Organizational Process Assets that may get updated as part of
performing the Control Schedule process are:
• Causes for variation
• Corrective action chosen with reasons
• Other types of lessons learnt from project schedule control
Refer to chapter–1 OPA page no. 26
Change Requests
The schedule variance analysis along with the review of progress reports,
results of performance measures and modifications to the project schedule
can result in a change request to the schedule baseline or any other
component of the PM plan. These change requests have to be processed,
reviewed and disposed through the project’s integrated change control
process.

The control schedule process will result in updates to some components of
the Project Management Plan.
The components of PM plan that may get updated are:
Schedule baseline
The changes to schedule baseline are incorporated in response to the
approved change requests
Chapter – 6 177
Schedule management plan
The schedule management plan may get updated to reflect a change in the
way the schedule is managed
Cost baseline
The schedule compression may lead to changes in the project cost baseline

Some of the documents that may get updated as a result of Control Schedule
process are:
Schedule Data
New project schedule network diagrams may be developed to display
approved balance durations and modifications to the work plan. In some
cases, the schedule delay may be severe, so the development of a new target
schedule with forecasted start/ finish date is required for providing a realistic
data for directing the work, measuring performance and progress
Project Schedule
An updated project schedule will be prepared from the updated schedule
data to reflect the schedule changes and manage the project
OPA Updates
As a result of project schedule some elements of OPA like schedule baseline
and organization artifacts etc., may get updated.
6.8 Summary
Time management is a very important skill for a successful project manager.
It is observed that poor schedule management is one of the major causes for
project cost overrun. To have better time management in a project, the
project manager has to list out all the activities to be accomplished, the
logical sequence in which they have to be performed, the resources required,
and the time duration to accomplish each activity. All this information is
required to develop a realistic project schedule.
Once the schedule is developed, the project manager has to effectively

monitor and control the execution, by employing EVM techniques. Any
variance has to be analyzed and if required, corrective or preventive action
to be taken to correct the variance.
❑
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179
Hence, with the end of the war, an effort was made to apply the OR approach
to other areas in business and industry.
Key Terms
Terms Related to Decision Models
Decision Tree
A decision tree is an Operation Research model which aids the decision
maker to choose the right alternative by visualizing the problem and the
possible outcomes of the decision.
Operational Decision
Operational decisions are day–to–day decisions used to support tactical
decisions.
Strategic Decision
Strategic decisions are at the highest level. They are concerned with general
direction, long term goals, philosophies and values.
Tactical Decision
Tactical decisions support strategic decisions. They are medium–ranged
and less–significant than strategic decisions with moderate consequences.
Terms Related to Network Analysis
Activity
The number of job operations or tasks which make up a project are called
activities. An activity is an element of a project and may also be a process.
An activity is shown by an arrow and begins and ends with an event.
Activities are classified as:
Critical Activities
In a network diagram, critical activities are those which consume more
than their estimated time and cause the project to be delayed. An activity
is critical if its earliest start time plus the time it takes is equal to the
latest finishing time.
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Critical Path
The critical path is that sequence of activities which determines the total
project duration. It is formed by critical activities. It consumes the maximum
resources and represents the longest path. A critical path has zero float
and reveals those activities which must be manipulated by some means or
the other so that schedule completion dates can be met.
Duration
The estimated or actual time required to complete a task or activity.
Event
An event is a specific instant in time which marks the start and the end of
an activity.
Earliest Start Time (ES)

The earliest possible time an activity can start.
Earliest Finish Time (EF)

The earliest possible time an activity can finish.
EF=ES + duration of that activity.
Float or Slack
Slack refers to an event and float to an activity. In other words, slack is
used with PERT and float with CPM.
Free Float
If all the non–critical activities start as early as possible, the surplus time
is the free float.
Independent Float
The use of independent float of an activity doesn’t change the float of another
activity.
Latest Finish Time (LF)

The last event time of the head event. It is calculated by moving back from
finish to start.
Latest Start Time (LS)

It is the latest possible time by which an activity can start LS= LF– duration
of that activity.
Chapter – 6 181
INTRODUCTION TO OPERATION RESEARCH
Network Diagram
A network diagram is the basic feature of network planning. It is a diagram
which represents all the events and activities in a sequence.
Non–Critical Activities
These activities have provisions (float / slack); even if they consume a
specified time over and above the estimated time, the project will not be
delayed.
Total Project Time

The time which will be taken to complete a project i.e.: the duration of the
critical path.
Total float
The additional time a non–critical activity can consume without affecting
the project duration.
TF: (LS– ES) (or) (LF–EF) (TF can be negative)
Terms Related to Simulation
Interactive Simulation
Interactive simulation represents a special kind of physical simulation, often
referred to as a “human in the loop simulation,” in which physical simulations
include human operators, such as a flight or driving simulator. Human in
the loop simulations can include a computer simulation as a so–called
synthetic environment.
Physical Simulation
Physical simulation refers to a simulation in which physical objects are
substituted for the real thing (some circles use the term for computer
simulations modeling selected laws of physics, but this article does not).
These physical objects are often chosen because they are smaller or cheaper
than the actual object or system.
Simulation
Simulation is a numerical technique for conducting experiments on a digital
computer, involving logical and mathematical relationships which interact
to describe the behavior and structure of a complex real–world system over
an extended period of time.
182 ROAD TO SUCCESS

6.9 Development of Operation Research
In 1947, George B. Dantzig developed Linear Programming and the Simplex
Method. Later, some more techniques for Statistical Quality Controls,
Dynamic Programming, Queuing Theory and inventory–related techniques
were developed before the 1950’s. After this research and development,
OR was introduced into the curricula of various universities, and techniques
were formulated and used in areas such as engineering, public
administration, applied mathematics, management, economics and computer
usage areas. The journal, OR quarterly was published in 1950, while the
Journal of Operations Research Society of India (ORSI), named ‘Operations
Research,’ was published in 1953.
In 1953, The Institute of Management Sciences (TIMS) was established and

its Journal ‘Management Science’ appeared in 1954. In India, an OR
establishment was formed at the Regional Research Laboratory (RRL) in
Hyderabad in 1949. In 1953, an OR team was formed in Calcutta and the
Formal OR Society of India was founded in 1957, with its journal,
‘OPSEARCH’. In 1953, India became a member of the International
Federation of Operations Research Societies (IFORS) headquartered in
London. In 1954, various project scheduling techniques such as CPM and
PERT, commonly used now, were developed. Around 1967–68, the area of
OR was extended for use in various functional requirements including
behavioral problems with in administration.
OR Models
OR models can be classified into the following categories:
• Linear Programming Models
• Sequencing Modes
• Waiting Line or Queuing Models
• Games Models
• Dynamic Programming Models
• Inventory Models
• Replacement Models
• Decision Analysis Models (Decision Theory)
• Simulation Models
• Network Models
Out of this, our scope of study is limited to the last three models.
Chapter – 6 183
6.10 Decision Analysis Models (Decision Theory)
These models are used for selecting an optimal strategy of operation given
the possible payoffs and their associated probabilities of occurrence. The
models are used for decision making processes under uncertainty or risk
conditions.
6.10.1 Types of Decision Models

Situations available for decision making are:
1. The quality of a decision will be superior if all aspects of a system are
known.
2. Normally, not all factors are certain, so the chances of a decision is
realized where certain risks are involved and hence it must be
assumed into a project.
3. When nothing is known about a system, the outcome decision is likely
to be inferior, due to risks and uncertainty.
As a result, we can consider decision making under three situations:

• Decision making under certainty
• Decision making under risks and conflicts
• Decision making under uncertainty
The models formulated to solve a particular problem should be very

simple, yet capable of providing the desired results which will help the
decision–maker. In any case, the quality of decision making depends on the
quality of input information data and its logical application and analysis
towards a given objective. Hence, over–simplification of the model at the
cost of its purpose should not be enacted.
Hence, these models can be broadly classified as follows:

• Deterministic models
• Probabilistic models
• Heuristic models
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6.10.2 Nature of Business Decisions
Fig. 6.10: Nature of Business Decisions
6.10.3 Decision Making Process

The process of decision making involves the following steps:
1. Define the problem
2. Obtain necessary information
3. Identify alternatives
4. Evaluate the alternatives
5. Make the decision
6. Implement the decision
7. Evaluate the decision
6.10.4 Components of Decision Making

The important components which are to be considered before making a
decision are:
• Alternatives
• Restrictions or Constraints
• Objective Criteria for Evaluation
• What is the Goal?
• Action–Outcome Relationships
Chapter – 6 185
The following figure shows the link between the various components of the
decision making process.
Fig. 6.11: Components of Decision Making Process
6.10.5 Decision–Making Process
Step 1: Define the problem

The most significant step in any decision–making process is to describe
why a decision is called for and to identify the most desired outcome(s) of
the decision–making process.
One way of deciding if a problem exists is to couch the problem in terms of

what one wanted or expected and the actual situation. In this way, a problem
can be defined as the difference between expected and/or desired outcomes
and actual outcomes.
This careful attention to definition in terms of outcomes allows one to clearly

state the problem. This is a critical consideration because how one defines
a problem determines how one defines causes and where one searches for
solutions.
The limiting aspect of the problem definition step is not widely appreciated.
Consider this example.
It rained heavily last night.

• So what?
• The ground will be wet.
• So what?
• It will turn into mud quickly.
186 ROAD TO SUCCESS

• So what?
• If many troops and vehicles pass over the same ground, movement
will be progressively slower and more difficult as the ground gets
muddier and more difficult.
• So what?
• Where possible, stick to paved roads. Otherwise, expect movement
to be much slower than normal.
Defining the problem involves:

• Breaking down complex problems progressively into smaller parts.
• Detailing each small part
• Identifying information gaps
Step 2: Identify available alternative solutions to the problem

The key to this step is not to limit yourself to the obvious alternatives or
what has worked in the past but to be open to new and better alternatives.
How many alternatives should you identify? Ideally, all of them.
Realistically, we teach that the decision maker should consider more than
five in most cases, more than three at the bare minimum. This gets us away
from the trap of seeing “both sides of the situation” and limiting one’s
alternatives to two opposing choices, either this or that.
Step 3: Evaluate the identified alternatives

As you evaluate each alternative, you should be looking at the likely positive
and negative outcomes for each. As you consider positive and negative
outcomes you must be careful to differentiate between what you know for a
fact and what you believe might be the case.
The decision maker will only have all the facts in trivial cases. People always
supplement what facts they have with assumptions and beliefs.
This distinction between fact–based evaluation and non–fact –based

evaluation is included in order to assist the decision maker in developing a
“confidence score” for each alternative.
Step 4: Make the decision

When acting alone, this is the natural next step after selecting the best
alternative. When the decision maker is working in a team environment,
this is where a proposal is made to the team, complete with a clear definition
of the problem, a clear list of the alternatives that were considered, and a
clear rationale for the proposed solution.
Chapter – 6 187
Step 5: Implement the decision
While this might seem obvious, it is necessary to make the point that deciding
on the best alternative is not the same as doing something. The action itself
is the first real, tangible step in changing the situation. It is not enough to
think about it or talk about it or even decide to do it. A decision only counts
when it is implemented. As Lou Gerstner (CEO of IBM) said, “There are no
more prizes for predicting rain. There are only prizes for building arks.”
Step 6: Evaluate the decision

Every decision is intended to fix a problem. The final test of any decision is
whether the problem was fixed. Did it go away? Did it change appreciably?
Is it better now, or worse, or the same? What new problems did the solution
create?
6.11 Decision Tree

A decision tree aids the decision maker in visualizing the problem and the
possible outcome of the decisions and helps him to choose the best decision.
The typical decision tree’s deterministic and probabilistic approach are given
as an illustration.
Fig. 6.12: Decision Tree – 1
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Fig. 6.13: Decision Tree – 2
6.11.1 Advantages of the Models

By model formulation, we achieve a structured way of decision–making and
these are useful tools to provide information to the decision maker.
The advantages can be summarized as follows:

• The models provide a logical, structured and systematic approach
for solving a given problem
• The models can help with a change of decision using the improved
information
• The models can qualify and quantify various measurable quantities
related to a given problem
• These models help in the physical and economic understanding of a
problem and in the improvement of the system
6.11.2 Limitations of the Models

Though models are useful tools for decision makers, the underlying
assumption in their formulation becomes the limitations of the models. Since
all real–life situations cannot be accurately quantified due to its dynamic
nature, these models need to be adjusted to the situation in question.
However, the limitations can be summarized as follows:

• Models are constructed based on certain assumptions and the nature
of relevant factors. Since all the factors and their nature cannot
always be predicted and quantified, the models remain valid under
assumed conditions only.
Chapter – 6 189
• Models are abstractions of real–life and hence cannot replace the
reality of life. Intangibility and dynamic nature of the parameters
make the model unusable in all conditions
• If we formulate the model, taking all possible factors into account, it
will be too complex and unwieldly for any useful business purpose.
The time consumed on such solutions may not be worthwhile with
respect to its utility as compared to time and cost involved
6.12 Network Analysis

Network analysis is a system by which both large and small project are
planned by analyzing the project activities. When these activities are
arranged in a logical sequence, a network diagram visually presents the
relationship among all the activities involved. Time, cost and other resources
are allocated to different activities. Network analysis helps designing,
planning, coordinating, controlling and decision–making in order to
complete the project economically within the minimum available time with
limited resources. Network techniques are developed from a milestone chart
and bar chart. Program Evaluation and Review Technique (PERT) and
Critical Path Method (CPM) represent the two well–known network analysis
techniques used to aid the manager in planning and controlling large scale
construction. Projects including the construction of a residential complex,
a shopping center, ships or air–crafts repair projects, site preparation
through installation and checkouts, are examples of the above project.
6.12.1 Steps in Network Analysis

The procedure involved in network analysis is given below:
1. Define the project and all of its significant activities or tasks
2. Develop the relationships among the activities. Decide the sequence
that these activities must follow
3. Draw the network connecting all activities
4. Assign time and /or cost estimates to each activity
5. Complete the longest time path through the network. This is called
the CPM
6. Use the network to plan, schedule, monitor and control the project
190 ROAD TO SUCCESS

6.12.2 Rules of Network Construction
1. Each activity is represented by a single arrow
2. Before an activity can be started, all preceding activities must be
completed
3. The arrows are indicative of the logic of precedence only
4. The arrow indicates generally the progression in time. The events
that start are called tail events and those completed are known as
head–events
5. When a number of activities terminate at one event, it indicates that
no event may start unless all activities are completed
Event 5 is called merge event.
Fig. 6.14: Network Construction – 1
Event 2 is called the burst event.
Chapter – 6 191
1. There cannot be any duplication of numbers, when assigning a number
to an event
2. The activities are identified by the numbers of their starting and
ending events expressed as ij where i = starting event, j = ending
event
3. A network should have only one initial and one terminal node
4. Two or more activities in a project cannot be identified at the same
beginning and ending events. Dummy activities do not consume time
or resources
5. Looping is not permitted in a network
Dummy Activities: When two activities start at the same time, the head
events are joined by a dotted arrow. This is known as a dummy activity. It
becomes a critical activity when its earliest start time (ES) is same as its
latest finishing time (LF).
192 ROAD TO SUCCESS

Mode Configuration
In a network, the mode shall contain the following information about an
activity such as:
• Activity number
• Activity duration
• Earliest start time
• Latest start time
• Latest finish time
Fig. 6.18: Mode Configuration
6.12.3 Critical Path Method (CPM)

The EI Du Point De Nemours company (USA) in the year 1958, employed a
technique called CPM to schedule and control the project and experienced
a good amount of saving. CPM developed in business and engineering
industry where activity timings were relatively well known. CPM is
applicable to both large and small projects. It is widely recognized and the
most versatile management planning technique.
CPM uses Activity on Node (AON) representation and is a deterministic

model. CPM is also called Precedence Diagram Method (PDM).
6.12.4 PERT
PERT was first used in 1957 as a method of planning and controlling the
Polaris missiles program by Booz, Allen and Hamilton together with United
States naval department. PERT describes basic network techniques which
include planning, monitoring, and the control of projects.
Chapter – 6 193
PERT uses Activity on Arrow (AOA) representation and is a probabilistic
model. PERT is also called Arrow Diagram Method (ADM). It is a very useful
device for planning time and resources, and can be employed in places where
a project cannot be easily defined.
Terms of time resources are required because of the uncertainty of active

timings. PERT has acquired the shape of probabilistic models. PERT foretells
the probability of reaching the specified target dates. PERT is mainly covered
with events and thus is an event–oriented system.
PERT Procedure
Step 1: Make a list of activities that make up the project, including the
pre–activity.
Step 2: Making use of Step 1, draw the required network.
Step 3: Denote the Most Likely Time type by (tm) the Pessimistic type by
(tp) and Optimistic type by (to)
Step 4: Use beta distribution for the activity duration. The expected time
for each activity is computed by using the formula.
te = ( tp + 4tm + to ) / 6
Step 5: Tabulate the various times (ES, EF).
Step 6: Determine the total float for each activity.
Step 7: Identify the critical activities and expected date of completion of

the project.
Step 8: Using the value of tp& to compute the variance (O 2) for each activity.
(Var O2) = ( (tp – to ) /6 ) 2
Step 9: Compute the standard normal variance
due date - expected date

Z=
project variance
194 ROAD TO SUCCESS

Step 10: Use the normal tables to find the probability of P (z d” zo) for
completing the project within the scheduled time where, z ˜ N (0, 1)
A project network with probabilistic time estimates is given below as an
illustration:
Fig. 6.19: Project Network
Chapter – 6 195
The activity time estimates for the above network using the PERT procedure
is:
Fig. 6.20: PERT Table
Fig. 6.21: PERT Network
196 ROAD TO SUCCESS

6.12.5 Difference between CPM & PERT
WD WZd

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Fig. 6.22: Difference Between CPM &PERT
Chapter – 6 197
6.12.6 Project Crashing
Crashing is one of the techniques used for reducing the project duration.
Crashing the schedule means deploying additional resources to the critical
path activities to reduce the schedule duration. Adding resources can include
approving overtime, bringing additional resources or paying extra to
expedite the delivery of activities in the critical path.
Crashing will work only for activities, where adding extra resources will
shorten the duration. The project management team has to be cautious when
using the crashing technique, as crashing always increases the Cost / Risk.
For instance, let’s say one person is working on a ten–day activity on the
critical path. If you are really desperate to shorten this time frame, you
might add a second resource to this activity. In fact, the resource may not
have all the right skills and he might work five days just to reduce the
overall time by two days.
Crashing generally results in increased costs. The cost and schedule

trade–offs have to be analyzed to obtain the greatest amount of compression
for the least amount of incremental cost. The time and cost trade–off
for crashing is shown in the graph below:
Fig. 6.23: Project Crashing
Steps in crashing the project:

• Determine if the critical path (CP) falls within targeted time. If yes,
stop
• If no, compute crash cost per time period for each activity
198 ROAD TO SUCCESS

• Select an activity on CP with lowest crash cost and crash the project
• Re–compute CP and check to see if within targeted time
• Repeat as necessary
Problem
Consider the following project schedule network, which has seven activities.
Fig. 6.24: Project Schedule Network
The data pertaining to ‘crashing’ for the project is as listed in the table
below. Find the best crashing technique to reduce the time by 5 weeks
Activity Actual Crashed Actual Crash Weeks Per week

Time Time Cost Cost gained crash
cost
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ϳϱ͕ϬϬϬ ϭϭϬ͕ϳϬϬ
Fig. 6.25: .Crash Data Table
Solution
Find the critical path.
In the above network the critical path is the network path involving activities
1, 2, 4 and 7.
The duration of the project is 12+8+12+4 = 36 weeks.
Chapter – 6 199
To crash the project duration, the duration of the activity in the critical
path is to be crashed taking into account the cost benefit trade–off. From
the given table we understand that crashing activity 1 is the best option,
which will cost $2,000 more and will result in 5 weeks reduction in the
project duration. The new network will be:
Fig. 6.26: Solution for 6.16
6.13 Simulation
Simulation has often been described as the process of creating the essence
of reality without ever actually attaining that reality itself. Simulation is
the next best thing to observing a real system in operation. It allows us to
collect pertinent information about the behavior of the system by executing
a computerized model. The collected data are then used to design the system.
It is a technique for estimating the measures of performance of the modeled
system.
Simulation is the imitation of some real thing, state of affairs, or process.

The act of simulating something generally entails representing certain key
characteristics or behaviors of a selected physical or abstract system.
Simulation is used in many contexts, including the modeling of natural or

human systems in order to gain insight into their functioning. Other contexts
include simulation of technology for performance optimization, safety
engineering, testing, training and education. Simulation can be used to show
the eventual real effects of alternative conditions and courses of action.
Key issues in simulation include acquisition of valid source of information,

selection of key characteristics and behaviors, the use of simplifying
approximations and assumptions within the simulation, and fidelity and
validity of the simulation outcomes.
200 ROAD TO SUCCESS

Simulation has been used in all aspects of science and technology as the
following partial list demonstrates:
• Basic Science:
• Estimation of the area under a curve or, more generally, evaluation
of multiple integrals
• Estimation of the constant ð (= 3.14159)
• Matrix Inversion
• Study of partial diffusion
• Practical Situations:
• Industrial problems, including the design of queuing systems,
communication networks, inventory control, and chemical
processes
• Business and economic problems, including consumer behavior,
price determination, economic forecasting, and total firm
operations
• Behavioral and social problems, including population dynamics,
environmental health effects, epidemiological studies, and group
behavior
• Biomedical systems, including fluid balance, electrolyte
distribution in the human body, blood cell proliferation, and brain
activities
• War strategies and tactics
Estimation of simulation output is based on random sampling, much the

same way we do when observing a real situation.
Naylor has suggested that simulation analysis might be appropriate for the
following reasons:
• Simulation makes it possible to study and experiment with the
complex internal interactions of a given system whether it be a firm,
an industry, an economy, or some sub–system of one of them.
• Through simulation, one can study the effects of certain information,

organizational, and environmental changes of the operations of a
system by making alterations in the model of the system and by
observing the effects of these alterations on the system’s behavior.
Chapter – 6 201
• A detailed observation of the system being simulated may lead to
better understanding of the system and suggestions for improving it,
which otherwise would be unobtainable.
• Simulation can be used as a pedagogical device for teaching both

students and practitioners the basic skills in theoretical analysis,
statistical analysis, and decision–making.
• The experience of designing a computer simulation model may be

more valuable than the actual simulation itself. The knowledge
obtained in designing a simulation study frequently suggests changes
in the system being simulated. The effects of these changes can then
be tested via simulation before implementing them on the actual
system.
• Simulation of complex systems can yield valuable insight into which

variables are more important than the others in the system and how
these variables interact.
• Simulation can be used to experiment with new situations about

which we have little or no information, so as to prepare for what may
happen.
• Simulation can serve as a “pre–service test” to try out new policies

and decision rules for operating a system, before running the risk of
experimenting on the real system.
• For certain types of stochastic problems, the sequence of events may

be of particular importance. Information about expected values and
moments may not be sufficient to describe the process. In these cases,
simulation methods may be the only satisfactory way of providing
the required information.
• Simulation analysis can be performed to verify analytical solutions.
• Simulation enables one to study dynamic systems in real time,

compressed time, or expanded time.
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• When new elements are introduced into a system, simulation can be
used to anticipate bottlenecks and other problems that may arise in
the behavior of the system.
6.13.1 Advantages
• It is useful in solving problems where all values of the variables are
not known or partly known in advance and there is an easy way to
find these values
• The model of a system, once constructed, may be employed as often
as desired to analyze different situations
• Simulation methods are handy for analyzing a proposed system in
which information is sketchy at best
• The effect of using a model can be observed without actually using it
in the real situation
• Usually data for further analysis can be easily generated from a
simulation model
• Simulation methods are easier to apply than pure analytical methods
The non–technical executives can comprehend simulations better
6.13.2 Disadvantages
• Adequate knowledge of the parts of the system in no sense guarantees
adequate knowledge of the system behavior
• A simulation model is “run” rather than solved
• Simulation does not produce an optimum result. It provides a
satisfactory approach only
• Each simulation run is like a single experiment conducted under a
given set of conditions. A number of simulation runs are necessary,
as well as its time consuming procedures
6.13.3 Process of Simulation

The process of simulation can be explained in the following steps:
Step 1: Select the measure of effectiveness.
Step 2: Decide the variables which influence the measure of effectiveness

significantly.
Step 3: Determine the cumulative probability distribution for each variable

in Step 2.
Chapter – 6 203
Step 4: Get a set of random numbers.
Step 5: Consider each random number as a decimal value of the cumulative

probability distribution.
Step 6: Insert the simulated values so generated into the formula derived
from the chosen measure of effectiveness.
Step 7: Repeat step 5 and 6, until the sample is large enough for the
satisfaction of the decision maker.
6.13.4 Monte Carlo Method

The term Monte Carlo method was coined in the 1940s by physicists working
on nuclear weapon projects in the Los Alamos National Laboratory.
Monte Carlo methods: are a class of computational algorithms that rely

on repeated random sampling to compute their results. Monte Carlo methods
are often used when simulating physical and mathematical systems. Due to
their reliance on repeated computation and random or pseudo–random
numbers, Monte Carlo methods are most suited for calculation by a computer.
Monte Carlo methods tend to be used when it is infeasible or impossible to
compute an exact result with a deterministic algorithm.
Monte Carlo simulation methods are especially useful in studying systems

with a large number of coupled degrees of freedom, such as fluids, disordered
materials, strongly coupled solids, and cellular structures (see cellular Potts
model). More broadly, Monte Carlo methods are useful for modeling
phenomena with significant uncertainty in inputs, such as the calculation
of risk in business. These methods are also widely used in mathematics: a
classic use is for the evaluation of definite integrals, particularly
multidimensional integrals with complicated boundary conditions.
Illustration
The Monte Carlo method can be illustrated as a game of battleship. First a
player makes some random shots. Next the player applies algorithms (i.e. a
battleship is four dots in the vertical or horizontal direction). Finally based
on the outcome of the random sampling and the algorithm the player can
determine the likely locations of the other player’s ships.
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The following diagram illustrates this.
Fig. 6.27: Game of Battleship
There is no single Monte Carlo method; instead, the term describes a large
and widely used class of approaches.
However, these approaches tend to follow a particular pattern:

• Define a domain of possible inputs
• Generate inputs randomly from the domain
• Perform a deterministic computation using the inputs
• Aggregate the results of the individual computations into the final
result
For example, the value of ð can be approximated using a Monte Carlo

method:
• Draw a square on the ground, and then inscribe a circle within it.
• Uniformly scatter some objects of uniform size throughout the square.
For example, grains of rice or sand
Chapter – 6 205
• Count the number of objects in the circle, multiply by four, and divide
by the total number of objects in the square
• The proportion of objects within the circle vs. objects within the
square will approximate ð/4, which is the ratio of the circle’s area to
the square’s area, thus giving an approximation to ð.
Notice how the ð approximation follows the general pattern of Monte

Carlo algorithms.
First, we define a domain of inputs: in this case, it’s the square which
circumscribes our circle.
Next, we generate inputs randomly (scatter individual grains within the

square), then perform a computation on each input (test whether it falls
within the circle). In the end, we aggregate the results into our final result,
the approximation of ð.
Note, also, two other common properties of Monte Carlo methods: the
computation’s reliance on good random numbers, and its slow convergence
to a better approximation as more data points are sampled.
If grains are purposefully dropped only into the center of the circle, for
example, they will not be uniformly distributed, and so our approximation
will be poor. An approximation will also be poor if only a few grains are
randomly dropped into the whole square. Thus, the approximation of ð will
become more accurate both as the grains are dropped more uniformly and
as more are dropped
6.13.5 Applying to Project Management

In project management, the technique can be used to model the project cost,
or it can be applied to certain project risks that we have identified. The
more common use is in the creation of the project schedule and the
determination of the project end date.
When we put together our project schedule, we typically create a series of

tasks and an estimated duration for each task. When we are finished, we
look at the resulting timeline to see the estimated end date. As we all know,
the chances of hitting that exact end date are not 100 percent; we are never
100 percent sure of the duration of the underlying activities. Since
uncertainty is associated with each step, a Monte Carlo analysis can be
performed.
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An example
Let us look at a small project with three tasks, namely task A, task B and
task C and the activities must be worked on sequentially.
To use the Monte Carlo analysis, instead of just one estimate of duration
for an activity, we create three. First, we estimate the most likely duration,
and then we estimate the worst case and the best case.
With each estimate, we assign what we think is a likely probability that it

will occur. (An even more sophisticated approach is to use a distribution
model that represents the probability of every possible outcome for the
task, but that is more than what we require in this discussion.)
In our project we estimated that:

• Task A: is likely to take three days (70 percent probability), but it is
possible that it could take two days (10 percent probability) or four
days (20 percent probability).
• Task B: will likely take six days (60 percent probability), but could
take as few as five days (20 percent probability) or as many as eight
days (20 percent probability).
• Task C: will probably take four days (80 percent probability), three
days (5 percent probability), or five days (15 percent probability).
How long will this project take to complete?

The Monte Carlo analysis involves a series of random simulations. Each
time, the analysis software plugs in random task durations for A, B, and C
based on the probabilities that we provided. It is possible that the first
time through, it would calculate 12 days (2 + 6 + 4). The next time, it might
calculate 11 days (3 + 5 + 3). Then it could calculate 12 days again (3 + 5 + 4).
Now, imagine that this simulation was run 1,000 times. By the time the
simulation was completed, we would expect around 700 simulations in which
task A took three days (70 percent). Likewise, there should be around 150
simulations where task C took five days (15 percent). Each time a simulation
is run, an end date is determined.
Chapter – 6 207
The results
When the Monte Carlo analysis is complete, we do not have a single end
date. We have a probability curve showing expected outcomes and the
probability of achieving each one.
For the purposes of scheduling, we would look at a cumulative curve showing

the probability of completing the project between the best case, 10 days (2 +
5 + 3), and the worst case, 17 days (4 + 8 + 5).
When we tell the stakeholders the due date by which the project will be
completed, we typically pick the duration that gives us a 90 percent chance
of success. In other words, we would say that, based on the Monte Carlo
simulation, we have a 90 percent chance of completion within X days.
Now, think about the projects that have hundreds, or thousands, of tasks.
The Monte Carlo analysis allows us to show the uncertainty associated with
the duration of these tasks.
Many, but not all, project management scheduling packages allow us to

perform these simulations. The software can run thousands of simulations
on our work plan and then show the dates on which we have a 50 percent
chance of completion, 80 percent chance of completion, 90 percent chance
of completion, etc.
6.13.6 Monte Carlo Simulation versus “What If” Scenarios

The opposite of Monte Carlo simulation might be considered deterministic
modeling using single–point estimates. Each uncertain variable within a
model is assigned a “best guess” estimate. Various combinations of each
input variable are manually chosen (such as best case, worst case, and most
likely case), and the results recorded for each so–called “what if” scenario.
By contrast, Monte Carlo simulation considers random sampling of

probability distribution functions as model inputs to produce hundreds or
thousands of possible outcomes instead of a few discrete scenarios. The
results provide probabilities of different outcomes occurring. For example,
a comparison of a spreadsheet cost construction model run using traditional
“what if” scenarios, and then run again with Monte Carlo simulation and
Triangular probability distributions shows that the Monte Carlo analysis
has a narrower range than the “what if” analysis. This is because the “what
if” analysis gives equal weight to all scenarios.
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6.14 Summary
In this chapter we discussed the key operation research topics, which are
essential for a project manager in managing his/her project effectively. We
discussed the decision models, which will help the project manager to
analyze the situation/problem, find out the alternatives and the possible
outcomes for each alternative and then take a decision based on a best–
case scenario.
We also discussed about network models such as PERT/CPM which are

essential in Project schedule development and Monte Carlo analysis which
will help the project manager to address the schedule uncertainties.
Chapter – 6 209
1. The client has requested a three–week delay on the project while they
calibrate their test equipment. This delay wasn’t planned, but the equipment
had to be calibrated. The company is limited on available resources. This
delay will be best shown in what?
A. Responsibility assignments matrix
B. Network diagram
C. Budget
D. Work breakdown structure (WBS)
2. Raymond wants to give himself a few extra hours in his budgeted time for a
construction project to account for problems with weather or delays in
delivery. This is called
A. Padding
B. Risk acceptance
C. Contingency
D. Mitigation
3. A project manager has received estimate activity durations from his team.
Which of the following does he need in order to complete ‘Develop Schedule’?
A. Change requests
B. Schedule change control system
C. Recommended corrective actions
D. Reserves
4. Rearranging resources so that a constant number of resources are used each

month is called:
A. Crashing
B. Floating
C. Resource leveling
D. Fast tracking
5. What does Monte Carlo analysis do?

A. A prediction of the amount of staff needed to complete the project
B. Calculates a distribution of possible total project cost or completion dates.
C. A possible sequence of task events
D. Resource–leveling
Chapter – 6 211
PROJECT TIME MANAGEMENT AND
6. The critical path provides the project manager with information about:
A. Where extra resources should not be placed
B. What tasks the project manager needs to focus on while managing the
project
C. Where stakeholders need to be assigned to the project
D. The longest time the project will take
7. Your lead engineer estimates that a work package will most likely not require
50 weeks to complete. It could be completed in 40 weeks if everything goes
right, but it could take 180 weeks in the worst case. What is the PERT
estimate for the expected duration for the work package?
A. 65 weeks
B. 70 weeks
C. 75 weeks
D. 80 weeks
8. Float on a network diagram is also known as what?

A. Slack
B. GERT
C. Lag
D. PERT
9. Resource leveling is:

A. Reduce the time needed to do the project
B. Increase the total time necessary to do all the tasks
C. Schedule decision that are driven by resource constraints
D. Reduce resources to the lowest skill that is possible
10. Which of the following is a correct attribute of the critical path?

A. It determines the earliest completion date
B. It has the smallest amount of float
C. It has the most activities in the project
D. It is the path with the most expensive project activities
11. How is slack of a task determined?

A. LS–EF
B. LF–EF
C. EF–LF
D. ES–LS
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12. Which estimating method uses a one time estimate for each task?
A. PERT
B. CPM
C. Monte Carlo
D. Control charts
13. Which calendar will take into account project team member’s vacations?
A. Project calendar
B. Resource calendar
C. Project team calendar
D. Human resources management calendar
14. You are the project manager for your company. You use project management
software. Which one of the following best describes the purpose of project
management software?
A. It manages projects
B. It creates the project management plan
C. It predicts the project schedule
D. It provides quality control
15. You have just started a project for a manufacturer. Project team members
report they are 30 percent done with the project. You agree with their
completion status but do not change any of the progress in your report to the
customer. This is an example of which one of the following?
A. 50/50 rule
B. 0/100 rule
C. Percent Complete Rule
D. Poor project management
16. If your expected value is 110 and the standard deviation is 12, which of the
following is true?
A. There is approximately a 99 percent chance of completing this activity in
86 to 134 days
B. There is approximately a 68 percent chance of completing this activity in
98 to 122 days
C. There is approximately a 95 percent chance of completing this activity in
98 to 122 days
D. There is approximately a 75 percent chance of completing this activity in
86 to 134 days
Chapter – 6 213
17. The Critical Path Method is a tool and technique of the Develop Schedule
process. All of the following statements are true regarding CPM Except
which one?
A. CPM determines a single early and late start date and a single early and
late finish date
B. CPM calculates expected value
C. CPM focuses on the calculation of float time
D. CPM shows the critical path or the path with the largest duration
18. You are in the Develop Schedule process and are going to use Monte Carlo
analysis to determine the feasibility of the project schedule under differing
adverse conditions. Which of the following tools and techniques are you using?
A. CPM
B. Critical chain method
C. Resource leveling
D. What–if scenario analysis
19. Lag means:

A. The amount of time an activity can be delayed without delaying the project
finish date
B. The amount of time an activity can be delayed without delaying the early
start date of its successor
C. Waiting time
D. The purposed of a forward and backward pass
20. You have a project with the following activities: Activity A takes 40 hours
and can start after the project starts. Activity B takes 25 hours and should
happen after the project starts. Activity B takes 25 hours and should happen
after the project starts. Activity C must happen after activity A and takes 35
hours. Activity D must happen after activity B and C and takes 30 hours.
Activity E must take place after activity C and takes 10 hours. Activity F
takes place after Activity E and takes 22 hours. Activity F and D are the last
activities of the project. Which of the following is True if activity B actually
takes 37 hours?
A. The critical path is 67 hours
B. The critical path changes to Start, B, D, End
C. The critical path is Start A, C, E, F, End
D. The critical path increases by 12 hours
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21. Assuming that the ends of a range of estimates are +/– 3 from the mean,
which of the following range estimates involves the Least risk?
A. 30 days, plus or minus 5 days
B. 22–30 days
C. Optimistic=26 days, most likely=30 days, pessimistic=33 days
D. Mean of 28 days
22. What is fast tracking also known as?

A. Crashing
B. Subcontracting
C. Assigning additional resources to critical path tasks
D. Concurrent engineering
23. Which of the following is correct?

A. A critical path can run over a dummy
B. There can be only one critical path
C. The network diagram will change every time the end date changes
D. A project can never have negative float
24. Estimate of a task are assessed as follows: Optimistic 10, most likely 12, and
pessimistic 15. What is the standard deviation of the task?
A. 5
B. 2
C. 0.8
D. 0.5
25. Cross Air Custom Homes is building a customer’s dream house. However,
rain has delayed the finish by two weeks. The Project Manager evaluates the
schedule and determines that the electrical and plumbing work could occur
at the same time instead of right after each other, as laid out in the schedule.
This is an example of what?
A. Mandatory dependencies
B. Crashing
C. Lag
D. Fast tracking
Chapter – 6 215
217
219
The ability to deliver projects on time and on budget is the basis of good
project management.
The objective of this lesson is to make the project manager understand the
basics of cost management, how to estimate and budget project activities
and control the spending throughout the life cycle of the project by employing
the right tools and techniques.
What is Cost Management?

Cost management is a process by which the performing organization / project
managers plan, monitor and control the cost of the project.
Key Terms
Actual Cost
Total cost actually incurred in accomplishing a work or scheduled activity.
Budget
The approved estimate of cost for the project or a WBS component or any
schedule activity.
Cost
The monetary value of an activity or component.
Cost Management plan

A document that sets out a format and establishes activities and criteria
for planning, structuring and controlling the project cost. It is a subsidiary
plan of the project management plan.
Cost Performance Baseline

A specific version of time based budget used to compare actual expenditure
to the planned expenditure.
Contingency Reserve
Contingency Reserves are the funds allocated to handle unplanned but
potentially required changes arising out of identified risk in the risk register.
The project manager has control over the fund.
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Cost Variance
Cost Variance (CV) is a measure of cost performance in a project. It is the
algebraic difference between the earned value (EV) and the actual cost (AC):
CV = EV– AC
Cost performance index

Cost performance index (CPI) is the ratio of earned value (EV) to the Actual
cost (AC); CPI = EV/AC
EVM
Earned Value Management (EVM) is a management methodology for
integrating scope, schedule and cost for objectively measuring project
performance and progress.
Earned Value (EV)

EV is the value of the work performed, expressed in terms of approved
budget assigned to that task or schedule activity or WBS component. Also
referred to as budgeted cost of work performed (BCWP).
Management Reserve
Management reserves are the funds allocated for mitigating risk arising
out of unplanned changes to project scope and cost. The project manager
may require approval for utilizing this management reserve.
Planned Value (PV)

The authorized budget assigned for a scheduled task to be accomplished
for a scheduled activity or WBS component. Also referred to as budgeted
cost of the work scheduled (BCWS).
Reserve
A provision in the project management plan to mitigate risk associated with
cost and schedule. Examples: Management reserve and contingency reserve.
‘S’ curve
‘S’ curve is a Graphic display of cumulative cost of the project. The name is
derived from the ‘S’ like shape of the curve.
Chapter – 7 221
PROJECT COST MANAGEMENT
7.0 Managing Project Cost
Managing project cost brings with it proper planning of effort by the project
management team in preparing a cost management plan. The cost
management plan sets out the format and establishes the criteria for
planning, estimating, budgeting and controlling the project costs.
The project management team has to identify and select appropriate cost
management processes and the required tools and techniques to estimate,
budget and monitor and control the project cost. This has to be identified in
a clear and concise manner in the project cost management plan.
Project Cost Management Processes

The Project Cost Management process includes the following key processes:
Fig. 7.0: Project Cost Management Processes
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7.1 Plan Cost Management
Process that establishes the policies, procedures and documentation for
planning, managing, expending and controlling project costs.
Fig. 7.1: Plan Cost Management – ITTO
7.1.1 Plan Cost Management – Inputs

• Documents how each step of the project is executed, monitored,
controlled and closed
• Incorporates and consolidates all the subsidiary plans and baselines
Refer to section 4.2.3 Develop Project Management Plan – Outputs
Project Charter
• Is the formal document authorizing the project
• It will contain the high level project and product requirements
Refer to section 4.1.3 Develop Project Charter – Outputs
Chapter – 7 223
• Market conditions vis–à–vis the products/services applicable for the
region and at the global market place
• Currency Exchange Rates that may influence project budgeting
• Published commercial information on resource costs, skill
availability, product pricing across competitors, standard costs for
materials and machinery

• Organizational Process, Procedure, Guidelines, Work instructions,
Proposal evaluation criteria and Measurement criteria etc.
• Financial control procedures applicable for various projects being
executed within the organization
• Estimation process for determining cost and budgets
• Project Management Plan templates
• Project files and data from the past projects
7.1.2 Plan Cost Management – Tools & Techniques
Expert Judgment
• Getting the opinion of an expert on a particular field.
• Will be useful to understand
• The level of tailoring that will be required to project process?
• To develop and include technical and management details in the
project management plan
• To decide on the resource and skill level required to perform a
project task/activity
• To decide the level of configuration management that will be
required for this project
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• To decide on the change control process and the documents which
must follow this process
Refer to section 4.2.2 Develop Project Management Plan – T & T
• Choosing strategic options to fund the project
• Self–funding, funding with equity or funding with debt
• Organizational policies and procedures may influence the financial
techniques that are being employed for decision making process.
Example: pay back period, ROI, internal rate of return
Meetings
• Project team may attend project meetings to develop the cost
management plan
• Attendees at these meetings may include:
• Project Manager
• Project Sponsor
• Selected project team members
• Selected stakeholders
7.1.3 Plan Cost Management – Output
Cost Management Plan

Cost management plan can establish the following:
• Units of measure
• Level of precision
• Level of accuracy
• Organizational procedures links
• Control thresholds
• Rules of performance measurement
• Report formats
• Process descriptions
• Additional details
Chapter – 7 225
A typical project cost management plan should address the
following:
• Process Description
The cost management plan has to clearly document the cost
management processes, namely Estimate Costs, Determine Budget
and Control Costs, that are employed in the project.
• Level of Accuracy
What is the level of accuracy that the cost estimates have to adhere
to, i.e., rounding of the estimates to a prescribed precision (e.g., $100
or $1000)? This depends on the scope of the activity and the magnitude
of the project.
• Units of Measure
The units to be used in the measurement such as staff hours, staff
days, weeks or lump sum are to be defined clearly for each resource
category.
• Organizational Control Account
The project cost management plan should link each WBS component
to a control account in the financial system.
• Control Thresholds
Variance threshold for monitoring cost & schedule performance should
be defined with in which the project should perform. Any variations
beyond the threshold values will call for actions to bring back the
variance under control.
• Rules for Performance Measurement
The project cost management plan has to document the rules with
respect to the Earned Value Management for performance
measurements. The plan has to specify:
• The points of WBS, where the control accounts will be performed
• The proposed earned value management technique that is going
to be employed
• The computation equations for determining the projected estimate
at completion
• Reporting Formats
The plan should specify the reporting formats that the project
management team is planning to use for reporting and also the
frequency of reporting
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7.2 Estimate Costs
In the Estimate Cost Process, the project management team estimates and
arrives at an approximate monetary resource required to execute all project
activities. This estimation is based on the information available with the
project team at a given point of time.
The cost estimates are prepared for the activities, considering the
alternative costing for initiation through completion of the project, risk vs.
cost trade–offs, make vs. buy analysis, buy vs. lease analysis and possibilities
of resource sharing to arrive at optimal cost estimates.
Costs are estimated for the resources needed for the project such as labor,
material, machines, equipment, services and facilities. A cost estimate for
an activity is the aggregation of the cost of resources required to complete
an activity. The cost estimates are generally expressed in units of some
currency such as dollars, pounds, euro, rupees etc. In some instances it will
be referred to in terms of staff hours or staff days to facilitate comparison
to offset currency fluctuations.
The initial project cost estimate may be a rough estimate and will get refined
during the course of the project’s progress as additional details become
available. The project cost estimate at the initiation stage by a Rough Order
of Magnitude (ROM) estimates in the range of –25% to + 75%. It can narrow
down to –5% to +10% as the project progresses and more information
becomes available.
When estimating the cost, the project management team has to decide on
whether the project estimate will include only the direct cost or both direct
and indirect costs. Few indirect costs which cannot be traced to a single
project and it will be common to many projects. This will be apportioned
across all projects as per the organizational accounting procedures.
Chapter – 7 227
Fig. 7.2: Estimate Costs – ITTO
7.2.1 Estimate Costs – Inputs

Refer to previous section – 7.1.3 Plan Cost Management – Outputs
Human Resource Management Plan

Project staffing requirements, resource rates and the planned rewards and
recognition program provide vital inputs to the cost estimation process.
Refer to section – 9.1.3 Human Resource Management Plan – Outputs
Scope Base Line

• Project Scope Statement
The project scope statement provides details about the project deliverables,
product description, acceptance criteria, assumption, constraints and project
boundaries. One of the constraints with respect to cost management will be
the limited budget.
Refer to 5.3.3 – Define Scope – Outputs
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• Work Breakdown Structure
• WBS dictionary
Project Schedule
The project management team can refer to the project schedule, which
includes information on when project activities are to be executed. This
provides vital input in estimating the cost of the activity.
Risk Register
The risk register is one of the critical inputs the project management team
has to refer to, while estimating the project cost. The risk register and its
impact on the project cost and schedule and the cost associated with
mitigating the risk are to be considered while estimating project cost.

Market conditions and published commercial information are some of the
enterprise environmental factors that influence the Estimate Costs process.
• Market conditions are the ones that describe what product, services
and results are available in the market and under what classifications
the terms and conditions are available. This information provides a
vital input to the estimate cost process
• Published information with respect to standard resource cost rates,

which are available from a commercial data base, provides
information in estimating the cost of resources required for the
project
Refer to chapter–1 – EEF page no. 30

The organizational policies, procedures, templates, historical information
from past projects and lessons learnt with respect to cost estimation are
Chapter – 7 229
some of the organizational process assets that influence the Estimate Costs
process.
7.2.2 Estimate Costs – Tools & Techniques
Expert Judgment
Expert judgment supported with historical information provides a valuable
insight for the project management team in deciding the numerous costing
variables such as labor rates, material costs, inflation factors, risk factors
and other variables. Expert judgment can also help in deciding how to
combine various cost estimating methods and how to reconcile the
differences.
Analogous Estimating
Analogous estimating uses cost estimating parameters/ data from the
previous projects, in estimating the project cost. These parameters may
include scope, cost, budget, duration or measures such as size, weight or
complexity. The analogous estimating completely relies on the information
of actual cost spent on similar projects in the past. This approach is a gross
value estimating approach and adjustments are made to accommodate
known differences in project complexity.
Parametric Estimating
Parametric estimating uses data from historic information and estimates
the cost of an activity using statistical relationship. For example from the
historic data, cost per sq. ft of construction is taken for estimating the cost
of construction of X sq. ft in the present project. This technique can produce
higher accuracy in estimation than the analogous estimation, depending
upon the accuracy of the data and model used in the estimation. It can be
applied for estimating the cost of the total project or parts of the project.
Bottom–Up Estimating
In Bottom–up estimating the cost of individual work packages or activities
are calculated individually with specific details. These costs are then rolled
up or summarized to arrive at the estimated cost of a higher level for
subsequent reporting and tracking. The bottom–up estimating produces
higher accurate estimates and is influenced by the size and complexity of
the individual work packages or activities.
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Three–Point Estimates
The uncertainty and lack of accuracy in a single point estimate can be
eliminated by using a Three–point estimate. This technique originated from
Program Evaluation and Review Technique (PERT).
In this, the project management team calculates three estimates namely

Optimistic estimates (C O), Pessimistic estimates (C P) and Most likely
estimates (CM) and estimates the cost (CE) of the project using the following
mathematical formula
CE = (CO+4CM+CP) / 6 – Beta distribution for traditional PERT analysis
CE = (CO+CM+CP) / 3 – for Triangular distribution
Reserve Analysis
Reserve analysis is done to include allowances for uncertainty, called
contingency reserves or contingency allowances. The contingency reserve
can be calculated as a fixed percentage of the estimated cost or a fixed
amount, or it can also be arrived at by using some quantitative techniques.
When more precise project information becomes available as the project

progresses, the contingency reserve should be reviewed and it can either
be used, reduced or eliminated. The information about the contingency
reserve should be clearly documented in the schedule documents.
Contingency reserve forms part of the project funding requirement.
Cost of Quality
The trade–off between the cost involved in project quality management
activities and the benefit arising out of it has to be considered in estimating
the project cost.
Refer to section 8.1.2 – Plan Quality Management – T & T
Project Management Estimation Software

The project management team can employ automated estimation tools,
computerized spreadsheets, simulation and statistical tools in estimating
the cost of the project, as such tools are getting wider acceptance.
These tools help in faster estimation, help in consideration of alternative

cost estimation techniques and help in simplifying the estimation process.
Chapter – 7 231
Vendor Bid Analysis
Whenever a project is awarded as a contract to any vendor, qualified through
a competitive bidding process, additional cost estimating may be required
by the project team to support the final total project cost.
7.2.3 Estimate Costs – Outputs
Activity Cost Estimates

Activity cost estimates are the likely costs that are required to complete
the project. This can be presented in a summary form or in a detailed form.
The costs are estimated for all activity resources such as human resources,
material, equipment, services, facilities, information technology and any
special factors such as inflation allowance, contingency reserve, indirect
costs etc.
Basis of Estimates
These are the supporting documents to provide clear and complete
understanding of the rationale behind the cost estimates and how it is
arrived. Some of the basic documents are:
• Documents detailing the basis used in estimation
• Documents of all assumptions made
• Documents of known constraints
• Possible estimate range to indicate that the particular item may cost
between a range of values
• Indication of the confidence level in the final estimates
Project document updates

The risk register is one of the examples of the project document that may
get updated as part of the Estimate Cost process.
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Estimate Costs – Best practices
Following are some the best practices you can employ in estimating the
cost accurately:
• Involve the work package owners

• When possible, the cost figures that go into the cost estimates for
individual work packages should be provided by those who will actually
provide the resources
• Gather any relevant input information that may help you prepare the
estimates, such as estimating publications and resource rates
• Determine which estimating technique to use
• Use analogous estimation when you have a limited information about
a project, you have a similar project to use for comparison, and the
work package owners preparing the estimates have the requisite
expertise
• Use parametric estimation to estimate work packages when you have
reliable parametric models and the work conforms closely to those
models
• Use resource cost rates method to estimate work packages when you
have specific and up–to–date resource cost data available
• Use bottom–up estimation later in the project life cycle, when more
details are available about the work packages. You need more accurate
estimates, and you have the time to invest in preparing the estimates.
Also use bottom–up estimation for work packages with the highest
level of uncertainty or risk associated with cost. Make sure that you
weigh the additional accuracy provided by bottom–up estimation
against the additional cost of preparing the estimates
• Use a combination of estimating techniques when you have a
combination of circumstances for different deliverables on the WBS
• Ensure that your cost estimates include the following key elements:
• Estimated costs for all resources that will be charged to the
project use the WBS and resource requirements document to
develop the estimates
• The level of estimate (degree of certainty)
• A list of assumptions made when developing the estimates
Chapter – 7 233
7.3 Determine Budget
In this process the project management team aggregates the estimated cost
of individual activities or work packages and establishes an authorized cost
baseline for the project. The Cost Baseline (project budget) represents the
authorized funds to execute the project and this does not include the
Management Reserve.
The performance of the project with respect to cost will be measured against
this baseline (authorized budget).
Fig 7.3 Determine Budget – ITTO
7.3.1 Determine Budget – Inputs
Cost Management
Refer to section 7.1.3 – Plan Cost Managements – Outputs
Scope Baseline
Any funding constraints or spending limitations within a period either
mandated by the organization or by the contract or by government agencies
will be reflected as a constraint in the project scope statement. The project
management team will refer to those constraints.
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Work Breakdown Structure
WBS Dictionary

Refer to section 7.2.3 – Estimate Costs – Outputs
Basis of Estimates
Refer to section 7.2.3 – Estimate Costs – Outputs
Project Schedule
Resource Calendar
Resource calendar will have detailed information about resource allocation
to a project and duration of assignment. The project management team can
use this information to indicate the resource cost over the life cycle of the
project.
Refer to section 6.4.1 – Time Management
Risk Register
Agreements
The cost information relating to products, services, or results that are
procured from outside the performing organization are available in the
agreements. This information is used for determining the budget.

The Organizational process assets that can influence the estimate budget
process are:
• Organizational process, and guidelines procedure for budgeting
• Cost budgeting tools and reporting methods
Chapter – 7 235
7.3.2 Determine Budget – Tools & Techniques
Cost Aggregation
Cost aggregation is nothing but the exercise of summing up the lower level
costs to arrive at the cost at a higher level. In a project the costs are
aggregated at the work package level in line with the WBS. The work
package costs are aggregated to arrive at the higher component level of
WBS (Control accounts) and ultimately aggregated to get the total budget
of the entire project.
Reserve Analysis
Budget Reserve analysis is done to include contingency reserves and
management reserves. The Contingency Reserves are the funds allocated
to handle unplanned but potentially required changes arising out of
identified risk in the risk register. The project manager has the authority
in utilizing the Contingency Reserve.
The Management Reserves are the funds allocated to handle any situation
arising out of unplanned changes to the project scope and cost. The project
manager may require approval for utilizing this reserve.
The reserves do not form a part of the project cost baseline and are not
considered for Project Earned Value Analysis.
Expert Judgment
The Project Management team can take the expert opinion provided by a
group or person, with relevant expertise in an application area, knowledge
area or industry, to help determine the budget.
The expert can be from within the project or from other projects or units
within the performing organization; they can either be a consultant, or a
stakeholder within the performing organization, customer or personnel from
professional or technical association.
Historical Relationships
Historical relationship of project parameters is used in analogous estimates
or parametric estimates to develop a mathematical model to estimate the
project budget. Such a model can be a simple or a complex one.
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The cost and accuracy of analogous and parametric estimate models vary
widely. They are reliable only when:
• The historical information used is accurate
• The parameters are quantifiable
• Models are scalable
Funding Limit Reconciliation

The project management team has to reconcile the funds requirement for
the project over a period of time against the funding limitation if any. In
case of any variance between the funding limits and the planned
expenditure, the team may need to reschedule the activities to meet the
funding limitation, resulting in changes in the project schedule.
7.3.3 Determine Budget – Output
Cost Baseline
As part of the estimate budget process, the project management team creates
an authorized summation of the budget against the time period called cost
performance baseline. It is an authorized time phased Budget At Completion
(BAC), which is used in earned value analysis to monitor and control project
cost performance.
The cost performance baseline will be displayed in the form of an ‘S’ curve
as shown in the figure below. In earned value management this is referred
to as Performance Measurement Baseline (PMB).
Fig 7.4 Performance Measure Baseline (PMB)
Chapter – 7 237
Project Funding Requirement
The periodic funding requirement can be calculated using the cost baseline
curve. The cost baseline will include the projected expenditure plus
liabilities. Funding requirement often occurs in incremental steps over a
period of time and is continuous.

Risk register, cost estimates and project schedule are some of the documents
that may get updated as a result of the Estimate Budget process.
7.4 Control Cost

The Control Cost process involves monitoring the project’s progress and
the expended cost on the completed activities, comparing with the baseline
and managing changes to the cost baseline. Monitoring the cost involves
analyzing the relationship between amount of money spent so far to the
dollar value of work accomplished.
Project cost control looks for causes of positive and negative variance that
includes but not limited to:
• Looking into the influencing factors that contribute to changes to
the cost baseline
• Ensuring that all change requests are acted upon in a timely manner
• Managing the changes as and when they occur
• Ensuring that the expenditure does not exceed the authorized funding
by time period and for the total project
• Monitoring cost performance to isolate and understand variances with
respect to the approved baseline
• Monitoring the work accomplished against the funds expended
• Preventing unapproved changes with respect to cost and resource
usage
• Providing information to the relevant stakeholder about all approved
changes and the associated impact on the cost
• Keeping the expected cost overruns within acceptable limits looking
into the influencing factors that contribute to changes to the cost
baseline
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Fig. 7.5: Control Cost– ITTO
7.4.1 Control Cost – Inputs

The project management plan has the information on cost management plan
and cost performance baseline. The project management team can use this
as a reference to keep the expenditure under control.
Project Funding Requirements

Refer to section 7.3.3 – Determine Budget – Outputs

Refer to section 4.4.1 – Monitor and Control Projects – Inputs

The performing organizations’ formal or informal policies, procedures and
guidelines related to cost control process and any cost control tools and
monitoring and reporting methods that influence the control cost process.
Chapter – 7 239
7.4.2 Control Cost – Tools & Techniques

The earned value management is a method to measure the project
performance against baselines with respect to cost, scope and schedule. It
integrates the project’s triple constraints to enable the project management
team to measure and assess project performance and progress. EVM can be
applied to any project and any type of industry. EVM monitors the three
key dimensions (PV,EV and AC) for each work package and control account.
Refer to the section 7.5 Earned Value Management
Forecasting
Refer to section 7.7 – Earned Value Management
To–Complete Performance Index

Refer to section 7.8 – Earned Value Management
Performance Reviews
Performance reviews compare the cost performance over a period of time
against the baseline, reviewing over running or under running of budget
and estimated funds needed to complete the project. In performance reviews
the following information is determined:
Variance Analysis
The project management team compares the actual performance of the
project to the planned or expected performance. This is often done for cost
and schedule analysis. Variance analysis compares the actual cost
performance measurement (CV, CPI) to the original baseline to arrive at
the difference if any. This also includes determining the degree of the
variance to the cost baseline and the root cause for the variance. Then the
project team decides if any corrective and preventive actions are required
to keep the variance under control.
Trend Analysis
The project performance information over a period of time is analyzed and
used to determine whether the performance is improving or deteriorating.
Graphical analysis tools are used to analyze past performance and to forecast
future trends.
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Earned Value Performance
The actual performance is compared with respect to the project cost and
schedule to the planned baseline plan using EVM.

Project Management Software is used to monitor the three dimensions of
the EVM (PV, EV, and AC) and display trends are used to forecast a range
of final project results.
Reserve Analysis
Refer to section 7.3.2 – Determine Budger – T & T
7.4.3 Control Cost – Output

The computed values of CV, SV, CPI and SPI for WBS components to the
work package or control account level is documented and communicated to
the stakeholder.
Cost Forecasts
Budget forecasts are the calculated EAC value or a bottom–up EAC value.
This is documented and communicated to all relevant stakeholders.
Change Requests
The project performance analysis may result in requesting some changes
by the project management team to cost performance baseline or to some
components of the project management plan. The change request may
include corrective or preventive actions. These change requests are
processed through the integrated change control process of the project.

The cost performance baseline and cost management plan are some of the
components of the project management plan that may get updated as a result
of Control Cost process.

Cost estimates and Basis of estimates are some of the project documents
that may get updated.
Chapter – 7 241
Organizational process assets that may get updated are:
• Causes of variance
• Corrective action chosen and the reasons
• Lessons learned from the project cost control
7.5 Summary
The Project Cost management is concerned about estimating the required
cost of the project activities, creating a cost baseline using that estimate,
monitoring and controlling the spending and creating an appropriate
response plan in case of variations from the baseline. The processes in this
knowledge area provide the project manager an effective framework to
manage the project cost effectively and efficiently.
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243
EVM has the unique ability to combine measurements of work performance
(completion of planned work), schedule performance (behind or ahead of
schedule), and cost performance (below or above budget) within a single
integrated methodology. Furthermore, it provides a sound basis for early
problem identification, corrective actions, and management replanning as
required. The use of EVM improves the delivery of projects.
7.6 History of EVM

The origin of EVM was in industrial manufacturing at the turn of the 20th
century, but the idea took root in the United States Department of Defense
in the 1960s. The original concept was called PERT/COST
In 1967, the U.S Department of Defense (DoD) established a criterion based

approach, using a set of 35 criteria, called the Cost/Schedule Control
Systems Criteria (C/SCSC). In 1970s and early 1980s, a subculture of C/
SCSC analysis grew, but the technique was often ignored or even actively
resisted by project managers in both government and industry. C/SCSC was
often considered a financial control tool that could be delegated to analytical
specialists.
In the late 1980s and early 1990s, EVM emerged as a project management
methodology to be understood and used by managers and executives, not
just EVM specialists.
In the 1990s, many U.S. Government regulations were eliminated or

streamlined. However, EVM not only survived the acquisition reform
movement, but became strongly associated with the acquisition reform
movement itself. Most notably, from 1995 to 1998, ownership of EVM criteria
(reduced to 32) was transferred to the industry by adoption of ANSI EIA
748–A standard.
Many industrialized nations also began to utilize EVM in their own

procurement programs. The construction industry was an early commercial
adopter of EVM. Closer integration of EVM with the project management
profession accelerated in the 1990s.
An overview of EVM was included in PMBOK Guide® First Edition in 1987

and expanded in subsequent editions. Efforts to simplify and generalize
EVM gained momentum in the early 2000s.
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7.6.1 Basic concepts of EVM
The basic concepts of EVM are:
• All project steps “earn” value as work is completed
• The Earned Value (EV) can then be compared to actual costs and
planned costs to determine project performance and predict future
performance trends
• Physical progress is measured in dollars, so schedule performance
and cost performance can be analyzed in the same terms
As per ANSI EIA 748–A, there are 32 criteria which form the EVM system.
They are grouped under the following categories:
1. Organization criteria
2. Planning, Scheduling and Budgeting criteria
3. Accounting criteria
4. Analysis criteria
5. Revision criteria
To learn more about these Criteria refer to

http://www.acq.osd.mil/pm/faqs/criteria.htm
7.6.2 Benefits of using EVM

In a typical project performance analysis, physical progress is not taken
into account when analyzing cost performance. Instead, the project’s actual
costs spent to date are simply compared against the planned costs. This
often gives misleading results.
EVM promises to improve the definition of project scope, prevent scope

creep, communicate objective progress to stakeholders, and keep the project
team focused on achieving progress.
EVM determines how much of a project has been completed at specific points
in time, known as milestones.
EVM allows senior management to monitor progress and to react to poor

performance.
Using EVM, senior management can tell early in the life of a project whether
it is likely to meet its targets. Management can then decide whether to
Chapter – 7 245
EARNED VALUE MANAGEMENT
abandon the project early on, before a huge amount of money has been spent.
Likewise, if senior management’s expectations are unrealistic, EVM will

quickly highlight the problem.
For the project manager, he knows how the project is performing at any
given time.
Measuring the performance of individual tasks rather than the project as a

whole gives both the project manager and senior management a steady
stream of signals about the health of the project.
Key Terms
Actual Cost (AC)

The total cost actually incurred and recorded in accomplishing a work
performed for a scheduled activity or WBS component. This is also referred
to as Actual Cost of Work Performed (ACWP).
Budget At Completion (BAC)

The sum of the entire budget established for the work to be performed on a
project or a WBS component or a scheduled activity.
Cost Variance (CV)

It is the algebraic difference between Earned Value (EV) and Actual Cost
(AC). A positive value of cost variance indicates a favorable condition and a
negative value indicates an unfavorable condition.
Cost Performance Index (CPI)

It is a measure of cost efficiency in a project. It is the ratio of Earned Value
(EV) to Actual Cost (AC). A CPI value of 1 and above indicates a favorable
condition and a CPI value of less than 1 indicates an unfavorable condition.
Earned Value (EV)

The value of the work completed expressed in terms of the approved budget
assigned to that work. This is also referred to as Budgeted Cost of Work
Performed (BCWP).
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Estimate At Completion (EAC)
The estimated total cost of a schedule activity, a WBS component or the
project. EAC is equal to the Actual Cost (AC) plus the Estimate to Complete
(ETC).
Estimate To Complete (ETC)

The expected cost required to complete the remaining work of a scheduled
activity or WBS component or the project.
Planned Value (PV)

The authorized budget assigned to the scheduled work to be accomplished
for a scheduled activity or WBS component. This is also referred to as
Budgeted Cost of Work Scheduled (BCWS).
Schedule Variance (SV)

It is a measure of schedule performance on a project. It is the algebraic
difference between the Earned Value (EV) and the Planned Value (PV).
Schedule Performance Index (SPI)

It is a measure of schedule efficiency in a project. It is the ratio of Earned
Value (EV) to Planned Value (PV). An SPI of equal to or greater than 1
indicates a favorable condition and a value less than one indicates an
unfavorable condition.
To Complete Performance Index (TCPI)

It is the calculated projection of cost performance that must be achieved on
the remaining work to meet a specified management goal, such as the Budget
at Completion (BAC) or Estimate at Completion (EAC). It is the ratio of
remaining work to the funds remaining.
Chapter – 7 247
7.7 Understanding EVM
Assume you are working on a project involved in constructing a fence around
a four–sided field. You have estimated that the project would cost you USD
4000 and the time required to complete the project is 4 weeks.
The project has four scheduled activities of constructing a fence on each

side within a week. The cost of each activity is estimated to be USD 1000.
The budget forecast and the project schedule of the project are given below;
Fig. 7.6 Budget Requirement
Fig. 7.7 Schedule
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Scenario – 1
Now assume that you are at the end of week one and you are reviewing
your project progress. The project status is:
Cost spent = USD 1000
Cost planned = USD 1000
Now by using the conventional method
The cost spent (AC) = the cost planned (PV), it appears that we are spending
as per plan and the project status looks healthy.
But now we will apply Earned Value Method

You have collected the data on the work accomplished and find that only
80% of the planned work is completed,
So the Earned value (EV) is USD 800.
Using EVM
Actual cost spent (AC) = USD 1000
Planned Value (PV) (For task 1) = USD 1000
Earned value (EV) = USD 800 (Task 1 is 80 % complete)

Now we will calculate the Cost Variance & Schedule Variance
The cost variance (CV) = EV– AC
= 800 –1000
= – 200
There is a negative variance between value earned and the cost spent, which
indicates a cost overrun and an early sign indicating that the project may
cost more than what is budgeted.
Calculating the cost performance index (CPI) =EV / AC

=800 / 1000
= 0.8
Chapter – 7 249
A CPI value of less than one indicates that we are spending more than the
work performed and the project may cost more than what is budgeted. The
project team needs to investigate and recommend appropriate corrective
action to bring back the schedule on track.
The Schedule Variance (SV) = EV – PV

= 800 – 1000
= – 200
There is a negative variance between the earned value and the planned
value, which indicates a schedule lag, giving an early sign that the project
will take more time than what is planned.
Calculating the schedule performance index (SPI)= EV/PV

=800/1000
= 0.8
A SPI value of less than one indicates that we are lagging behind the schedule
and the project may take more time than what we planned. The project
team needs to investigate and recommend appropriate corrective action to
bring the schedule back on track.
Scenario – 2
Now assume that you are at the end of week 2 and you are reviewing your
project’s progress for the work package scheduled for week 2.

You collected the data on the work accomplished and find that 100% of the
planned work is completed,
Using EVM
Actual cost spent (AC) = USD 1100
Planned value (PV) (For task 2) = USD 1000
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= 1000 –1100
= – 100
There is a negative variance between value earned and the cost spent, which
indicates a cost overrun and an early sign indicating that the project may
cost more than what is budgeted.
= 1000 – 1000
=0
There is a no variance between the earned value and the planned value,
which indicates the task 2 is completed as per schedule.

=1000 / 1100
= 0.909
A CPI value of less than one indicates that we are spending more than the
worth of work performed and the project may cost more than what is
budgeted. The project team needs to investigate and recommend appropriate
corrective action to bring the schedule back on track.
Calculating the schedule performance index (SPI) = EV/PV

=1000/1000
=1
A SPI value of 1 indicates that we are on schedule and the project will be
completed as planned.
Scenario – 3
Now assume that you are at the end of week 3 and you are reviewing your
project’s progress for the work package scheduled for week 3

Chapter – 7 251
You collected the data on the work accomplished and find that 80% of the
planned work is completed,
Using EVM
Actual cost spend (AC) = USD 700

Planned value (PV) (For task 3) = USD 1000
= 800 –700
= 100
There is a positive variance between value earned and the cost spent, which
indicates a cost under run indicating that the project may cost less than
what is budgeted.

= 800 – 1000
= –200
There is a negative variance between the earned value and the planned
value, which indicates that task 3 is behind schedule.

=800 / 700
= 1.14
A CPI value of greater than one indicates that we are spending less than
what we have planned and the project may cost less than what is budgeted.
Calculating the schedule performance index (SPI) = EV/PV

=800/1000
= 0.8
A SPI value of less than one indicates that we are behind schedule and the
project will take a longer time to complete.
In this case, as the Cost Performance Index is greater than one, indicating
that we are spending less, the project team can consider crashing techniques
to bring the schedule on track.
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7.8 Forecasting
Estimate at Completion (EAC)

As the project progresses, the project team can develop a forecast for the
Estimate At Completion (EAC) that may differ from the original budget at
completion (BAC) based on the project performance. If it becomes obvious
that the BAC is no longer valid; the project manager should work out a
forecasted EAC. Forecasting the EAC involves making estimates or
predictions of conditions and events in the project future based on the
information available at present. EAC is typically based on the actual cost
incurred for the completed work plus an estimate to complete (ETC) for
the remaining work.
To calculate the ETC for the remaining work using bottom up estimating,
based on the actual cost incurred for the work completed, may be
problematic.
EVM helps the project team to calculate and forecast the EAC and ETC
based on the actual data, CPI and SPI.
Using EVM, the EAC can be forecast using three different methods
EAC forecast for ETC work performed at the budgeted rate

• This method takes the actual performance to date and assumes that
all the remaining work will be completed at the budgeted rate
• The equation for calculating EAC using this method is
EAC = AC + BAC – EV
EAC forecast for ETC work performed at the present CPI

• This method assumes that what the project has experienced to date
can be expected to continue in future
EAC = BAC / Cumulative CPI
EAC forecast for ETC work Considering both SPI and CPI
• This method assumes that ETC work will be performed at the present
efficiency rate and considers both the cost and schedule performance
indices
Chapter – 7 253
EAC = AC+ {(BAC–EV) / (cumulative CPI x cumulative SPI)}
Now consider the data mentioned in scenario 1 given earlier.

Budgeted at Completion (BAC) = USD 4000
Earned Value (EV) = USD 800.
Actual Cost spent (AC) = USD 1000
Planned Value (PV) = USD 1000

SPI = EV/PV = 800/1000 = 0.8
CPI = EV/AC = 800/1000 = 0.8
As the project manager of this project, you want to forecast how much the
total cost for this project on completion (EAC) would be, by using the three
methods.
1. EAC forecast for ETC work performed at the budgeted rate

EAC = AC + BAC – EV
= 1000+4000–800 = 4200
Therefore the project would cost USD 4200 at completion, if the remaining
work is completed as per the budgeted cost.
2. EAC forecast for ETC work performed at the present CPI

EAC = BAC / Cumulative CPI
= 4000/0.8 = 5000
work is completed with the present cost performance efficiency.
3. EAC forecast for ETC work considering both SPI and CPI factors
EAC = AC+ {(BAC–EV) / (cumulative CPI x cumulative SPI)}
= 1000+ {(4000–800) / (0.8 x 0.8)}
= 1000+ {3200/0.64}
= 1000+5000 = 6000
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work is performed with the present cost and schedule performance
efficiency.
7.9 To–Complete Performance Index (TCPI)

To–complete performance index (TCPI) is the calculated projection of cost
performance that must be achieved on the remaining work to meet a specified
management goal such as BAC or EAC. If it becomes obvious that the BAC
is no longer viable and the forecasted EAC is approved, the EAC supersedes
the BAC and becomes the Cost performance goal.
TCPI can be calculated using BAC or EAC
Equation for Calculating TCPI using BAC = (BAC–EV) / (BAC–AC)
Equation for Calculating TCPI using EAC = (BAC–EV) / (EAC–AC)
Now we will calculate TCPI for scenario 1 using BAC and EAC forecast for
ETC work performed at the present CPI.
1 TCPI using BAC

TCPI = (BAC–EV) / (BAC–AC)
= (4000–800) / (4000–1000)
= 3200 / 3000
= 1.06
Therefore the project management team has to ensure that the remaining
work is to be performed with a TCPI of 1.06 to remain within the approved
budget of USD 4000.
2 TCPI using EAC forecast for ETC work performed at the present
CPI
TCPI = (BAC–EV) / (EAC–AC)
= (4000–800) / (5000–1000)
= 3200 / 4000
= 0.8
Chapter – 7 255
Therefore the project management team has to ensure that the remaining
work is to be performed with a TCPI of 0.8 to remain within the new revised
cost performance goal of USD 5000.
7.10 Summary
Earned value management is an important tool in the management of
projects. EVM helps the project team to provide a reliable and accurate
forecast to questions such as how long will the project take to complete and
how much money will it cost to complete?
The project employing earned value needs to monitor their cost and schedule
performance results against the approved baseline and calculate the
variance with respect to the baseline. A negative cost means that the project
is spending more than what has been budgeted and a negative schedule
variance means the project is lagging behind on the timeline. The project
management team has to take appropriate action to bring the project on
track.
In this lesson we learnt how to calculate the cost variance (CV), schedule
variance (SV), cost performance index (CPI), schedule performance index
(SPI) and how to forecast the estimate at completion (EAC), estimate to
complete (ETC) and to complete performance Index (TCPI).
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1. Which process is not included in Project Cost Management?

A. Closeout
B. Estimating
C. Budgeting
D. Controlling
2. An estimate that is –50% to +50% of actual is considered a (n):

A. Budget estimate
B. Order of magnitude estimate
C. Definitive estimate
D. Parametric estimate
3. Steve is asked to provide a cost estimate for a redecorating project. How

should he proceed?
A. Take the cost of raw materials and labor for each activity in the WBS.
Check previous project files and consider any risks to delivery; then add
10% to account for the company profit.
B. Add raw materials and labor costs for each activity in the WBS.
C. Check competitor pricing, add the raw materials and labor from the WBS
and then decrease by 10% to be competitive.
D. Use the cost of raw materials from a similar project on a house with the
same floor plan.
4. Which of the following can be considered to be the best description of

Estimate Cost?
A. The process of developing the future trends along with the assessment of
probabilities, uncertainties and inflation that could occur during the
project
B. The process of developing an approximation of the monetary resources
needed to complete project activities
C. The process of establishing budgets, standards, and a monitoring system
by which the investment cost of the project can be measured and managed.
D. The process of gathering, accumulating, analyzing, monitoring, and
managing the costs on an on–going basis
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PROJECT COST MANAGEMENT & EARNED VALUE MANAGEMENT
5. All of the following are outputs of estimate cost except?
A. A description of the scope of work whose costs have been estimated
B. The prevention of inappropriate changes from being included in the cost
baseline
C. An indication of the range of possible costs for the project
D. Documentation of any assumptions made during cost estimation
6. You are the project manager for a consulting company. Your company has
two possible projects to manage, but they can only choose one. Project MNC
is worth $217,000, while Project GMS is worth $229,000. Management elects
to choose Project GMS. Which one of the following can be considered as the
opportunity cost of this choice?
A. $12,000
B. $217,000
C. $229,000
D. Zero, as project MNC is worth more than Project GMS
7. Of the following estimates, which most accurately reflects the actual cost of
the project?
A. Bottom up estimates
B. Order of magnitude estimates
C. Preliminary estimates
D. Conceptual estimates
8. You are the project manager for the hardware inventory project. You have a
piece of equipment that was purchased recently for $10,000 and is expected
to last five years in production. At the end of five years, the expected worth
of the equipment is $1,000. Using straight–line depreciation, what is the
amount that can be written off each year?
A. Zero
B. $1,000
C. $1,800
D. $2,000
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9. A project cost performance is currently at 0.5. The project manager has
indicated that the original estimates are fundamentally flawed and that the
ETC should be re–estimated. The project sponsor has asked for a definitive
estimate for the ETC. What is the accuracy range of the estimate that the
project team must ensure while making the new estimates?
A. –5% to +10%
B. –10% to +25%
C. –25% to 75%
D. –5% to +5%
10. Cost baseline is an output of which cost management process?

A. Resource planning
B. Estimate Costs
C. Determine budget
D. Control Costs
11. Project Manager is creating an estimate for building a company WAN (wide
area network). It is something that is new to the Project Manager and his
team, and they want to make sure that all the work of the project is covered.
They decide to create a bottom–up estimate. All of the following are
advantages of this type of estimate except:
A. It provides supporting detail of the estimate
B. It provides team buy–in when they help create it
C. It takes a great amount of the time to create
D. It has a greater degree of accuracy because of the detail at which it was
created
12. All of the following are inputs to the Determine budget process except?
A. Activity cost estimates
B. Scope baseline
C. Project schedule
D. Procure management plan
Chapter – 7 259
13. You are working on a project that will upgrade the phone system in our
customer service center. You have used bottom–up estimating techniques to
assign costs to the project activities and have determined the cost baseline.
Which of the following is true?
A. You have completed the Estimate Costs process and now need to complete
the Determine Budget process to determine the project’s baseline
B. You have competed the Develop Project Management Plan process and
established a project baseline to measure future project performance
C. You have completed the Estimate Costs process and now need to complete
the Develop Project Management Plan process to establish a project
baseline to measure future project performance
D. You have completed the Determine Budget process, and the cost baseline
will be used to measure future project performance
14. Which of the following is displayed as an S curve?

A. Gantt
B. Cost baseline
C. Critical path
D. Schedule baseline
15. All of the following are tools and techniques for Estimate Cost process except?
A. Parametric estimating
B. Bottom–up estimating
C. Earned value management
D. Analogous estimating
16. Which describes how cost variances will be managed?

A. Cost management plan
B. Cost baseline
C. Cost estimate
D. Chart of accounts
17. What characteristic best describes the cost baseline?

A. Total cost of project
B. Total Time required for the project
C. Total cost of project including the contingency reserve
D. Total cost for the project including the contingency reserve and the
management reserve
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18. The methodology that is used to measure variance in projects is:
A. Accounting
B. Earned Value management (EVM)
C. Earned Value (EV)
D. Scheduling
19. You’ve been hired by a large consulting firm to evaluate a software project
for them. You have access to the CPI and EV for the project, but not the AC.
The CPI is 0.92, and the EV is $172,500. How much money has actually been
spent on the project?
A. $158,700
B. $172,500
C. 187,500
D. There is not enough information to calculate the actual cost
20. You know that BAC = 375, AC = 200 and EV = 250. Variables that have
occurred on the project to date are not expected to continue. What is the
ETC?
A. 75
B. 50
C. 125
D. 150
21. Which performance measurement tells us the budget required to finish the
project?
A. ETC
B. EV
C. AC
D. EAC
22. If EVc=145, PV=162, ACc=138, BAC=200, what is EAC when you expect
project performance to continue with the same type of variance that you’ve
experienced to date?
A. 201
B. 190.4
C. 200
D. 193
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23. If EV is US $300,000, AC is US $350,000, and PV is US $375,000, what does
the schedule performance index indicate?
A. You are only progressing at 86% of the rate originally planned
B. You are progressing at 125% of the rate originally planned
C. You are progressing at 116% of the rate originally planned
D. You are only progressing at 80% of the rate originally planned
24. You are manager for community Trends, a nonprofit organization. Your
project has come about due to a social need. You’re calculating performance
measurements, and you know the following information: BAC=900, ETC=65,
PV=500, EV=475, and AC=425. Which of the following statements is true?
A. This project is ahead of schedule and costs are higher than planned
B. This project is behind schedule and costs are higher than planned
C. This project is behind schedule and costs are lower than planned
D. This project is ahead of schedule and costs are lower than planned
25. You know that PV=470, AC=430, EAC=200 and BAC=525. What is VAC?
A. 80
B. 40
C. 325
D. 275
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263
8.0 What is Quality?
Quality is a perceptual, conditional and somewhat subjective attribute for
describing goodness. This can be viewed both from producer and consumer
perspectives. However the TQM movement places customer’ views first.
Following are few of the definitions provided by quality gurus:
“Fitness for use.”

– Joseph M. Juran
“Conformance to requirements.”
– Philip B. Crosby
“Uniformity around a target value” & “the loss a product imposes on society
after it is shipped.”
– Genichi Taguchi
“Quality in a product or service is not what the supplier puts in. It is what
the customer gets out and is willing to pay for.”
– Peter Drucker
“A subjective term, for which, each person has their own definition. In
technical usage, quality can have two meanings:
a. the characteristics of a product or service that bear on its ability to
satisfy stated or implied needs;
b. a product or service free of deficiencies.”
– ASQ
The approach of quality management focuses on the principle of reducing

variation and improving the conformance to requirements (“right first time
and every time”).
The objective of project quality management is to ensure that the project

deliverables are aligned to both the customer and the performing
organizational quality parameters, and it helps achieve the purpose for
which the project is initiated.
Project quality management entails tailoring of the applicable processes

from the organizational quality management systems, which are aligned to
customer/project objectives of meeting the project and product
requirements, besides providing a framework for continual improvements.
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The essence of project quality management include, planning for project
quality, performing quality assurance and controlling quality of project
deliverables.
Detailed explanation for each of the process areas are covered in the
subsequent paragraphs.
8.0.1 Quality Management Approach and Philosophy

Project quality management applies to all projects irrespective of the project
size, products or services to be delivered. Project quality management
addresses both process and product quality requirements. There are various
attributes and terminologies associated with the term “quality” that are
used to define the goodness. These are explained in the section Key Terms.
Quality Standards & Models

Some of the international quality management systems and models
organizations typically implement include (not limited to):
• ISO 9000: 2008
• CMMI®
• Six sigma methodology (DMAIC, DMADV)
• ITIL (ISO 20K, ISO 27K)
• OPM3®
Quality Management Systems

The objective of quality management is to bring about standardization and
consistencies to help reduce variations, improve predictability and increase
conformance to requirements (“right first time and every time”).
The key principles of quality management include:

• Customer satisfaction and focus – Fitness for Purpose (Conformance
to Requirements) and Fitness for Use (Product/Services needs to
satisfy the real needs)
• Leadership commitment
• People involvement
• Prevention over correction
• Process approach
• Statistical approach (Metrics driven culture)
• Continuous process improvement
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PROJECT QUALITY MANAGEMENT
Customer Satisfaction and Focus
Project must produce what is expected – “Fitness for Purpose”
Product / Service must satisfy Customer Requirements – “Fitness for Use”

• Customer is the key for the business/ project success
• Design, develop and Deliver Product/ service/ solutions that fulfill
their needs
Customer is the key for the success of a business/ project. Identify the
customers and understand their stated and implied needs. Transform their
needs into workable solutions. Design, develop and deliver product/ service/
solutions that fulfill their needs.
Leadership Commitment and Responsibility

Project success greatly depends on the level of commitment and personal
involvement from the senior management. It is management’s responsibility
to provide the suitable resources at adequate (optimal) capacities on–time.
Commitment and personal involvement are required from the senior

management in creating and deploying clear quality goals and objectives
consistent with the business objectives of the organization.
The senior management must be committed in creating and deploying a

well–defined process, systems, methods and resources for achieving those
goals.
People Involvement
Employees at all levels should be involved in the quality management
process. Teamwork enables organization to realize business goals with ease
and creates a conducive work place environment. Good teams feel
comfortable discussing ideas/problems/challenges proactively to find a
solution.
Prevention over Correction

The approach calls for proactive planning for achieving project objectives
through systematic usage of quality tools/techniques to ensure the products/
services are delivered “right the first time, every time”, reduce/eliminate
rework and rejections. The proactive planning for quality is intended
towards the prevention over detection/correction which is the essence of
continual improvement.
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Process Approach
The organization has to develop and deploy well defined set of processes
for their workforce to carry out their tasks. Focus should be on deploying a
well–defined process and provide the necessary infrastructure to maximize
efficiency and effectiveness. A well–defined process ensures consistency in
the output. Quality should be “planned, designed and built into–not
inspected
into” the project’s management or deliverables.
Statistical Approach
Data and metric driven decision making must be the basis for an effective
quality management initiative. The statistical approach to problem solving,
helps in analyzing issues, taking appropriate actions (thereby reducing costs)
and preventing non–conformance. Projects should identify the “vital few”
metrics aligned to customer and performing organization’s goals and
objectives using techniques like Goal/Question/Metrics/Process framework.
Organizational process performance baseline and voice of customer
(customer specifications) forms the basis for statistical approach.
Continuous Improvement
A continual improvement process, also often called a continuous
improvement process (abbreviated as CIP or CI), is an ongoing effort to
improve products, services, or processes. These efforts can seek
“incremental” improvement over time or “breakthrough” improvement all
at once.
Delivery (customer valued) processes are constantly evaluated and improved

in the light of their efficiency, effectiveness and flexibility. Source: Wikipedia
Continuous improvement is an ongoing effort to improve products, services

or processes. These efforts can seek “incremental” improvement over time
or “breakthrough” improvement all at once.
Product quality is a direct reflection of the process quality. Proactive

improvement of project processes are essential in achieving improvement
in product quality and increased customer satisfaction.
Organizations continuously look for opportunities to improve their

processes, products, systems and resource capabilities. Among the most
widely used tools for continuous improvement is a four–step quality model—
the Plan–Do–Check–Act (PDCA) cycle, also known as Deming Cycle or
Shewhart Cycle.
Chapter – 8 267
PDCA cycle
The Walter Shewhart cycle or Deming wheel or the PDCA cycle (Plan, Do,
Check, Act), is a proven method for continuous process improvement. It
also forms the basic foundation for the project management processes.
Fig. 8.1: PDCA Cycle
Here is what you do for each stage of the Cycle:

• Plan for improvement initiatives and come up with actions for
implementation.
• Do changes designed to bring about improvements on a small or

experimental scale first (Proof Of Concept). This minimizes disruption
to routine activity while testing whether the changes will work or
not.
• Check whether the small scale or experimental changes are achieving

the desired result or not. Also, continuously check key activities
(regardless of any experimentation going on) to ensure that there
are no surprises.
• Act to implement changes on a larger scale if the experiment is

successful. This means making the changes a routine part of your
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activity. Also act to involve other persons (other departments,
suppliers, or customers) affected by the changes and whose
cooperation you need to implement them on a larger scale, or those
who may simply benefit from what you have learnt (you may, of course,
already have involved these people in the Do or trial stage).
This completes the first cycle to arrive at ‘objective achieved’. Go back to

the Plan stage to identify the next ‘improvement objective’.
If the experiment was not successful, skip the Act stage and go back to the
Plan stage to come up with some new ideas for addressing the improvement
objective and go through the cycle again.
Plan–Do–Check–Act describes the overall stages of improvement activity,

but how is each stage carried out? This is where other specific quality
management, or continuous improvement, tools and techniques come into
play. The diagram above lists the tools and techniques which can be used to
complete each stage of the PDCA Cycle.
8.0.2 Managing Quality in Projects

All general quality management principles apply to Project Quality
Management. Project quality management includes processes/ activities that
determine quality policies, quality objectives and responsibilities so that
the project might meet the purpose for which it is undertaken.
Projects and Quality

In any project, quality is an important dimension. Project stated objectives
can be achieved by developing an effective quality assurance plan and
adhering to the same. Periodic and proactive monitoring of project’s
performance will help in the early identification of potential problems and
avoid last minute surprises.
Project Quality Management is applicable for both product quality and
process quality. It can be formal or informal depending on the size and
complexity of the project.
Chapter – 8 269
Cost of Quality
The cost of quality refers to three major cost components associated with
the quality cost namely, Prevention cost, Appraisal cost and Failure cost.
Fig. 8.2: Cost of Quality (COQ)
Appraisal Cost
These are the costs associated with, inspection activity to verify goodness
of the work products. These costs include cost of incoming inspection, cost
of in–process inspection, cost of final inspection, cost of inspection & testing
equipment and cost of resources involved in appraisal activity.
Prevention Cost
These are the costs associated with the activities to keep the failure and
appraisal cost to a minimum. These costs include cost of quality planning,
cost of product review & redesigning, cost of process control, cost of supplier
evaluation and cost of training.
Failure Costs
Failure costs are the costs associated with producing nonconforming
products. It can be further classified into two i.e. cost involved in internal
failures and external failures that arise out of a nonconforming product.
Internal Failure Cost : These are the costs associated with producing
defective products. In other words the cost of scrap, cost of rework,
cost of 100% inspection & testing and cost of re–inspection after
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rework. The internal failure cost can be minimized or eliminated by
producing defect–free products.
External Failure Cost : These are the costs associated with shipping
a defective product to customers. These are the costs that include
compliant costs, warranty costs and liability costs. The external
failure cost can be eliminated by producing and shipping defect–free
products.
The sum of the three cost components gives the total Cost of Quality.
The following figure shows the relationship between the cost
components.
8.0.3 Seven basic Quality Tools
Flow Charts
It is a graphical representation of a process. It gives the reader a clear
understanding of the input, output and process steps to be performed in a
sequential order for a given process. Flow charts show the relationship
between various process elements, which helps in identifying critical process
areas where problems can occur.
Fig. 8.3: Internal Audit Flow Chart
Chapter – 8 271
Check Sheets
Also called: defect concentration diagram. A check sheet is a structured,
prepared form for collecting and analyzing data. This is a generic tool that
can be adapted for a wide variety of purposes.
When to Use a Check Sheet

When data can be observed and collected repeatedly by the same person or
at the same location. When collecting data on the frequency or patterns of
events, problems, defects, defect location, defect causes, etc. When collecting
data from a production process.
Check Sheet Procedure

• Decide what event or problem will be observed. Develop operational
definitions
• Decide when data will be collected and for how long
• Design the form. Set it up so that data can be recorded simply by
making check marks or Xs or similar symbols so that data do not
have to be recopied for analysis
• Label all spaces on the form
• Test the check sheet for a short trial period to be sure it collects the
appropriate data and is easy to use. Each time the targeted event or
problem occurs, record data on the check sheet
An example of a check sheet is provided below. This figure shows a check

sheet that was used to collect data on telephone interruptions. The tick
marks were added as data was collected over several weeks.
Fig. 8.4: Check Sheet
Histogram
It is a graphical tool for grouping of data showing the distribution of
variables. Each bar in the histogram represents a character/ problem and
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the height of the bar indicates the frequency of occurrence. This helps in
grouping data under various categories. It shows how often each different
value in a set of data occurs. A histogram is the most commonly used graph
to show frequency distributions. It looks very much like a bar chart, but
there are important differences between them.
Use a Histogram when:

• The data is numeric
• You want to see the shape of the data’s distribution, especially when
determining whether the output of a process is distributed
approximately normally
• Analyzing whether a process can meet the customer’s requirements
• Analyzing what the output from a supplier’s process looks like
• Monitoring whether a process change has occurred from one time
period to another
• Determining whether the outputs of two or more processes are
different
• You wish to communicate the distribution of data quickly and easily
to others
Fig. 8.5: Histogram
Scatter Diagram
It is a tool to identify the correlation/association between a cause and an
effect. A series of measurements are taken and plotted against each other
to see whether there is any association between them.
Chapter – 8 273
Following is an example of a scatter diagram:
Fig. 8.6: Player Weight/Height
Fig. 8.7: Scatter Diagram
Run Chart
It is a graphical representation of the product or process measurement over
a period of time. The specific measurements are collected over
predetermined intervals and plotted on a time scale. The run chart helps
in understanding the trend in process/ product characteristic over a period
of time.
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The following is an example of a Run Chart.
Fig. 8.8: Run Charts
Control Charts
This is similar to a run chart and is used to monitor the performance of a
process. Control charts are often used as part of process control systems.
They were developed by W. A. Shewhart in 1924 while working for Bell
Telephone Laboratories.
Control charts provide a graphical representation of a process behavior

over a period of time and consists of a center line and two boundary lines
placed above and below the center line (the control limits). Control limits
are based on the variability within the data. Values are plotted to determine
the state of the process.
Control charts tell you how the process is performing and helps in
determining whether a process is in control or out of control. The process
performance / results are measured over a period of time and plotted in a
graph. The changes in process behavior will be indicated by abnormal points
on the graph.
Chapter – 8 275
Fig. 8.9: Control Charts
Control charts can be viewed as a distribution plotted on its side – if you

created a histogram of the points, you would expect this to show a normal
distribution (assuming the process stays in control). Below is an example:
Fig. 8.10: Control Charts and normality
Control limits
Usually the control limits are set at ± 3 sigma (i.e. standard deviation) of
the process. Any variation in the process performance within the upper
control limit and lower control limit will be due to common cause variation
and the process is said to be in statistical control. The process does not
require correction.
Tolerance limits or specification limits are not the same as control limits.
Generally, the control limits will be within the tolerance or specification
limits. In other words specification limits should not be stringent than
control limits for a capable process.
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Variations
Any variation in the observed results which falls within the control limits
without showing any trend is due to common cause variation.
Variations due to special causes will fall outside of either the upper control
limit or the lower control limit. Any seven consecutive observations which
fall on one side of the mean (center–line) are due to special cause variation.
This is known as the Rule of Seven.
Following are some of the indications of special cause variation:

• Any point falling outside the upper control and lower control limits
• Seven or more consecutive points on one side of the center–line
• Six points in a row showing an increasing or a decreasing trend
• Fourteen points altering up and down
Fig. 8.11: Control Charts Interpretation
Chapter – 8 277
Pareto Chart
It is a form of bar chart, used as a prioritizing tool to identify the few vital
problems, issues or defects the project team have to focus on. It is based on
the 80/20 rule (law of the vital few) conceptualized by the Italian economist
Vilfredo Pareto, which says 80 percent of the problems are attributable to
20 percent of the causes. In Pareto charts, each bar represents a character/
problem and the height of the bar indicates the relative frequency. The
chart shown below is a Pareto chart showing a defect analysis in a software
application.
Fig. 8.12: Pareto Charts
Cause–and–Effect Diagram
This is a structured brainstorming tool and is also called a fish–bone diagram
or Ishikawa diagram or 5 Why method. This is useful in organizing
brainstorming ideas about the potential causes of a problem under major
causal areas, such as
• People
• Process
• Machine
• Material
• Environment
• Measurement systems
• Time
• Energy
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The diagramming process can also help you visualize relationships between
a problem and possible underlying causes. Cause–and–effect diagrams also
help isolate large problems into manageable pieces.
Fig. 8.13: Cause & Effect Diagram
8.0.4 Additional Quality Planning Tools

Additional Quality Planning Tools include, but are not limited to:
1. Benchmarking
2. Design of Experiments
3. Statistical Sampling
4. Brainstorming
5. Force Field Analysis
6. Nominal Group Techniques
The project manager and his team can use these tools to define the quality
requirements and develop an effective Quality Management Plan.
Benchmarking
It is the process of comparing one organization’s practices and performance
against those of others. It seeks to identify standards, or “best practices,”
to apply in measuring and improving performance.
Chapter – 8 279
Design of Experiments
This is a statistical method by which the factors influencing the output of a
process or product can be optimized. It is a planned set of tests on the
variable with one or more inputs. It allows changing of all the important
factors or inputs at a time and conducting experiments. The results of the
experiment are then analyzed to identify the influencing factors and arrive
at the optimum value of each factor.
The term experiment is defined as the systematic procedure carried out

under controlled conditions in order to discover an unknown effect, to test
or establish a hypothesis, or to illustrate a known effect. When analyzing a
process, experiments are often used to evaluate those process inputs
which have a significant impact on the process output, and what the
target level of those inputs should be to achieve a desired result (output).
Experiments can be designed in many different ways to collect this
information. Design of Experiments (DOE) is also referred to as
Designed Experiments or Experimental Design – all of the terms have
the same meaning.
Experimental design can be used at the point of greatest leverage to reduce

design costs by speeding up the design process, reducing late engineering
design changes, and reducing product material and labor complexity.
Designed experiments are also powerful tools to achieve manufacturing
cost savings by minimizing process variation and reducing rework, scrap,
and the need for inspection.
Statistical Sampling
During quality planning, the project team has to decide the sampling size
and frequency it is going to employ for control quality activities like
inspection and testing. Proper designing of sampling size requires the study
of actual level of quality required by the customer or user.
There are sampling standards available for attribute sampling, variable

sampling, single sampling, double sampling and multiple sampling methods.
It is advisable that the project management team is aware about the
sampling standards. It is recommended that the project management team
is aware of the various sampling standards that are available, to help them
select the appropriate standard for their project.
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Brainstorming
It is an effective way of generating multiple ideas on a specific issue and
then determining which idea – or ideas – offer the best solution. A
brainstorming session requires a facilitator, a brainstorming space and
provision to write ideas, such as a white–board a flip chart or software tool.
The facilitator’s responsibilities include:

• Guiding the session
• Encouraging participation
• Writing ideas down
Brainstorming works best with a varied group of people. Participants should

come from various departments across the organization and have different
backgrounds. Even in specialist areas, outsiders can bring fresh ideas that
can inspire the experts. Brainstorming is most effective with groups of 8–
12 people and should be performed in a relaxed environment.
Force Field Analysis

It is a useful technique for looking at all the forces FOR and AGAINST a
decision. In effect, it is a specialized method of weighing pros and cons. By
carrying out the analysis you can plan to strengthen the forces supporting
a decision, and reduce the impact of opposition to it.
To carry out a force field analysis, describe the plan or proposal.

• List all forces for change in one column, and all forces against change
in another column
• Assign a score to each force, from 1 to 5, 1 being weak and 5 being
strong
Once you have carried out an analysis, you can decide whether your project
is viable or not. Force Field Analysis can help you to work out how to
improve its probability of success by:
Reducing the strength of the forces opposing a project
or
Increasing the strength of the forces pushing a project
Chapter – 8 281
Fig. 8.14: Force Field Analysis
Nominal Group Technique

It is also a form of brainstorming, where the generation of ideas is done by
a small group and then the ideas generated are reviewed by another bigger
group.
8.0.5 New 7 Quality Management Tools and Control Tools
Affinity Diagram
It is a tool used to group complex and apparently unrelated data into natural
and meaningful categories. It allows teams to quickly collect and organize
hundreds of ideas and then organize/summarize them under meaningful
heads.
• Gathers input from everyone working on the problem

• Gives all ideas equal weight
• Ideas are grouped according to their natural relationships
• A very creative brainstorming process
• Is spatial and interactive
• Can be constructed with post–it notes or note cards on a wall or tabl
• Helps to identify purpose, vision, problems
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Fig. 8.15: Affinity Diagram Example
Process Decision Program Charts (PDPC)

A technique designed to help identify the consequential impact of failure
on activity plans, and create appropriate contingency plans to limit risks.
PDPC helps in
1. identifying what can go wrong (failure mode or risks)

2. consequences of that failure (effect or consequence) possible counter
measures (risk mitigation action plan)
Fig. 8.16: Example of a Process Decision Program Chart
Chapter – 8 283
Interrelationship Digraphs (ID)
• An interrelationship digraph is a visual display that maps out the
cause and effect links among complex, multivariable problems or
desired outcomes
• Another type of cause–and–effect diagram is an inter–relationship
digraph (di is short for directional). This type of diagram adds a layer
of complexity, but helps identify problems that, when addressed
properly, provide the greatest benefits
Affinity Diagrams are best used in conjunction with IDs
Problem Statement
High no–show rates. The basic steps for arriving at interrelationship digraph
are as follows:
1. Brainstorm the potential causes of the problem, group similar

concepts together, and label these nodes A, B, C, etc.
2. Identify cause and effect, and draw directional arrows. For example,
too much paperwork (node G) leads to an overworked staff (node D),
and consequently an unfriendly environment for clients and staff
(node A). There may be cases when arrows point both ways, which
typically indicates a vicious cycle. Again, if the problem is too complex,
break up the diagram into manageable parts.
3. Count the number of arrows coming into and going out of each node.
These counts determine:
• Potential causes—the nodes that have the most number of arrows

coming out of them
• Key indicators (Outcome/Effect)—the nodes that have the most
number of arrows going into them.
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Fig.
8.17: Inter–relationship Diagraphs
Focusing on the root causes (in this case, nodes C and G) provides the
greatest benefits as they help resolve other problems. Measuring and
monitoring the key indicators (such as node F) provide clues on overall
system performance.
Tree Diagram
It is a hierarchical map that shows a project or process broken down into
increasing levels of detail. It starts with the main objective or top–level
view and successively branches out into smaller and smaller components,
showing the relationships involved in greater detail. It is called Systematic
Diagram, Tree Analysis, Analytical Tree, Hierarchy Diagram. It looks like
a tree, with trunk and multiple branches.
It is used to break down broad categories into finer levels of detail.

Developing the tree diagram helps one to progress gradually from
generalities to specifics. It is often used for WBS, RBS and EMV based
decision trees.
Chapter – 8 285
Fig. 8.18: Tree Diagram
Prioritization Matrix
This helps rank order alternatives vis–à–vis a set of criteria using a weighted
average method for decision making. The options are typically solutions
for a given project or business scenario. It is also a useful technique to
achieve consensus about an issue. The matrix helps rank ordering problems
or issues (usually generated through brainstorming) using a set of criterion
that are important for decision making (often refereed as business levers).
The weighted scores enables in identifying the most important items.
Fig. 8.19: Prioritization Matrix
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Activity Network Diagrams
There are two types of representations in network diagrams which are called
Activity On Node (AON) or Activity On Arrow (AOA). These are typically
used for Project Scheduling using CPM, PERT or Precedence Diagrams.
Fig. 8.20: Activity Network Diagram
Matrix Diagrams
A powerful quality management tool, which seeks to establish a correlation
between a set of parameters defined in two dimensional matrix (eg: Project
Goals or KPI Vs Business Levers)
Fig. 8.21: Matrix Diagram
Chapter – 8 287
8.0.6 Relation between New Seven C. Q. Tools & Basic Seven Tools
Project Quality Management involves the development and implementation
of a clear and concise quality plan with focus on customer / stakeholder
satisfaction, prevention of defective occurrences and continuous
improvement. The plan choice must address the policies & procedures,
methodologies, metrics, the choice of resources, the tools and techniques
and the costs associated in infusing quality into the project.
Source: Nayatani, Y., The Seven New QC Tools (Tokyo, Japan, 3A Corporation, 1984
Fig. 8.22: Relation between New Seven C. Q. Tools & Basic Seven Tools
Key Quality Terms
Accuracy & Precision

Accuracy and precision are not the same and they have different connotations
in the project quality management context. Accuracy is an assessment of
correctness (proximity to the target) i.e. how close is our measured value
with respect to the actual value?
Precision represents a measure of exactness. (i.e. how close the measured

values are to each other). For example, refer to the dart board shown below,
which explains the difference:
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Fig. 8.23: Accuracy & Precision
Control Quality
Control quality refers to the process of monitoring and recording of results
to assess project/process performance to take corrective/preventive actions
(if required).
Grade
Grade is the classification of products based on its features / characteristics.
Low grade does not necessarily mean low quality product, but it will have
less features compared to a high grade product of the same nature. Quality
and grade are not the same. It is the responsibility of the project team
members to choose the right grade of raw materials / resources to meet the
customer specifications / requirements.
Inspection
It is an activity to check the work products to ensure conformance to
standards, requirements and specifications as per customer requirements.
The results of inspections generally include measurements. It applies to
all work products (internal and external) across the entire project lifecycle.
Quality Planning
Quality planning is the process of developing plans to ensure that a product/
service will satisfy its stated objectives and business needs. It involves
identifying quality standards, performing an analysis in order to determine
how to satisfy those standards, and creating a quality management plan.
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Quality Assurance
The term quality assurance and control quality are often used in the same
context to refer to activities performed for ensuring quality of a product/
service. However, these two terms have different meanings.
Quality Assurance refers to planned, systematic activities that are

performed to provide confidence to the customer that the product/service
will satisfy their requirements.
Statistical Sampling Techniques

It is about selecting and evaluating the characteristics/ performance of a
representative portion of the population. Based on the measurement of the
representative sample, it is determined whether large batches of a product
should be accepted or rejected without testing the entire population. Proper
designing of sample size requires study of the actual level of quality required
by the customer or user.
There are different sampling standards available for attribute sampling,

variable sampling, single sampling, double sampling and multiple sampling
methods.
8.0.7 Project Quality Management Processes

The Project Quality Management process includes the following key
processes:
Fig. 8.24: Project Quality Management Processes
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8.1 Plan Quality Management
This is the process of identifying project quality requirements and/or
standards applicable to both project process and product. It involves
performing an analysis in order to determine how to satisfy those standards,
and creating a quality management plan and process improvement plan.
Fig. 8.25: Plan Quality Management – ITTO
8.1.1 Plan Quality Management – Inputs

Some of the key sub plan components that are used for defining the Quality
management plan include (but not limited to):
• Scope baseline (refer to section 5.4.3 Create WBS) contains important

information like deliverables and acceptance criteria, which forms
the basis of creating project performance standards. Project WBS
provides details on the project deliverables and milestones which
form the basis for variance analysis.
• Schedule baseline (refer to section 6.6.3 Develop Schedule) contains
approved delivery dates (start and finish). This forms the basis for
identifying analysis triggers and threshold for project performance
management (EV, SPI, and SV).
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• Cost performance baseline (refer to 7.3.3 Determine Budget – Output)
contains approved budget (including reserves). This forms the basis
for identifying analysis triggers and threshold for project performance
management for cost related performance indicators (EV, CPI, and
CV).
Other subsidiary plans also contain inputs that may be relevant to the
project depending on the type and size of the projects.
The Stakeholder Register contains information about the identified project
stakeholders. The stakeholder needs and expectations with respect to
quality should be identified and taken into account while identifying the
quality requirements. The project manager must ensure effective
stakeholder participation while developing the quality plan.
Refer to section 13.1.3 – Identify Stakeholders – Outputs
Risk Register
The Risk Register is one of the key inputs a project manager has to refer to
when preparing the quality plan as it has a significant impact on the project
quality requirements. All knowledge areas have a contribution to risk
depending on the nature, size and type of the project.
The requirements collected during the requirement gathering phase are
clearly documented. This can be a simple document listing all the
requirements or a detailed one containing all the descriptions and
attachments. In some complex projects, the requirement document may
contain very high level information about the project or product
requirements and will be detailed in the course of the project progress,
called progressive elaboration. The documented requirements must be
quantifiable, testable and acceptable to all stakeholders.
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Some of the key components of the requirement documents are (but not
limited to):
• Business need
• Business and project objective
• Functional requirements
• Non–functional requirements
• Quality requirements and acceptance criteria
• Support and training requirements
• Requirements assumptions and constraints
• Business rules of the organization
• Impact to the entities both inside and outside the performing
organization.
Refer to section 5.2.3 – Requirements Documentation – Outputs

The Enterprise Environmental Factors which influence project quality
planning should be considered when developing the Project Quality Plan.
Some of the examples of EEF which has such influence are:

• Standards, rules and guidelines
• Legal and Government Regulations
• Working and Operating Environments

Organizational quality policies, procedures and guidelines, historical
databases and lessons learnt from previous projects specific to the
application area may affect the project. Quality Policy is the overall intention
and direction of an organization with regard to quality as formally expressed
by top management. In case of non–existence of Organization Quality Policy,
the project team has to develop a quality policy for the project and
communicate the same to the project team and the stakeholders.
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8.1.2 Plan Quality Management – Tools & Techniques
Cost Benefit Analysis

Cost and benefit trade–offs of meeting quality requirements should be taken
into consideration when planning quality activities.
Fig. 8.26: Cost Benefit Analysis Example
Cost of Quality
A balanced approach to the cost of prevention vs. cost of nonconformance
should be considered while planning for the quality activities and
corresponding resources required for the project.
Refer to section “8.0.2 – Manageming Quality in Products
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Seven Basic Quality Tools
Fig. 8.27: Seven Basic Quality Tools
The above relationship depicts how each of the seven basic quality tools are
mutually related and help project teams throughout the project life cycle.
“As much as 95% of quality related problems in the factory can be solved
with seven fundamental quantitative tools.” – Kaoru Ishikawa
Refer to section 8.0.3 – Severn Basic Quality Tools
Benchmarking
Refer to section 8.0.4 – Additional Quality Planning Tool
Design of Experiments
This is an important tool in determining the variables that will influence
quality and help in optimizing those variables.
Additional Quality Planning Tool

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Meetings
This is a formal forum where all relevant stakeholders get together to
identify the most appropriate quality tools and techniques that are
applicable for the project and the scenarios in which those will be applied
to understand the project outcome vis–à–vis project stated objectives. During
this meeting, process tailoring and process improvement plan requirements
for the project, will be reviewed to ensure that appropriate levels of process
are included and non–value added activities are identified and addressed
appropriately.
Meetings tend to be in the form of:

• Brainstorming
• Decision Making
8.1.3 Plan Quality Management – Outputs
Quality Management Plan

The quality management plan contains details of how the project
management team would be implementing the quality policy and other
quality activities such as quality assurance, control quality and process
improvement activities in the project.
The quality management plan may be a formal or informal plan depending

upon the complexity of the project.
Process Improvement Plan

The process improvement plan addresses how the project management team
will measure the effectiveness and efficiency of the tailored processes for
delivering value to the relevant stakeholders.
This plan will include (not limited to):
Process boundaries : Specifies the process objectives, outline, input/

output, entry/exit, process owner and the relevant stakeholders
Process configuration: This provides a graphic visualization of the

project’s tailored processes with various touch–points (hand–in, hand–
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offs) to identify the value added and non–value added process steps (akin
to value stream mapping)
Process metrics: The measurements and derived metrics (the vital

few) that need to be monitored (along the identified control limits and
thresholds) that provides the health of the project at any point in time.
It will include both leading and lagging measurements/metrics.
Target for improved performance: The project team identifies,

upfront, the proposed process/product improvements for setting project
goals and objectives. Improvement objectives are realized through a set
of planned initiatives.
Quality Metrics
Quality metrics clearly describes the operational definition of process or
product attributes in specific terms and how these metrics will be measured
and monitored. Typically the metrics should include “Voice Of Client (VoC),
Voice Of Management (VoM) and Voice of Processes (VoP).
Some of the quality metrics include, but are not limited to:
• Schedule variance
• Cost variance
• Effort variance
• Defect rate
• Defect frequency
• Defect density
Quality Check Lists

A structured verification aid that helps in ensuring all project specific
quality requirements/standards are captured in the form of a tool or other
means, which when used effectively (on–time), will help identify and address
potential deviations or non–conformances before it is delivered to the client
or end users
Project Document Update

Documents that may get updated include:
• Stakeholder Register
• Responsibility Assignment Matrix (RAM or RACI)
• WBS and WBS Dictionary
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Developing a Quality Management Plan (Guideline)
The following guidelines will help you create an appropriate quality
management plan:
1. Review the scope baseline to identify customer or stakeholder goals,

objectives and acceptance criteria
2. Review the organization’s quality policy and determine how the project
team will implement the policy
3. Identify standards, rules and regulations that are applicable to your
project
4. Identify methods for addressing potential non–conformities and its
impact on the quality of the project’s product/service, or process
5. Identify tools & techniques applicable for the project quality
management such as define COQ, flowcharting, control charts,
benchmarking, design of experiments, sampling methods or any other
applicable tool & techniques
6. Identify metrics and measurements to be measured and monitored
7. Include quality management organization structure for the project and
roles & responsibilities matrix
8. Identify applicable standards, templates, re–usable components that
can be leveraged for expediting delivery and enhance the quality of
deliverables in terms of reliability, stability and maintainability
9. Identify measurements and key process performance indicators which
will form the basis of measuring project performance
10. Define triggers and thresholds for taking corrective actions
11. Define the method of feasibility assessment and performing cost
benefit analysis
12. Define measurements for evaluating the effectiveness of the quality
management system
13. Describe the project management team’s approach for implementing
the quality policy, quality assurance, control quality, and quality
improvement approaches
14. Define the resources requirement to implement quality management
activities
15. Define customer satisfaction management process including the
frequency and category of users to be covered for the survey
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8.2 Perform Quality Assurance
Perform Quality Assurance is a method of evaluating the overall project
performance through planned, systematic activities; it creates confidence
that the project will employ the appropriate processes and satisfy standards
for quality. It is part of a set of quality activities that start with the
development of the quality management plan which begins in the initiating
and planning processes and continues throughout the project. The actual
QA process varies with the needs of each project. QA is an iterative process
and may be adapted based on the identification and resolution of quality
problems over the project’s life cycle.
Fig. 8.28: Perform Quality Assurance – ITTO
8.2.1 Perform Quality Assurance – Inputs

The quality management plan contains details of how the project
management team would be implementing the quality policy and other
quality activities such as quality assurance, control quality and process
improvement activities in the project.
Refer to section 8.1.3 – Plan Quality Managements – Outputs
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Process Improvement Plan
This plan contains the framework adopted for the project’s process
improvement initiatives.
Refer to section 8.1.1 – Plan Quality Management – Outputs
Quality Metrics
These are the Key Performance Indicators (KPI) and Control Thresholds
for measuring a project’s performance at any given point in time.
Quality Control Measurements

These are measurements resulting out of control quality activities. These
results are used to analyze and evaluate the effectiveness of the processes
and quality standards deployed in the project.
Project Documents
These include all project documents, which are maintained as part of
configuration management, and are required for the successful execution
of the project in meeting the customer requirements
8.2.2 Perform Quality Assurance – Tools & Techniques
Quality Management and Control Tools

Perform Quality Assurance uses all tools defined in Plan Quality
Management and the additional tools listed below. All tools may not be
used by all projects. The tools usage will depend on the type and size of the
project. The tools are not mutually exclusive and hence they can be used in
any possible combination that is relevant to the project context.
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Fig. 8.29: Seven New Quality Management & Control Tools
Fig. 8.30: N7 Cycle of Activity Example
The main objectives of introducing New 7 Quality Management Tools are

as follows:
• Express verbal data diagrammatically

• Make information visible
• Organize information intelligibly
• Clarify overall picture and fine details
• Get more people involved
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The benefits of using the New 7 Quality Management Tools are as follows:
• Provide training in thinking
• Raise people’s problem solving confidence
• Increase people’s ability to predict future events
Refer to section 8.0.5 – New 7 Quality Management Tools and Control Tools
Quality Audits
A quality audit is a systematic and independent examination to determine
whether quality activities and related results comply with planned ones
and whether the planned activities are effectively implemented or not. It
also evaluates if the planned activities are suitable for achieving the quality
objectives and it is really effective.
Quality audits must be carried out by independent personnel who are not
responsible for the function/performance under review. An independent
audit provides an unbiased picture of the performance.
Process Analysis
This is about evaluating process capability by analyzing process performance
for its effectiveness and efficiency in meeting the project goals.
The process performance data are collected and analyzed to determine the
causes of variation and to identify opportunity for improvements.
8.2.3 Perform Quality Assurance – Outputs
Organizational Process Asset Updates

As a result of quality assurance activity some elements of the OPA like
quality standards, process specifications and organizational artifacts etc.,
may get updated.
Change Requests
Change request may result due to non–conformities identified, either in
the process /service or results. They may also arise as a result of quality
assurance activities that results in corrective and preventive actions to set
right the non–conformities. Change requests must be initiated as per the
integrated change control process of the project.
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Project Quality Management Plan, Cost Management Plan and Schedule
Management Plan are some of the project management plans which may
get updated while performing quality assurance activities, as the project
management team needs to revise these plans to set right the deviations in
planned vs. actual value.

Quality audit reports, training plan and process documents may get updated
as a result of quality assurance activities.
8.3 Control Quality

This process involves monitoring project work results to determine if they
comply with relevant quality standards and identify ways to eliminate causes
of unacceptable performance. Control quality involves continually
measuring, adjusting, and monitoring of project performance. Its goal is to
improve the work process and produce results that meet customer and
stakeholder specifications and expectations.
Fig. 8.31: Control Quality – Inputs, Tools & Techniques and Outputs
Chapter – 8 303
8.3.1 Control Quality – Inputs

Quality Metrics
Quality Checklists

Work performance data on project progress as compared to the planned
progress.
These performance measurements include, but are not limited to

• Technical performance
• Cost performance
• Schedule performance etc.
Refer to section 4.3.3 – Direct and Manage Project Work – Outputs

These are the approved changes that are to be implemented in a timely
manner to ensure that there are no adverse impacts on project delivery.
Deliverables
A deliverable is a unique verifiable product/ service or result that is required
to complete the project or a phase.
Project documents
The following are typical project documents (but not limited to) that has
the relevant information:
• Agreements
• Audit reports
• Change logs
• Corrective preventive action plans
• Training plan and evaluation of effectiveness
• Project specific processes defined as per Plan quality management
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Organizational policies, procedures and standards and organizational
policies can influence control quality process of a project.
8.3.2 Control Quality – Tools & Techniques
Seven Basic Quality Tools

Cause & Effect Diagram – Control Charts – Flow Charting – Histogram –
Pareto Chart – Run Chart – Scatter Diagram – Statistical Sampling &
Inspection
Refer to section 8.0.3 – Seven Basic Quality Tools
Inspection
It is an activity to check the work products to ensure conformance to
standards, requirements and specifications as per customer requirements.
The results of inspections generally include measurements. It applies to
all work products (internal and external) across the entire project lifecycle.
Approved Change Requests Review

All approved change requests should be reviewed for timely and effective
implementation and also to ensure that it has produced the desired results.
8.3.3 Control Quality – Outputs
Quality Control Measurements

Quality control measurements are a result of quality control activities
carried out as per the quality plan.
Validated Changes
Changes implemented are inspected / reviewed. Based on inspection results,
changes will either be accepted or rejected. Rejected items will require
rework.
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Verified Deliverables
On completion of each work package / project phase or project, the
deliverables are verified for correctness to ensure that they meet the
specifications. Verified deliverables are the inputs to verify scope to get
formal acceptance.

Refer to section 4.3.3 – Direct and Manage Schedule – Outputs
Change Requests
If the results of the control quality activities are not as per the planned
values, the project management team will initiate corrective and preventive
actions to set right the nonconformance. This may require changes to the
project management plan too. A formal change request will be raised as per
the integrated change control process of the project.

The project quality management plan in project management plan and
process improvement plan may get updated as a result of control quality
activities.

Some of the project documents like quality standards, inspection reports,
lessons learnt documents will get updated.

Inspection reports, completed checklists and lessons learnt documents are
some of the organization process assets that may get updated while
performing a control quality activity.
8.4 Summary
The project management team has to emphasize quality throughout the life
cycle of the project. Failure to meet the product or project quality will have
serious negative consequences for the performing organization and the
customers. The project management team must understand and agree on
the customer’s / project requirements in clear terms.
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1. All of the following are examples of the cost of non–conformance to quality,

Except for which one?
A. Rework
B. Corrective actions
C. Safety measures
D. Loss of customers
2. When a product or service completely meets a customer’s requirements:

A. Quality is achieved
B. The cost of quality is high
C. The cost of quality is low
D. The customer pays the minimum price
3. At the close of your project, you measure the customer satisfaction and find
that some customer needs were not fully met. Your supervisor asks you what
steps you took on your project to improve customer satisfaction. Which
subsidiary plan would you consult to determine this information?
A. Quality management plan
B. Communication management plan
C. Staffing management plan
D. Risk management plan
4. A project team is working on preparing a quality management plan for the

project. Which amongst the following would not be relevant for creating the
plan?
A. Checklists
B. Organizational quality policy
C. Project scope statement
D. Schedule baseline
5. According to PMBOK, which of the following is not an input to plan quality

management process?
A. Project management plan
B. Stakeholder register
C. Risk register
D. Fishbone Diagrams
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6. Which is the best definition of quality?
A. A product made of expensive material
B. A product made with a lot of care by the team who built it
C. The degree to which a set of inherent characteristics fulfills requirements
D. A product that passes all of its tests
7. If the probability of one event occurring does not affect the probability of
another event occurring, the events are:
A. False events
B. Mutually exclusive
C. Statistically independent
D. Just in time
8. You are a manager for a construction project. The project will be using a new
material that the project team has never worked with before. You allot $10,000
to train the project team on the new materials so that the project will operate
smoothly. The $10,000 for training is known as what?
A. Cost of quality
B. Cost of poor quality
C. Sunk costs
D. Contingency allowance
9. What should be the role of inspection in Perform Quality Control?

A. To determine the level of performance against standards
B. To prove you are producing a quality product
C. To satisfy upper management and the customer
D. Minimally useful because quality cannot be inspected in
10. This tool and technique of the Plan Quality Management process helps the
project team anticipate and identity where quality problems might occur on
the project, which in turn, helps them develop alternatives for dealing with
the quality problems.
A. Cost benefit analysis
B. Benchmarking
C. Flowcharting
D. Design of experiments
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11. A project manager and team from a firm that designs railroad equipment are
tasked to design a machine to load stone onto railroad cars. The design allows
for 2 percent spillage, amounting to over two tons of spilled rock per day. In
which of the following does the project manager document quality control,
quality assurance and quality improvements for this project?
A. Quality management plan
B. Quality policy
C. Control charts
D. Project management plan
12. Perform Quality Assurance should be performed:

A. During creation of the project proposal
B. During project design
C. Control charts
D. Throughout the project
13. Which of the following is not an input to the perform quality assurance
process?
A. Project Management Plan
B. Quality metrics
C. Deliverables
D. Quality control measurements
14. Perform Quality assurance is:

A. Definition of organizational quality practices
B. Ensuring of six sigma compliance
C. Application of Pareto charts to project sample points
D. Process of auditing the quality requirements and results and ensure
appropriate quality standards are used
15. The implementation of approved change requests, corrective actions,

preventive actions, and defect repair are confirmed using this tool and
technique of perform Quality Assurance.
A. Plan quality tools and techniques
B. Process analysis
C. Inspection
D. Quality audits
309
16. What is the act of avoiding quality problems rather than inspecting for them?
A. Perform Control Quality
B. Quality System Work
C. Perform Quality Assurance
D. Quality Management
17. When is Optimal quality is reached?

A. When the stakeholder accepts the project deliverables
B. When revenue from improvements equal the costs of conformance
C. When revenue from improvement equals the incremental costs to achieve
the quality
D. When revenue from corrective actions equals the cost of the improvement
18. Quality audits when preformed correctly will provide the following benefit(s):
A. The product of the project is fit for use and meets safety standards
B. Allow for applicable laws and standards not to adhered to
C. Corrective action is implemented continuously throughout the project
D. Quality improvements need not be identified
19. Quality checklists are used to:

A. Ensure that Quality Assurance procedure were followed
B. Keep quality inspectors busy
C. Inform upper management where failures occur
D. Prevent project audits
20. The project manager invited many of the project stakeholders to help inspect
quality on the project. Of the following, which would not be an output of this
activity?
A. Change request
B. Project document updates
C. Quality management plan
D. Validates changes &Validated deliverables
21. Measuring quality of a product against a standard is called:

A. Pareto Analysis
B. Benchmarking
C. Lessons learnt
D. Auditing
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22. Warranty and inventory costs are going up causing the project manager to
worry about the costs of non–conformance. What is the best advice you can
give the project manager?
A. Increase scrap
B. Increase rework
C. Perform a quality audit
D. Look for benchmarks
23. Which of the following is not perform control quality tool?

A. Design of Experiments
B. Fishbone Diagram
C. Pareto Diagram
D. Control diagram
24. What does it imply when two events are said to be mutually exclusive?
A. One has a probability of 100% while the other has that of 0%
B. Both have zero probability of occurrence
C. Both of them cannot occur concurrently
D. The events are statistically independent
25. A project manager is monitoring specific project results to determine if they

comply with relevant standards and eliminate causes of unsatisfactory
results. This activity is a part of quality:
A. Planning
B. Assurance
C. Work results
D. Control
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313
9.0 Project Human Resource Management Process
Human Resource Management deals with “people” dimension in
management. Byars and Rue say “Human Resource Management
encompasses those activities designed to provide for and coordinate the
human resources of an organization”. Every organization or team is composed
of people and utilizing their services, developing their skills and motivating
them to enhance their levels of performance are essential for the
accomplishment of organizational objectives. Competent managers and
workers are essential for the coordination of efforts towards the ultimate
objectives which ensure the survival of the organization. Though such
coordination alone cannot guarantee success, the lack of it can lead to failure.
The Project Human Resource Management consists of those processes that

the project manager would need, to organize, manage and lead the project
team. The team members have to be involved early in the project, in planning
and decision making.
The Plan Human Resource Management process includes the following key
process:
Fig. 9.0: The Project Human Resource Management Processes
Key Terms
Role
A defined function to be performed by a project team member such as testing,
filing, inspection, coding.
Resource Calendar
A calendar of working days and non–working days that determines those
dates on which each specific resource is idle or active.
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Resource Breakdown Structure
A hierarchical structure of resources by resource category and resource
type used in resource leveling, scheduling, to develop resources.
Resource Histogram
A bar chart showing the amount of time that a resource is scheduled to
work over a given time period.
9.1 Project Human Resource Management Process

Human Resource planning is used to determine the human resources with
the required skills for the project. It also includes determining roles &
responsibilities, project organization structures, staffing management plan
(when to acquire and release resources), training needs, rewards &
recognition programs, reporting relationships, etc.
Fig. 9.1: Plan Human Resource Management – ITTO
Chapter – 9 315
PROJECT HUMAN RESOURCE MANAGEMENT
9.1.1 Plan Human Resource Management – Inputs

Project management plan, which contains the project objective, work
execution process, change control process and monitoring & control.
Refer to section 4.2.3. – Develop PM Plan – Outputs

The activity resource estimates from the Project Time Management process
are used as an input here. These requirements are progressively elaborated
during the human resource planning process.

The Enterprise Environmental Factors which influence this process include
company culture, organization structure, existing pool of human resources
and policies and procedures related to personnel administration.

The organizational process assets that can affect this process include:
• Organizational standardized role descriptions
• Templates for organization charts and position descriptions
• Historical information
9.1.2 Plan Human Resource Management – Tools & Techniques
Organization Charts and Position Organizations

The important objective of using this tool is to unambiguously state all the
team members’ roles and responsibilities. There are 3 main formats used to
document roles and responsibilities. They are:
Hierarchical–type charts: This type of chart shows the various resources

and relationships in a graphical and top–down format. The Organizational
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Breakdown Structure (OBS) shows the various departments or units and
the assigned project responsibilities in a hierarchical manner, while the
Resource Breakdown Structure (RBS) shows the responsibilities based on
the various types of resources.
The span of control and the number of hierarchical levels define this type
of organizational structure. The span of control is the optimum number of
subordinates a supervisor can manage. In a tall organizational structure,
the hierarchical levels are more and the span of control is narrow. This
structure is characterized by close–supervision and a central decision–
making authority.
Fig. 9.2 : Tall Organizational Structure
In a flat organizational structure, the number of hierarchical levels is less

and the span of control is wide. This structure is normally characterized by
the management delegating more authority and empowering people at all
levels.
Fig. 9.3 : Flat Organizational Structure
Chapter – 9 317
Matrix based charts: A Responsibility Assignment Matrix (RAM) shows
the relationship between work packages or activities and the team members
or teams responsible for it. The RAM can be designed at many levels. One
example of a RAM is the RACI (Responsible, Accountable, Consult and
Inform).
The table below is a sample RACI.
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ZĞƋƵŝƌĞŵĞŶƚƐ Z Z /
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Fig : 9.4 RACI Matrix
Text–oriented formats: The team member’s roles and responsibilities are

described in a text format at the level of detail required by the project.
Networking
Networking is an informal / formal way of interaction and is considered to
be an important factor in understanding the political and interpersonal
impact on the staffing plan. Examples include attending luncheon meetings,
trade conferences, proactive communication and symposia. Networking with
other professionals and people can help a project manager to understand
the current trends in competencies, market conditions, job trends, etc.
Organizational Theory
Organizational theory is the study of how organizations ‘function’ and how
they ‘affect’ and are ‘affected’ by the environment in which they operate.
This theory is based on three other principles, namely, organization
structure, organization design and change and organization culture. The
understanding of how organizations function and knowing the conceptual
tools used to influence organization situations are two most important skills
a project manager can effectively make use of in managing his/her resources.
The organizational theory explains several principles that underlie the
design, operations, change and redesign of organizations to increase their
effectiveness.
Refer to chapter–2 – General Management
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9.1.3 Plan Human Resource Management – Outputs
The Human Resource Management Plan

The human resource plan is part of the project management plan and should
contain the following information:
Roles and Responsibilities: This should describe all the different roles
that are required for the project (eg. business analyst, programmer, testing
coordinator), description of different types of authorities and their levels,
description of responsibilities, that is, the activities a team member must
do in order to complete project work and a description of the various
competencies and their levels required for the project activities to be
completed.
Project Organization Charts: These are graphical representations of the

structure of project teams and their reporting relationships.
Staffing Management Plan: This is part of the project management plan

and describes when and how project resources will be acquired and released.
There are several sub–sections to this plan. Staff acquisition deals with
questions related to the source of human resources, geographical location
and costs. Resource calendars normally are represented by a resource
histogram to show when each resource is required and for how long. The
staff release plan indicates when a resource will be released for a project
thereby reducing costs. The training requirements, rewards and recognition
programs and safety needs are some of the information that is contained in
the staffing management plan.
It also includes:
• Staff acquisition
• Resource calendars
• Staff release plan
• Training needs
• Recognition and rewards
• Compliance
• Safety
Chapter – 9 319
9.2 Acquire Project Team
This process deals with the acquisition of the human resources necessary
to complete project activities. Acquisition of resources is not entirely under
the control of the project manager due to factors such as a matrix project
environment, other projects competing for the same type of resources and
internal and external reporting relationships. The following factors should
be considered by the project manager during this process: effective
negotiation with the departments who should provide the resources, to
ensure timely availability of the right resources and making alternative
arrangements if resources with the necessary skill levels are not available.
Fig. 9.5: Acquire Project Team – ITTO
9.2.1 Acquire Project Team – Inputs

This plan contains information on roles and responsibilities, project
organization charts and staffing management plan.
Refer to section 9.1.3 – Plan Human Resource Management – Outputs
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Enterprise environmental factors that can influence this process are
information about the available pool of resources, personnel administration
policies, organizational structure and geographical locations.

Organization policies, processes and procedures are some of the process
assets that are used for this process.
9.2.2 Acquire Project Team – Tools & Techniques
Pre–assignment
In some situations, a project is won as a result of certain key people being
promised for the project. In such a case, the team members are considered
as pre–assigned.
Negotiation
Effective negotiation is one of the important skills a project manager should
possess. To acquire the right project resources on time, a project manager
should effectively negotiate with functional managers (in a matrix project
environment), or other project managers and external sources such as
vendors, suppliers and contractors to get the appropriate, scarce, trained
and qualified resources.
Acquisitions
When the performing organization does not have the right resources for
the project, it may be necessary to hire contractors and/or consultants from
external sources.
Virtual Teams
Different geographical locations are no more a constraint today for
organizations, thanks to the concept of virtual teams. Virtual team is one in
which the team members are located in different geographical locations
and still work towards a common goal and interact solely through electronic
communication, with little face–to–face interaction. Virtual teams make it
possible to add members, who work from their own places, add specialists
Chapter – 9 321
who are not located in the same geographical area and include people with
mobility limitations and disabilities.
Multi–Criteria Decision Analysis

To acquire the project team, various selection criteria are often used. Multi–
criteria decisions are weighed according to the relative importance of the
needs within the team. Some examples for multi–criteria decision analysis
are:
• Availability
• Cost
• Experience
• Ability
• Knowledge
• Skills
• Attitude
• International factors
9.2.3 Acquire Project Team – Outputs
Project Staff Assignments

Assignment of staff to projects should be documented and made available
to all stakeholders through project directories, memos and updates to project
management plan where necessary.
Resource Calendars
Resource calendars contain details of the time period for which a team
member is available for the project, including vacation details and other
project commitments.
Refer to section 6.5.1 – Estimate Duration – Inputs

The human resource plan which contains roles and responsibilities may
undergo certain changes due to the acquisition of resources.
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9.3 Develop Project Team
Developing a project team includes the process of improving team work
and competencies and creating an environment where project performance
is enhanced.
The project manager should spend time and effort on:

• Motivating team members continuously
• Recognizing and rewarding good performance
• Facilitating an environment for open communication and mutual
trust
• Getting adequate resources to support team–building measures
The diversity of the workforce is an important aspect in today’s globalized

environment. A project manager should have the skills to capitalize on the
diversity of the team and promote working together in an environment of
mutual trust.
Fig. 9.6: Develop Project Team – ITTO
Chapter – 9 323
9.3.1 Develop Project Team – Inputs

This plan contains information on roles and responsibilities, project
organization charts and staffing management plan.

Refer to section 9.2.3 – Acquire Project Team – Outputs
Resource Calendars
Contains details on the duration for which resources are available for project
activities.
Refer to section 6.5.1 – Estimate Duration – Inputs
9.3.2 Develop Project Team – Tools & Techniques
Interpersonal Skills
Skills such as empathy, influence, creativity and group facilitation are some
of the “soft skills” that are very essential for the project manager to lead
the team.
Training
Project team members are trained on various skills to improve their
competencies. Several training methods can be used including classroom,
on–the–job and on–line training.
Team–building Activities
Team–building is an on–going effort in a project environment. In order to
deal effectively with the changes that happen in the environment, a project
manager should continue to do team–building exercises, monitor team
functioning and performance and make changes accordingly.
One of the main purposes of team–building efforts is to enhance the

problem–solving capabilities of the team as a whole. Any team should be
able to collaborate and resolve issues.
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Team–building exercises can be carried out on teams who are co–located as
well as on teams who are located in different regions.
Ground rules
Ground rules lay down acceptable behavior from team members. Discussing
the ground rules allows team members to discover values that are important
to one another.
Co–location
Co–location means placing all or some of the team members in the same
location, in order to improve the performance.
Recognition and Rewards

Rewards and recognition are important methods in motivating team
members to achieve the project objectives. Apart from monetary rewards,
many intangible awards are also considered as effective. Many project
members are motivated by opportunities to grow, and challenging
assignments to apply their skills and creativity, etc.
Personnel Assessment tools

This tool helps project managers assess team preferences, aspirations, how
they process and organize information, how they tend to make decisions,
and how they prefer to interact with people. These tools can provide
improved understanding, trust, commitment, and communications among
team members and facilitate more productive teams throughout the project.
9.3.3 Develop Project Team – Outputs
Team Performance Assessments

Formal and informal methods of assessment have to be carried out to
measure the effectiveness of team–building measures, training, rewards
and recognition programs. The assessment methods should measure the
project performance in terms of the objectives achieved.
Performance assessments can reveal results such as:

• Improvement in the skills of individual team members
• Improvement in the competencies of the team to function as a cohesive
whole
Chapter – 9 325
• Reduced staff turnover rate
• Increased team cohesiveness since the team help each other to
improve the overall project performance
Enterprise Environmental Factors Updates

The enterprise environmental factors that can be updated include personnel
administration policies, employee training records and skill assessments.
9.4 Manage Project Team

Managing project teams is about tracking team member performance,
providing feedback, resolving issues and optimizing performance. A project
manager needs to develop specific skills, such as negotiation, conflict
resolution, communication and leadership skills in order to integrate the
team effort to create high–performance teams.
Fig. 9.7: Manage Project Team – ITTO
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9.4.1 Manage Project Teams – Inputs

Human resources plan has information on roles and responsibilities, project
organization charts and staffing management plan

Refer to section 9.2.3 – Acquire Project Team – Outputs
Team Performance Assessments

Results of the team performance assessment help in implementing
improvements in team communication & interaction and resolving conflicts.
Issue Log
An issue log is a document that is used to log details about issues that arise
during the course of managing the team. Details such as the person
responsible for resolving the issue with target date are documented here.
Work Performance Reports

Work Performance reports contain results from cost control, quality control
and scope validation. These and the forecast information can be used in
determining rewards and recognition, staff requirements and so on.

Elements of organizational process assets that can be used are recognition
certificates, newsletters, websites, bonus structure, corporate apparel and
other organizational perquisites, etc.
9.4.2 Manage Project Teams – Tools & Techniques
Observation & Conversation

An organization consists of a group of individuals, working in coordination,
at different levels of authority and in different areas of specialization. These
individuals need a well–defined structure and system to synchronize and
direct their plans and efforts towards the organizational goals. There are
Chapter – 9 327
different types of organizational structures. Here we will discuss a few of
them.
Project Performance Appraisals

Appraisal is the process of evaluating an employee’s performance and
providing feedback for the purpose of rewarding and developing the
employee. The process also facilitates setting future goals for the employee
as well as devising an incentive system.
There are several appraisal systems that are being used today by
organizations. Some of them are 360 degree performance appraisal, Balance
Score card Method, Team appraisals, etc.
Organizations face several challenges during the performance appraisal

process. This can lead to errors in appraisals. Some of the common pitfalls
are Halo effect (appraiser gives more importance to a single characteristic
of the appraisee), Recency effect (the most recent activities or achievements
of the appraisee dominate the appraisal process), Stereotyping (the
appraiser tends to evaluate the person based on the group to which he/she
belongs and the perception the appraiser has about the group), etc.
Conflict Management
Conflict is unavoidable in any business environment and can be treated as
an opportunity for improvement. Conflicts arise due to factors such as scarce
resources, scheduling priorities, cost and personal working styles.
The following characteristics of conflict have to be noted by the project

manager:
• Conflicts are natural and enforce a search for alternatives
• Conflict is a team issue
• Openness resolves conflict
• Conflict resolution should focus on the real issue and not on
personalities
• Conflict resolution should focus on the present, not on the past
• Conflicts, in the initial stages, should be resolved by the team
members. If it escalates, the project manager should facilitate a
resolution.
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There are six techniques for Conflict Resolution:
Withdrawing/Avoiding: Avoiding the situation or people who are part of

the conflict or postponing a resolution of the problem. This is not the best
way to deal with conflicts.
Smoothing/Accommodating: Focusing on areas where both the parties

agree rather than differences in opinion. The benefits arising from diverse
ideas and opinions will be lost in this method.
Compromising: Finding a solution so that it offers some degree of

satisfaction to both the parties.
Forcing: one’s viewpoint on the other. Will only create a win–lose situation
Collaborating: Incorporating multiple viewpoints and insights from

different perspectives. Focuses on consensus and commitment.
Confronting/Problem solving: Viewing conflict as a problem to be solved

by examining alternatives and creating a win–win situation. According to
PMBOK, this is the most preferred way for conflict resolution.
Interpersonal skills
Interpersonal skills are an important set of skills a project manager should
possess in addition to technical and managerial skills.
Interpersonal skills that a project manager uses most often are:

• Leadership influencing effective decision making
• Influencing
• Effective decision making
• Group formation theory
Leadership
The success or failure of projects depends on the leadership qualities of the
project manager. A leader’s primary function is to establish goals and
motivate the team to achieve them.
Chapter – 9 329
The key elements of leadership are:
1 The ability to use power in a responsible manner
2 The ability to understand and apply the fact that people are motivated
for different reasons at different times in different situations
3 The ability to inspire and
4 The ability to behave in a manner that will help develop a harmonious
working culture.
Influencing
Refer to chapter–2 General Management
Effective decision making

Group Formation Theory

A theory for group formation was first proposed by Bruce Tuckman in 1965.
This theory has become the basis for subsequent models in group
development and team dynamics. It has also taken a firm place in
experiential education targeted for executives where team building and
leadership are the focus.
There are four distinct stages in team development: Forming, Storming,

Norming and Performing.
Forming: In the first stage of team building, the forming of the team takes
place. The team meets and learns about the opportunity and challenges,
agrees on goals and takes up the tasks. Team members tend to behave
independently and remain focused on themselves. They have little idea
about the real issues in the team.
Storming: This is the second stage. During this stage, different ideas are
put forward and team members will look at issues that need to be resolved
and decide on how they are going to resolve whether collaboratively or
independently. Storming stage is necessary for the growth of the team even
though it can be contentious and painful. Tolerance and patience is the key
during this stage.
Norming: Team members work through this stage by agreeing on rules,

values, professional behavior, etc. They also start learning to trust each
330 ROAD TO SUCCESS

other. In this phase, teams may lose creativity if the norming behaviors
become too strong which may stifle healthy dissent.
Performing: Some teams will reach this stage. These high performing
teams will work as a unit with / without inappropriate conflict or the need
for external supervision. They are motivated and knowledgeable.
Supervisors of this team are almost always participative during this stage.
But any high–performing team can go back to any of the previous stages in
certain circumstances. For example, a change in leadership may cause the
team to revert to storming as the new people challenge the existing norms.
Adjourning: In this phase, the team completes the work and moves on from
the project.
9.4.3 Manage Project Teams – Outputs
Change Requests
Changes to the staffing plan may occur as a result of managing the project
team which in turn can affect the schedule and/or cost.

Staffing management plan may have to be updated as a result of this process.

Project documents that may indirectly be updated include Issue log, Roles
description, project staff assignments, etc.
Enterprise Environmental Factors Updates

The enterprise environmental factors that can be updated include
organizational performance appraisal process and templates and personnel
skill updates.

Historical information, lessons learnt, organizational standard processes
and templates are some of the organizational process assets that can get
updated.
Chapter – 9 331
Summary
In this chapter, we looked at the processes that are involved in project
human resource management. We also looked at the various inputs, tools
and techniques and outputs that are relevant to all these processes.
Apart from technical skills, a project manager has to be proficient in those

skills that are required for managing people. Leadership qualities,
motivating people, communication abilities, negotiation skills and conflict
resolution skills are some of the competencies that will help the project
manager in making the project a success.
❑
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1. Which of the following can be considered as the best example of a reward

system?
A. The team member who works the hardest will receive $1000
B. Everyone will get a bonus of $500 if the project meets its quality goals,
$500 if it meets its budget goals and $600 if it comes in on time.
C. The five team members who put in the most hours will get a trip to
Disneyland
D. The team will only get a bonus if the project comes in 50% under budget,
schedule and quality metric goals. Even though the team leads know this
goal is unrealistic, they agree that it will motivate the team to work
harder.
2. What does a staffing management plan describe?

A. Timetable for staff acquisition and release
B. Resources leveling details
C. Details of resources to be used on the project
D. Skills necessary for the project
3. You are reviewing performance goals to figure out how much bonus to pay to
your team members. What document would you consult to find your team’s
bonus plan?
A. The reward and recognition plan
B. The staffing management plan
C. The human resource management plan
D. The project’s budget
4. Which of the following is the best method to make reward systems more
effective?
A. Pay a large salary to the best workers
B. Give the team a choice of rewards
C. Make the link between performance and reward clear
D. Present notification of rewards within the company
Chapter – 9 333
5. Which of the following describes the contents of a staffing management plan?
A. Organizational chart, training needs, estimated labor cost, and release
criteria
B. Sponsor, organizational chart, scope verification plan, and schedule
C. RACI Matrix, organizational chart, performance improvement plan, and
budget
D. Staff acquisition, resource calendars, staff release plan, training needs,
recognition and rewards, compliance and safety
6. Which of the following shows roles and responsibilities on your project?

A. Bar chart
B. Resource histogram
C. RACI matrix
D. Human Resource Management Plan
7. The right to command or act in the management of a project is called:

A. Power
B. Authority
C. Leadership
D. Influence
8. You are the project manager of the MNC Project. This project requires a
chemical engineer for seven months of the project although there are no
chemical engineers available within your department.
This is an example of which of the following?
A. Organizational interfaces
B. Resource requirements
C. Contractor requirements
D. Resource constraints
9. During which of the following processes are the roles and responsibility
assignments completed?
A. Collect requirements
B. Develop schedule
C. Acquire project team
D. Plan human resource management
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10. Which one the following is an interpersonal skill a project manager must
have to be successful?
A. Sales and marketing
B. Leadership
C. Health and safety practices
D. Information technology experience
11. The project manager, stakeholders and project team members all have roles
and responsibilities throughout the project. As the project manager, you might
link the project scope definition to the project roles and indicate the activities
assigned to each team member. You might display this information in which
of the following ways:
A. PDM
B. RAM
C. SOW
D. RRM
12. To help the project team function more efficiently on complex and interrelated
tasks, the project manager decides to use a war room. What does this mean?
A. All the project records are kept in many locations.
B. The tools needed to accomplish the work are kept in one place with easy
access by the team from various locations.
C. The entire team is located in one area.
D. The project’s entire senior management team is located in one area.
13. Which is an input to Plan Human Resource Management?

A. Organizational Process Asset
B. Cost baseline
C. Activity Duration requirements
D. Networking
14. RAM is defined as:

A. Random access memory
B. Rapid air movement
C. Responsibilities and methods
D. Responsibility assignment matrix
Chapter – 9 335
15. Do the work because I have been put in charge! Is an example of what type of
power?
A. Formal
B. Penalty
C. Effective
D. Expert
16. Which of the following, if not adequately addressed, is likely to dissatisfy

employees, but is never likely to ensure motivation irrespective of the degree
of deployment?
A. Work environment
B. Recognition
C. Career opportunities for growth
D. Empowerment and responsibility
17. An organization has recently undertaken a prestigious project involving

complex technology. An expert in the application of the project has been
deputed as the project manager, and has been allotted a corner office on the
projects division floor. Which need is being attempted to be addressed by
doing so?
A. Self–actualization
B. Esteem
C. Social
D. Physiological
18. The types of power that have substantial influence on both subordinates and
top management are:
A. Formal & expert
B. Reward & penalty
C. Expert & referent
D. Formal & referent
19. You are the project manager for ABC Project. This project affects a line of
business, and the customer is anxious about the success of the project. Which
of the following is likely not a top concern for the customer?
A. Project priorities
B. Schedule
C. Cost
D. Personality conflicts
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20. John in an excellent programmer. He was promoted to a role of project manger
because he understands technology better than anyone else in the company.
Unfortunately, he is having trouble doing the project management job and
his projects are failing. This is an example of:
A. Gold plating
B. Halo effect
C. Pre–assignment
D. Ground rules
21. You are the project manager for Industrial Lights Project. You have been
hired by your organization specifically because of your vast experience in
this technology and with projects of this nature. What type of power are you
likely to have, on this project?
A. Formal power
B. Coercive power
C. Expert power
D. Referent power
22. You have just found that a major sub–contractor for your project consistently
delivers items late. You decide that you have bigger problems to address, so
you do nothing. What conflict resolution mode are you using?
A. Ignoring
B. Compromise
C. Smoothing
D. Withdrawal
23. As a project manager, you need to know how to manage conflict. Which one
of the following is not a successfully method of managing conflict?
A. Problem–solving
B. Compromising
C. Formal
D. Withdrawal
24. Theory X postulates that people

A. are motivated by pay
B. have expectations
C. need to be watched every second
D. can direct their own efforts
Chapter – 9 337
25. You just find out that a major sub–contractor for your project consistently
provides deliverables late. The subcontractor approaches you and asks you
to continue accepting late deliverables in exchange for a decreased project
cost. This offer is an example of:
A. Confronting
B. Compromise
C. Smoothing
D. Forcing
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339
Communication processes are necessary to ensure timely and appropriate
planning, collection, creation, distribution, storage, retrieval, management,
control, monitoring and the ultimate disposition of project information
Project communications management involves managing the various aspects

of communication in a project, big or small, easy or complex. It also addresses
one of the most important tasks of a project manager, that of managing the
stakeholders’ expectations, which is very crucial for any project’s success.
10.0 What is Communication Management?

As per the PMBOK®Fifth Edition, managing communications is all about
planning for communication (by determining the communication needs and
approach based on stakeholder needs), Manage communications (creating,
collecting, distributing, storing and the ultimate disposition of project
information), Control Communications (monitoring and controlling
communications to ensure the information needs of the stakeholders)
Key Terms
Communication Channels
Communication in a project gets more complex with the increase in the
number of people involved in the project. To calculate the total number of
communication channels in a project, use the following formula: n(n–1)/2,
where ‘n’ is the number of stakeholders.
Conflict Resolution Skills

Conflicts are unavoidable in a project environment. Conflicts usually arise
due to competing demands for scarce resources, schedule priorities and
personal working styles.
There are several conflict resolution techniques, including:

1 Withdrawing
2 Smoothing
3 Compromising
4 Forcing
340 ROAD TO SUCCESS

5 Collaborating and
6 Problem Solving.
According to PMBOK, compromising is the most preferred and forcing is

the least preferred option in conflict resolution.
Listening Skills
As communication is a two–way process, listening is as important as
speaking. Active listening is an important listening skill. A person with
this skill, is not only genuinely interested in what the speaker is saying,
but is also actively checking out if the understanding is correct and then
sending a new message. This feedback makes it the most effective form of
communication.
Negotiation Skills
This skill is required when there are conflicting needs between two parties
and a settlement is required that will benefit both the parties. While
negotiating, the following points have to be kept in mind: the desired
outcome of the negotiation, what each person has that can be traded during
the process, the nature and history of the relationship, the consequences of
winning or losing for either parties.
Performance Reporting
This is an important communications function which involves collecting
and distributing information to all the stakeholders at a level of detail that
is required by each of them. Some reports include status, forecast, variance
and earned value reports.
Presentation Skills
Effective presentations are a good way to send across messages to audiences.
Presentations with visuals are particularly helpful in driving home the
points. The following tips can be used in making good presentations: listing
and prioritizing the top 3 goals of the presentation, understanding the
audience’s interest and priority in attending the presentation, listing the
major points of information that have to be conveyed, selecting a tone for
delivering the speech, designing a brief and clear opening, presenting goals,
presenting the overall structure of presentation and presenting the body of
the presentation.
Chapter – 10 341
PROJECT COMMUNICATIONS MANAGEMENT
Stakeholder
A person, group or an organization, who is positively or negatively affected
by the execution or outcome of the project. Examples are the project team,
customers, suppliers, sponsors, other projects, performing organizations,
public, etc.
Project Communication Management Processes

The Project Communication Management process includes the following
key process:
Fig. 10.0: Project Communication Management Processes
10.1 Plan Communication Management

In this process, the project communication management has to decide, based
on the needs of the stakeholders, an approach to cater to those needs. For
example, identify the recipient of the message, selecting the means of
transmitting the message and timelessness of the message.
During project communication planning, it is important to allocate the

necessary resources such as time and budget, for communication activities.
Improper planning can lead to problems such as delay, communicating to
the wrong audience or lack of communication to certain key stakeholders.
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Fig. 10.1: Plan Communications Management – ITTO
10.1.1 Plan Communications Management – Inputs


All the Enterprise Environmental Factors are used as inputs since
communication must be adapted to the project environment.

All organizational process assets are used as inputs.
10.1.2 Plan Communications Management – Tools & Techniques
Communication Requirements Analysis

An important factor in determining communication requirements is to know
the potential number of channels. This is determined by the
formula (n(n–1)/2, where n is the number of stakeholders).
Chapter – 10 343
Project resource should be used while communicating information that
contribute to the success of the project or where a lack of communication
can lead to failure
Communication Technology
The technology to be used for communication needs to be considered while
planning. For example, a project team may use techniques from brief
conversations to extended meetings, from written documents to material
that is accessible online.
The factors that can determine the technology to be used for each situation
includes:
• Urgency of the need for information
• Availability of technology
• Ease of use
• Project environment
• Sensitivity and confidentiality of the information
Communication Model
A basic model for communication involves a ‘sender’ and a ‘receiver’.
This includes the following components.

• Encode – to translate thoughts or ideas into a language that others
will understand. For eg. ‘encode’ a highly technical description of a
product feature into a language that a user will understand.
• Message and feedback–message – result of encoding. Feedback
message is what is sent back by the receiver to the sender.
• Medium – The method used to convey the message, such as telephone,
e–mail, snail–mail, body language, air, etc.
• Noise – anything that interferes with the transmission and
understanding of the message.
• Decode – to translate the message back into meaningful thoughts
and ideas.
These components have to be considered while planning communications.

For example, the sender is responsible for ensuring that the message sent
is clear and complete and the receiver understands and acknowledges the
message. The receiver is responsible for ensuring that the message received
is complete, understood and acknowledge it.
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Fig. 10.2: Communication Model
Communication Methods
Interactive communications: are multi directional and the most effective
method to ensure that all the parties understand and acknowledge the
message. Eg., meetings, phone and video conferences.
Push communication: message is sent to recipients, where it is not

important to verify if the message has reached or acknowledged. Eg. letters,
fax, memo, e–mail, press releases, etc.
Pull communication: allows recipients to access information at their own

discretion. This is meant for large audiences and large volumes of
information. Eg. websites, e–learning, etc
Meetings
Meetings are for the purpose of discussion on the project during execution.
The attendees could include the project manager and affected or involved
stakeholders who need to sort out differences among them. Meetings should
have a defined agenda, time frame and end with a minutes of meeting along
with an action plan.
Meetings tend to be:

• Brainstorming
• Decision Making
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10.1.3 Plan Communications Management – Outputs
Communication Management Plan

The plan contains among other things:
• Stakeholder communication requirements
• The information needs to be communicated
• Identifying the recipients
• Selecting the frequency and format of the information to be
communicated
• Selecting the medium to be used
• Resources allocated to the process and their responsibilities
• Technologies to be used
• Escalation process

Some of the project documents that may get updated due to communication
planning include, Project schedule (as time needs to be allocated for
gathering and distribution of information), stakeholder register (as
additional stakeholders may be identified during the planning process)
10.2 Manage Communications

Manage communications is an execution process in creating, collecting,
distributing, storing, retrieving and the ultimate disposition of project
information in line with the communications management plan. This process
ensures that effective communication takes place between project
stakeholders.
Some techniques considered for effective communications between

stakeholders are:
• Sender–receiver models
• Choice of media
• Writing style
• Meeting management techniques
• Presentation techniques
• Facilitation techniques
• Listening techniques
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Fig. 10.3: Manage Communications – ITTO
10.2.1 Manage Communications – Inputs

Refer to section 10.1.3 – Plan Communication Managements – Outputs

Work Performance Information is communicated to all project stakeholders
through a work performance report. It can be in a physical format or
electronic format. The intended use of this is to help everyone in their
decision making or actions or awareness. These formats can be stored or
collated for future use in the decision making process. Work Performance
Report is a subset of project documents. Specific work performance reports
and metrics can be generated based on user needs. Some types of reports
are status report, memos, justification, information notes, recommendation
and updates.
Enterprise environmental factors

Organizational Process assets

Process assets such as policies, procedure, guidelines, templates and
historical information and lessons learnt database can be used for this
process.
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10.2.2 Manage Communication – Tools & Techniques
Communication Technology
Refer to section 10.1.2 – Plan Communications Management – T & T
Communication Models
The methods for information distribution include meetings, audio and video
conferences, mails, fax, websites, etc.,
Information Management Systems

An automated tool that provides facilities such as capturing data, analyzing
and reporting them in various formats, such as hard–copy document
management (Letters, memos, reports and press releases;), electronic
communications management (e–mail, fax, voice mail, telephone, video and
web conferencing, websites and web publishing) and electronic project
management tools (web interfaces for scheduling and project management
software meetings, portals, etc.,)
Performance reporting is the act of collecting and distributing performance
information, including status reports, progress measurements and forecasts.
A status report might show performance information such as percent
complete or status dashboards for each area of scope, schedule, cost and
quality. Elaborate reports may contain analysis of past performance, analysis
of project forecasts (including time and cost), current status of risks and
issues, work completed during the period, work to be completed in the next
period, summary of changes approved in the period and other relevant
information which is reviewed and discussed.
10.2.3 Manage Communication – Outputs
Project Communication
Involves the activities that are required for information to be created,
distributed, received, acknowledged and understood.
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• Deliverables status
• Schedule progress
• Cost incurred
Project communications can vary and are influenced by factors such as

• Urgency and impact of message
• Its method of delivery and
• Level of confidentiality
Communication has many aspects, such as:

• Internal vs External
• Formal vs Informal
• Vertical vs Horizontal
• Official vs Unofficial
• Written vs Oral
• Verbal vs Non–verbal
Each of these aspects comes into play depending on the situation. For
example, reports, memos and briefings are considered as formal means of
communication, where as sending informal e–mails and ad–hoc discussions
are informal means of communication. Similarly, if a team member is not
performing or shows no improvement, initially the project manager could
give the feedback orally and then follow it up with written communication.
Project Management Plans Updates

The Monitor and Control Project Work process may result in updates to
the Project Management Plan and its subsidiary plans. Some of the plans
that may get updated include:
• Schedule management plan
• Cost management plan
• Quality management plan
• Baseline updates such as:
• Scope baseline,
• Schedule baseline and
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Some of the project documents that may be updated are:
• Forecasts
• Issue logs

Project reports, presentations, records, feedback from stakeholders and
lessons learnt documents are some of the Organizational Process Assets
that may get updated during this process.
• Stakeholder notifications
• Project reports
• Project presentations
• Project records
• Feedback from stakeholders
• Lessons learned documentation
10.3 Control Communications

This is the process to ensure that the information needs of stakeholders
are met and an optimal information flow among all stakeholders at any
situation in time. The control communications process is repetitive of the
plan communications management and/or manages communications process.
The impact and repercussions of project communications should be carefully
evaluated and controlled to ensure that the right information is delivered
to the right audience at the right time.
Fig. 10.4: Control Communications – ITTO
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10.3.1 Control Communications – Inputs

The project baselines are contained in the project management plan, to which
actuals are compared, to measure project performance. It provides valuable
information for the control communications process such as stakeholder
communication requirements, reason for the distribution of the information,
time–frame and frequency for the distribution of required information,
individual or group responsible for communication of the information and
receiving the information.
Project Communications
The control communication process involves activities that are required
for information and communications to be monitored, acted upon and
released to stakeholders.
Project communications come from multiple sources and may vary

significantly in their format
• Level of details
• Degree of formality and confidentiality
• Deliverables status
• Cost incurred
Issue Log
Issue log is used to document and monitor the resolution of issues. A written
log documents and help to manage who is responsible for resolving issues
by a target date, status of issue, etc. This log will contain information that
will aid future stages of the project by providing a history of what has taken
place and the action required to meet the deliverables.

To collect and summarizes the information gathered and presents the
summary of results of comparative analysis with respect to scope, schedule,
cost, etc., against respective baselines.
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Report templates, policies and procedures and organization–defined
variance limits, allowed communication media, record retention polices and
security requirements are some of the assets that could be used for this
process.
10.3.2 Control Communication – Tools & Techniques

An automated tool that provides facilities such as capturing data, storing,
analyzing and reporting them in various formats, such as spreadsheets, tables
and presentations. Information can be consolidated from other systems and
reported to all the stakeholders. Graphic capabilities can be used to create
visual representations of project performance information.
Expert Judgment
Meetings
Refer to section 14.3.2 – Direct and Manage Project Execution – T & T
10.3.3 Control Communication – Outputs

Work performance information provide the summarized status and progress
information, at the level of detail required by various stakeholders. These
summarized reports are communicated to appropriate stakeholders.
Change Requests
Analysis of performance leads to change requests which also include
corrective, preventive and recommended actions. These are processed
through the Integrated Change Control Process.

The change requests as well as other approved changes may result in
updates to some elements of the project management plan including the
subsidiary plans.
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The project documents, forecasts, performance reports, issue logs, etc., are
some of the documents that may get updated as a result of the control
communications process.

Report formats and lessons learnt are some of the assets that may get
updated during this process.
10.4 Summary
In this chapter, we looked at the processes that are involved in project
communications management. We also looked at the various inputs, tools
and techniques and outputs that are relevant to all these processes. The
communication processes are required to ensure timely and appropriate
planning, collection, creation, distribution, storage, retrieval, management,
control, monitoring and the ultimate disposition of the project information
Given that project managers spend nearly ninty percent of their time
communicating with various stakeholders, it is important that these
processes are well understood and followed to make a project successful.
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1. Of the following, which one is an example of informal communication?

A. Memos
B. Stakeholders
C. Project manger
2. There is a project team of 10 members including a quality specialist. The

project manger hires two domain consultants to the team. What is the change
in number of communication channels as a result of this expansion in the
team?
A. Increases by 21
B. Increases by 22
C. Increases by 44
D. Increases by 20
3. How many possible channels are potentially required if there are ten members
on the project team?
A. 25
B. 40
C. 45
D. 54
4. Inputs to plan communication management include all the following except?

A. Stakeholder register
B. Project management plan
C. Enterprise environment factors and Organizational Process Assets
D. Project documents
5. You are the project manager for the MNC Project. Management has requested
that you create a document detailing the information that will be expected
from stakeholders and to whom that information will be disseminated.
Management is asking for which one of the following?
A. The roles and responsibilities matrix
B. The scope management plan
C. The communication management plan
D. The communications worksheet
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6. You need to convey some very complex, detailed information to the project
stakeholders. The best method of communicating this kind of information
is?
A. Verbal
B. Vertical
C. Horizontal
D. Written
7. Management calls a meeting to explain to all employees the new benefits

package. This is an example of:
A. Upward communication
B. Downward communication
C. One–way communication
D. Two–way communication
8. Whose needs are required to be addressed by Manage Communications?

A. Senior management
B. Project team
C. Stakeholders
D. Project sponsor
9. You have been assigned as project manager for a construction project that
has two project mangers earlier. You discover that a deliverables will be
late. Luckily, only the completion date will be affected and it will cause the
project to be delayed by four weeks. Your analysis shows that the item can
be purchased from another seller at a higher price without affecting the
schedule. What is the best thing to do?
A. Evaluate the impact of the decision
B. Discuss the impact with the customer and ask for a decision
C. Crash or fast track the project
D. Change the project plan to reflect the new due date
10. Which of the following is the best form of communication for cancelling a
project?
A. Email
B. Verbal
C. Informal written
D. Formal written
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11. You are the single point of contract (SPOC) for your projects and are
frequently overwhelmed by the quantity of information and materials that
you are required to disseminate to the team. What is the key purpose of
distributing project information?
A. To create an archive of project information that can be used by other
projects
B. To share the results of work with the stakeholders in a timely manner
C. To ensure that the project continues to have sponsorship
D. To resolve conflicts between project members.
12. What is the difference between project reports and performance reports?
A. Both mean the same
B. Project reports are meant for customers while performance reports are
meant for review within the team
C. Project reports describe the status and issues while performance reports
assess variance from project objectives
D. Project reports are weekly, while performance reports are event driven
13. You have just been assigned as a project manager for a manufacturing project.
This one–year project is about halfway done. It involves five different sellers
and 20 members of your company on the project team. You want to quickly
review the current status of the project. Which of the following reports would
be most helpful in finding such information?
A. Work status
B. Progress
C. Forecast
D. Communication
14. You have collected the performance measurement documentation for your
project to be included in the project archives. What is the purpose of the
performance measurement documentation?
A. It is used as part of the formal acceptance process to verify contract
expenditures
B. It is reviewed to make certain that the project goals and objectives were
met
C. It is included in the project archive documentation after confirming the
accuracy of the measurements
D. It is used as historical information for future projects that are similar in
scope to this project
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15. The inputs of the Control Communications process include all of the following
except for which one?
A. Project Management Plan
B. Work performance Data
C. Issue Log
D. Work performance Information
16. What are the three types of information found in project communications?
A. Earned value analysis, variance analysis, and trend analysis
B. Project plan updates, work results, and performance reports
C. Performance reviews, performance reports, and work results
D. Performance reports, deliverables status, schedule progress and cost
incurred
17. If your project comes in 20% ahead of schedule and 25% under budget you
should:
A. Reward yourself
B. Demand a raise and throw a party
C. Be proud
D. Find out why there was such a variance from the original plan
18. Performance report:

A. Occurs only when a major change is made to the project
B. Is the process of collecting and distributing performance information,
including status reports, progress measurements and forecasts
C. Refer to report where project manager writes “Performance Report” on
top of the project status
D. Refers to the final report of the project which describes what was actually
achieved at the end
19. Communication under a contract should tend towards:

A. Formal written communication
B. Formal verbal communication
C. Informal written communication
D. Informal verbal communication
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20. To ensure an effective meeting the project manager should:
A. Create and distribute a meeting agenda well before the meeting
B. Always call a meeting even if the project manager is not sure there is a
real need
C. Ensure all of the problems are solved during the meeting
D. Not encourage participation from everyone as this will prolong the
meeting
21. You’re managing a software project. Your team has discovered a problem,
and as a result you’ve requested a change. The change will cost the project
an extra three weeks, but without it several stakeholders might have problems
with the final product. What is the next thing that you should do?
A. Instruct the team to make the change
B. Call a meeting with each stakeholder to figure out whether or not to
make the change
C. Document the change and its impact, and put it through the change control
system
D. Do not make the change because it will delay the project
22. A project team has members in five different locations with varying
information systems. The project manager works with the project team to
determine how project information will be distributed. These methods are
detailed in which document?
A. Overall project management plan
B. Scope statement
C. Communication management plan
D. Staffing management plan
23. The person writing down meeting notes for a project status meeting is
called a:
A. Bookkeeper
B. Secretary
C. Scribe
D. Project manager
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24. Which one of the following is a technology factor that may affect project
communication?
A. Communications management
B. Management by walking around
C. The project duration
D. Variance analysis reporting
25. The most common communication problem during negotiations is that

A. One side may try to confuse the other side
B. One side may be too busy thinking about what to say next to hear what is
being said
C. Each side may misinterpret what the other side has said
D. Each side may give up on the other side
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361
Managing risk involves risk management planning, identification, analysis,
response planning and monitoring and control. The objective of risk
management is to increase the probability and impact of positive events
and decrease the probability and impact of negative events.
The project management team and organization have to be committed to

address risks proactively and consistently throughout the project, to make
the project successful. A focused and conscious approach to risk management
is required to minimize the impact of negative events and increase the
impact of positive events.
More on Risk
Risk always pertains to the future and is anchored in the uncertainty
associated with all projects. Risks may be caused by requirements that
cannot be met on time, assumptions that get invalidated or constraints that
may have one or more impacts. For example, the required resources with
specific competencies may not be available for the project on time due to
limited supply of such personnel in the market. Risks may also occur due to
immature project management practices, lack of integrated management
systems, concurrent multiple projects, etc.
Risks can be categorized as known risks and unknown risks. Known risks
are those that have been identified and analyzed and for which a response
plan has been created. Unknown risks are those risks which cannot be
managed proactively and therefore need to have a contingency plan.
Key Terms
Probability Distributions
Probability distributions of cost elements and activity durations are used
to perform risk analysis. Continuous distributions which are most commonly
used in modeling and simulation are made of possible values of the cost
element or activity duration, developed through intensive interviews and
examination of past performance. The typical input is developed using a 3–
point estimate, in which the cost or duration is represented by the optimistic
value, the most likely value, and the pessimistic value.
Risk Appetite
Degree of uncertainties that an organization is willing to take in anticipation
of reward
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Risk Tolerance
Risk tolerance is the degree to which a risk can be considered as acceptable
or unacceptable by the organization or stakeholders. Risk tolerance may
vary between projects and organizations depending on the objectives and
the environment. For example, a project may be tolerant towards schedule
risk, namely a delay, but not to quality risks, namely a defective product.
Risk threshold
Represents the limit for risk exposure which is used for making decisions
in terms of accepting (tolerating) the risk
Threats and Opportunities

Risks, when they happen, can positively or negatively impact projects. When
they negatively impact the project, they are called threats and when they
positively impact the projects, they are called opportunities. Examples of
opportunity include availability of a highly skilled resource to complete
project activities faster, availability of a cheaper and better software testing
product than originally planned, etc.
11.0 Project Risk Management Processes

The Project Risk Management includes processes for conducting risk
management planning, identification, analysis, response planning and
monitoring and control on a project.
Project Risk Management process includes the following key process:
Fig. 11.1: Project Risk Management Processes
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PROJECT RISK MANAGEMENT
11.1 Plan Risk Management
This process defines how to conduct the risk management activities in a
project. Risk planning should start as soon as a project is conceived and
should be completed during the initial stages of project planning. Several
project stakeholders including the project manager, project team, sponsor,
customer can be involved during risk planning.
Fig. 11.2: Plan Risk Management – ITTO
11.1.1 Plan Risk Management – Inputs

All approved subsidiary management plans form the input for creating the
risk management plan. Project Management Plan provides the baseline and
current state of the project, based on which the risk management plan will
be created.
Project Charter
The project charter provides details on the high–level risks identified during
the project initiation phase, high–level requirements and associated
assumptions/ dependencies/ constraints which are potential risks that need
to be revisited during project planning phase.
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Provides details in terms of determining accountability and responsibility
for identified risks and the risk responses.

risk attitudes, tolerances and threshold levels that an organization can
withstand.

The organizational process assets that can affect this process include:
• Risk categories
• Common definition of concepts and terms
• Risk statement formats
• Standard templates
• Roles and responsibilities
• Authority levels for decision making
• Lessons learnt
• Stakeholder registers
11.1.2 Plan Risk Management – Tools & Techniques
Techniques used to analyze/understand the overall risk management context
vis–à–vis stakeholder risk attitudes and strategic risk exposure for the
project to define the risk management approach for the project. Tools to
assess stakeholder risk profile and organizational risk scoring sheets are
some of the typical aids which are used for risk assessment and management.
Expert Judgment
To establish a robust risk management plan, subject matter experts play a
vital role in providing valuable inputs based on their experience.
Chapter – 11 365
Following are some of the experts who need to participate and provide
inputs for establishing an effective risk management plan.
• Senior Management
• Project Stakeholders
• Project Managers
• Subject Matters Experts (SME)
• Industry groups and consultants
• Professional and technical associates
Meetings
Meetings involving all relevant stakeholders and subject matter experts
are held to review the risk management approach and ensure that all aspects
of risks (such as scope, cost, time and quality) are adequately addressed.
Tailoring decisions are reviewed and approved to ensure the controls
established are appropriate to the size and nature of the project.
11.1.3 Plan Risk Management – Outputs
Risk Management Plan

Risk Management plan is part of the project management plan and should
contain the following information:
Methodology: Defines the approach for performing risk management for

the specific project. This may also include tools and data sources that are
needed for risk management.
Roles and responsibilities: Defines the roles and responsibilities for

performing risk management. Assigns clear responsibilities for executing
risk management activities. Apart from team members, other stakeholders,
such as sponsors and customers may also be assigned responsibilities.
Budgeting: Funds for risk management activities are estimated and

included in the cost baseline. Protocol for applying a contingency reserve is
established
Timing: Defines when risk management activities have to be carried out in

the project life cycle. Includes risk management activities in the schedule.
Establishes a protocol for applying schedule contingency reserve.
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Risk Categories: A Risk Breakdown Structure (RBS) is normally used to
categorize and identify risks. Risk categories can include internal, external,
technical, project management and organizational. A project typically uses
a previously identified list of risk categories. Categorization of risks helps
identify all possible risks during the Identify Risks process.
Fig. 11.3: Risk Breakdown Structure
Definition of Risk Probability and Impact: A standard definition for

risk probability and impact is required in order to carry out a meaningful
qualitative analysis of risks. Numerical or relative definitions of probability
and impact can be defined or tailored for the project needs so that a uniform
meaning can be attributed to them by everyone in the project. A probability
scale can range from ‘very unlikely’ to ‘most certainly’ or can have numerical
values ranging from 0 – 1. Similarly, the impact scale can be defined to
reflect the significance of impact, both positive as well as negative. Impact
scales can also be defined specific to the project objectives, such as time,
scope, quality, etc. Relative values ranging from ‘very low’ to ‘very high’ as
well as numerical values ranging from 0 – 1 can be defined.
Probability and Impact Matrix: This matrix is used for prioritizing and
assessing the implications of risks on project objectives. Organization–
defined matrices can be tailored for specific project purposes.
Revised stakeholders’ tolerances: The stakeholder tolerances may be

revised during this process and reflected in the plan.
Reporting Formats: Defines how the information related to risk processing

will be documented and communicated.
Chapter – 11 367
Tracking: Defines how risk processing activities will be documented for
the purposes of the current project as well as for future projects.
11.2 Identify Risks

This process involves systematic identification of risks and documenting
their characteristics. Participants in the risk identification process can
include the project manager, project team members, sponsor, subject matter
experts, customers and risk management experts.
Fig. 11.4: Identify Risks – ITTO
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11.2.1 Identify Risks – Inputs

Inputs such as roles and responsibilities for carrying out risk processing
activities, provision for these activities in the budget and schedule and
categories of risk will be used from the risk management plan.
Refer to section 4.2.3 – Plan Risk Management – Outputs

How well a project is able to manage its costs depends on the structure and
nature of the cost management plan. The project’s approach to the cost
management plan and its structure can be a potential source for cost related
risks that need to be considered during this process.
Refer to section 7.1.3 – Plan Cost Management – Outputs

How well a project is able to manage its schedule depends on the structure
and nature of the schedule management plan. The project’s approach to
schedule management plan and its structure can be a potential source for
schedule related risks that need to be considered during this process.

How well a project is able to manage its quality depends on the structure
and nature of the quality management plan. The project’s approach to quality
management plan and its structure can be a potential source for quality
related risks that need to be considered during this process.

Chapter – 11 369
Scope Baseline
Scope baseline contains project assumptions. Project assumptions are
potential sources for risks and must be evaluated. WBS is also an important
source for risks, both at the micro and macro levels.

The activity cost estimates are normally provided as a range and are
therefore an indication of risks. The width of the range can be an indicator
of the degree of the risk, suggesting that the estimate is either sufficient or
insufficient to carry out the activity.
Refer to section 7.2.3 – Estimate Cost – Outputs

Activity duration estimates are normally provided as a range and therefore
are an indication of the risks associated with timelines. The width of the
range can be an indicator of the degree of the risk, suggesting that the
estimate is either sufficient or insufficient to carry out the activity.
Refer to section 6.5.3 – Estimate Activity Durations – Outputs
Relevant stakeholders must be involved during the “Risk Identification”
process, in order to ensure that their inputs are taken for identifying risks.
Project Documents
Documents that are reviewed for identifying risks include assumptions log,
work performance reports, earned value reports, network diagrams,
baselines, etc.
Procurement Documents
Refer to section 12.1.3 – Plan Procurement Management – Outputs
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Enterprise environmental factors that can influence this process are
commercial databases, academic studies, benchmarks, industry studies, risk
attitudes, etc.

Organizational process assets include risk statement templates, lessons
learnt, historical information related to actual risks occurred, etc.
11.2.2 Identify Risks – Tools & Techniques
Documentation Reviews
Reviewing project documents can provide insights into the sources and
nature of potential risks. The quality of the plans and the consistency among
the various plans and the project requirements and assumptions can provide
valuable information in identifying risks.
Information Gathering Techniques

Information Gathering Techniques consists of the following:
Brainstorming: with several key project stakeholders, either in a

structured way or through free–form can be useful in collecting ideas about
the various risks. A risk breakdown structure can be used to do a systematic
collection of risks based on categories.
Delphi Technique: is useful in collecting data without any bias and

reducing the undue influence of one participant on another. Here data is
collected anonymously through a questionnaire to solicit ideas on risk. The
responses are summarized and circulated among the participants. Consensus
may be reached after a few rounds of this process.
Interviewing: subject matter experts, team members and other

stakeholders can help identify risks.
Root cause analysis: as a technique can sometimes be used to identify

risks.
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Checklist Analysis
A risk checklist can be used to identify risks. Such a checklist will normally
be developed with the experience from previous projects using lessons
learnt and historical information. Since a checklist cannot be an exhaustive
one, care should be taken to explore areas of risk that are not covered in
the checklist.
Assumptions Analysis
Analyzing assumptions can help the project team to identify risks. Since
assumptions reflect incompleteness, inaccuracy, instability and
inconsistency in projects, assumptions are a good source for identifying
project risks.
Diagramming Techniques
Cause and Effect diagrams (also known as Ishikawa or fishbone diagrams),
system or process flow charts and influence diagrams can be used to identify
root causes of issues. During the risk identification process, they can be
used to identify risks.
SWOT Analysis
SWOT is the short form for Strength, Weaknesses, Opportunities and
Threats. This technique may use a brainstorming method to first identify
the strengths and weaknesses of the performing organization. This may be
further analyzed to identify the risks that could have a positive or negative
impact on the project. SWOT analysis further proceeds to maximize the
opportunities that arise from strengths and minimize threats that arise
from weaknesses.
Expert Judgment
Experts who have relevant experience in similar projects can be invited to
identify risks in a project. The experts’ views should be taken into account
in this process.
11.2.3 Identify Risks – Outputs
Risk Register
Risk register is the key output of this process. Though it is created in this
process, details get added to it in all the subsequent processes as
understanding of project risks evolves. A risk register contains the following
essential elements:
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List of identified risks: The risks identified are listed along with details
such as the possible causes of the risk and the effect or impact on the project.
List of potential responses: Responses to risk, if identified, at this stage,

may be included in the risk register. This section will be updated during
the Plan Risk Responses process.
11.3 Perform Qualitative Risk Analysis

In order to effectively manage project risks, this process helps to prioritize
risks based on the probability of occurrence and impact. The levels of
probability and impact established in the Identify Risks process enables
prioritizing without bias. This process must be revisited during the project’s
life cycle in order to stay current on the project risks.
Fig. 11.5: Perform Qualitative Risk Analysis – ITTO
11.3.1 Perform Qualitative Risk Analysis – Inputs

Roles and responsibilities for conducting risk management activities, budget
and schedule activities for risk management, categories of risk, definitions
of probability and impact, probability and impact matrix are some of the
key elements of the risk management plan that will be used for this process.
Refer to section 11.1.3 – Plan Risk Management Plan – Outputs
Chapter – 11 373
Scope Baseline
Scope of the project sometimes determines the type of risks. For example,
if the project is going to use some cutting–edge technology for development
or if the project is highly complex, the uncertainty is more. The project
scope statement needs to be evaluated to identify specific risks and prioritize
them.
Risk Register

• Industry trends for similar projects and its associated impact, if any,
on the project
• Risk database from the industry or other sources
Refer to chapter–2 EEF page 30

Information relevant to Perform Qualitative Risk Analysis include:
• Information from similar, past projects
• Risk database from industry sources
• Studies of similar projects by risk specialists
11.3.2 Perform Qualitative Risk Analysis – Tools & Techniques
Risk Probability and Impact Assessment

For each of the identified risks, the probability of occurrence and the impact
on the project objectives such as cost, time and quality are assessed. The
impact can be either positive or negative and can be treated as an
opportunity and threat respectively. The risks can be assessed by
interviewing or conducting meetings with people who are familiar or
knowledgeable about those risks.
The assessment results are documented with supporting details, such as

any underlying assumptions made for assigning levels to the probability
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and impact. Risk probabilities and impact are rated and those with lower
ratings are put on a watch list for future monitoring.
Probability and Impact Matrix

A probability and impact matrix helps the project team to prioritize risks
and decide which risks need to be closely watched and acted upon. The
matrix contains ratings for specific combinations of probability and impact
for each risk. With this rating, the risks can be prioritized as low, moderate
and high.
Risk rating helps the team derive appropriate responses for risks. For
example, a risk that has a negative impact (threat) on a project objective
and also has a high impact rating in the matrix needs an aggressive response
strategy. Similarly, opportunities that have a high impact rating should be
pursued aggressively, since they will offer the maximum benefits.
Fig. 11.6: Probability and Impact Matrix
Chapter – 11 375
Fig. 11.7: ..........................
Risk Data Quality Assessment

In order to derive credible risk responses, it is important to evaluate and
understand the quality of the risk data. The risk data should have accuracy,
quality and integrity and should be unbiased. If these qualities are missing,
it may be necessary to gather better quality data.
Risk Categorization
Grouping risks can help in deriving effective risk responses. Risks can be
categorized using a Risk Breakdown Structure (RBS) (according to the
source of risks), or WBS (according to the areas of the project) or other
useful categories (such as project phases).
Risk Urgency Assessment

Risks should be assessed to decide if any of them requires a short–term
response. In some cases, the risk urgency assessment is combined with the
rating given using the probability and impact matrix to arrive at a final risk
rating.
Expert Judgment
Expert judgment can be used in deciding the priority of risks. Such data
can be collected through workshops and interviews. Bias in this form of
data needs to be considered.
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11.3.3 Perform Qualitative Risk Analysis – Outputs

The risk register which is created during the Identify Risk process is updated
with the following items in this process:
Priority list of project risks: Risks are prioritized and listed based on the
probability and impact matrix. Depending on the need of the project, risks
can be listed by priority separately for each of the project objectives, such
as, cost, schedule and quality. The project manager should use the list to
focus effort on those risks that are high–priority
Risks grouped by categories: can reveal common root causes or project

areas that require specific attention
Causes of risks or project areas requiring particular attention: may

allow developing effective risk responses
List of risks requiring response in the near–term
Watch lists of low–priority risks: Risks that have been rated as low–
priority can be placed in a watch list for future monitoring.
Trends in qualitative risk analysis results: Trends in particular risks

can be noticed during this process, making further analysis more or less
important.
11.4 Perform Quantitative Risk Analysis

Perform Quantitative Risk Analysis helps us to do a numerical analysis of
those risks that have been prioritized during the Perform Qualitative Risks
Analysis process. The quantitative analysis leads to a numerical rating which
indicates the effects of the risks on the project objectives. The numerical
values can be derived either for individual risks or for the overall project.
This process should be repeated after the Plan Risk Responses, as well as
the Monitor and Control Risks, to determine if the overall project risk has
been satisfactorily decreased.
Chapter – 11 377
Fig. 11.8: Perform Quantitative Risk Analysis – ITTO
11.4.1 Perform Quantitative Risk Analysis – Inputs
Risk Register


The cost management plan may decide the approach for the quantitative
analysis of the cost related risks.
Refer to section 7.1.3 – Plan Cost Management – Outputs

The schedule management plan may decide the approach for the quantitative
analysis of the schedule related risks.
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• Industry trends for similar projects and its associated impact, if any,
on the project
• Risk database from the industry or other sources

Elements of organizational process assets that can be used are:
• Information from similar past projects
• Risk database from industry sources
11.4.2 Perform Quantitative Risk Analysis – Tools & Techniques
Data Gathering and Representation Techniques

Interviewing: This involves interviewing the relevant stakeholders to
collect data to quantify the probability and impact of risks on project
objectives. The data needed depends on the type of probability distribution
that is to be used. For example, data is collected on the optimistic (low),
pessimistic (high) and most likely scenarios for some commonly used
distributions.
Refer to the table given, on the three–point estimate on costs.
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dŽƚĂů ΨϭϭϴϬϬ ΨϭϬϱϬϬ ΨϵϲϬϬ
Fig. 11.9 Three Points Estimate on Cost
Probability Distribution: Continuous distributions are commonly used

in modeling and simulation. They represent the uncertainty in values such
as duration of schedule activities and costs.
Chapter – 11 379
Quantitative Risk Analysis and Modeling Techniques
Sensitivity Analysis: helps to examine the impact of one risk event on the
project objectives, when all the other risks are held stable. A tornado diagram
graphically displays which risk has the most impact when all the other
risks are held constant. It helps examine the extent to which each risk
element of the project affect the outcome or project objectives being
evaluated, when all other risk elements are held at their baseline value. In
a Tornado diagram the Y axis contains each type of uncertainty at their
base value and the X axis contains the spread or correlation of the
uncertainty to the outcome being studied.
A sample Tornado diagram is given below to show the visual impact of

evaluating multiple risks which has the maximum impact on the outcome.
A graphical sensitivity analysis shows the relative importance of the
uncertain value drivers. A tornado diagram can provide direction for the
rest of the risk analysis (akin to prioritization using Pareto Chart), allowing
one to focus on the factors which influence decisions and have the greatest
effect on value.
Fig. 11.10: Tornado Diagram
Expected Monetary Value Analysis

A decision tree is a common technique that applies the EMV method. EMV
calculates the average value of an outcome when the future includes
scenarios that may or may not happen. EMV for a project is calculated by
multiplying the value of each possible outcome with the probability and
adding the products together.
Refer to chapter–6 – Operational Research
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Modeling and Simulation: Using simulation, a project model is computed
several times, with the input values chosen at random for each iteration,
from the probability distribution of these variables. For example, for cost
risk analysis, cost estimates are used as inputs, while for schedule risk
analysis, schedule network diagram and duration estimates are used. A
probability distribution for the total project cost or project completion data
is plotted from the outcome. Monte Carlo technique is a simulation technique
that uses the above method to quantitatively analyze the impact of risks on
project objectives.
Refer to chapter–6 – Operational Research
Expert Judgment: is useful in identifying appropriate inputs for the tools

and interpreting the outcome of the tools.
11.4.3 Perform Quantitative Risk Analysis – Outputs

The following are added to the risk register in this process:
Probabilistic analysis of the project: The possible completion dates and

costs are arrived at along with their associated confidence levels. This
output along with stakeholder tolerance levels are used to calculate the
cost and schedule contingency reserves.
Probability of achieving cost and time objectives: Given the project

risks, the probability of achieving project objectives can be quantified using
the quantitative risk analysis techniques.
Prioritized list of quantified risks: This list contains those risks that
pose the greatest threat or the greatest opportunity to the project. These
may include risks that have the greatest impact on contingency reserve
and more likely to be on the critical path.
Trends in quantitative risk analysis results: Trends may be noticed and

new insights gained as the quantitative risk analysis is repeated.
Chapter – 11 381
11.5 Plan Risk Responses
This process comes up with action plans to address opportunities and threats
that are faced by the project. It also involves identifying resources to execute
the action plan, inserting resources and activities into the budget, schedule
and project management plan, as needed.
Risk responses must be appropriate for the risk, depending upon the priority
and urgency, cost–effective and should be agreed upon by all stakeholders.
Risk responses should also be timely and realistic.
Fig. 11.11: Plan Risk Responses – ITTO
11.5.1 Plan Risk Responses – Inputs

Risk management plan contains roles and responsibilities, risk analysis
definitions, timing for reviews and risk thresholds for low, moderate and
high risks.
Risk Register
The following items from a risk register are used during this process:
• The list of prioritized risks
• Symptoms and warning signs
• Risk owner and responsibility
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• Lists of risks requiring response in the near term
• Lists of risks for additional analysis and response
• Trends in quantitative risk analysis
• Watch–list of low–priority risks
11.5.2 Plan Risk Responses – Tools and Techniques
Strategies for Negative Risks or Threats

Four strategies are normally followed for negative risks. They are to avoid,
transfer, mitigate or accept.
Avoid: Involves changing the project management plan to avoid the threat.
The project manager can reduce the scope, extend the schedule, etc. to avoid
risk. Early in the project, risks can be avoided by clarifying requirements,
seeking more information or acquiring expertise.
Transfer: Involves shifting the risk and the ownership of response to a

third party. Transferring risk does not eliminate the risk, it only transfers
the ownership to somebody else. Insurance, performance bonds, guarantees,
etc. are used as tools for transference. Contracts are used to transfer some
liability to another party. For example, in a cost–plus contract, the risk is
transferred to the buyer. In a fixed–price contract, the risk is transferred
to the seller.
Mitigate: Involves reducing the probability of occurrence of a threat and/

or reducing its impact. Conducting more tests, choosing stable products
and adopting less complex processes are examples of mitigation. Designing
redundancy into a system may reduce the impact of failures.
Accept: This strategy is adopted if there is very little possibility to deal

effectively with a risk, if it occurs. This strategy can be either passive or
active. In the passive strategy, no action is taken except to document it,
and leave it to the project team to handle the risks as they occur. In the
active strategy, a contingency is set aside in terms of money, time or other
resources to handle the risk.
Chapter – 11 383
Strategies for Positive Risks or Opportunities
Exploit: This strategy is chosen for risks with positive impacts to ensure
that the risk actually happens. Examples include assigning a most talented
person to the project so that the completion time reduces or reducing the
actual cost than was originally planned.
Accept: Involves accepting the opportunity if it happens, but not actively

pursuing it.
Share: Sharing a positive risk involves shifting some of the ownership to a

third party who is better able to capture the opportunity. Examples include
joint ventures, special–purpose companies, etc. to take advantage of the
opportunity so that everyone benefits from the positive risks.
Enhance: Involves increasing the probability of the positive risk event and/
or increasing the impact. Examples of enhancing opportunities include
adding more resources to an activity to finish early.
Contingent Response Strategies

These are response actions that are executed only if certain predefined
conditions occur for certain risks, if it is believed that there is sufficient
warning to implement the plan.
Expert Judgment
Expert advice can be sought from people who have the experience, skill or
training in gaining strategies for responding to risk events.
11.5.3 Plan Risk Responses – Outputs

The following elements of the project management plan can be updated:
Schedule Management Plan: Changes to this may include changes in

tolerance and threshold levels related to resource loading and leveling, as
well as the schedule itself
Cost Management Plan: May include changes to tolerance and threshold

levels related to cost accounting, tracking and reporting, as well as updates
to the budget and contingency reserves
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Components of risk register at this point can include:
• List of risks, their descriptions, areas of project impacted, causes
and how they affect project objectives
• Risk owners, roles and responsibilities
• Priority ranking of risks
• Response strategies
• Triggers, warning signs and symptoms of risks
• Budget and schedule activities for implementing the responses
• Fallback response when the primary response proves inadequate
• Residual risks that remain after the planned responses have been
taken
• Secondary risks that arise as an outcome of implementing a risk
response
Assumptions log: updates Project assumptions which are part of the scope
statement or separate logs are revisited to accommodate any changes that
happen due to risk response planning
Technical Documentation Updates: New information may be available

as the result of application of risk responses. To accommodate these,
technical documentations are updated
11.6 Control Risks

Control risk is an iterative process of executing the risk response plan,
tracking identified risks, monitoring residual risks, evaluating risk process
effectiveness and identifying new risks throughout the project life cycle. It
applies various techniques such as variance and trend analysis, which uses
the performance information generated during project execution.
In addition to the above, control risk process is also used to validate project
assumptions, to evaluate if certain risks need to be retired, whether risk
management processes are being followed and to assess whether contingency
reserves are in alignment with the current risk assessment.
Chapter – 11 385
Fig. 11.12: Control Risk – ITTO
11.6.1 Monitor and Control Risks – Inputs

Project management plan contains the risk management plan, which
includes risk tolerances, protocols and assignment of resources.
Risk Register
Risk register has identified risks, roles and responsibilities, risk response
plans, symptoms and warning signs of risks, a watch list of low–priority
risks and contingency reserves.

Work performance information required for this process includes, but is
not limited to:
• Deliverable status
• Actual costs incurred
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Performance reports provide data on trend analysis, variance analysis,
forecasting data and earned value using information from performance
measurements.
11.6.2 Monitor and Control Risks – Tools and Techniques
Risk Reassessment
Project risk reassessments should be periodically carried out in order to
identify new risks; close any risks that are not relevant and reassess current
risks.
Risk Audits
Risk audits examine the effectiveness of the risk management processes,
as well as the effectiveness of the risk responses. The project manager should
ensure that risk audits are conducted as per the schedule mentioned in the
risk management plan.
Variance and Trend Analysis

Variance and trend analysis and earned value analysis should be reviewed
for monitoring and controlling risk events. Outcomes of these events may
forecast potential deviation of the project at completion from cost and
schedule targets and therefore may indicate a potential impact of threats
or opportunities.
Technical Performance Measurement

Technical performance measurements, when compared against the project’s
targets, can help to determine and forecast the degree of success and may
expose the degree of technical risk the project is facing.
Reserve Analysis
Reserve analysis checks if the remaining contingency reserves are adequate
to cover the remaining risks.
Meetings
Periodic status meetings should cover discussions on risk status. This will
ensure that the project team is practicing risk management processes and
new threats and opportunities are identified as soon as they arise.
Chapter – 11 387
11.6.3 Monitor and Control Risks – Outputs

Updates to risk register include, but not limited to:
• Results of risk reassessments, risk audits and risk reviews
• Actual outcome of project’s risks and risk response plan execution
Change Requests
Implementing risk response plans can result in change requests. These
change requests can be either corrective or preventive actions and are
processed through the integrated change control process.

If the approved change requests have an effect on the risk management
processes, then the project management plan has to be updated to reflect
the approved changes.

Project documents that can get updated as a result of the monitor and control
risks processes are same as those in the Plan Risk Responses process.

The organizational process assets that can get updated include, but not
limited to:
• Templates for risk management plan, risk register and probability
and impact matrix
• Risk Breakdown structure
• Lessons learnt from project risk management activities
11.7 Summary
In this chapter, we looked at the processes that are involved in project risk
management. We also looked at the various inputs, tools and techniques
and outputs that are relevant to all these processes.
Project risks come into existence the moment projects are conceived. To be
successful, the organization should be committed to address risk
management proactively and consistently throughout the project. Moving
forward on a project without a focused effort increases the impact a realized
risk can have on project objectives.
❑
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1. The project team has established the anticipated risks for the project,
assigned probabilities, impacts and risk owners to them. As the project
management plan evolves where will this information get documented?
A. Risk list
B. Risk trigger
C. Risk register
D. Risk response
2. When should risk identification take place?

A. As early as possible in the initiation process
B. As early as possible in the planning process
C. Throughout the project management life cycle
D. Throughout the project life cycle
3. At his Indonesia–based software manufacturing company, Daniel realizes

that risk management has become more important as the company continues
to evolve. He needs to begin the process of incorporating risk management
into all of his new projects. What is the first step in using a WBS as an
effective tool for risk management?
A. Determine the probability of occurrence of risks
B. Review WBS elements and segment into risk events
C. Further define high–risk areas in the WBS
D. Include contingency activities in the WBS
4. A project has a schedule reserve of four weeks when the team makes a major
change approved by the customer. The change has a 40% chance of delaying
the project by two weeks. What should be the answer?
A. Add two weeks
B. Look for ways to cut two weeks from another task
C. Add 5.6 days to the schedule reserve
D. Plan to add two weeks of overtime to the project
5. You are managing a software engineering project. Two team members come
to you with a conflict. The lead developer has identified an important project
risk: you have a subcontractor who may not deliver on time. Another
developer does not believe that the risk is likely to happen; however, you
consult the lessons learnt from previous projects and discover that
Chapter – 11 389
subcontractors failed to deliver their work on two previous projects. You
decide that the risk is too big; you terminate the contract with the
subcontractor, and instead hire additional developers to build the component.
Both team members agree that this has eliminated the risk. Which of the
following best describes this scenario?
A. Transference
B. Mitigation
C. Avoidance
D. Acceptance
6. Which of the following is not an Information Gathering technique?

A. Brainstorming
B. Risk Urgency Assessment
C. Delphi technique
D. Interviewing
7. All of the following are diagrams that can be used with the risk management,
except for which one?
A. Network diagram
B. Influence diagram
C. Cause–and–effect diagram
D. Process flowchart
8. Identify Risk process tools and technique include the following except:
A. Documentation reviews
B. Risk Register
C. Checklist Analysis
D. SWOT Analysis
9. Unfortunately, risk analysis is not done regularly on many projects at many

companies. A lot of time should be spent on risk analysis during the planning
phase as a key ingredient to the success of a project by proactively identifying
and isolating known risk occurrences. Dany is evaluating a number of risk
options and the probabilities as well as costs associated with each option.
He wants to provide the highest expected value for his choice. What tool
should he use?
A. Critical path method (CPM)
B. Decision tree analysis
C. Sensitivity analysis
D. Expert judgment
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10. Costs that are expected to occur, but the time when they will occur is not
known are called?
A. Indirect
B. Tactical
C. Direct
D. Known unknowns
11. A project team is through with identify risk, qualification, quantification and
response planning. Risk owners have been identified for monitoring and
control actions. When should the risk management plans be revisited?
A. At closure, for lessons learnt
B. During risk response audits
C. Periodically updated during team reviews for changes in risk rankings
D. After the first risk event
12. You and your project team need to complete risk identification. Which item
can help the most?
A. Strength, weakness, opportunities, and threats (SWOT) analysis
B. Control charts
C. Product analysis
D. Defect repair review
13. Perform Qualitative Risk analysis includes:

A. Subtotaling internal and external events
B. Identifying potential risks and impact
C. Evaluating event probability occurrence and impact
D. Developing contingency plans and resources
14. Perform Qualitative Risk Analysis will be performed under:

A. Initiation Process Group
B. Planning Process Group
C. Executing Process Group
D. Monitoring & Controlling Process Group
15. The team and the project manager are in the process of identifying risk on
the project. They have decided to use categorization of risks to start out
with, because the project is very large. Which of the following is the best
example of risk categories?
A. Initiation, Planning, Execution, Controlling, Closing
B. Scope, Time, Cost
C. Quality, Schedule, Budget
D. External, Internal, Technology, Personnel
Chapter – 11 391
16. The ability to research the project risks and capture them for future reference
helps to show a relationship to the success of a project. In what ways do
perform quantitative risk analysis and perform qualitative risk analysis
differ?
A. Perform Quantitative risk analysis assesses the impact and likelihood,
whereas quantitative risk analysis assesses the consequence on specific
project objectives
B. Perform Qualitative risk analysis assesses the impact and likelihood,
whereas qualitative risk analysis assesses the consequence on specific
project objectives
C. They are essentially the same and generally done at the same time
D. Perform Qualitative risk analysis uses the risk management as input
whereas perform quantitative risk analysis does not
17. You are the project manager on a software project that is planning various
approaches for technical tasks. There is a 20% chance that a component you
are going to license will be difficult to integrate and cost $3000 in rework
and delays. There is also a 40% chance that the component will save $10,000
in time and effort that would have been used to build the component from
scratch. What is the EMV for these two possibilities?
A. $13,000
B. $7,000
C. $3,400
D. $600
18. You are considering the decision to go for a contract. The probability of
completing a contract is 92% and if the project fails to complete the contract
then the associated risk is $10000 which will be charged as penalty. What is
the expected value of your decision?
A. +800
B. –800
C. –1000
D. 9200
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19. You are working with the project manager for a construction project. One of
the identified risks within the project has a 20 percent chance of occurring.
If the risks occurs, it will cost your project an additional $150,000. What is
the contingency amount needed for this risk event?
A. $150,000
B. $30,000
C. $75,000
D. Zero; the risk is not real until it occurs
20. During which risk management process, will risks be identified?

A. Perform quantitative risk analysis and Identify Risk
B. Identify Risk and Control Risk
C. Perform qualitative risk analysis Control Risk
D. Identify Risks
21. During project execution, a major problem occurs that was not included in
the risk register. What should you do first?
A. Create a work around
B. Re–evaluate the identify risk process
C. Look for any unexpected effects of the problem
D. Inform management
22. The software testing team is involved in developing responses to the

identified risks. They could potentially create all of the following except?
A. Residual risks
B. Secondary risk
C. Updates to the risk register
D. Risk management plan
23. The Department of Defense is involved in performing risk reassessment as

part of their overall risk strategy. Which of the following best describes
risk reviews?
A. Determining the risks associated with the project
B. Determining the characteristics of the risks
C. Determining the validity of the documented risks and looking for any
new risks that could occur
D. Determining who will implement a risk response plan
Chapter – 11 393
24. The project manager and the team have just completed determining what
will be done if risk events occur, and who will be responsible for executing
those actions. Which of the following roles will be responsible for acting if
the risk events happen?
A. Risk seeker
B. Team lead
C. Project Manager
D. Risk owner
25. The team has implemented a risk response plan when a vendor was unable
to fulfill a contract commitment. The response was to choose another vendor.
Due to short notice, the other vendor could not fulfill the need of the team.
who will be responsible for, what had happened with different vendor?
A. Risk seeker
B. Team lead
C. Project manager
D. Risk owner
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395
This chapter assumes that the performing organization is the buyer and
that the sellers are organizationally external to the project team.
12.0 What is Project Procurement Management?

The Project Procurement Management processes involve contracts that are
legal documents between a buyer and a seller. A contract represents a
mutually binding agreement that obligates the seller to provide the specified
products, services, or results, and obligates the buyer to provide monetary
or other valuable consideration. The contract without consideration is null
and void.
It is the project management team’s responsibility to make certain that all

procurements meet the specific needs of the project while adhering to
organizational procurement policies. Most organizations will have
documented policies and procedures specifically defining the procurement
rules and specifying who has authority to sign and administer such
agreements on behalf of the organization.
The various activities involved in the Project Procurement Management

processes form the life cycle of a contract. Entering into a contract for
products or services is one method of allocating the responsibility for
managing or sharing potential risks.
In such cases, each contract life cycle can end during any phase of the project
life cycle. Project Procurement Management is discussed within the
perspective of a buyer–seller relationship.
Depending on the application area, the seller can be called a contractor,

subcontractor, vendor, service provider, or supplier. Depending on the
buyer’s position in the project acquisition cycle, the buyer can be called a
client, customer, prime contractor, contractor, acquiring organization,
governmental agency, service requestor or purchaser.
The seller will typically manage the work as a project if the acquisition is
not just for shelf material, goods, or common products. In such cases:
The buyer becomes the customer, and is thus a key project stakeholder for
the seller.
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The seller’s project management team is concerned with all the processes
of project management, not just with those of its Knowledge Area.
Terms and conditions of the contract become key inputs to many of the
seller’s management processes. The contract can actually contain the inputs
(e.g., major deliverables, key milestones, cost objectives), or it can limit the
project team’s options (e.g., buyer approval of staffing decisions is often
required on design projects).
Key terms
Agreement
An agreement is a mutually binding agreement that obligates the seller to
provide the specified product or service or result and obligates the buyer
to pay for it.
Buyer
The acquirer of products, services or results from outside the project team
Bidder Conferences
A meeting organized by the buyer organization with all the prospective
vendors or sellers to clarify all the queries of the vendor/seller.
Cost plus Fixed Fee Contracts (CPFF)

A type of cost–reimbursable contract where the buyer reimburses the seller
for the seller’s allowable cost as defined in the contract plus a fixed amount
of fee (profit).
Cost plus Incentive Fee Contracts (CPIF)

A type of cost–reimbursable contract where the buyer reimburses the seller
for the seller’s allowable costs, as defined by the contract and the seller
earns an incentive if it meets the defined performance criteria.
Firm–Fixed Price Contracts (FFPC)

A type of fixed price contract where the buyer pays the seller a set amount,
as defined by the contract, regardless of the seller cost.
Chapter – 12 397
PROJECT PROCUREMENT MANAGEMENT
Fixed Price Incentive Fee Contracts (FPIF)
A type of contract where the buyer pays the seller a set amount as defined
by the contract and the seller can earn an additional amount if the seller
meets a defined performance criteria.
Procurement
Acquiring or purchasing of products, services or results of an organization.
The documents utilized in bid and proposal activities, which include the
buyer’s Invitation for Bid (IFB), Invitation for Negotiations (IFN), Requests
for Information (RFI), Request for Quotation (RFQ), Request for Proposal
(RFP) and seller’s response.
Seller
A provider or supplier of products, services or results to an organization.
Time and Material Contracts (T&M)

A type of contract, which is a hybrid of both cost reimbursable and fixed
price contract. An arrangement under which a contractor is paid on the
basis of actual cost of direct labor, usually at specified hourly rates, or/and
actual cost of materials and equipment usage, or/and agreed upon fixed
add–on to cover the contractor’s overheads and profit
Project Procurement Management Processes

The Project Procurement Management process includes the following key
processes:
Fig. 12.0: Project Procurement Management Processes
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12.1 Plan Procurement Management
Plan procurement management is the process of documenting project
purchasing decisions, specifying the approach, and identifying potential
sellers. It identifies those project needs which can be, met by acquiring
products, services, or results outside of the project organization, as against
those project needs which can be accomplished by the project team.
This process involves determining whether to acquire external support and,

if so what to acquire, how to acquire it, how much is needed, and when to
acquire it. When the project obtains products, services and results required
for project performance from outside the performing organization, the
processes from Plan Procurements through Close Procurements are
performed for each item to be acquired.
The Plan Procurements process includes consideration of the risks involved

with each “make or buy” decision. It also includes reviewing the type of
contract planned to be used with respect to mitigating risks and sometimes
transferring risks to the seller.
Fig. 12.1: Plan Procurements Management – ITTO
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12.1.1 Plan Procurements Management – Inputs

The Project Management Plan describes the need justification,
requirements, and current boundaries for the project. It consists of the
following components:
Requirements documentation may include:
• Important information about project requirements that is considered
during planning for procurements
• Requirements with contractual and legal implications that may
include health, safety, security, performance, environmental,
insurance, intellectual property rights, equal employment
opportunity, licenses, and permits – all of which are considered when
planning for procurements
Risk Register
The risk register includes risk related information such as the identified
risks, risk owners, and risk responses.

Activity resource requirements contain information on specific needs such
as people, equipment, or location.
Project Schedule
Project schedule contains information on required timelines or mandated
deliverable dates.
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Cost estimates developed by the procuring activity are used to evaluate
the reasonableness of the bids or proposals received from potential sellers.
Refer to section 7.2.3 – Estimate Cost – Outputs
This contains the list of all stakeholders and their interest in the project.

The enterprise environmental factors that can influence the Plan
Procurements process include, but are not limited to:
• Market place conditions
• Products, services, and results that are available in the marketplace;
• Suppliers, including past performance or reputation
• Typical terms and conditions for products, services, and results or
for the specific industry and
• Unique local requirements

The organizational process assets that influence the Plan Procurement
process include, but are not limited to:
• Formal procurement policies, procedures and guidelines

• Management systems that are considered in developing the
procurement management plan and selecting the contract types to
be used
• An established multi–tier supplier system of pre–qualified sellers
based on prior experience
The risk shared between the buyer and seller is determined by the contract
type. The firm fixed price type of contractual arrangement is typically the
preferred type and often demanded by most organizations.
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Most legal contractual relationships generally fall into one of two broad
families, either fixed price or cost reimbursable. The other popular type of
contract is Time and Material.
12.1.2 Plan Procurement Management – Tools & Techniques
Make–Or–Buy Analysis
A make–or–buy analysis is a general management technique used to
determine whether a particular work can best be accomplished by the
project team or must be purchased from external sources.
Budget constraints may influence make–or–buy decisions. If a buy decision
is to be made, then a further decision of whether to purchase or lease is
also made. A make–or–buy analysis should consider all related costs: both
direct costs as well as indirect support costs.
Expert Judgment
Expert technical judgment will often be pursued to assess the inputs to and
outputs from this process. Expert purchasing judgment can also be used to
develop or modify the criteria that will be used to evaluate seller proposals
on technical or business expertise.
Market Research
Market research is any organized effort to gather information about the
right vendor. It is a very important component of procurement management
to identify a vendor who can provide us goods or services.
Meetings
Meetings are held to exchange information with potential bidders. And this
builds mutual trust between the buyer and the seller.
12.1.3 Plan Procurement Management – Outputs
Procurement Management Plan

The procurement management plan describes how the procurement
processes will be managed from developing procurement documents
through contract closure.
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The procurement management plan can include guidance for:
• Types of contracts to be used
• Risk management issues
• Whether independent estimates will be used and if they are needed
as evaluation criteria
• Those actions the project management team can take unilaterally, if
the performing organization has a prescribed procurement,
contracting, or purchasing department
• Standardized procurement documents, if they are needed
• Managing multiple suppliers
• Coordinating procurement with other project aspects, such as
scheduling and performance reporting
• Any constraints and assumptions that could affect planned
procurements
• Handling the required lead times to purchase items from sellers and
coordinating them with the project schedule development
• Handling the make–or–buy decisions and linking them into the
Estimate Activity Resource and develop schedule processes
• Setting the scheduled dates in each contract for the contract
deliverables and coordinating with the schedule development and
control processes
• Identifying the requirement for performance bonds or insurance
contracts to mitigate some forms of project risk
• Establishing the direction to be provided to the sellers on developing
and maintaining a work breakdown structure (WBS)
• Establishing the form and format to be used for the procurement/
contract statements of work
• Identifying pre–qualified sellers, if any, to be used
• Procurement metrics to be used to manage contracts and evaluate
sellers
Procurement Statements of Work

The statement of work (SOW) for each procurement is developed from the
project scope baseline and defines only that portion of the project scope
that is to be included within the related contract. The procurement SOW
describes the procurement item in sufficient detail to allow prospective
sellers to determine if they are capable of providing the products, services,
or results. Sufficient detail can vary based on the nature of the item, the
needs of the buyer, or the expected contract form. Information included in
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a SOW can include specifications, quantity desired, quality levels,
performance data, period of performance, work location, and other
requirements.
These are the documents the project team requires to solicit responses from
prospective sellers. Request for Information (RFI), Request for Quotation
(RFQ), Invitation for Bid (IFB), Tender Notice, Invitation for Negotiation
(IFN) are some examples of procurement documents.
The buyer prepares the procurement documents to facilitate accurate and
complete responses from prospective sellers.
The procurement document will include information such as:

• The procurement statement of work (PSOW)
• The desired form of the response from the seller
• Any applicable regulations
The procurement documents should be detailed enough to receive consistent

and appropriate responses from the prospective seller. It should be flexible
enough to allow suggestions from the seller for better ways to satisfy the
same requirements. The level and complexity of the procurement documents
should be consistent with the value and risk associated with the planned
procurement.
The issue of procurement request to potential sellers to submit their

proposal or bid is done in accordance with the policy of the performing
organization. This can include publishing the request in newspapers, trade
journals, public registers or in the internet.
Source Selection Criteria

The source selection criteria are often included as part of the procurement
documents. Such criteria are developed and used to rate the seller and
their proposals and the sellers are selected based on the outcome.
The criteria can be objective or subjective and can include:

• Purchase price
• Seller ability in understanding the need
• Overall life cycle cost
• Technical capability of the seller
• Risk
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• Management approach
• Technical approach
• Warranty the seller gives
• Financial capacity of the seller
• Production capacity of the seller
• Business type and size
• Sellers past performance
• References
• Intellectual property rights
• Proprietary rights
Make–Or–Buy Decisions
Make–or–buy decisions are the documented conclusions with regard to the
project product or services or results that will be purchased or acquired
from outside the project organization or those that will be performed
internally by the project team.
Change Requests
The Plan Procurement process may lead to changes to the project
management plan and any of the other subsidiary plans. These will be in
the form of change requests, which shall be processed through the Perform
Integrated Change Control process.

Project documents that are often considered include:
• Risk register and
• Requirement traceability matrix
12.2 Conduct Procurements

Once we complete the planning activities, we need to obtain responses from
sellers and select them and enter into an agreement with them. This process
is Conduct Procurements.
A list of qualified sellers will be selected based on an initial evaluation. A

detailed study can be conducted based on documents received from sellers.
Tools and techniques described here can be used independently or in
combination to select sellers.
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For example, a weighting system can be used to:
• Select a single seller to sign a standard contract, and
• By ranking all proposals by the weighed evaluation scores assigned
to each proposal
Fig. 12.2: Conduct Procurements – ITTO
12.2.1 Conduct Procurements – Inputs
Procurement Management Plan

Refer to section 12.1.3 – Plan Procurements Management – Outputs
Source Selection Criteria

Source selection criteria can include information on the supplier’s required
capabilities, capacity, delivery dates, product cost, life–cycle cost, technical
expertise, and the approach to the contract.
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Seller Proposals
Seller’s proposals are prepared in response to a procurement document.
The basic set of information that will be used by an evaluation body to select
one or more successful bidders (sellers).
Project Documents
Project documents that are often considered include Risk Register.
Make–Or–Buy Decisions
Make–or–buy decisions are the documented conclusions with regard to the
project product or services or results that will be acquired from outside the
project organization or will be performed internally by the project team.
Procurement Statements of Work

The Procurement statement of work (PSOW) is developed from the project
scope baseline and defines only that portion of the project scope that is to
be included within the related contract. The procurement SOW describes
the procurement item in sufficient detail to allow prospective sellers to
determine if they are capable of providing the products, services, or results.
Sufficient detail can vary based on the nature of the item, the needs of the
buyer, or the expected contract form. Information included in a SOW can
include specifications, quantity desired, quality levels, performance data,
period of performance, work location, and other requirements.

The organizational process assets that can influence the Conduct
Procurements process include, but are not limited to:
• Listings of prospective and previously qualified sellers, and

• Information on relevant past experience with sellers, both good and
bad.
• Prior agreement
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12.2.2 Conduct Procurements: Tools and Techniques
Bidder Conferences
Prior to submission of proposal, all interested sellers are called for a
meeting to answer all their queries and their responses shall be
incorporated in procurement documents as amendments.
Proposal Evaluation Techniques

On complex procurements, where selection will be made based on seller
responses to previously defined weighted criteria, a formal evaluation
review process will be defined by the buyer’s procurement policies. The
evaluation committee will make their selection for approval by management
prior to the award.
Independent Estimates
Using an independent professional estimator, an estimate of cost will be
prepared which will serve as a benchmark on proposed responses.
Expert Judgment
Expert judgment may be used in evaluating the proposals which may be
accomplished by a multi–discipline review team with expertise in each of
the areas covered by the procurement documents / proposed contract.
Advertising
By placing advertisements in general circulation publications or popular
media, the existing lists of potential sellers can often be expanded.
To ensure that vendors will bring value through their offerings, analytical
techniques can be used to get the desired end state, cost expected, etc., by
analysing the information on past performance. The team has to ensure
that they identify areas that are of high risk and need to be monitored closely
to make the project a success.
Procurement Negotiations
Mutual agreement can be reached prior to signing the contract to clarify
the structure, requirements and other terms of the purchases so that the
final contract reflects all agreements reached. Negotiations conclude with
a contract document that can be executed by both parties. For complex
procurement items, contract negotiation can be an independent process.
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12.2.3 Conduct Procurements – Outputs
Selected Sellers
Those sellers, who have been judged to be in a competitive range based on
the outcome of the proposal or evaluation. These selected sellers have
negotiated a draft contract that will become the actual contract when an
award is made.
Agreements
Agreement is awarded to each selected seller. Regardless of the document’s
complexity, a contract is a mutually binding legal agreement that obligates
the seller to provide the specified products, services, or results, and obligates
the buyer to compensate the seller.
It shall contain:
• Statement of work or deliverables
• Performance reporting
• Period of performance
• Roles and responsibilities
• Seller’s place of performance
• Pricing
• Payment terms
• Place of delivery
• Inspection and acceptance criteria
• Warranty
• Product support
• Limitation of liability
• Fees and retaining
• Penalties
• Incentives
• Insurance and performance bonds
• Subordinate subcontractor approvals
• Change request handling
• Termination and alternative dispute resolution (ADR) mechanisms.
The ADR method can be decided in advance as a part of the
procurement award. It may vary from country to country
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Resource Calendars
The quantity and availability of contracted resources along with dates on
which each specific resource can be active or idle are to be documented.
Change Requests
Change requests to the PM plan, its subsidiary plans, and other components
are processed for review and disposition through the Perform Integrated
Change Control process.

Project Management Plan that may be updated includes, but is not limited
to:
• Cost, Scope and Schedule baseline
• Communication management plan
• Procurement management plan

Project documents that may be updated include, but are not limited to:
• Requirements traceability matrices
• Risk register
12.3 Control Procurements

Control procurements is the process of managing the procurement
relationships, monitoring contract performance, and making changes and
corrections as needed. Both the buyer and the seller will administer the
procurement contract for similar purposes. The legal nature of the
contractual relationship makes it imperative that the project management
team is aware of the legal implications of actions taken when administering
any procurement “Control Procurements” includes application of the
appropriate project management process to the contractual relationship(s)
and integration of the outputs from these processes into the overall
management of the project.
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The project management processes that are applied may include, but are
not limited to:
• Direct and manage project execution
To authorize the seller’s work at the appropriate time
• Quality Control
To inspect and verify the adequacy of the seller’s product
• Perform Integrated Change Control
To assure that changes are properly approved and that all those with
a need to know are aware of such changes
• Control Risks
To ensure that risks are mitigated
Agreements can be amended at any time with the mutual consent of the
buyer and seller in accordance with the documented change control terms
of the agreement.
Fig. 12.3: Control Procurements – ITTO
Chapter – 12 411
12.3.1 Control Procurements – Inputs

The procurement management plan, part of the project management plan,
is an input to Conduct Procurements and describes how the procurement
processes will be managed from developing procurement documentation
through contract closure.
This includes procurement contract awards and statement of work.
Refer to section 12.1.3 – Plan Procurement Managements – Outputs
Agreements
Refer to Refer to section 12.2.3 – Conduct Procurement – Outputs

All changes are formally documented and approved before being
implemented. Approved change requests can include modifications to the

terms and conditions of the contract including the procurement statement
of work, pricing, and description of the products, services, or results to be
provided.

• Technical documentation: Seller–developed technical documentation
and other deliverable information provided in accordance with the
terms of the contract
• Work performance information: Seller performance reports. The
seller’s performance reports contains the list of completed and
pending deliverables

Work performance data including the extent to which quality standards
are being satisfied, the costs incurred or committed, and a list of seller
invoices that have been paid, are all collected as part of project execution.
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12.3.2 Control Procurements – Tools and Techniques
Contract Change Control System

A contract change control system defines the process by which the
procurement can be modified. It includes the paperwork, tracking systems,
dispute resolution procedures, and approval levels necessary for authorizing
changes.
Procurement Performance Reviews

A procurement performance review is a structured review of the seller’s
progress to deliver project scope and quality, within cost and on schedule,
as compared to the contract. The objective of a performance review is to
identify performance successes or failures, progress with respect to the
procurement statement of work, and contract non–compliance.
Inspections and Audits

Inspections and audits required by the buyer and supported by the seller
as specified in the procurement contract can be conducted during execution
of the project to verify compliance in the seller’s work processes or
deliverables.
Performance reporting provides management with information on how
effectively the seller is achieving the contractual objectives.
Payment Systems
Payments to the seller are typically processed by the accounts payable
system of the buyer after certification of satisfactory work by an authorized
person on the project team.
Claims Administration
These contested changes are variously called claims, disputes, or appeals.
Contested changes and potential contested changes are those requested
changes where the buyer and seller cannot reach an agreement on
compensation for the change. We need to resolve such claims and disputes.
Records Management System

A records management system is used by the project manager to manage
contract and procurement documentation and records. It consists of a specific
set of processes and related control functions.
Chapter – 12 413
12.3.3 Control Procurements: Outputs

Work performance information contains information on how to identify
current and potential problems to support later claims or new
procurements. In case of a dispute with the vendor, the performance reports
will help to resolve the dispute.
Change Requests
Change requests to the project management plan, its subsidiary plans and
other components, such as the cost baseline and project schedule requested
but unresolved changes can include direction provided by the buyer, or
actions taken by the seller, that the other party considers a constructive
change to the contract.

• Procurement Management Plan: The procurement management plan
is updated to reflect any approved change requests that affect
procurement management, including impacts to costs or schedules.
• Schedule Baseline: If there are slippages that impact overall project
performance, the baseline schedule may need to be updated to reflect
the current expectations.
• Cost Baseline: If there are changes in cost that impact the overall
project cost, the cost baseline may need to be updated to reflect the
current expectations.

Project documents that may be updated include, but are not limited to:
• Procurement documentation
• Schedule
• Requested unapproved contract changes
• Approved change request
• Financial documents
• Seller performance reports and warranties
• Invoice and payment records
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• Correspondence: Contract terms and conditions often require written
documentation for warnings of unsatisfactory performance and
requests for contract changes or clarification.
• Payment schedules and requests: All payments should be made in
accordance with the procurement contract terms and conditions.
• Seller performance evaluation documentation: Such performance
evaluations documented by the buyer on the seller’s ability to
continue to perform work on the current contract also indicates if
the seller can be allowed to perform work on future projects.
12.4 Close Procurements

Close procurement is an element in the Project Closing Process Group. It
is focused on closing all project procurements. This involves verifying that
all work and deliverables are acceptable.
This process also involves administrative activities such as:

• Finalizing open claims
• Updating records to reflect final results
• Achieving such information for future use
‘Close Procurements’ addresses each contract applicable to the project or a

project phase. In multi–phase projects, the term of a contract may only be
applicable to a given phase of the project.
In some cases early termination of contract due to mutual agreement of

both parties, or from the default by one of the parties or can be for the
convenience of the buyer if there is a provision in the contract. The early
termination of the whole contract or portion of the contract can happen
based upon the procurement terms and conditions. In such cases the buyer
may have to compensate the seller for seller’s preparations and any
completed and accepted work related to the terminated part of the contract.
Chapter – 12 415
Fig. 12.4: Close Procurements – ITTO
12.4.1 Close Procurements– Inputs

Refer to section 4.2.3 – Project Management Plan – Outputs
To close the contract, all procurement documentation is collected, indexed,
and filed. Information on contract schedule, scope, quality, and cost
performance along with all contract change documentation, payment
records, and inspection results are cataloged.
12.4.2 Close Procurements– Tools & Techniques
Procurement Audits
Procurement audits are structured reviews of the whole procurement
process from Plan Procurement through Administer Procurements to
identify the successes and failures. The input from these audits are used in
improving the preparation and administration of other procurement
contracts on the same project or in other projects within the organization.
Procurement Negotiation
In all procurement relationships the final settlement of all outstanding
issues, claims, and disputes will be through negotiations. But in case of
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disagreements, which are not resolved through direct negotiation, some
form of alternative dispute resolution (ADR) can be considered like
mediation or arbitration. In spite of all these, if agreement cannot be reached,
then the issue can be settled by litigation in the courts, which is the least
desirable option.
Records Management System

The record management system is used by the project manager to manage
the contract and procurement documentation and records.
12.4.3 Close Procurements – Outputs
Close Procurements
Once the contract is completed and the deliverables accepted or in case of
an early termination of the contract, the buyer provides the seller with
formal written notice that the contract has been completed. The letter will
be sent by the buyer’s authorized procurement administrator. The
requirements for formal procurement closure are usually defined in the
terms and conditions of the contract and are included in the procurement
management plan.

Some of the organizational process assets that may be updated as part of
Close Procurements process are Procurement files, Deliverable acceptance
and lessons learnt documentation.
• Procurement File: It is a complete set of indexed contract

documentation, including the closed contract and is prepared for
inclusion with the final project files.
• Deliverable Acceptance: The buyer, usually through his authorized

procurement administrator, provides the seller with formal written
notice that the deliverables have been accepted or rejected.
Requirements for formal deliverable acceptance, and how to address
non–conforming deliverables, are usually defined in the contract.
• Lessons Learnt Documentation: Lessons learnt, what has been

experienced, and process improvement recommendations should be
developed for the project file to improve future procurements.
Chapter – 12 417
Different Types of Contracts
Fixed–price Contracts
This category of contracts involves setting a fixed total price for a defined
product or service to be provided. Under the fixed price arrangement,
buyers must precisely specify the product or services being procured.
Changes in scope can be accommodated, but generally with an increase
in contract price.
• Firm Fixed Price Contracts (FFP)

The most commonly used contract type is the FFP. It is favored
by most buying organizations because the price for goods is set at
the outset and not subject to change unless the scope of work
changes.
• Fixed Price Incentive Fee Contracts (FPIF)

This fixed price arrangement gives the buyer and seller some
flexibility in that it allows for deviation from performance with
financial incentives tied to achieving agreed metrics. Under FPIF
contracts, a price ceiling is set, and all costs above the price ceiling
are the responsibility of the seller, who is obligated to complete
the work.
• Fixed Price with Economic Price Adjustment Contracts

(FP–EPA).
This contract type is used whenever the seller’s performance
period spans a considerable period of years, as is desired with
many long–term relationships. It is a fixed price contract, but
with a special provision allowing for pre–defined final
adjustments to the contract price due to changed conditions, such
as inflation changes, or cost increases (or decreases) for specific
commodities.
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The following table gives an overview of all the types of Fixed Price
contracts:
FFP Contract FPIF Contract FP-EPA Contract

• A price that is not • Specifies a target cost, • Economic price
subject to any a target profit, a price adjustment is
adjustments. ceiling and a profit revision of prices
adjustment formula. for specific
• Places upon the • The FPI contract • Adjustments based
contractor maximum provides a profit motive upon increases or
risk and full for the contractor to decreases from an
responsibility for all perform efficiently from agreed upon level
costs and resulting a cost perspective. If the in either published
profit. contractor completes the or established
market prices
for specific items.
• It provides maximum contract while incurring • Adjustments based
incentive for the less cost than originally upon actual
contractor to control anticipated, the contractor increases or
costs and perform will receive more profit. decreases in the
effectively. price of specific
items of cost or
specific labor that
the contractor
incurs.
• Firm Fixed Price • Used when a fixed-firm • Adjustments based
contracts are the contract is not upon increases or
preferred method appropriate decreases in the
when scope is clear specific labor or
material cost
standards or
indexes, such as
Bureau of Labor
Standards indices.
• Used when sealed bid • Supplies/services can be
is involved. acquired at lowers costs,
with improved delivery
or improved technical
performance.
• Used for acquiring
supplies and services
and/or for acquiring
commercial items.
Fig. 12.5: Fixed Price Contracts
Chapter – 12 419
Cost–reimbursable Contracts
This category of contract involves payments to the sellers for all
legitimate actual costs incurred for completed work, plus a fee
representing seller profit. Three of the more common types of cost–
reimbursable contracts in use are Cost Plus Fixed Fee (CPFF), Cost
Plus Incentive Fee (CPIF), and Cost Plus Award Fee (CPAF).
• Cost plus Fixed Fee Contracts (CPFF):

The seller is reimbursed for all allowable costs for performing
the contract work, and receives a fixed fee payment calculated
as a percentage of the initial estimated project costs
• Cost plus Incentive Fee Contracts (CPIF):

The seller is reimbursed for all allowable costs for performing
the contract work, and receives a predetermined incentive fee
based upon achieving certain performance objectives as set forth
in the contract
• Cost plus Award Fee Contracts (CPAF)

The seller is reimbursed for all legitimate costs, but the majority
of the fee is only earned based on the satisfaction of certain broad
subjective performance criteria defined and incorporated into the
contract
Time and Material Contracts (T & M)

Time and material contracts are a hybrid type of contractual
arrangements that contain aspects of both cost–reimbursable and
fixed price contracts. They are often used for staff augmentation,
acquisition of experts, and any external support when a precise
statement of work cannot be quickly prescribed. T & M contracts
can increase in contract value similar to cost–reimbursable
contracts. Many organizations require not to–exceed values and
time limits placed in T&M contracts to prevent unlimited cost
growth. Conversely, T &M contracts can also resemble fixed unit
price arrangements when certain parameters are specified in the
contract.
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12.5 Summary
Every project will require the project team to procure some form of service/
results from vendors. This is essentially done either to mitigate risk, or to
reduce cost or to meet timelines or due to non–availability of the required
expertise /skills. The project management team must have the basic
knowledge in managing the procurement process such as identification of
the procurement needs of the project, how to prepare the procurement
documents, how to identify potential sellers, how to get responses from
them, how to shortlist and select the sellers, how to enter into a contract
with them, and how to manage the contract through its life cycle etc…
In this lesson we learnt about the key processes in the project Procurement
Management process.
❑
421
1. You have hired a company to produce a video training series but are not
sure of the detail needed. It agrees to pay the supplier for costs and a fee of
$37K US. What type of contract is this?
A. Fixed–price
B. Time and materials
C. Cost–plus–fixed–fee
D. Cost–plus
2. All of the following are part of the procurement documents except?

A. Description of the desired form of responses
B. Procurement statement
C. Terms and conditions
D. Negotiation process
3. Cost Plus incentive contracts are advantageous due to the fact that they do
not require:
A. Detailed specifications
B. Comprehensive risk analysis
C. Highly experienced negotiation teams
D. A change control process
4. Which of the following would endure the most competitive and accurate price
for the scope of work intended to be procured?
A. Bidders conference
B. Personal meetings with sellers representatives
C. Advertisements
D. Procurement document
5. Under which type of contract arrangement is the seller most interested in

controlling costs?
A. Cost Plus Percentage of Cost
B. Firm Fixed Price
C. Time and materials
D. Firm Fixed Price with Economic Price Adjustment
Chapter – 12 423
6. In which of the following circumstance(s) would you most likely procure the
goods or services instead of producing them in–house?
A. Your company has excess capacity and your company can produce the
goods or services
B. Your company has no excess capacity and cannot produce the goods or
services
C. There are many reliable vendors for the goods or services that you are
attempting to procure but the vendors cannot achieve your level of quality
D. Your company has skills in a critical area that require development
7. What type of contract do you NOT want to use if you do not have enough
labor to audit invoices?
A. Cost plus fixes fee (CPFF)
B. Time and material (T&M)
C. Fixed price (FP)
D. Fixed price incentive fee (FPIF)
8. You are the project manager for the Goodwin Cabin Project. One of your
vendors is completing a large portion of the project. You have heard a rumor
that the vendor is losing many of its workers due to labor issues. In light of
this information, what should you do?
A. Stop work with the vendor until the labor issues are resolved.
B. Communicate with the vendor in regard to the rumor.
C. Look to secure another vendor to replace the current vendor
D. Negotiate with the labor union to secure the workers on your project.
9. You are working on a research and development project, and your customer
asks to include a particular component in the project. You know that you do
not have excess funds to incorporate this new work. What should you do?
A. Follow the contract change control process
B. Ask for more funds from the project sponsor
C. Negotiate with the customer for reducing some other work with similar
effort line
D. Remove some lower priority work from the scope to incorporate the new
requirement.
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10. Which of the following is a tool and technique of the “Close Procurement”
process?
A. Procurement audits
B. Procurement Management plan
C. Procurement statement of work
D. Procurement Documentation
11. When can a seller consider the contract as ‘completed’?

A. After the formal acceptance of all the deliverables
B. After the final payments are received
C. After the procurement audit is initiated by the buyer
D. After close procurement is completed by the buyer
12. With a clear contract statement of work, a seller completes the work as
specified, but the buyer is not pleased with the results. The contract is
considered to be:
A. Null and void
B. Incomplete
C. Complete
D. Waived
13. Tools and techniques of plan procurement management include

A. Scope statement, product description, procurement resources, and market
conditions
B. Make–or–buy analysis, expert judgment, market research and meetings
C. Make–or–buy analysis, expert judgment, contract type selection,
agreements
D. Scope statement, correspondence, contract file, agreements
14. Inputs to Control procurements include

A. Procurement document, agreements, work performance reports, approved
change request
B. Agreements, work results, scope request and seller involves
C. Agreements, work results, contract change control system
D. Scope statement, correspondence, contract file, agreement
Chapter – 12 425
15. The contract is expected to cost $280k US. Actual costs are $240K US. There
is a 50/50% share for any cost savings. What is the total value of the contract?
A. $260K US
B. $240K US
C. $280K US
D. $300K US
16. In considering a contract type to use, what would be most attractive to the
seller and least attractive to the buyer as related on the project?
A. Fixed–price
B. Time and material
C. Cost–plus–fixed–fee
D. Cost–plus–percentage of cost
17. A project manager is in the execution phase of a highly visible project and a
major milestone is due in three weeks. The project manager has discovered
that a vendor’s deliverable for this milestone will be five weeks’ late. What
should the project manager do?
A. Do not report this problem in the status meeting
B. Meet with the team and brainstorm how to create a work around for this
problem
C. Halt all payments to the vendor until the deliverable is received
D. Report the status of the missed milestone
18. The knowledge that the team and stakeholders gain by actually performing
the project is known as
A. Team management
B. Best practices
C. Lessons learned
D. Cumulative intellectual capacity
19. When a project is being performed under contract, the product description
is provided by which of the following?
A. The buyer
B. The project sponsor
C. The project manager
D. The contractor
20. A quick and objective method to evaluating proposals is the

A. Team–based system
B. Screening system
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C. Delphi method
D. Weighting system
21. Benny is the project manager of MNC Project. He has hired an independent
contractor for a portion of the project work. The contractor is billing the
project $120 per hour, plus materials. This is an example of which one of the
following?
A. Cost plus fixed fee
B. Time–and–materials
C. Unit–price
D. Lump sum
22. A single source seller means?

A. There is only one qualified seller.
B. There is only one seller the company wants to do business with.
C. There is a seller who can provide all aspects of the project procurement
needs.
D. There is only one seller in the market
23. When a vendor reports that he has completed all the procured work, what
should you as a project manager do next?
A. Complete scope validation
B. You and the vendor must both acknowledge that the work has been
completed by signing the purchase order as fulfilled
C. Inspect the work completed by the vendor
D. Pay the vendor according to the terms of contract
24. The tools and techniques of Conduct Procurements include all of the following
except:
A. Bidder Conference
B. Make or Buy analysis
C. Advertising
D. Independent estimates
25. During which phase of the procurement process is evaluation criteria

determined?
A. Control Procurements
B. Plan procurements Management
C. Conduct Procurements
D. Close Procurements
Chapter – 12 427
429
13.0 What is Project Stakeholder Management?
Project stakeholder management addresses the processes that are required,
• To identify people, groups or organizations that could impact or he
impacted by the project
• To analyse stakeholder expectation and their impact on the project
• To develop appropriate strategies for effective stakeholder
engagement towards project decisions and execution
• To focus on continuous communication to understand stakeholder
needs, addressing issues as they occur, managing conflict of interest
and fostering appropriate stakeholder engagement in project
activities and decisions. Stakeholder satisfaction should be managed
as a key project objective.
Key Terms
Change Log
All the changes that are being captured irrespective of infrastructure,
hardware, software, user request, internal request etc., The change log is
closely monitored throughout the project life cycle.
Communication Method
A systematic procedure, technique or process used to transfer information
among project stakeholders.
Issue Log
Issue Log contains the various issues need to be resolved or closed during
the project phase. All the issues that need to be closed which will otherwise
slow down the progress of the project.
Ability to establish and maintain relationships with other people.
Management Skills
All project managers need to have managerial skills like communication,
leadership, decision making etc., as part of their skills. These managerial
skills can be developed through academic curriculum and also through
experience.
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Stakeholder
An individual, group or organization who may affect, be affected by or
perceive itself to be affected by a decision, activity, or outcome of a project.
Project Stakeholder Management Processes

The project stakeholder management process includes the following key
process:
Fig. 13.0: Project Stakeholder Management Processes
13.1 Identify Stakeholders

Identify stakeholders is performed during the Initiating Process Group. It
entails identifying people, groups and organizations which might be
impacted by project organization’s decisions, project’s outcomes, or process
activities.
The project stakeholders include the following entities/group types in

relationship with the project:
• Project Team (project management team, project manager, other
project team members)
• Sponsor – interfacing between project team and the rest of project
stakeholders
• Project management office (PMO)
• Program manager
• Portfolio manager
• Operations management
• functional managers
• Sellers/business partners
• Customers/users
• Other stakeholders
Chapter – 13 431
PROJECT STAKEHOLDERS MANAGEMENT
Identify stakeholders process uses specific tools and techniques, stakeholder
analysis and has a specific output in the stakeholder register. This register
is used as input for Plan Stakeholder Management Process.
Fig. 13.1: Identify Stakeholders – ITTO
13.1.1 Identify Stakeholders – Inputs
Project Charter
The project’s high level scope, possible stakeholders such as customers,
sponsors and other projects/departments affected by the project can be
assessed from the Charter.
The parties involved in a procurement activity or contract, mentioned in
the procurement documents, are the key stakeholders in a project.
Refer to section 12.1.3 – Plan Procurement Management – Outputs
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company culture and structure and government standards, rules and
regulations.

The organizational process assets that can affect this process include :
• Stakeholder register templates
• Lessons learnt
• Stakeholder register from previous projects
13.1.2 Identify Stakeholders – Tools & Techniques
Stakeholder Analysis
This is a systematic process of identifying all the stakeholders and their
level of interest and influence in a project’s success. It also helps in
identifying stakeholder relationship (vis–à–vis project and stakeholders).
This can be done in two steps.
Fig. 13.2: Stakeholder Analysis
Chapter – 13 433
Step 1. Brainstorm to identify all the stakeholders along with information
such as their roles, interests, expectations and influence levels. The key
stakeholders for any project would include anyone in a decision–making
role or management role, such as the sponsor, the customer, project
manager, etc. The other stakeholders can be identified by interviewing the
key stakeholders and expanding the list.
Step 2. Classify and prioritize the list of stakeholders so as to formulate a

strategy to manage their expectations. Some classification models listed in
the PMBOK® guide are:
1. Power/interest grid – grouping the stakeholders based on the level

of authority and the level of interest
2. Power/influence grid – grouping the stakeholders based on the level

of authority and level of active involvement
3. Influence/impact grid – grouping the stakeholders based on the

level of active involvement and ability to effect changes
4. Salience model – grouping based on power, urgency and legitimacies
Fig. 13.3: Stakeholder Grid
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High power, High interest people: these are the people you must
fully engage with, and make the greatest efforts to satisfy.
High power, Low interest people: work with these people to keep
them satisfied by meeting their respective needs (like compliance
and adherence to standards etc.)
Low power, High interest people: keep these people adequately

informed, and speak with them to avoid any major issues. These
people can often be very helpful in supplying the detail for your
project.
Low power, Low interest people: monitor these people, but do not
bombard them with excessive communication.
Step 3. Assess how key stakeholders will react in various situations in

order to harness their support.
In order to assess the importance and influence of the stakeholder you

should be able to assess:
• The power and status (political, social and economic) of the
stakeholder
• The degree of organization of the stakeholder
• The control the stakeholder has over strategic resources
• The informal influence of the stakeholder (personal connections, etc.)
• The importance of these stakeholders to the success of the project
Both the influence and importance of the different stakeholders can be

ranked along simple scales and mapped against each other. This exercise is
an initial step in determining the appropriate strategy for the involvement
of these stakeholders. As with the second step, in order to ensure the
assessment is as accurate as possible, it would be preferable to have
face–to–face consultations.
Chapter – 13 435
Fig. 13.4: Identify Stakeholders – ITTO
Expert Judgment
Analysis of stakeholders is done by individual consultations and/or a panel,
with a group of experts who have specialized training or knowledge. For
example, senior management, project managers who have worked in similar
projects, or industry groups can be approached to ensure a comprehensive
listing of stakeholders.
Meetings
Project meetings addressing the profile analysis, are designed to capture
an understanding of major stakeholders. The meetings can be used to
effectively exchange and analyze information on clarity of roles, interests,
knowledge and overall position of each stakeholder.
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13.1.3 Identify Stakeholders – Outputs
It contains all the information related to stakeholders, which includes,
• Identification information
• Assessment information
• Stakeholder classification
The register shall be updated on a regular basis, as stakeholders may change
and or new ones may get added throughout the project lifecycle.
13.2 Plan Stakeholder Management

Plan Stakeholder Management is the process of developing appropriate
management strategies to effectively engage stakeholders throughout the
project life cycle. This process leads to the development of an actionable
plan of engagement.
This process uses the Stakeholder Register for collecting, analyzing and
documenting stakeholder requirements, needs, their specific interests, and
any potential impacts on project success.
The process focuses on identifying stakeholder’s needs in order to meet the

project objectives. It is an iterative process that starts with investigation of
the Project Management Plan (lifecycle, delivery operations model, change
control process etc), Stakeholder Register and Enterprise Environmental
Factors to create a comprehensive Stakeholder Management Plan
Chapter – 13 437
Fig. 13.5: Plan Stakeholder Management – ITTO
13.2.1 Plan Stakeholders Management– Inputs

Project Management Plan is the main input, but is not limited to
• Life cycle selected for the project and the processes that are applicable
at each phase
• Work description
• HR requirements
• Change management plan
• Need and techniques for communication among stakeholders
Refer to section 4.2.3 – Develop Project Management Plan – Outputs.

These refer to conditions not under the control of the project team but which
may impact the project outcome. These factors vary widely in type of nature.
Some of them include

• Organization culture, structure, process and governance
• Infrastructure
• Law of the land
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• Existing HR system & guideline.
• Market place

Organizational process assets are the plans, procedures, processes, policies
and knowledge bases, specific to and used by the performing organization.
Throughout the project phase, the project team members may update and
add to the organizational process assets.
13.2.2 Plan Stakeholder Management– Tools & Techniques
Expert Judgment
Project manager should use past experience and expertise to identify the
key stakeholders whose inputs and participation is paramount in achieving
the project objectives. In order to create a stakeholder management plan,
judgment and expertise should be sought from groups or individuals from
within the organization with specialized skills or subject matter expertise
or expertise available outside the organization through industry groups or
consultants.
Meetings
Meetings should be held with experts and subject matter experts to define
the required level of engagement of all stakeholders and the appropriate
channel/ level of project communication.
It is critical for the stakeholder to be fully engaged at planned intervals
throughout the project lifecycle, for a successful project delivery. The project
team needs to constantly measure the level of engagement of the
stakeholders which could be measured as
• Unaware
• Resistant
• Neutral
• Supportive
• Leading
Chapter – 13 439
It is necessary to develop appropriate communications (leading to action),
to facilitate each stakeholder to the desired engagement level.
Stakeholder Management Strategy
Assessment Definition Approach

Unaware Unaware of project 1. Fill any knowledge gaps
and potential impacts 2. Seek views on issues &
address concerns
3. Educate and move them
to desired engagement
level –supportive
Resistant Aware of project and 1. Understand reasons for resistance

potential impact and 2. Is loss perceived or real?
resistant to change 3. Counter the reasons with facts
and data
Neutral Aware of project but 1. Fill any knowledge gaps

neither supportive 2. Seek views on issues and
nor resistant address concerns
3. Be careful not to make
them Resistant
Supportive Aware of project and 1. Increase understanding for

potential impacts and future benefit
supportive to change 2. Keep informed and positive
3. Avoid temptation to exploit
Leading Aware of project and 1. Active communications,

potential impacts and keep involved
actively engaged 2. Input to key milestones
in ensuring the project and decisions
is a success 3. Use to promote objectives
and benefits
Fig. 13.6: Stakeholder Management Strategy
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13.2.3 Plan Stakeholder Management– Outputs
Stakeholders Management Plan

The outputs provides the:
• Current and desired levels of engagement of stakeholders
• Scope and impact of change to each stakeholder
• Communication levels and timings
• Methods for updating & refining the plan
It will be important to validate any assumptions and ensure correctness of

data, before updating the plan.
The Stakeholder Management Plan includes details on how to accomplish

the most effective stakeholder management. Its content includes information
from the Stakeholder Register and associated details such as (but not limited
to) stakeholder communication requirements, level of stakeholder
engagement in the project. This level is evaluated vis–à–vis the level of
stakeholder participation required in a project’s specific activities.
As a subsidiary plan of Project Management Plan, it is updated during the

project lifecycle taking into account the project phase and project
performance vis–à–vis project baselines.
Planning the stakeholder management represents an iterative process

which is periodically reviewed by the project manager.
Project Documents
Based on the project progress, the following shall be updated.
• Project schedule
This will go through a formal review process.
Chapter – 13 441
13.3 Manage Stakeholder Engagement
This is a process of communicating and working with stakeholders to meet
their needs and expectations, addressing issues (if any) as they occur,
throughout the project cycle. This is part of the project execution process
group.
Fig. 13.7: Manage Stakeholder Engagement – ITTO
13.3.1 Manage Stakeholder Engagement – Inputs
Stakeholder Management Plan

This describes the strategy for identifying and managing stakeholders
throughout the project lifecycle.
Refer to section 13.2.3 – Plan Stakeholders Management – T & T

This provides guidance and information on managing stakeholders
expectations.
Refer to section 10.1.3 – Plan Communication Management – Outputs.
Change Log
A Change log is used to document changes that occur during a project and
communicated to the appropriate stakeholders.
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13.3.2 Manage Stakeholder Engagement – Tools & Techniques
The methods of communication identified for each stakeholder in the
communication management plan are used during stakeholder management.
The project manager decides on the communication method after discussing
with the relevant stakeholders.
Refer to 10.1.2 – Plan Communication Management – T & T
The project manager effectively applies interpersonal skills such as building
trust, conflict resolution, active listening and overcoming resistance to
change to manage stakeholder expectations.
Refer to section 9.3.2 – Develop Project Teams – T & T
Management Skills
Application of appropriate management skills to coordinate and harmonize
the group towards accomplishing the project objectives.
Refer to chapter–2 General Managements
13.3.3 Manage Stakeholder Engagement – Outputs
Issue Log
Management of stakeholder engagement may result in generating an issue
log. (A document listing ISSUES) This is updated regularly as current issues
are resolved and new issues added.
Change Request
Managing stakeholder engagement may result in a change request to the
product or the project. This may also include corrective / preventive actions
to the project itself or to the interaction with the impacted stakeholder, as
appropriate.
Chapter – 13 443
Project Management Plan Update
Project Management Plan is updated, when new or changed stakeholder
requirements are identified.

The project document is updated as information on stakeholders changes
as new stakeholder are identified or if registered stakeholders are no longer
involved in the project.
Organization Process Assets Updates

The OPA updates include,
• Stakeholder notification
• Project reports / Presentations / Records
• Feedback from stakeholders
• Lessons learnt
13.4 Control Stakeholder Engagement

Control stakeholder engagement is the process of monitoring stakeholder
relationships and adjusting strategies and plans for engaging stakeholders.
While implementing the stakeholder management plan, the project manager
has to continuously monitor project stakeholder relationships and adjust
strategies, plans for engaging stakeholders actively. Project management
plan, issue logs, work performance data (planned versus actual schedule
and cost, technical performance, variance limits), reports, policy and
procedures are some of the critical inputs for this process area.
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Fig. 13.8: Control Stakeholder Engagement – ITTO
13.4.1 Control Stakeholder Engagement – Inputs

Issue Log
Management of stakeholder engagement is likely to generate an issue log.
(A document listing ISSUES) This is updated regularly as current issues
are resolved and new issues added.

Refer to section 4.3.3 – Direct and Manage Project work – Outputs
Project Documents
Various documents generated during project schedule, stakeholder
register, issue & change log and project communications are used as
supporting inputs for controlling stakeholder engagement.
13.4.2 Control Stakeholder Engagement – Tools & Techniques

The above provides a standard tool to capture, store, retrieve and distribute
information to stakeholders about project costs, progress and performance.
Chapter – 13 445
Expert Judgment
Meetings
13.4.3 Control Stakeholder Engagement – Outputs

Refer to section 4.4.3 – Monitor and Control Project work – Outputs
Change Request
Refer to 4.3.3 – Direct and Manage Project Work – Outputs



Organizational process assets, which may be updated include, but not limited
to:
• Stakeholder notification
• Project report/presentation/feedback
• Lessons learnt documents
13.5 Summary
In this chapter we discussed all the process, tools & techniques involved in
Project Stakeholder Management. The Project Stakeholder Management
come into picture the moment the project is initiated. The stakeholders are
to be identified and their roles are well defined. It is essential to manage
the stakeholder engagement and control their engagement during the project
life cycle. We need to give more importance to the stakeholder engagement
rather than the stakeholder itself.
❑
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1. The new CIO for Mega–Byte Compact Disk Corporation, George, brings John
into his office to discuss a new project that has been approved to improve
the security access to their corporate systems worldwide. George explains
the key objectives of the project, general time frame, and business value.
The CIO assigns John to be the project manager and ends the meeting. What
is the first thing John needs to do?
A. Determine the key stakeholders to have a kick–off meeting.
B. Find out how much money is available for the project.
C. Order new business cards that show he is the project manager.
D. Begin developing the scope definition.
2. You are a project manager for a software project. As you are defining the
high level description of the work you need to do, you sit down with all of
the project’s stakeholders and record all of the requirements you can get
from them. Which of the following is not a valid requirement from stakeholder
analysis?
A. The work the team does must be better than they did on their last project
B. There can be no more than 5% schedule variance on the project
C. The quality of the product must fit within organizational metrics for
software quality
D. The budget must be within 10% of our projected cost
3. During the execution phase of the project, you realize the subcontractors
are working with incomplete and different scope statements. As a project
manager, what should you do first?
A. Check the work completed against the correct scope statements
B. Review the scope of work with the stakeholders
C. Document the inconsistencies to management, calculating the cost of non–
conformance
D. Stop all activities until the scope of work is complete
Chapter – 13 447
4. You are mentoring a junior project manager on his overall responsibilities
to stakeholders. He asks about educating stakeholders. What is a true
statement about educating stockholders?
A. He should leave education of the stakeholders to the project sponsor and/
or business area management.
B. He should educate stakeholders about project management processes.
C. He should educate stakeholders primarily on issues that affect the active
project.
D. Educating stakeholders is not a recognized responsibility of project
managers.
5. Which of the following statements best describes why stakeholders are

necessary on a project?
A. They determine the project schedule, deliverables, and requirements
B. They help to determine the project constraints and product deliverables
C. They supply the resources and resource constraints on the project
D. They help provide assumptions, the WBS, and the management plan
6. You have requested that several of the stakeholders participate in the

different phases of the project. Why is this important?
A. It prevents scope creep
B. It allows for scope constraints
C. It improves the probability of satisfying the customer requirements
D. It allows for effective communications
7. All of the following are examples of stakeholders that have a positive influence
on a project except for which one?
A. Business leaders in a community affected by a commercial development
project
B. Team members that will receive a bonus if the project is successful
C. Employees that prefer the older version of the software that a project is
replacing
D. Functional managers that want your project to complete so their
employees can move onto other projects
8. All of the following statements concerning project stakeholders are true

except:
A. Differences between or among stakeholders should be resolved in favor
of the customer
B. Managing stakeholder expectations may be difficult because stakeholders
often have very different objectives, that may come into conflict
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C. Project stakeholders may influence the course of the project and its results
D. Differences between or among stakeholders should be resolved in the
most cost efficient manner consistent with project objectives
9. Project stakeholders should have the opportunity to participate in project

planning. Which of the following is important for enabling stakeholders to
contribute?
A. Stakeholders should be PMPs
B. Project managers should tell stakeholders to call if they have a question
C. Stakeholders should be invited to all project team meetings
D. Project managers should create an environment that allows stakeholders
to give input
10. You are the project manager for the MNC Project. Your project will have
several human resource issues that must be coordinated and approved by
the union. Which of the following statement is correct about this scenario?
A. The union is considered a resource constraint.
B. The union is considered a management constraint.
C. The union is considered a project stakeholder.
D. The union is considered a project team member.
11. You are assisting a project manager for your organization. You currently
have a signed project charter. What other information do you need to conclude
the initiation process group?
A. Full project team
B. Work breakdown structure (WBS)
C. Network diagram
D. Stakeholder register
12. Stakeholders are important because:

A. Their interest in the workings of the project gives the project energy
B. Their interests may be positively or negatively affected by the project
C. Their knowledge of important product information helps the project
manager
D. They know whom to talk to in order to get things done
13. Individuals or organizations with active involvement or active interest in a

project are called:
A. Stakeholders
B. Team members
C. Client organizations
D. Employees
Chapter – 13 449
14. You have requested that several of the stakeholders participate in the
different phases of the project. Why is this important?
A. It prevents scope creep
B. It allows for scope creep
C. It improves the probability of satisfying the customer requirements
D. It allows for effective communication
15. Stakeholder analysis is a tool used in

A. Identify stakeholder
B. Organizational planning
C. Collect requirements
D. Validate scope
16. Who determines the requirements of a project?

A. Customer
B. Stakeholders
C. Project manager
17. Near the end of your last project additional requirements were demanded
by a group of stakeholders when they learned would be affected by your
project. This became a problem because you had not included the time or
cost in the project management plan to perform these requirements. What is
the best thing you can do to prevent such a problem on future projects?
A. Review the WBS dictionary more thoroughly, looking for incomplete
descriptions
B. Review the charter more thoroughly, examining the business case for
“holes”
C. Pay more attention to stakeholder management
D. Do a more thorough job of solicitation planning
18. A particular stakeholder has a reputation for making many changes on

projects. What is the BEST approach a project manager can take at the
beginning of the project to manage this situation?
A. Say “no” to the stakeholder a few times to dissuade him from submitting
more changes
B. Get the stakeholders involved in the project as early as possible
C. Talk to the stakeholder’s boss to find ways to direct the stakeholder’s
activities to another project
D. Ask that the stakeholder not be included in the stakeholder listing
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19. You are the project manager for your company and have invited the key
stakeholders to participate in your project management planning sessions.
Jack wants to know why you have included these stakeholders in these
planning sessions. What is the best response?
A. The project stakeholders are usually the individuals who are paying for
the project work, so they should be in the planning sessions.
B. You know that the stakeholders may not attend, but you’ve covered
liabilities by inviting them.
C. The stakeholders have skills and knowledge that can be leveraged in
developing the project management plan.
D. Key stakeholders are required to attend the project planning sessions
because they can correct any oversights or inaccuracies the project
manager or the project team may have about the project scope.
20. You are a project manager for a large installation project when you realize
that there are over 200 potential stakeholders on the project. Which of the
following would be the best course of action for you to take?
A. Eliminate some stakeholders
B. Contact your manager and ask which ones are more important
C. Gather the needs of all the most influential stakeholders
D. Find an effective way to gather the needs of all stakeholders
21. You are a construction project manager for your company, Landmark
Construction. You are defining the scope for a new project. The chief financial
officer defines project success as maintaining a balance of project costs and
profitability. The professional engineer describes project success as
implementing standard technical profitability. The project sponsor defines
project success as completing the project as planned. The project customer
defines project success as the presence of sales–promoting features. What
should you do as the project manager?
A. Follow the professional engineer’s opinion, since he’s the closest to the
work your project team will be completing.
B. Follow the project sponsor’s opinion, since he is in charge of the project.
C. Follow the chief financial officer’s opinion, since she is in charge of project
finances.
D. Complete stakeholder analysis to define the project objectives in
measurable terms.
Chapter – 13 451
22. Which one of the following is an example of a positive stakeholder?
A. The comptroller within your organization
B. A customer who is eager for your project’s deliverable
C. An environmental group that has claims against your project
D. A union
23. Stakeholders are important because:

A. Their intense interest in the workings of the project gives the project
energy.
B. Their interests may be positively or negatively affected by the project.
C. Their knowledge of important product information helps the project
manager.
D. They know whom to talk to in order to get things done.
24. Stakeholders can be identified in which project management process group?

A. Initiation, Planning, executing, monitoring & controlling, & closing
B. Initiating and planning
C. Planning and monitoring and controlling
D. Monitoring and controlling and closing
25. An important part of performing stakeholder analysis is documenting

quantifiable expectations. Which of the following expectations is
quantifiable?
A. The project must improve customer satisfaction
B. The project should be of higher quality
C. The project must yield a 15% reduction in part cost
D. All stakeholders’ needs must be satisfied
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453
14.0 Persons to Whom the Code Applies
1. All PMI members
2. Individuals who are not members of PMI but meet one or more of the
following criteria:
a. Non–members who hold a PMI certification
b. Non–members who apply to commence a PMI certification process
c. Non–members who serve PMI in a volunteer capacity
Key Words
Abusive Manner
Conduct that results in physical harm or creates intense feelings of fear,
humiliation, manipulation, or exploitation in another person.
Conflict of Interest
A situation that arises when the practitioner of project management has to
make a decision or perform some action that will give rise to a conflict of
interest between two individual or two organizations. The only way
practitioners can resolve conflicting duties is to disclose the conflict to those
affected and allow them to make the decision about how the practitioner
should proceed.
Duty of Loyalty
A person’s responsibility, legal or moral, to promote the best interest of an
organization or other person with whom they are affiliated.
Project Management Institute [PMI]

The totality of the Project Management Institute, including its committees,
groups, and chartered components such as chapters, colleges, and specific
interest groups.
PMI Member
A person who has joined the Project Management Institute as a member.
PMI–Sponsored Activities
Activities that include, but are not limited to, participation on a PMI Member
Advisory Group, PMI standard development team, or another PMI working
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group or committee. This also includes activities engaged in under the
auspices of a chartered PMI component organization—whether it is in a
leadership role in the component or another type of component educational
activity or event.
Practitioner
A person engaged in an activity that contributes to the management of a
project, portfolio, or program, as part of the project management profession.
PMI Volunteer
A person who participates in PMI–sponsored activities, as a member of the
Project Management Institute or non–member.
14.1 Responsibility
Description of Responsibility
Responsibility is our duty to take ownership for the decisions we make or
fail to make, the actions we take or fail to take, and the consequences that
result.
Responsibility: Aspirational Standards

As practitioners in the global project management community:
• We make decisions and take actions based on the best interests of
society, public safety, and the environment.
• We accept only those assignments that are consistent with our
background, experience, skills, and qualifications.
• We fulfill the commitments that we undertake – we do what we say
and we will do.
• When we make errors or omissions, we take ownership and make
corrections promptly. When we discover errors or omissions caused
by others, we communicate them to the appropriate body as soon as
they are discovered. We accept accountability for any issues resulting
from our errors or omissions and any resulting consequences.
• We protect proprietary or confidential information that has been
entrusted to us.
• We uphold this code and hold each other accountable for it.
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Responsibility: Mandatory Standards
As practitioners in the global project management community, we require
the following of ourselves and our fellow practitioners:
Regulations and Legal Requirements

• We inform ourselves and uphold the policies, rules, regulations and
laws that govern our work, professional, and volunteer activities
• We report unethical or illegal conduct to appropriate management
and, if necessary, to those affected by the conduct
• We bring violations of this Code to the attention of the appropriate
body for resolution
• We file complaints pertaining to ethics only when they are
substantiated by facts
• We pursue disciplinary action against an individual who retaliates
against a person raising concerns of ethics
14.2 Respect
Description of Respect
Respect is our duty to show a high regard for ourselves, others, and the
resources entrusted to us. Resources entrusted to us may include people,
money, reputation, the safety of others, and natural or environmental
resources.
An environment of respect engenders trust, confidence, and performance

excellence by fostering mutual cooperation — an environment where diverse
perspectives and views are encouraged and valued.
Respect: Aspirational Standards

• We keep ourselves informed about the norms and customs of others
and avoid engaging in behaviors they might consider disrespectful
• We listen to others’ points of view, seeking to understand them
• We approach directly those persons with whom we have a conflict or
disagreement
• We conduct ourselves in a professional manner, even when it is not
reciprocated
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Respect: Mandatory Standards
• We negotiate in good faith
• We do not exercise the power of our expertise or position to influence
the decisions or actions of others in order to benefit personally at
their expense
• We do not act in an abusive manner toward others
• We respect the property rights of others
14.3 Fairness
Description of Fairness
Fairness is our duty to make decisions and act impartially and objectively.
Our conduct must be free from competing self interest, prejudice, and
favoritism.
Fairness: Aspirational Standards

• We demonstrate transparency in our decision–making process
• We constantly re–examine our impartiality and objectivity, taking
corrective action as appropriate
• We provide equal access to information to those who are authorized
to have that information
• We make opportunities equally available to qualified candidates
Fairness: Mandatory Standards

Conflict of Interest Situations are:

• We proactively and fully disclose any real or potential conflicts of
interest to the appropriate stakeholders
• When we realize that we have a real or potential conflict of interest,
we refrain from engaging in the decision–making process or otherwise
attempting to influence outcomes, unless or until we have made full
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disclosure to the affected stakeholders; we have an approved
mitigation plan; and we have obtained the consent of the stakeholders
to proceed
• We do not hire or fire, reward or punish, or award or deny contracts
based on personal considerations, including but not limited to,
favoritism, nepotism, or bribery
• We do not discriminate against others based on, but not limited to,
gender, race, age, religion, disability, nationality, or sexual orientation
• We apply the rules of the organization (employer, Project
Management Institute, or other group) without favoritism or
prejudice
14.4 Honesty
Description of Honesty
Honesty is our duty to understand the truth and act in a truthful manner
both in our communications and in our conduct.
Honesty: Aspirational Standards

• We earnestly seek to understand the truth
• We are truthful in our communications and in our conduct
• We provide accurate information in a timely manner
• We make commitments and promises, implied or explicit, in good
faith
• We strive to create an environment in which others feel safe to tell
the truth
Honesty: Mandatory Standards

• We do not engage in or condone behavior that is designed to deceive
others, including but not limited to, making misleading or false
statements, stating half–truths, providing information out of context
or withholding information that, if known, would render our
statements as misleading or incomplete
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• We do not engage in dishonest behavior with the intention of personal
gain or at the expense of another
Responsibility to the Profession: Some basic responsibilities are:

• Be truthful at all times and in all situations
• Report code violations (with factual basis)
• Disclose conflicts of interest
• Comply with laws
• Respect other’s intellectual property rights
• Support the Code
Responsibility to Customers and the Public: Some basic responsibilities

are:
• Be truthful at all times and in all situations
• Maintain professional integrity (satisfy the scope of your professional
services)
• Respect the confidentiality of sensitive information
• Refrain from gift or compensation giving/receiving where
inappropriate
• Ensure conflicts of interest do not interfere with client’s interest or
interfere with professional judgment
14.5 Business Ethics

Ethics in project management involves learning what is right or wrong,
and then doing the right thing.
Here are guidelines to help you establish a strong ethics foundation for
your project.
• Recognize that managing ethics is a process. Ethics management is
the process of reflection and dialogue,. that produces deliverables
such as codes, policies and procedures
• The goal of an ethics management initiative is preferred behavior
in the project environment
• The best way to manage ethical dilemmas, like negative project risks,
is to avoid their occurrence in the first place
• Make ethics decisions in teams, and make decisions public, as
appropriate
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PROFESSIONAL ETHICS
• Integrate ethics management with other project practices. Define
preferred ethical values directly in the project plan
• Use cross–functional teams to develop your ethics management
plan. Benefit from varied input
• Value forgiveness Help project personnel recognize and address
their mistakes and then support them to continue to try to operate
ethically
• Give yourself credit for trying Attempting to operate ethically and
making a few mistakes is better than not trying at all. All projects
are comprised of people and people are not perfect
However, in the light of today’s corporate scandals, ethics has surfaced as

an important issue. As a result, values are increasingly becoming an integral
part of effective project management.
How do project managers turn to values?

Here are five areas to approach:
• Risk Management: This is fairly straight forward, incorporating
values into your project can help eliminate risks associated with
organizational and individual misconduct.
• Organizational functioning: Planned–in values can build a well–
functioning project organization by encouraging cooperation,
inspiring commitment, nurturing innovation and energizing team
members around a positive self–image.
• Civic positioning: Values can establish the project organization’s
standing in the community as a progressive force for social betterment
and as a solid contributing citizen.
• Market positioning: Values can shape a project organization’s
identity and reputation. Values can help build the organization’s
brands and earn the trust of customers, suppliers and partners
• Simply a better way: Although values do provide financial benefits,
this should not be the justification for ethics. Values are worthwhile
and fundamental principles of responsibility, humanity and
citizenship. They need no justification.
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14.6 How to Face a Public Crisis
Hopefully, you will never encounter the misfortune of having to deal with a
public crisis. But, as project manager, you are the one that may be called
upon to face the community. Here’s how to handle it: Understand this is a
formative experience and let these seven words be your guiding principle...
Tell the Truth and Tell it Fast: Communicate frequently, invite everyone,
answer all questions willingly and truthfully.
Cultural Competencies
As modern business continues its evolution to becoming a world community,
project managers increasingly find themselves managing multicultural
teams. Many projects today are even global in scope, with project teams
working from different locations around the world.
Today’s project managers must add ‘cultural competency’ to their long list
of general management skills.
To become truly expert and fluent in cultural competencies, you could spend
a lifetime studying and traveling. For our purposes, maintaining a
professional sensitivity to cultural differences and knowing a few basic
‘rules’ should be adequate.
There is no need to study this material meticulously. Simply read it to

develop a general feel for the subject.
Differences
Differences exist, not only between countries, but within a country’s own
borders as well. Some key differences between countries:
• Physical time
• Perceived time
• Monetary policies
• Procurement practices
• Negotiating practices
• Language
• Body language
• Education
• Governments
• Management styles
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• Trust
• Risk thresholds
• Quality standards
• Travel constraints (country infrastructure)
Some key cultural differences in perception and behavior:

• Social groups
• Religions
• Races
• Class structure
• Genders
• Local laws
Some key cultural differences in perception and behavior:

• Environment
• Time
• Action
• Communication
• Space
• Power
• Individualism
• Competitiveness
• Structure
• Thinking
14.7 Dos and Don’ts in Managing Global Projects

In managing global projects, it is essential to develop cultural self–
awareness. The first and most important step is becoming aware of your
own cultural orientations and the impact they can make in managing projects
across cultures. You must prepare for cross–cultural project encounters
with purpose and thoroughness. Here are a few dos and don’ts to consider.
DO:
• Develop your cultural self–awareness
• Set realistic expectations for yourself and others
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• Accept that you will make mistakes, but remain confident
• Be patient
• Slow down. Make relationships
• Keep your sense of humor
• Keep your integrity
• Stay objective. Minimize blame
DON’T:
• Assume similarity
• Try to adopt the orientations of the other culture. Adaptation does
not mean adoption
• Dwell on comparing the other culture with your own
• Evaluate the other culture in terms of good or bad
• Assume that just being yourself is enough to bring you cross–cultural
success
14.8 How to Develop Multicultural Excellence in Global

Projects
As we rapidly evolve into a global community, many project managers find
themselves managing project teams across vast geographical landscapes.
To improve your success probability in such environments, it is essential to
develop multicultural competencies.
Here are a few things you can do to help develop multicultural excellence:
• Multiple languages: Recruit core team members who speak multiple
languages
• Multicultural experience: Provide core team members with
multicultural experiences
• Cross–cultural experience: Arrange cross–cultural experiences for
extended team members
• Continuous improvement: Acknowledge the continuous need to
improve cross–cultural experiences for all team members
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14.9 Across the Miles, Keep Team Members Feeling Con-
nected
It is important to let offsite project team members know they mean more to
the project than just deliverables, an email address or a teleconference voice.
Although personal events have little to do with work, make it a routine
practice to acknowledge events such as birthdays, weddings, births and
graduations.
This level of thoughtfulness sends a powerful message and helps to enhance

overall team performance.
• Culture Shock refers to the initial disorientation that a person first
experiences when visiting a country other than his own.
• Ethnocentrism is a typical belief that one’s culture is superior to the
foreigner’s culture.
14.10 Summary
In a broad sense, professional and social responsibility to a project manager
means –
Do the right thing, follow the right process, act ethically, fairly and
professionally towards team and stakeholders, watch for conflicts of
interests, report violations, deal with problems, put the project’s needs
before you own, share lessons learnt and enhance competence
❑
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1. You are the project manager for MNC Project. This project takes place in a
different country. The project leader from this country presents a team of
workers that are only from his family. What should you do?
A. Reject the team leaders recommendations and assemble your own project
team
B. Review the resume and qualifications of the proposed project team before
approving the team
C. Determine if the country’s traditions include hiring from the immediate
family before hiring from outside the family
D. Replace the project leader with an impartial project leader
2. You are about to begin negotiation on a new project that is to take place in
another country. Which of the following should be your guide on what business
practices are allowed and discouraged?
A. The project charter
B. The project management plan
C. Company policies and procedures
D. The PMP Code of Conduct
3. Your company is in competition to win a major project for the government of

a country. Your contacts in that country inform you that you must make a
large payment to the foreign minister to be considered for the project. What
should you do?
A. Inform your management and ask for direction
B. Do not make the payment
C. Have the local contact make the payment
D. Make the payment
4. The human resources department wants to hire new project managers from
within the company. They can choose from the following candidates:
Candidate A has good management knowledge
Candidate B has good project management knowledge
Candidate C has solid technical knowledge
Candidate D has general management, project management, and technical
skills. Who is the best candidate?
A. Candidate A
B. Candidate B
C. Candidate C
D. Candidate D
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PROFESSIONAL ETHICS
5. Which of the following should be the correct guiding principle for managing
an international project with teams, stakeholders, and destination of project
deliverables across several countries?
A. Laws of the destination country would prevail over others
B. Performing organizations host country’s laws would prevail
C. Ensure that the fundamental laws or human rights are not violated and
legality of any stated common practice is ascertained, in accordance with
regulations of the destination country
D. Project triple constraint of scope, schedule, and cost shall prevail over
other considerations
6. A seller meets a project manager during the solicitation process of a large

subcontract in the context of seeking clarifications on the statement of work.
At end of the meeting, the seller representative offers to arrange free air
tickets for the project manager’s family to a holiday resort. What should the
project manager do?
A. Decline the offer politely
B. Decline the offer and report it to his supervisor
C. Decline the offer and report it to the seller representative’s manager
D. Disqualify the seller from the approved vendor’s list
7. You are the project manager of a large project that is scheduled to last five
years. Nancy, a project team member, reports that she has taken a laptop
computer from work to complete project reports at home. George, another
project team member, reported the laptop computer as stolen. Because Nancy
did not have permission to take the computer out of the office, she did not
say anything when the computer was reported as stolen. Now the insurance
company has paid for a new computer. Nancy felt guilty and scared for more
than a month and has now confessed. You believe she has no intention of
stealing the computer, but wanted to work on the project from home. What
should you do?
A. Remove Nancy
B. Require Nancy to pay for the laptop
C. Follow your company policies for inappropriate removal of hardware
D. Have Nancy put the laptop back in inventory and keep this a secret
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8. You have created a newsletter for your company that provides monthly
information on PMP certification, project management methodologies, and
how your company is implementing project management. This is an example
of what?
A. Ensuring integrity
B. Contributing to the knowledge base
C. Applying professional knowledge
D. Balancing stakeholder interests
9. While studying for your PMP exam, you are invited to participate in a study
group. At your first meeting another attendee announces that he has “real,
live questions” from the PMP exam. What should you do?
A. Examine the questions
B. Report the questions
C. Leave the study group
D. Ask where the person got the questions so you can report the testing
center to PMI
10. Your company does not allow project managers to accept gifts from vendors
of any kind. A friend that you have known for years now works for a vendor
that your company may be doing business with. Your friend from the vendor
asks you to lunch to discuss an upcoming project and you accept. When the
check arrives at the lunch table your friend insists on paying. You should:
A. Allow the friend to buy because you have been friends for years
B. Allow the friend to buy because lunch isn’t really a gift
C. Don’t allow the friend to buy because your company does not allow any
gifts from vendors
D. Insist that you purchase your friend’s lunch and your friend buys yours
11. Over lunch with another project manager, you discuss ways to identity risks
on your project. The next day a project manager sends you risk identification
software created by her company with a copyright date of 1998. What should
you do?
A. Find out if using an old format would be acceptable
B. Obtain approval from your legal department
C. Share some of your templates with her to improve her company’s abilities
D. Send the software back
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12. You are the project manager for your organization. Jenny is a project team
member on your project, and she is consistently late with her assignments.
While Jenny is late, her work is always excellent. Which of the following is
not a corrective action you should take?
A. Remove jenny from the project team
B. Assign other project team members to help Jenny complete her work on
time
C. Determine why Jenny’s work is late
D. Assign Jenny to noncritical activities
13. A company puts a new product into the market place without any reports of
problems. However, your internal research indicated that there is a
possibility of two serious injuries per year and would cost $20,000,000 to fix.
What should you do?
A. Make the modifications necessary in current products
B. Recall all existing products
C. Wait until an injury to verify the impact
D. Obtain insurance to cover the anticipated damages
14. You receive 25 new computers from a seller, but were expecting only 20.
While looking at the contract, you see that it says “seller to provide twenty
(25) computers.” What should you do first?
A. issue a change order through the contract manager
B. Return the five extra computers
C. Make payment for the 25 computers
D. Call the seller and ask for clarification
15. While working on a project in another country, you are asked to make a
“facilitating” payment so the country officials will issue a work order. What
should you do?
A. Make the payment
B. Ask the person for proof the payment is required
C. Seek legal advice on whether such a payment is a bribe
D. Do not pay and see what happens
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16. In order to complete work on your projects, you have been provided
confidential information from all of your clients. A university contacts you
to help it in its research. Such assistance would require you to provide it
with some of the client data from your files. What should you do?
A. Release the information, but remove all references to the client’s name
B. Provide high level information only
C. Contact your clients and seek permission to disclose the information
D. Disclose the information
17. You are a project manager working on a multimillion–dollar project. As the

project progresses, you become friends with the general contractor. You are
working on a US $100,000 change request. She has offered to let you use her
boat on Lake Superior this weekend while she is away in Mexico. What should
you do?
A. Accept the offer with thanks
B. Decline the offer
C. Decline the offer and report it to your supervisor
D. Ask your boss to approve of you using of the boat
18. You are taken to lunch by one of your sellers who has become a friend. He
gives you an opportunity to participate in a new venture in association with
his company, unrelated to your current employment. What should you do?
A. Refuse to participate
B. Participate
C. Participate but advise your employer of the offer
D. Request your employer’s consent for your participation
19. The disorientation experienced by people who suddenly find the living and
working in a different environment is known as:
A. Cultural shock
B. Sociocentrism
C. Temporal shock
D. Ethnocentrism
20. A project involves teams from three locations across different regions of the
world. What should the project manager address actively to ensure virtual
teaming?
A. Communication management
B. Orientation of team members in cultural diversity
C. Working with teams in different time zones
D. Communication methods to be used
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PROFESSIONAL ETHICS
21. A project manager needs five areas of expertise to be successful. Which one
is not one of the five areas of expertise?
A. Application area knowledge
B. An understanding of the project environment
C. PMP or CAPM certification
D. Interpersonal skills
22. It is important to communicate clearly the project’s objective among project

personnel and all managers, in order to:
A. Minimize hard feelings in the organization
B. Motivate the project team
C. Reduce conflicts caused by different interpretations of the project’s final
goal
D. Allocate enough resources
23. Project success depends on a number of inter–related factors, including time,

cost and scope control. The success of any project depends primarily on:
A. Customer acceptance
B. Customer satisfaction
C. Customer compromise in defining its needs
D. Exceeding customer requirements through gold plating
24. All of the following are socioeconomic influences that frequently affect
projects except:
A. Standards and regulations
B. Procurement statement of work
C. Internationalization
D. Cultural influences
25. The most important document for running a status meeting professionally
is:
A. The WBS
B. The scope Statement
C. An agenda
D. SOW
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Chapter – 1
Project Management Framework
1. Answer: B
Did you forget that in a matrix organizational the functional manager controls
the resources?
2. Answer: B
Project manager can take decision on contingency reserve. Only for accessing
management reserve we need permission from top management.
3. Answer: A
One of the most important things that you do as a project manager is to
constantly monitor the project and take, appropriate action whenever there
is a change.
4. Answer: B
Project management is the application of knowledge, skills, tools, and
techniques to project activities to meet project requirements. This is a direct
quote from the PMBOK. A, C, and D do not describe what project management
is.
5. Answer: A
The requirements to complete the project in three months using only four
resources is an example of constraints. Constraints are limitations in project.
6. Answer: C
The monitoring and controlling process group provides feedback between
project phases. A, B, and D are all incorrect because these process groups do
not provide feedback between project phases.
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ANSWERS FOR PRACTICE QUESTIONS
7. Answer: C
If your project is broken up into phases, you should have a kickoff meeting at
the start of each phase. During that meeting you talk about lessons learnt
from past projects and establish the way people will communicate as the
project goes on.
8. Answer: B
Mary is working for a projectized organization. In those companies, the
project manager has authority over the team as well as the project.
9. Answer: A
The end of a phrase is also known as kill point. In some instances, this may
also be called a phase gate.
10. Answer: D
Rolling wave planning is a form of progressive elaboration planning where
the work to be accomplished in the near term is planned in detail. The work
to be accomplished at a later date are only planned at a very high level.
11. Answer: C
12. Answer: B
There are many reasons for authorizing a project. Remember that the reasons
for authorizing a project are most often market-driven and usually contain
the constraints of cost and schedule.
13. Answer: D
A deadline for the project is an example of a schedule constraint. All of the
other choices represent project assumptions.
14. Answer: A
Not all information in the PMBOK should be applied uniformly to all projects.
It is the responsibility of the project management team to determine what
practices are appropriate for each Project B, C, and D are all false statements
regarding the implementation of the PMBOK.
15. Answer: C
A program is a collection of related projects managed and coordinated to
gain a higher level of control. A, B, and D do not accurately describe a
program.
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16. Answer: B
All of the concerns listed fall into the international and political environment,
cultural and social. Choice A, describes the demographic, educational, and
ethical environment. Choice C, Physical, is concerned with the ecology and
geography affected by the project, or the ecology and geography that the
project may affect. Choice D, organizational structure, is not a project
environment.
17. Answer: B
Project managers typically do not select the projects to be initiated. The
project selection committee, customers, or project sponsors are typically
responsible for this. A, C, and D are all incorrect choices because the project
manager is responsible for these activities.
18. Answer: A
The Project Management Office (PMO) supports the project manager through
templates, standardized policies, and software. B,C, and D do not fully answer
the question. So these answers are incorrect.
19. Answer: A
If you define your final deliverable any later than this, you may find that you
have a moving target.
20. Answer: A
This project was launched because the customer requested for a new
component. Answer B is incorrect because the project is not a response to a
change in technology, but a customer request. Answer C, a legal requirement,
is not correct because this actually refers to a law or mandated regulation
that has been created.
21. Answer: B
Given that estimates are roughly the correct number, your task as a PMP is
to get as close as you can to the actual costs. This can often be very difficult.
You owe it to the project sponsor to make a concerted effort to get close to
correct every time you do an estimate.
22. Answer: A
Stakeholder influences, risk and uncertainty are greatest at a start of the
project. These factors decrease over the life of the project.
475
23. Answer: A
Strong Matrix is the correct answer. Next to a projectized form of organization,
a strong matrix gives the most authority to the project manager.
24. Answer: C
This is because the project team members may have reporting lines to more
than one person, which causes complex communication and authority issues.
25. Answer: D
Senior management is responsible for portfolio management. Project
managers are responsible for a project’s success, but not the portfolio. Answer
B, project sponsors, authorize projects. Answer C, stakeholders, is an
incorrect choice as it is too vague an answer to be acceptable.
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Chapter – 4
Project Integration Managment
1. Answer: A
Initiation process is performed to define a new project or a new phase of an
existing project by obtaining authorization to start the project or phase.
Stakeholders might be identified in the Initiation process in Identify
Stakeholder process.
2.
3. Answer: C
Statement of Work (SOW) . A narrative description of products, services, or
results to be supplied, business needs, product scope description and
strategic plan.
4. Answer: A
Project team is determined after establishment of a project charter and
assignment of project manager. This takes place in the planning phase of
the project. All other activities are completed during the initiating phase of
the project.
5. Answer: C
Project statement of work, business case, agreement, Enterprise
Environmental factors and Organizational process assets are inputs to
Develop project charter; Project charter is the output.
477
6. Answer: B
The project sponsor creates and issues the project charter. Answers A, C,
and D list groups who can assist in creating the project charter but do not
have the responsibility to issue the project charter.
7. Answer: D
The project management plan communicates how the project will be executed,
monitored and controlled, and then closed. A and B both describe components
of the project charter. Answers A & B, reflect the purpose of Project Charter.
Answer C does not answer the question.
8. Answer: D
When developing the project management plan, expert judgment is utilized
to tailor the process to meet the project needs. Develop technical and
management details to be included in the project management plan.
Determine the resources and skill levels needed to perform project tasks.
Define the level of configuration management to apply on the project and
determine which project document will be subject to the formal change control
process.
9. Answer: B
The team did not find the dependency and a network diagram was not used.
10. Answer: D
The primary purpose of the project management plan is to define how the
project will proceed. A and B are incorrect choices, as these address only the
project work. C is incorrect, as this answer only addresses the project’s change
control system. The Project Management plan documents the actions
necessary to define, prepare, integrate, and coordinate all subsidiary plans.
11. Answer: A
Changes are found in Monitor and Control Project Work process; they are
approved in perform Integrated Change Control and implemented in Direct
and Manage Project work process. When you are monitoring and controlling
the project, you are always looking for changes that might need to be made
to your plan and you are analyzing their impact. Then you represent those
changes to the change control board for approval. If they approve, you
implement them in the Direct and Manage project Execution process.
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12. Answer: B
Deliverables are any unique and verifiable products results or capabilities
to perform a service that must be produced to complete a process, phase or
project.
13. Answer: D
Talk to the research department to understand the reasons for the changes.
Answer A, B and are not best choices.
14. Answer: A
The project management plan should continually be updated to reflect
modifications to the project.
15. Answer: D
As per PMBOK, “closure” will include the development of the index and
location of project documentation using the Configuration Management
System. Hence, “OPA” will be updated with new documents from the current
project.
16. Answer: D
Project Management Plan, Work performance report, Enterprises
Environmental Factors, Organizational Process Assets and Change requests
are inputs to perform Integrated change control process.
17. Answer: B
The change control board’s responsibilities should be agreed upon by the
project stakeholders. A change control board is usually necessary to approve
or reject project change requests. Answers A, C, and D are incorrect because
the change control board’s main focus is to approve or reject change requests
and not changes to the project plan, work breakdown structure, or selection
of project team resources.
18. Answer: B
Once you’ve understood the impact of the change to your schedule, budget,
and scope, the next step is to take the change request to the Change Control
Board. If they approve your recommendation, then the request will be
approved and you can update your baseline and implement the change.
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19. Answer: B
You will have to be careful with such situational questions in the PMP exam.
The situation is that there are scope conflicts among key stakeholders. The
question also states that you, the PM already have realized / decided to give
careful attention to ICC, which means how to effectively execute ICC. Stated
differently, ICC is what is described in B. Because the question states that
you as the PM have already realized what needs to be done, answers A.C,
and D are irreverent.
20. Answer: C
A change request is an input to Perform Integrated change control process.
Options A, B and D are outputs.
21. Answer: B
The director of sales and all stakeholders need to follow a formal change
request process. Verbal change requests are not valid.
22. Answer: C
As per PMBOK, various inputs to the “Close Project” process are PM Plan,
Accepted Deliverables, and OPA. The final product is an output of the “Close
Project” process.
23. Answer: C
Post-implementation audits are similar to lessons learnt in that they review
and document a project’s successes and failures, look for possible
improvements for future projects, and evaluate the project goals and compare
these to the end project.
24. Answer: C
Project or phase closure is the process of obtaining acceptance from the
customer or sponsor, conduct post project or phase end review, record impacts
of tailoring to any process, document lessons learnt, apply appropriate
updates to organizational process assets, archive all relevant documents and
close out procurements.
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Chapter – 5
Project Scope Management
1. Answer: D
The outputs of plan scope management are scope management plan and,
requirements management plan.
2. Answer: D
The requirements management plan describes how requirements will be
analyzed, documental and managed. A, B, and C, are not correct.
3. Answer: D
Inspection is performed in Validate Scope. All other Tools and Techniques
are part of Collect requirements process.
4. Answer: B
The project scope statement and project document updates are outputs of
Define Scope process.
5. Answer: B
The scope baseline (WBS + WBS D + Scope Statement) is an input to all of
these choices. However, team buy-in (choice B) is a direct result of the WBS
creation process, while the other choices use the WBS to assist in their
completion.
6. Answer: B
Project charter is not required during creation of WBS. Answers A, B and D
are inputs to the process.
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7. Answer: A
The requirement management plan in not part of the scope baseline.
8. Answer: D
The WBS Dictionary is an output of the Create WBS process. It is created
along with the WBS and gives all of the details about each work package in
the WBS.
9. Answer: C
The lowest level of the WBS is a work package, which can be performed by
more than one person. Generally called as 8/80 rule. Work package duration
ranges from 8 hours to 80 hours.
10. Answer: B
A work package is located at the lowest level of a work breakdown structure.
11. Answer: C
The WBS Dictionary is the complementary document to the WBS. It gives
all the details about each work package in the WBS including estimates and
billing information.
12. Answer: B
Scope baseline and project document updates are outputs of Create WBS
process.
13. Answer: C
Create the WBS is the process that follows plan score management and define
scope. Answers A, B are incorrect because they do not follow the PMBOK
process flow.
14. Answer: B
Although it might be true that Ralph does not have the insight into
her project, Sally’s first step should be to review the WBS and be sure
it is at a sufficient level of detail to provide the accurate estimates.
Answer A is incorrect because re-interviewing SMEs does not address the
root of the problem. Sally can do so after she has examined the WBS.
Answer C is incorrect because a good project manager will always
want to produce the best quality project, and the quality control
function if it is auditing a project probably has some knowledge
of the corporate projects and general expectations. Answer D is incorrect,
although it does happen often in real life.
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15. Answer: B
The project team develops Scope Baseline (Scope Statement, WBS and
WBSD).
16. Answer: B
The decomposition of the project scope creates the WBS. The bill of materials
defines all the materials the project requires to be completed. An
organizational breakdown structure is similar to an organizational chart.
The activity list is created after the WBS has been created.
17. Answer: D
The WBS of the previous project can serve as a WBS template for the current
project. Inspecting the deliverables of the previous project will not necessarily
help in planning the current project. The Royal Office Complex Project’s
risk matrix may help guide risk assessment, identification, and risk process,
but the WBS will help even more. The financial controls will most likely be
universal to all projects within your organization.
18. Answer: C
The code of accounts is assigned to the elements in the WBS.
19. Answer: B
WBS is created by the project team. It ensures that all work on the project is
included. It also helps organize and define all work on the project. WBS can
get updated at define activities or due to approved changes to scope.
20. Answer: A
WBS is organized with increasing detail of work with each descending level
in the structure. All other statements do not hold true for WBS.
21. Answer: A
Decomposition subdivides the major deliverables into smaller components.
It is a tool and technique of Create WBS process.
22. Answer: B
Project management plan, Requirement documentation, Requirement
traceability matrix, validated deliverables and work performance data are
inputs to Validate Scope process. Answer A, B and C are incorrect.
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23. Answer: D
Control Quality is concerned with the correctness of the work, while validate
scope is concerned with the customer accepting the work.
24. Answer: B
Inspection is examining or measuring to verify whether an activity,
component, product, result, or service conforms to specified requirements.
Inspection is sometimes called reviews, product reviews, audits and walk
through. See PMBOK Page No.124.
25. Answer: D
Options ‘A’, ‘B’ and ‘C’ are, also legitimate components of the Control Scope
process. However, the question asks you to determine where the project
manager should dedicate a primary focus. Since Control Scope involves efforts
to monitor scope performance, manage changes to project scope and help
ensure that scope changes are beneficial, the primary thing that should be
focused on is preventing unnecessary changes, Option ‘D’. Once changes are
deemed to be appropriate, then the other 3 options would come into play.
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Chapter – 6
Project Time Management
1. Answer: B
The network diagram shows the sequencing and length of the activity. The
responsibility assignment matrix shows who is responsible for what and does
not include time. The WBS shows what work is in the project but does not
focus on how long it should take. The budget deals with the costs of the
project, not time.
2. Answer: C
Providing additional hours as a contingency is a risk mitigation strategy;
therefore, Answer C is the best option because we are talking about time.
Answer A is incorrect because padding has no basis and is not quantified as
a risk or any other type of estimate. Padding is highly discouraged by PMI.
Answer B is incorrect because adding contingency is not acceptance of a
risk, it is mitigation. Answer D is not the best answer, although what Raymond
is doing is a form of mitigation.
3. Answer: D
Develop Schedule includes all work and uses all inputs needed to come up
with a finalized, realistic schedule. One would need time reserves (choice D)
in order to complete a schedule. All of the other items are parts of schedule
control and occur after Develop schedule.
4. Answer: C
The key to this question is the phrase “constant number used each month.”
Only resource leveling, choice C, has such an effect on the schedule.
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5. Answer: B
Monte Carlo analysis is technique that computes or iterates, the project cost
or project schedule several times using input values selected at random from
probability distributions of possible costs or durations, to calculate a
distribution of possible total project cost or completion dates.
6. Answer: B
Any delay in the critical path will delay the project. Hence the project team
has to focus on critical activities while managing the project.
7. Answer: B
PERT=0 + P +4ML /6 = 40 + 180 + 50* 4=420/6=70. Hence Answers A, C and D
are not correct
8. Answer: A
Slack and float are interchangeable terminologies. Lag is a delay between
activities on a network diagram. GERT and PERT are tools and techniques
of the Develop schedule process.
9. Answer: C
Resource leveling is a form of schedule network analysis in which schedule
decisions are driven by resource constraints e.g., limited resources availability
or difficulty in managing changes in resource availability levels.
10. Answer: A
Of all the choices presented, A is the best description of the critical path.
The critical path is the path with the longest duration. There can be instances,
however, when the project’s expected end date is well beyond the duration
of the scheduled work. In such cases, the critical path is considered the path
with the least amount of float. Choices B, C, and D are incorrect because
they are false descriptions of the critical path. The critical path has no float,
has the longest duration, and does not necessarily have the most expensive
activities.
11. Answer: B
A task’s slack is computed as LF – EF or LS – ES, where LS = Late start, LF
is the late a finish, we have option B which is the definition of slack. Hence
Option A & C are irrelevant. Option D would have been consider if it is LS –
ES and hence option B is right
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12. Answer: B
The critical path method uses deterministic method, meaning it uses one
time estimates. Hence A, C and D are not correct.
13. Answer: B
A resource calendar provides details on those dates when a specific resource
has been idle or active. Typically it defines resource specific holidays and
resource availability periods. A project calendar provides a list of working
days or shift periods during which project work has been scheduled. This
typically defines holidays, weekends, and shift hours. Answers C and D are
not valid options.
14. Answer: C
Project management software can predict the project schedule based on
activity duration, team calendars, and the project calendar. Project
management software does not manage project. Software can help create
the project plan, but it cannot create it for the project manager and the project
team. Project management software does not provide quality control.
15. Answer: B
This is an example of the 0/100 rule. This completion method allows for zero
percent credit on an activity until it is 100 percent complete. Choice A allows
for 50 percent completion when the work begins and 50 percent when the
work is completed. Choices C and D are incorrect responses, as they do not
describe the scenario.
16. Answer: B
A 68 percent probability is calculated using plus or minus one standard
deviation, a 95 percent probability uses plus or minus two standard
deviations, and a 99 percent probability uses plus or minus three standard
deviations.
17. Answer: B
CPM is calculated using deterministic value not expected value.
18. Answer: D
What If scenario analysis. This is an analysis of the question “What if the
situation represented by scenario ‘X’ happens?” The most common technique
is Monte Carlo Analysis, in which there is a distribution of possible outcomes
for the total project.
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19. Answer: C
Total float and free float (choices A and B) are the time an activity can be
delayed without impacting the entire project or the next activity. CPM
(Choice D) is a schedule network analysis technique, not waiting time.
20. Answer: C
Looking at this situation, you see that there are three paths through the
network. They are (1) Start, A, C, E, F, End with duration of 40+ 35+ 10+ 22
or 107. (2) Start, A, C, D, End with duration of 40 + 35 + 30 or 105 . And start
B, D, End with duration of 25+30 or 55. If the duration of the activity B
changes from 25 to 37, the activity will take 12 hours longer. As the activity
is only on the third path, it will only change the duration of that path from
55 to 55 + 12 or 67 hours. Since the duration of the critical path is 107 hours,
the delay with activity B will have no impact on the project’s timeline or the
current critical path.
21. Answer: C
This one drove you crazy didn’t it? Re-read the question! When you look at
the range of each choice, you will see that choice. A is ten days, choice B is
eight days, and choice C is seven days. The range of estimates with the
smallest range is the least risky. Therefore, the answer is C. The words +/-3
sigma is extraneous. Practice reading questions that are wordy and have
extraneous data.
22. Answer: D
Fast tracking is getting tasks done in parallel or concurrently i.e. concurrent
engineering.
23. Answer: A
This question tests your knowledge about a number of topics. There can often
be more than one critical Path. (Choice B) but you might adjust to decrease
risk resulting in only one critical path. Choice C uses the word “will” . The
network diagram may or may not change, depending on the amount of
schedule reserve and the reason for the change to the schedule. You can
have negative float (choice D) if you are behind schedule. Only choice A is
correct.
24. Answer: C
Task standard deviation = (P-O)/6 = 15-10/6= 5/6 ~ 0.8
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25. Answer: D
Fast tracking involves re-sequencing of activities on the network diagram to
attain compression of the schedule. Crashing involves putting more resources
on the critical path. Mandatory dependencies involve a required predecessor
before something can begin. Lag is a delay between activities on the network
diagram.
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Chapter – 7
Project Cost Management
1. Answer: A
Project Cost Management is nothing but the processes involved in estimating,
budgeting and controlling costs so that the project can be completed within
the approved budget.
2. Answer: B
It is order of magnitude estimate. This will be done at the initial state of
estimation based on historical information; estimation may vary between -
50 to +50 of actual estimates.
3. Answer: B
Answer A adds the profit margin, which has to do with pricing, not cost.
Answer C is similar, but is dealing with competitive pricing. Answer D is
incorrect because in a decorating project, the raw materials can be
significantly different, even if it is the same size and type of house. Answer
D also does not factor in labour.
4. Answer: B
Estimate Costs is the process of developing an approximation of the monetary
resources needed to complete project activities.
5. Answer: B
Estimate Costs is the process of developing an approximation of the monetary
resources needed to complete project activities. Option B is the incorrect
statement. All other options are parts of Estimate Costs Process.
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6. Answer: B
The opportunity cost is the amount of the project that the organization cannot
execute. Answer A is incorrect, as the $12,000 represents the difference
between the two projects. Answer C, $229,000, is incorrect, as this is the
amount of the GMS project. Answer D is incorrect because this is not an
accurate statement.
7. Answer: A
A Bottom up estimate of project is more accurate than other types of estimates.
Option B order of Magnitude or option C preliminary estimate are calculated
at very early stage where many project components will be at very high level.
Option D Conceptual Estimate is a wrong answer as no such estimates is
being considered in project management.
8. Answer: C
The straight-line depreciation takes the purchase value of the item, minus
the salvage price of the item, divided by the number of time periods. In this
it would instance, be $10,000 minus $1000, or $9,000. The $9000 is divided by
five years and equates to $1800 per year. A, C, and D are all incorrect, as
they do not reflect the correct calculation.
9. Answer: A
A definitive estimate should be within the range -5% to +10%. The accuracy
range of a budget estimate is usually within -10% to +25% while an order of
magnitude estimate made during the initiating phase is within -25% to +75%.
10. Answer: C
A cost performance baseline is an authorized time phased budget at
completion (BAC) used to measure, monitor and control overall cost
performance of the project. It is an output of determine budget process.
11. Answer: C
Taking a great amount of time to create is not an advantage of estimating.
All of the answers are advantages of the bottom-up estimate.
12. Answer: D
Activity cost estimates, Basis of estimates, Scope baseline, Project schedule,
Resource calendars, Agreements, Organizational process assets, cost
management plan and risk register are inputs to Determine budget process.
A Procurement Management plan is an output of the Plan Procurements
process.
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13. Answer: D
The Estimate Costs and Determine Budget process include bottom-up
estimating techniques as well as analogous estimating, parametric modeling
and computerized tools. However, Answer D is correct because the cost
baseline is an output of the Determine Budget process and is used to measure
and track the project throughout the remaining process groups.
14. Answer: B
The cost performance baseline is displayed as an S curve because of the way
the project spending occurs. Spending begins slowly, picks up speed until
the spending peak is reached and then tapers off as the project draws to a
close.
15. Answer: C
Expert Judgment, Analogous Estimating, Parametric Estimating, Bottom-
up Estimating, Three-point Estimates, Reserve Analysis, Cost of Quality,
Project Management Software, Vendor Bid Analysis, Group decision-making
techniques are Tools and Techniques of the Estimate costs process. Earned
value management is a technique used in Control Costs process.
16. Answer: A
Cost Management Plan is the document that sets the format and establishes
the activities and criteria for planning, structuring, and controlling project
costs. The Cost Management Plan is contained in or is a subsidiary plan of
the project management plan.
17. Answer: C
Cost baseline is nothing but cost aggregation of all activities to project level
(bottom up) with Contingency reserve. Answer A, is wrong, total cost will
not have reserves. Answer B, is wrong it talks about time. Answer D is Cost
Budget.
18. Answer: B
The methodology is EVM; the technique is EV.
19. Answer: C
You can find out the actual cost that was spent on a project, even if only
some project metrics are provided. In this case, if you only have CPI and EV,
you can figure out the AC by writing down the formula that has all three of
them: CPI = EV / AC. Now flip the formula around: AC = EV CPI = $172,500
/ 0.92 = $187,500.
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20. Answer:C
To answer this question, you will first have to calculate EAC because you
need that result to plug into the ETC formula. The correct formula for EAC
for this question is as follows: (AC + BAC) –EV. Therefore, EAC for this
question is as follows: (200 + 375) – 250 = 325. ETC is calculated this way:
EAC –AC. Therefore, ETC is as follows: 325 – 200 – 125.
21. Answer: A
Estimate to complete (ETC) calculates how much more of the budget is needed
to complete the project if everything continues at the current level of
performance.
22. Answer: B
CPI = EV/AC = 145/138 = 1.05
EAC = AC + (BAC-EV)/CPI (typical in future) = 138 + (200-145)/ 1.05 = 190.4
or EAC = BAC /CPI.
23. Answer: D
SPI = EV/PV = 300000/375000 = 0.8, i.e you have only consumed 80% of the
rate originally planned.
24. Answer:C
Cost Variance CV = EV = 475-425 = 50 and Schedule Variance SV = EV-PV =
475-500 = -25. So, this project is behind the schedule, and costs are lower
than planned.
25. Answer: C
VAC = BAC-EAC = 525-200 = 325
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Chapter – 8
Project Quality Management
1. Answer: C
Safety measures are cost of conformance to quality. If measures are not
taken, accidents may happen and the project may be stopped for investigation
and rework and the measures. Rework is an example of the cost of non-
conformance to quality. When work is unacceptable, it has to be corrected.
Corrective actions are part of the cost of non-conformance to quality. When
work, performance, and other components are unacceptable, corrective
actions steer the project back online. When customers get disgusted due to
quality issues, they will find other providers.
2. Answer: A
As a general rule, one cannot say that quality (as defined in the question) is
either of high or low cost (Choices B and C) or that provides the minimum
price (Choice D). It does give the customer what he/she customer wanted,
which may not be the lowest or highest cost.
3. Answer: A
Customer satisfaction is an important part of the modern quality
management. Remember, customer satisfaction is about making sure that
the people who are paying for the end product are happy with what they get.
You can ensure that customers are happy by meeting their needs and
developing a product that meets his requirements.
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4. Answer: A
A quality management plan describes how the project management team
would implement the quality policy of the project. Therefore, the
organization’s quality policy as it applies to the product and scope of the
project would need to be clearly established. The project scope statement
and product description are relevant inputs to determine the quality planning
of the project. Schedule baseline documents the accepted schedule
performance measures including start and finish dates. Checklists are specific
documents that are determined during quality planning for different
deliverables of the project.
5. Answer: D
Stakeholder register, Risk register, Enterprise Environmental Factors,
Organizational Process Assets, Project management plan and requirement
documentations are inputs to Plan quality management process. When taking
the examination, make sure that you noted when a question is asked in the
negative mode or positive mode.
6. Answer: C
Quality management is all about ensuring that the product you are building
conforms to your customer’s requirements. If you have done a good job of
gathering and understanding those requirements, all of the measurements
you take on your project should help you see if what you are building will
make your clients satisfied in the end.
7. Answer: C
If the occurrence or non=occurrence of an event does not affect the probability
of another event occurring, it is known as statistically independent events.
8. Answer: A
Training for the project team is the cost of quality. Answer B, the cost of
poor quality, is incorrect because this would be the costs the project would
incur if it did not ascertain the expected level of quality. Sunk costs describe
the amount that has been spent on a project already, so Answer C is not
correct. Answer D, contingency allowance, is an amount of fund allotted to
cover cost overruns in a project.
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9. Answer: A
The answer is A, to determine the level of performance against standards.
Although one could argue that elements of B and C have some value, A is the
best answer. We inspect to see where we are in terms of quality. Inspection
can take many forms including visual examination, precise measurements
with instruments and testing. In some instances, the testing can include
destructive testing, which renders the tested item useless. An example of
this might be the collision testing of prototype automobiles to determine
their resistance to damage or ability to project occupants.
10. Answer: C
According to PMBOK, flowcharting can help the project team anticipate and
identify where quality problems might occur on the project, which in turn,
helps the team develop alternative approaches for dealing with quality issues.
11. Answer: A
Choices B and C are components of a quality management plan. The quality
management plan is part of the project management plan. The best answer
is choice A, the quality management plan.
12. Answer: D
Perform Quality assurance is the process of auditing the quality requirements
and the results from quality control measurements to ensure that appropriate
quality standards and operational definitions are used.
13. Answer: C
Monitoring and determining specific project results for compliance to quality
standards are parts of the perform quality control process. Therefore,
deliverable results are inputs to control quality process, and not to the
perform quality assurance process. Quality management plan describes how
the project management team will implement its quality policy.
14. Answer: D
Perform Quality Assurance is the process of auditing the quality
requirements and the results from quality control measurements to ensure
appropriate quality standards on operational definitions are used. Six sigma
and Pareto charts are used to represent the execution trending of a process,
while organization quality practices refer to how quality is managed and
considered in the enterprise.
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15. Answer: D
Quality audits can confirm the implementation of approved change requests
including corrective actions, defect repairs, and preventive actions.
16. Answer: C
The main idea is that preventive actions are better than corrective ones.
17. Answer: C
Marginal analysis provides that optimal quality is reached when the cost of
the improvements equals the incremental costs to achieve the quality. A, B,
and D are incorrect. These answers do not describe marginal analysis.
18. Answer: A
Quality audits when performed correctly will determine if the product is fit
for use and meets safety standards.
19. Answer: A
Quality checklists are used to ensure that quality assurance steps were
followed.
20. Answer: C
Quality control measurements, validated changes, validated deliverables,
organizational process assets updates, change requests, Project management
plan updates, project document updates and work performance information
are outputs of control quality process. Quality management plan is the output
of Plan Quality management process.
21. Answer: B
The benchmarks provide a guide for the project manager. They come from
previous projects and can be used to construct plans for a new project. In
addition, they can be used as measuring devices.
22. Answer: C
The Quality Audit effort to correct any deficiencies should result in a reduced
cost of quality and an increase in sponsor or customer acceptance of the
project’s product. Quality audits may be scheduled at random and may be
conducted by internal or external auditors.
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23. Answer: A
Design of Experiments is used in Plan Quality process. A “Fishbone” or
“Ishikawa Diagram”, or a “Cause and effect” diagram is a tool to analyze how
various factors impact the output of a process. A “Pareto Diagram” is used to
identify those few causes, producing a majority of non-compliances / failures.
“Control Charting” facilities identifying common causes and special causes,
impacting outputs of the process. “Design of Experiment” is usually used as
a planning tool to determine future causes and permissible ranges of inputs
for a desired output from a process.
24. Answer: C
Mutually exclusive events mean that the occurrence of one ensures the non-
occurrence of another, in the same trail. Statically independent events mean
that the occurrence of one event does not influence the occurrence of the
other event.
25. Answer: D
Perform Quality Control is the process of monitoring and recording results
of executing the quality activities to assess performance and recommend
necessary changes.
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Chapter – 9
Project Human Resource Management
1. Answer: B
The key to a good bonus system is that it must be achievable and motivate
everyone in the team to work toward it. If you are rewarding only one team
member or a few people in the group, the rest of the team will not be
motivated. Also, Making the goals too aggressive can also demotivate people.
2. Answer: A
Staffing management plan describes when and how human resource
requirements will be met. It is contained in or is a subsidiary plan of the
human resource plan.
3. Answer: B
The staffing Management plan includes a “ Reward and Recognition” section
that describes how will reward your team for good performance. It also
contains the training requirements and release criteria.
4. Answer: C
Part of the team development process involves recognizing and rewarding
desirable behavior. The best method to make reward systems more effective
is making the link between performance and reward clear in Develop Human
resource plan process.
5. Answer: D
The Staffing Management Plan includes Staff acquisition, Resource calendars,
Staff release plan, Training Needs, Recognition and rewards, compliance
and safety.
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6. Answer: C
The RACI matrix shows roles and responsibilities on your project. RACI
stands for Responsible, Accountable, Consult, and Inform. Some people on
your project will be responsible for activities; others might be accountable
for them. The RACI matrix is a table that shows people and how they relate
to the work that is being done.
7. Answer: B
Power is the ability of individuals or groups to induce or influence the beliefs
or actions of other persons or groups. Authority in organization is the right
in a position to exercise discretion in making decisions affecting others.
Leadership is defined as the process of influencing people so that they will
contribute to organization and group goals.
8. Answer: B
The project needs the resource of the chemical engineer to be successful.
When the project needs a resource, it is a staffing requirement. A, C, and D
are all incorrect. This is not a situation describing an organizational interface
or contractor requirements. Resource constraints might include a
requirement to use a particular resource or that a resource must be available
when certain project activities are happening.
9. Answer: D
Roles & responsibilities are defined in Plan Human Resource Management
process.
10. Answer: B
Leadership is the only interpersonal skill listed. A, C and D are incorrect as
these are general management skills and not interpersonal skills.
11. Answer: B
The Responsibility Assignment Matrix (RAM) links the project roles and
responsibilities to the scope definition and WBS elements or activities. The
RAM usually has a row and column format showing activities and the roles
assigned to hose activities.
12. Answer: C
War room is having the entire team in one location.
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13. Answer: A
Activity Resources requirements, Enterprises Environmental Factors,
Organizational Process Assets and Project management Plan act as inputs
to Plan Human Resource Management process. Answer B, Cost baseline is
the output of Determine Budget. Answer C Activity Duration Requirements
is the output of Estimate Activity Durations. Answer D, Networking is a
technique used in Plan Human Resource Management process.
14. Answer: D
RAM is Responsibility Assignment Matrix.
15. Answer: A
Formal power is based on your position.
16. Answer: A
‘Work environment’ is a hygiene factor, while ‘recognition’, ’career
opportunities’. and ‘empowerment & responsibility are motivating agents.
Hygiene factors could be employee de-motivators when not adequately taken
care of, but would not motivate enough even when enhanced significantly.
17. Answer: B
The situation describes rewarding an individual by allotment of a corner
office. This is a perk and address the need for recognition and
accomplishment.
18. Answer: C
Expert and referent powers have substantial influence on both subordinates
and top management.
19. Answer: D
Personality conflicts can be a concern for the customer, but are not as
important as project priorities, schedule, and cost. The customer hired your
company to solve the technical issues. A, B, and C are all incorrect because
these are most likely the top issues for a company in a project of this
magnitude.
20. Answer: B
The halo effect is when you put someone in a position they cannot handle,
just because they are good at another job. Just because John is a great
programmer, that doesn’t mean he will be a good project manager.
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21. Answer: C
You, the project manager, have expert power on this project because of your
experience with the technology and with projects that are similar in nature.
A, B, and D are all incorrect. These project management powers do not
accurately describe the scenario. Formal power is based on the position in
the company. Coercive power describes fear of the project manager. Referent
power describes power by association and personal knowledge.
22. Answer: D
Withdrawl: Postpone or procrastinate a decision or a conflict so that it will
solve automatically or slowly die away. Answer A is Ignoring-hence not
correct. Answer B Compromising: Finding a solution that brings some degree
of satisfaction to both, i.e. accepting the second-best solution, hence not
correct. Answer C Smoothing: Emphasizing agreement rather than
differences of opinion. The problem is never solved, it is only temporarily
put away, hence not correct.
23. Answer: C
With the exception of formal, the rest are known ways to resolve conflict.
The orders of magnitude based on their long-lasting effects are problem-
solving, compromising, and forcing. Withdrawal and smoothing are part of
this group, but they do not address the problem.
24. Answer: C
Theory X states people need to be watched closely. They need to be directed
in work. They may not be willing to work.
25. Answer: B
Both parties are giving up something. This is a compromising situation.
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Chapter – 10
Project Communication Management
1. Answer: A
Memos are examples of informal communication. Choices B, C, and D are
incorrect, as presentations, briefings, and speeches are formal communication.
2. Answer: A
Number of communication channels in the original team = 10*9/2 = 45 Number
of communication channels in the expanded team = 12*11/2 = 66= Increase
by 21
3. Answer: C
Number of channels = n (n-l)/2 = 10(10-l)/2 = 45
4. Answer: D
Answers A, B and C are inputs to plan communications management process
and Answer D is output of the Plan Communications management process.
5. Answer: C
Management is requesting a communications management plan, which details
the requirements and expectations for communicating information among
the project stakeholders. Answer A is incorrect, since a roles and-
responsibilities matrix depicts the roles and decision-making authority.
Answer B, the scope management plan, is also incorrect because this plan
explains how changes to the scope may be allowed, depending on
circumstances. Answer D is not a valid choice for the question.
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6. Answer: D
Information that is complex and detailed is best conveyed in writing. A verbal
follow-up would be good to answer questions and clarify information. Vertical
and horizontal are ways of communicating within the organization.
7. Answer: B
Downward communications. And Top to down communications.
8. Answer: C
Manage Communications is the process of making relevant information
available to project stakeholders as planned.
9. Answer: B
Discuss the impact with the customer and ask for a decision. Answers A, C
and D are not correct.
10. Answer: D
Formal written is the best form of communication to use for any official,
project documentation. Anything verbal or informal would not be sufficient
for official documentation and would not integrate with the project archives.
11. Answer: B
Project information is important so that stakeholders and sponsors
understand how well a project is meeting its goals. For sponsors, a project
behind schedule might call for some type of intervention. Answer A is
incorrect because, although it is important to create a project archive, it is
not the purpose of distributing the information. Answer C is incorrect because
project sponsorship should be resolved prior to project initiation.
Occasionally, a project is cancelled because it no longer meets the needs of
the sponsors or company, but distributing the project information is not
intended to retain sponsorship of the project. Answer D is incorrect because
conflicts need to be managed by the project manager and resolved apart from
reporting on the project.
12. Answer: C
Project reports reflect project status and issues while making no assessment
on the project performance objectives. Performance reports include variance
or trend analysis and predict future project performance with reference to
the planned objectives. The timing, content, structure, and distribution list
are part of the communication management plan dependent on stakeholder
requirements. These could vary from project to project and are not generic
differentiators.
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13. Answer: B
The key word is ‘quickly’. The status report (choice A) is too detailed for a
quick look. The forecast report (choice C) only looks into the future. The
progress report (choice B) will summarize project status.
14. Answer: B
The performance measurement documentation is reviewed to make certain
the project goals and objectives have been met. This is an input to the Close
project process.
15. Answer: D
Project Management plan, Work performance data, Project communications,
Organizational Process assets are inputs to Control Communications. Work
performance information is an output of Control Communications.
16. Answer: D
Project communications involves the activities that are required for
information to be created, distributed, received, acknowledged and
understood. And this document contains performance reports, Status of
deliverables schedule progress, cost incurred, etc.,
17. Answer: D
What you are trying to do as a project manager is to make a plan and then
stick to it. Even if you are able to complete in less time and money than
planned, this does not help the organization. It is very hard to plan anything
if time and money are not controlled.
18. Answer: B
Performance reports involves the periodic collection and analysis of baseline
versus actual data to understand and communicate project progress and
performance as well as forecast the project results
19. Answer: A
When we talk about contract, everything that we do is more formal than in
other project activities. Records are important, thus the need for written
communication.
20. Answer: A
For an effective meeting the project manager should create and distribute
the meeting agenda prior to the start of the meeting.
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21. Answer: C
Every change request needs to be evaluated to determine whether or not it
should be made. That is what we do in the Integrated Change Control process
- every change is analyzed to determine its impact. It is then documented as
a change request and put into the change control system. That is where the
CCB determines if the change should be made.
22. Answer: C
Plan Communications management is the process of determining the project
stakeholder information needs and defining a communication approach.
Hence Answers A, B and D are not the right choices.
23. Answer: C
The scribe may or may not be the project manager. It depends on the size of
the project and the staff.
24. Answer: C
The project duration is the only technology factor that may affect project
communication. Answer A, communications management focuses on managing
communications, not performance. Answer B, management by walking
around, is an effective management style, but it does reflect project
performance. Answer D, variance analysis, focuses on the root causes of
variances within the project, but not solely on project performance.
25. Answer: C
One side may be too busy thinking about what to say next than to hear what
is being, is the best answer.
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Chapter – 11
Project Risk Management
1. Answer: C
The risk list and risk triggers are created in this situation. The risk list and
triggers end up in the risk register. Risk responses end up in the risk register
after they are created in risk response planning.
2. Answer: D
Risk identification is an iterative process that happens throughout the
project’s life cycle. A and B are both incorrect because risk identification is
not limited to any one process group. C is incorrect because risk identification
happens, technically, throughout the project management life cycle, which
is unique to each project, and not through the product management life cycle.
3. Answer: B
Answers A, C, and D are incorrect because they are done after risk events
are identified.
4. Answer: C
2 weeks = 14 days 14 X 40% = 5.6 the risk using decision tree is probability of
5.6 days delay, hence add same to schedule reserve.
5. Answer: C
The best thing that you can do with a risk is avoid it - if you can prevent it
from happening, it definitely won’t hurt your project. The easiest way to
avoid a risk is to cut it out of your project entirely; in this case, getting rid of
the subcontractor avoids the risk.
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6. Answer: B
A Risk Urgency Assessment is a tool of Perform Qualitative Risk Analysis.
Identify Risk is all about finding risks. Perform Qualitative Analysis is about
prioritizing them based on what your team thinks their impact and probability
will be for your project. Brainstorming, Delphi technique, root cause analysis
and interviewing ate called as Information gathering Techniques.
7. Answer: A
A network diagram illustrates the flow of project activities from launch to
completion. All other options are risk management diagramming techniques.
8. Answer: B
Documentation reviews, information gathering techniques (Brainstorming,
Delphi Technique, Interviewing, Root Cause analysis), Checklist analysis,
Assumptions Analysis, Diagramming Techniques, SWOT Analysis and Expert
Judgment are Tools and Technique of Identify Risks process. The Risk
Register is an Output of Identify Risks.
9. Answer: B
A decision tree focuses on the probability and cost outcome of a particular
decision path and provides the means to analyze which decision would provide
the highest expected value. Answer A is the critical path method and is used
in scheduling, not risk analysis. Answer C is incorrect because sensitivity
analysis is used to determine what risks have the most impact on the project.
Answer D is tempting because expert judgment is used so often in projects,
but it is not the correct answer.
10. Answer: D
There is a high probability that a cost will occur but you are not sure when it
will happen.
11. Answer: C
Risk management plans should be periodically updated and should
necessarily be on the agenda during all project team reviews. At project
closure, all deliverables have been completed and hence risk plans are no
longer relevant. Risk response audits are periodic reviews to assess the
performance of risk owners and hence, do not include a review of risk list.
Risk identification is a continuous process and should not be linked to events
of risks.
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12. Answer: A
SWOT analysis helps identify both positive and negative risks within a project.
Product analysis is used to define the scope of a project rather than identify
risks. Defect repair review is an action taken by the control quality
department after defects have been repaired. Control charts are used in
control quality, and help project managers determine if a project is stable
and predictable.
13. Answer: C
Perform Qualitative Risk analysis is the process of prioritizing risks for
further analysis or action by assessing and combining their probability of
occurrence and impact.
14. Answer: B
Perform Qualitative Risk Analysis is in Planning Process Group. It is The
Process of Prioritizing Risks for further analysis or action by assessing and
combining their probability of occurrence and Impact?
15. Answer: D
It fits the description of categorization of risk which means to group risks
together.
16. Answer: A
Answer B is incorrect because it is the opposite of Answer A. Answer C is
tempting because it is often true that they are done at the same time; however,
the objectives of the two functions are different. Answer D is not true because
both processes use the risk management plan as inputs.
17. Answer: C
The expected monetary value (or EMV) of the problems integrating the
component is the probability (20%) times the cost ($3,000), but don’t forget
that since it’s a risk, that number should be negative. So it is EMV is 20% x
$3,000 = -$600. The savings from not having to build the component from
scratch is an opportunity. It has an EMV of 40% x $10,000 = $4,000. Add them
up and you get -$600 + $4,000 = $3,400.
18. Answer: B
The probability of not completing the contract = 1 - probability of completing
the contract = 1 - 0.92 = 0.08. Expected value = Probability X Impact = 0.08 X
(-10000) = -800 (remember that since impact is a penalty it has negative value)
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19. Answer: B
The risk has a 20 percent chance of happening and will cost the project
$150,000. Twenty percent of $150,000 is $30,000—the expected amount of
contingency. $150,000 is 100 percent of the risk event occurring. $75,000 is
based on a 50 percent likelihood of the risk occurring. The risk is real even if
the risk event does not occur.
20. Answer: B
This is a tricky question. Risks are identified during risk identification,
naturally, but newly emerging risks are identified in Control Risk.
21. Answer: A
Notice that this is a problem that has occurred, rather than a problem that
has just been identified. Following the right process is part of professional
and social responsibility. Because an unidentified problem occurred, it is
important to perform choices B and C. However, they are not your first choice.
You might need to inform management (choice D) but this is reactive, not
proactive, and not the first thing you should do.
22. Answer: D
The risk management plan is created in Plan Risk Management. Of the
remaining answers, not all will be created in Plan Risk Response but can be
created if certain events happen.
23. Answer: C
Risk reassessment is done during the process of Monitor and Control Risks.
This often results in the identification of new risks, reassessment of current
risks, option A is a method of identified risk and option B is determining
risk attributes. Option D referring to role and responsibilities hence option
C is a right answer as it is part of reassessment activities.
24. Answer: D
The risk owner is responsible for implementing risk response plans if the
risk they are responsible for occurs. The risk seekers are the one who as
very high risk appetite toward risk. The Project Manager and Team Lead
would not act unless they were the risk owners or they have been informed
or communicated of the risk.
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25. Answer: B
Option B is a right answer as vendor could not fulfill the need of Team, as he
is Risk owner. Option A, ‘Risk sector’ or option D ‘Risk owner’ have no
relevance here. Option C is not the right one as the project management will
not be knowing about the incidence, unless he is being communicated.
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Chapter – 12
Project Procurement Management
1. Answer: C
The cost-plus-fixed-fee pays a seller cost plus a negotiated fixed fee. A time
and materials contract (T&M) is typically used for smaller projects or staff
augmentation. The fixed-price contract has a seller doing the work for a set
price. The cost-plus contract pays a seller a specific cost plus a negotiated
fee.
2. Answer: D
Negotiation process is not a part of procurement document. Answers A, B
and C options are part of procurement document.
3. Answer: A
Cost Plus incentive contracts are advantageous due to the fact that they do
not require detailed specifications. This is the best answer among the four
4. Answer: A
Bidders’ conference is a meeting with all the prospective sellers to clarify
all the questions on scope and distribute the answers to all the sellers. This
facilitates a common understanding of the scope amongst all and prevents
misinterpretation of scope, which can result in padded prices to cover risk
contingencies by sellers. Personal meetings with sellers’ representatives
would not ensure a common understanding amongst all sellers. Thus, choice
B is incorrect. Advertisements are tools to expand the list of prospective
sellers, but this does not serve the purpose of ensuring a common
understanding of scope amongst all sellers. Thus, choice C is incorrect.
Answer D is incorrect.
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5. Answer: B
Seller is most interested in controlling costs in Firm fixed price, since he
will work towards maximizing profits and controlling the expenditures.
6. Answer: B
Your company has no excess capacity and cannot produce the goods or
services.
7. Answer: A
If you got this question wrong, reread it. You need to audit invoices in all
contract types, so how do you choose? Look for the answer that is best. In
this case, it would be the choice that requires the greatest effort. Invoices
need to be audited in a fixed price contract because the seller could be
charging you before they pay out the money, thus taking the payment and
investing it until they need to pay it out. A T & M contract (Choice B) should
be for small dollars and short duration (remember that a T & M contract has
no incentive to finish) so it does not have a great risk. Choices C & D cannot
be best because the risk to the buyer is limited they are still going to pay
only the contract price. In a CPFF contract, the buyer bears all costs. The
seller could be charging the buyer for costs that should not be allocated to
the buyer. Because the risk to the buyer is great, CPFF contracts need the
most auditing. Since this question asked for which one you do not want to
use, the answer should be Choice A.
8. Answer: B
The project manager should confront the problem by talking with the vendor
about the rumour. Answer A is incorrect and would delay the project and
possibly cause future problems. Answer C is incorrect and may violate the
contract between the buyer and seller. Answer D is also incorrect—the
agreement is between the vendor and the performing organization, not the
labour union.
9. Answer: A
A contract change control system defines the process by which the
procurement can be modified. It includes the paperwork, tracking systems,
dispute resolution procedures, and approval levels necessary for authorizing
changes. The contract change control system is integrated with the change
control system.
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10. Answer: A
As per PMBOK, Procurement Negotiated settlements and Record
Management System are the three tools and techniques of the “Close
Procurement” process. Procurement Audit is a structured review of the
procurement process and its objective is to identify successes and failures.
Procurement Management Plan, Procurement documents are inputs to the
“Close Procurement” process.
11. Answer: B
Close procurement and procurement audit are done at the buyer’s end when
the contract is a part of the performing organization’s project. From the
seller’s view, the contract is completed when the seller receives the final
payments.
12. Answer: C
If the seller completes the work specified in the contract statement of work,
the contract is considered complete. That does not mean that the contract is
closed. Contract closure must still occur. However, in this situation the
contract work is completed.
13. Answer: B
Make-or-buy analysis, expert judgment, market research and meetings are
tools and techniques of plan procurements managements.
14. Answer: A
Input Control Procurements are procurement documents, Project
Management Plan, Agreements, Work Performance reports, approved
changes request and Work performance data. Choice A is the best answer
among all.
15. Answer: A
This is a calculation question. The $280K US is the expected value of the
contract. Actual cost of the contract is $240K US. This means that there is
$40K US saved. The 50/50% share means that $20K US of the savings would
go to the seller. The actual cost of $240K US and $20K US saving share makes
the total value of the contract worth $260K US.
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16. Answer: D
Cost-plus-percentage of cost covers the cost of the seller to build something
and pays that seller a percentage of the total costs as a fee. The more that
seller spends, the greater the fee. The fixed-price contract provides the seller
with the most risk because the contract limits the amount that the buyer
will pay for the project. Time and materials contracts are typically used for
smaller amounts of work and staff augmentation and provide compensation
for the labour and materials. Cost-plus-fixed-fee is a structure that is used
when the buyer does not have an exact definition of what they need and can
use this to pay the seller for their services and a pre-negotiated fee.
17. Answer: B
Meeting with the team and brainstorming how to create a workaround for
this problem would be the first step the project manager should try. Reporting
the status of the missed milestone would be the second option. Failure to
report this problem in the status meeting violates professional and social
responsibility on reporting accurate information. Halting all payments to
the vendor would put your company in default of a signed contract.
18. Answer: C
Lessons learnt are important outputs of projects and can be used as historical
data to provide assistance for other projects. Answer A is incorrect because
team building involves the activities that develop camaraderie in order to
enhance team performance. Answer B is incorrect because best practices
are those successful activities that a team wants to repeat in current or future
projects. Answer D is incorrect because it is a fictitious term that is not
related to project management.
19. Answer: A
The buyer provides product descriptions when projects are performed under
contract.
20. Answer: D
The weighting system is a quick and objective method for evaluating
proposals. The question asks for an objective method. The weighting system
is an objective method of ranking the qualitative data and reducing the effects
of personal opinion. It can be performed quickly once the measurements are
selected. Although the screening system is also quick, it is not as objective
as a ranking approach using a weighting system. Team based evaluations
are a good idea, but not as an answer to this question. The Delphi Method is
a tool to reach group consensus using expert opinion. It is not objective. It is
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sometimes used in crisis situations when there is not enough time for
objective source selection measures.
21. Answer: B
The contractor’s rate of $120 per hour plus the cost of materials is an example
of a time-and-materials contract. Answer A is incorrect; a cost plus fixed fee
charges the cost of the materials, plus a fixed fee, for the installation or
work to complete the contract. Answer C is incorrect; a unit price has a set
price for each unit installed on the project. Answer D is also incorrect, as a
lump sum does not break down the time and materials.
22. Answer: B
A single source seller means there is only one seller the company wants to
do business with. A describes a “sole source” seller. C is incorrect; there may
be multiple sellers who can satisfy the project needs. D is also incorrect; just
because there is only one seller in the market does not mean the seller can
adequately and fulfill the project needs.
23. Answer: C
Before the vendor is paid, the project manager must inspect the work results
that the vendor has completed. The vendor’s work must be inspected to see
that it conforms to the requirements of the contract. If not, the vendor must
correct the work so that it conforms to the contract. Once the work is
completed, and after the project manager agrees on the completion, the terms
of the contract are followed.
24. Answer: B
Bidder conferences, proposal evaluation techniques, independent estimates,
expert judgment, advertising, procurement negotiations and analytical
techniques are tools and techniques of Conduct Procurement. Make or Buy
analysis is tools and techniques in Plan Procurements management.
25. Answer: B
Evaluation criteria are determined during Plan procurement management
and are usually a part of the procurement documentation. Plan Procurement
management is the process of documenting project purchasing decisions,
specifying the approach, and identifying potential sellers. Conduct
Procurements is the process of obtaining seller responses, selecting a seller,
and awarding a contract. Control Procurements is the process of managing
procurement relationships, monitoring contract performance, and making
changes and corrections as needed. Close Procurements is the process of
completing each contract.
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Chapter – 13
Project Stakeholder Management
1. Answer: A
A kick-off meeting is indeed one of the first things a project manager should
schedule and is in fact the initial task in Define scope. Answer B is tempting,
because the amount of money for use on the project could indeed be a
constraint; ideally, however, a project manager will determine the scope,
activities, and resources needed, and then develop the budget needed.
Answer C is also tempting in terms of showing authority to do a project;
however, John’s CIO just authorized him to execute the project, and a business
card does not necessarily give him the authority. Answer D is incorrect
because scope definition is after Define scope, and requires as input the scope
statement, which is defined in Define Scope.
2. Answer: A
Saying that the work must be “better” is subjective. Requirements gathered
during stakeholder analysis should be quantifiable. That way, the team has
a goal they can shoot for and you can always tell how close or far from it you
are.
3. Answer: B
Review the scope of work with the stakeholders
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4. Answer: B
He should educate stakeholders about project management processes. It is
the responsibility of the project manager to educate stakeholders regarding
project management processes, both on a high level and on specific processes
that affect the current activities. This education will provide payback in
cooperation, understanding, and participation. He should not just educate
stakeholders primarily on issues that affect the active project. The project
manager should also educate the stakeholders on general project
management approaches and processes. He should not leave education of
the stakeholders to the project sponsor and/or business area management.
The project sponsor and business area managers may not have project
management expertise. Educating stakeholders is a recognized responsibility
of project managers.
5. Answer: B
Stakeholders help to determine the project constraints and product
deliverables.
6. Answer: C
By involving the stakeholders in different aspects of the project, their
requirements are more likely to be met. Specifically, ‘Verify’ scope ensures
that the stakeholders are seeing that phase deliverables, project progress,
quality, and expectations are being met. Answer A is incorrect because the
untimely introduction of stakeholders can actually increase scope creep.
Answer B is incorrect because scope constraints will be evident early in the
project, rather than during the implementation of the project work. Answer
D is incorrect since stakeholder presence does not ensure effective
communication. Effective communication will stem from the project manager
and the requirements identified and documented in the communications
management plan.
7. Answer: C
The employees who do not want the deliverable of a project are negative
stakeholders. Choices A, B, and D are all greatly affected by the success of
the projects; these are positive stakeholders.
8. Answer: D
According to PMBOK, differences between or among stakeholders should
be resolved in favor of the customer. Option D is not in compliance with this.
The other sentences (“A”, “B” and “C”) are surely true. Therefore, though
sentence “D” makes sense, it is the “least true” of all.
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9. Answer: D
Project Managers should create an environment that allows stakeholders to
provide input.
10. Answer: C
In this instance, the union is considered a project stakeholder because it has
a vested interest in the project’s outcome. Answer A is incorrect because the
union is not a resource constraint; they are interested in the project
management methodology and the project human resource management.
Answer B is incorrect; Answer D is also incorrect; the union is not a project
team member.
11. Answer: D
The initiating process group includes develop project charter and ‘Identify
Stakeholders’. The full project team is not organized until the planning
processes. The WBS is not prepared in the initiating processes, but in the
planning processes. The network diagram is not created until the planning
processes.
12. Answer: B
As per the definition of stakeholder option B is the right answer, option A, C
and D are very vague.
13. Answer: A
A stakeholder is a person or organization (e.g., customer, sponsor, performing
organization, or the public) who is actively involved in the project, or whose
interests may be positively or negatively affected by the execution or
completion of the project. A stakeholder may also exert influence over the
project and its deliverables.
14. Answer: C
By involving the stakeholders at different phases of the project, their
requirements are more likely to be met. Specifically, validate scope
ensures that phase deliverables, project progress, quality, and
stakeholder expectations are being met. Answer A is incorrect because the
untimely introduction of stakeholders can actually increase scope creep.
Answer B is incorrect because scope constraints will be evident early in the
project, rather than during the implementation of the project work. Answer
D is incorrect since stakeholder presence does not ensure effective
communication. Effective communication will stem from the project manager
and the requirements identified and documented in the communications
management plan.
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15. Answer: A
Identify Stakeholder process is the right answer. Identification of stakeholder
at an early stage in the project will ensure. This is success of the project a
continues process.
16. Answer: B
Identifying Stakeholders during the initial stage of project will be better.
17. Answer: C
Pay more attention to stakeholder management. Answers A, B and D are
correct.
18. Answer: B
We cannot avoid the stakeholder (Choice C & D) because he has stake in the
project. A project manager can say no (Choice A) but this does not solve the
root cause. If we have an open and direct communication with the stakeholder
from the early stages of the project, we can understand and anticipate the
changes that he will require as the project progresses. This will eliminate/
minimize the negative impact of these changes on the project.
19. Answer: C
The project manager and the project team can leverage the stakeholder skills
and knowledge to create a better project management plan. Simply inviting
the stakeholders to cover your liabilities is not a good choice for this question.
While stakeholders are often the individuals paying for the project, this is
not true in all instances. Relying on the stakeholders only for correcting
oversights limits the stakeholders from leading the requirement gathering
and contributing to the planning sessions.
20. Answer: D
Find an effective way to gather the needs of all stakeholders. As all the
stakeholders are important in projects, Answers A, B and C are incorrect.
21. Answer: D
The project manager must complete stakeholder analysis to capture metrics
that will define goals that the project can work towards. Vague objectives, as
in this question, can set up a project for failure. The customer, the
professional engineer, and the CFO did not provide metrics for project
success.
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22. Answer: B
The eager customer is an example of a positive stakeholder. Answer A, the
comptroller, is usually an influencer and not a positive or negative
stakeholder for most projects. Answer C, the environmental group that has
claims against your project, is an example of a negative stakeholder. Answer
D, the union, is another example of a project influencer. In this example, the
union is neutral, but there are instances when a union could become either a
positive or negative stakeholder.
23. Answer: B
According to stakeholder definition option B is the right answer all other
options are very vague
24. Answer: A
Stakeholders can be identified throughout the project management process
groups. However, the earlier stakeholders are identified, the better for the
project. If all of the stakeholder’s need and requirements are taken into
account before plans are finalized and project work is begun, fewer changes
will be needed later in the project, when they will be more costly.
25. Answer: C
It is very hard to figure out whether or not your project is successful unless
you can measure that success. That is why you need to come up with goals
that have numbers attached to them – which is what quantifiable means. Of
all the four answers, only answer C has a goal that you can actually measure.
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Chapter – 14
Professional Ethics
1. Answer: C
You should first confirm what the local practices and customs call for
regarding hiring family members before others. Answer A and D are incorrect,
since they do not consider the qualifications of the project team leader and
the project team. In addition, they do not take into account local customs.
Answer B is incorrect as well; although it does consider the qualifications of
the project team, it does not consider the local customs.
2. Answer: C
The company policies and procedures should guide the project manager and
the decision he makes in a foreign country. Answer A and B are incorrect,
since these documents are essential but usually do not contain and reference
business practices. Answer D incorrect; while the PMP harbours crucial
information, the company’s policies and procedures are more specific to the
project work and requirements.
3. Answer: B
Do not make the payment. Paying money for considering the project is not
correct.
4. Answer: D
Candidate D has general management, project management, and technical
skills. This is the best among four.
527
5. Answer: C
It is the project manager’s responsibility to ensure that business conducted
across different countries does not violate human rights and any action in
the destination country complies with relevant local regulations.
6. Answer: A
The offer described in this case is illegitimate and should be declined politely
since this is a type of bribe. Reporting this incident to the concerned
individual (as in choice B and C) is not the roles and responsibilities of the
project manager in this case.
7. Answer: C
In this instance, the project manager should follow the company’s policy for
inappropriate removal of hardware. The project manager may not have the
ability to fire Nancy. Nancy should not have to pay for the laptop, as she may
have had legitimate uses for the laptop, and she has returned it. This is
ethically wrong for the project manager to do.
8. Answer: B
Although this maybe a small, limited contribution, it is still a reference for
others on project management methods and applications. Ensuring integrity
is valuable, but this is not contributing to the knowledge base. This is not an
example of applying professional knowledge – this is sharing professional
knowledge. This is not an example of balancing stakeholder interests.
9. Answer: C
You should not participate in the study group. A is incorrect as it clearly
violates the PMP code of professional conduct. B and D are not good choices
because there is not any clear evidence that the questions, or claim, are
genuine. The questions may have been purchased through a web site or other
entity - not necessarily through a testing center.
10. Answer: C
Although you have been friends for years, the friend is now working with a
vendor , and it would be inappropriate for the friend to purchase lunch. This
would clearly be a violation of your company’s policies because you and your
friend are discussing an upcoming project. Answer A, B, and C are all
incorrect because you would be allowing your friend to purchase your lunch
and this is against company policies.
528 ROAD TO SUCCESS

11. Answer: D
Send the software back. It is against copyrights law.
12. Answer: C
By removing Jenny from the project team, you will create additional risk
and stress for the project team members. In addition, the project manager
should first determine why her work is late. It may be that Jenny is loaded
with many different assignments from other projects, that she doesn’t
understand the work she is to do, or needs help in completing her
assignments.
13. Answer: B
Recall all existing products.
14. Answer: B
Return the five extra computers.
15. Answer: C
Seek legal advice on whether such a payment is a bribe. If it is legal you can
pay.
16. Answer: C
Contact your clients and seek permission to disclose the information. Answer
A, B and D are not correct.
17. Answer: B
Decline the offer as a first choice. Hence option is the right answer. If she
continues then report it to you supervisor.
18. Answer: D
Request your employer’s consent for your participation. Answer A, B and C
are not the right options.
19. Answer: A
Cultural shock is disorientation experienced by people who suddenly find
themselves living and working in different environments.
529
20. Answer: B
While ‘communication management’, ‘working with teams in different time
zones’ and communication methods to be used’ are all relevant and need to
be addressed; ‘orientation for cultural diversity’ would be the most critical
one to be addressed for virtual teaming.
21. Answer: C
Believe it or not, you do not have to be a PMP or a CAPM to be a successful
project manager. A, B, and D are valid characteristics of a project manager.
22. Answer: C
In order to reduce conflicts caused by different interpretations of the project’s
final goal, it is important to communicate clearly the project objectives among
project personnel and all managers.
23. Answer: B
The success of any project depends primarily on customer satisfaction.
24. Answer: B
Procurement Statement of work is not socioeconomic influences that affect
project.
25. Answer: C
An agenda. It is your most important tool for keeping a meeting on track.
530 ROAD TO SUCCESS

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Titles in this Volume :

First Edition : 2009

No part of this book may be reproduced in any form or by any means

All product names and company names mentioned

Corrections and suggestions for improvement of

Please send your suggestions to [email protected]

All rights reserved. No part of this book may be

This book is dedicated to the memory of Mr.Natarajan, fondly known as

ROAD TO SUCCESS III

We would like to acknowledge the meticulous efforts of Ms. Usha C Sekaran,

It will be remiss on our part if we fail to acknowledge and appreciate the

Special mention should be made of the efforts put in by Ms. Savitha

Project Management is at once a science and an art. It is a science because

Project Management is an art because we practice and perfect certain

Till recently, the emphasis has been on the concept of Management by

The practical study guide ‘Road to Success’ – Project Management, PMP®

‘Road to Success’ – Project Management, PMP® has been modelled on the

While discussing Project Time Management, a study of PERT/CPM,

We welcome your suggestions/feedback. Please write to us at:

Chapter 1— Project Management Framework

Chapter 3— Fundamentals of Cossting &

Chapter 4— Project Integration Management

VIII ROAD TO SUCCESS

Chapter 5— Project Scope Management

Chapter 6— Project Time Management and

Project Time Management

Chapter 7— Project Cost Management and

Project Cost Management

Earned Value Management

Chapter 9— Project Human Resource Management

Chapter 10— Project Communications Management

Chapter 12— Project Procurement Management

Chapter 13— Project Stakeholder Management

XII ROAD TO SUCCESS

Chapter 14— Professional Ethics (PMI)(R) Standards

Chapters Answers for Practice Questions 473

Reference Books 533

ROAD TO SUCCESS XIII

Project Management Office (PMO)

Though the work involved in projects may be temporary, the product or

A project can create:

Some examples of projects are:

The temporary and finite characteristic of projects stands in sharp contrast

As per “A Guide to the Project Management Body of Knowledge (PMBOK®

The five process groups are:

Managing a project typically includes, but not limited to:

1.3 Portfolio, Program & Program Management Office

1.3.1 The Portfolio Management

For example, an infrastructure company with a business objective of

1.3.2 Program Management

• Aligning with the organizational strategic direction that may affect

An example of a program would be the development of a passenger car with

1.3.3 Project Management Office (PMO)

The Project Management Office (PMO) is a centralized department or

The PMO may be given the authority to act as an integral stakeholder in an

• Identifying and developing project management methodology, best

Fig. 1.1: Project Manager and Program Manager

1.4 Projects and Strategic Planning

Strategic Opportunity / Business Need